Specie Payment Resumption Act
Immediately after the Civil War during Reconstruction, there were large capital inflows into the United States and a general improvement in the export-to-import ratio since the export-dominant South was reintegrated with the North.The resumption of specie payments was perceived as a method to curb the rise in the price level and eventually equate currency with gold.Supporters of the Resumption Act argued that the Panic of 1873 might not have occurred had there been sufficient reserves of gold in the United States Treasury as would have been the case if specie payments were resumed.Opposed to resumption, a new coalition of agrarian and labor interests found common cause during Reconstruction in advocating for "soft money" or the promotion of inflationary monetary policies.Collis P. Huntington and other railroad leaders called for further greenback issuance in light of harsh business conditions that made honoring debt obligations difficult.However, the Resumption Act also required that greenbacks be retired in a proportion of 80% of new national bank note issue, which in theory aimed to contract the money supply and hence encourage dollar appreciation such that gold and currency might equate.Aided by the return of prosperity in 1877, Secretary of the Treasury John Sherman accumulated a gold reserve to be redeemed for existing greenbacks mostly from transactions with Europe.[18] The decline in the premium cannot entirely be attributed to the Resumption Act, as downward pressure on the overall price level also resulted from increased production in the South especially during 1877.