71

71-c- Silver

In January 1933 U. S. silver producers got 25-c- an oz. for their product. Before the year was out they were getting 43 (devalued) cents. Then President Roosevelt by proclamation decreed that the Treasury would give them 64 1/2-c- an oz. for all the silver they produced. For fifteen months they have joyfully sold their output to the New Deal at that price--a better price than they had received since 1926. Last week President Roosevelt upped the price of silver again, this time to 71-c- which, except for the Wartime boom, was the best price that metal had enjoyed in 40 years. Mining stocks had a flurry on all exchanges. Senators from silver States made speeches and urged new bills in Congress. International silver merchants excitedly bid up the world price to 65-c-. But the U. S. public and U. S. stockmarkets remained calm. Two years ago they would have frothed and foamed at such news but now it was old stuff. Stocks failed to bound upward. Pulses (outside the Senate) failed to beat faster.

Sop. "Simply one maneuver in the steady retreat of the New Deal Administration before the silver gang," said the New York Herald Tribune. And most disinterested observers agreed that the President had jacked up the price of silver principally to forestall a silverite assault in Congress. However it was a trivial sop. U. S. producers nowadays turn out only about 26,000.000 oz. of silver a year and their bonus from the price increase will be less than $2,000,000.

Actually the Treasury's purchases from U. S. producers and the price it pays them is but the tail on the dog of the Treasury's big silver policy. Last June a silverite putsch in Congress got the President to accept a bill authorizing the Treasury to buy silver until the price of silver reached $1.29 or until the U. S. metallic reserve against its currency consisted of 25% silver and 75% gold. The Treasury in less than ten months has bought:

1) 24,000,000 oz., the entire output of U. S. producers.

2) 112,000,000 oz. from U. S. owners of silver bullion.

3) 255,000,000 oz. from the world at large.

These purchases in the world market, amounting to nearly nine times U. S. output, boosted the world price for silver until last week it topped 64-c-. When it did so U. S. producers who had been getting 64 1/2-c- all along ceased to receive any better price than any other producers. Hence the new price to give domestic producers a new bonus.

Significance. When the Silver Purchase Act of 1934 was passed, many an observer pointed out that the Treasury had discretion in the purchase of silver, probably would not try very hard to build up a huge silver reserve. Last week's announcement showed that those observers were wrong. The figures on Treasury purchases, released for the first time, showed that the Treasury had been far from idle. It now holds $1.450,000.000 worth of silver (fictitiously valued at $1.29 per oz. in Government bookkeeping), which is half what is required to bring silver stocks to the 1-to-3 ratio with gold. At the present rate of acquisition, that proportion should be reached in less than three years. Meantime the Treasury is, on a small scale, trading gold for silver with Mexico, tending to bring that proportion nearer still. Boosting the price to domestic producers indicates that the Treasury intends to continue buying silver and forcing up the world price.

Thus the U. S. is acquiring a huge silver investment at prices maintained only by its own huge purchases. Why it should do so puzzles some economists, but only those who have ignored the writings of the New Deal's monetary adviser, Dr. George Frederick ("Rubber Dollar") Warren. Dr. Warren's chief tenet is, in substance, that the Depression is due to the production of gold falling behind the production of other commodities. He is not primarily a silverite but in his book Gold & Prices, published month ago,* he asserted: "The production of silver has come much nearer the production of other things than has the production of gold. ... A combination of gold and silver (as money) would be much more stable than gold."

As yet the U. S. has no combination of gold and silver. It is on the gold standard (at 59-c- to the dollar) and has on the side a hoard of silver, a highly speculative asset against some of its liabilities. Only sensible explanation of the Treasury's continuing to increase that huge speculation is that it is looking forward to making the dollar a gold & silver combination. That would be symmetallism, first cousin to bimetallism and would take the speculative element out of the U. S. silver hoard. But no word did the Treasury breathe last week of symmetallism or bimetallism. Talk of monetary changes has brought too many dead cats flying towards the Treasury. Now the Treasury no longer talks.

*John Wiley & Sons ( $ 5)

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