Silver Triumphant

One evening last week President Roosevelt held a pleasant little White House gathering attended by Acting Secretary of the Treasury Morgenthau. his assistant, Earle Bailie, Professor ("Rubber Dollar") Warren and Governor Black of the Federal Reserve Board. They let it be known that they were considering the results of the Administration's monetary policy. The Press, sensing important decisions in the making, headlined "Important Gold Conference."

The Press was right about everything except the metal concerned. Twenty-four hours later the President issued a proclamation on silver. With it he released some brief history:

At the London Economic Conference last July the world's silver countries entered into a four-year silver agreement (TIME, July 31). Of the great silver holding countries China promised not to melt down any coin; India, not to sell more than 35,000,000 ounces per year; Spain, not to sell more than 5.000.000 ounces. The silver-producing countries agreed to buy up 35.000.000 ounces per year and keep it off the market. The U. S. quota for silver purchases was set at 24,421,410 ounces, practically the present amount of annual U. S. production.

On the strength of this international agreement the President proclaimed that the U. S. Mint would take all silver henceforth mined in the U. S., would coin half of it into dollars, half-dollars, quarters and dimes which would be handed back to the producers. The other half the Government would keep for its trouble. Since by law 50 ounces of silver make $64.50 in coins, silver miners would receive that amount for every 100 ounces they produced, or 64 1/2-c- per ounce, about 21-c- more than the current market price.

Celebration. The news meant more to silver men than Repeal meant to distillers. In Colorado and Nevada there was singing in the streets and free drinks in the bars. On the Manhattan Commodities Exchange silver jumped 3-c- an ounce. Mining stocks boomed on the New York Stock Exchange and the entire stock list zoomed upward at one more whiff of inflation.

But those who hoped for direct cash profits were no happier than the little group of men to whom silver is almost a religion, those who have fought to raise its price, to see the day when silver once more became money. To Senator Pittman of Nevada, who wangled through the London agreement, it was a delightful Christmas present. In the first flush of joy he predicted that it would: 1) stabilize the world price of silver at 64 1/2 -c- 2) increase buying power in the U. S. 50%; 3) increase the exchange value of the moneys of China, India, Mexico and all South America 60% so that they would buy more U. S. products; 4) bring happiness to millions depending on mining. To many miners full of moonshine, discharging their revolvers in the streets of Leadville, to many others dancing with girls atop the bars of Tonopah, happiness had already been brought. There were only a few grumblers, men who had stuck to the old Bryan ideal of silver at 16-to-1. At that day's gold price ($34.06) the ratio became 53 to 1.

Significance. To Franklin Roosevelt in the White House and to many another keen political head the stir had quite another significance. It meant that most of the silver bloc in Congress had had their thunder stolen. Only a few months ago silver was 25-c- an ounce and 64 1/2 -c- was such a magnificent price by comparison that they would appear foolish to complain By his action the President appeared to have detached one of the most earnest battalions from the inflationist army, to have disarmed what would undoubtedly have been one of the most troublesome factions in the new Congress. As for the results of the new policy, quidnuncs saw that:

1) The President had gone far beyond the terms of the London agreement for he had undertaken to buy not 24,000,000 ounces a year but all that U. S. producers might mine. At present U. S. production is estimated at about 24,000,000 ounces but it was 31,000,000 ounces in 1931, 50,000,000 ounces in 1930 and 60,000,000 ounces in 1929. Inasmuch as the price of silver was less than 60-c- an ounce in 1929, the U. S. Mint will probably be offered a lot more than 24,000,000 ounces at 64 1/2-c- 2) Since the world market price of silver has been around 43-c- an ounce, the proclamation will give a bonus of about 21-c- an ounce to silver producers, or about $5,000,000 a year at present rates of production; $12,000,000 at the 1929 level. Chief beneficiaries of this bonus will be the big U. S. silver producers:

1929 U. S. Production Anaconda 8,564,609 oz.

Silver King Coalition 2,993,193 oz. Tintic Standard 2,986,213 oz.

Park Utah Consolidated 2,759,678 oz. United Verde 2,092,418 oz. 3) Assuming U. S. silver production increases to 60,000,000 ounces a year, half of that converted into dollars and put in circulation will amount to less than $40,000,000. That much new money would be less than half the amount added to circulation in the week before Christmas, all in the ordinary course of Federal Reserve's operations. So direct inflationary effect would be trifling compared to other measures now afoot.

4) Since the Mint will pay 64 1/2-c- an ounce only for silver newly mined in the U. S., the world price of silver will not necessarily rise to that level, will continue to be fixed by supply & demand. The proclamation will, however, remove 24,000,000 ounces (the U. S. quota) from world supply. This is about 20% of world production. This will undoubtedly tend to raise the world price but if private hoards of silver begin to leave India and China (which hold 600,000,000 oz.) or if Manhattan's silver speculators decide to dump their 100,000,000 oz. holdings, the inflationary effects of the new policy will be blunted at the start.

5) If world silver prices actually mount all nations will soon be laying down goods in China at very cheap rates in terms of China's silver money. Result of this dumping is likely to be deflation in China. Chinese workmen will be thrown out of work, and the probable result will be actual reduction of China's demand for foreign goods including U. S. cotton, oil, lumber.

This file is automatically generated by a robot program, so reader's discretion is required.