FROZEN SILVER

Auckland Star, Volume LXXIII, Issue 125, 29 May 1942, Page 4

FROZEN SILVER

U.S.A.'S 46,000 TONS

OLD FALLACIES RECALLED

(By JAY G. HAYDEN)

ASHINGTON, April 18.

The cro- uing touch of irony as respects tne New Deal's currency manipulations has been supplied in the suggestion by Donald M. Nelson, chairman of the War Production Board, that 40,000 tons of the Treasury's over-priced silver stock be released to supply solder and bus bars for the war machine.

Silver Senators have added the proposal that this silver be leaseloaned to the W.P.8., a subterfuge designed to avoid the necessity for legislation which might eventuate in wiping out the present requirement that the Treasury purchase all domestically-mined silver at 71. li cents an ounce, approximately twice the prevailing commercial price. *" The 40,000-ton figure obviously arises from the fact that this is approximately the amount of socalled "free silver" in the Treasury vaults. To be exact, the free silver stock at last report amounted to 1,365,441,310 ounces, which the Treasury calculates as equivalent to 46,000 tons. This is valued on the Treasury books at its purchase price of 665,079,182 dollars, an average of 47 cents an ounce. In addition the Treasury has 1,153,275,993 ounces (about 40,000 tons) of monetary silver. This also cost an average of 47 cents an ounce, but it is valued on the books at 1,491,104,314 dollars, based on the artificially established currency price of 1.29 dollars an ounce. Approximately a third 9f this monetary silver has been coined or pledged as security for greenback issues. Heavy Commercial Demand Technically, the Treasury is still offering 35 1-8 cents an ounce for foreign-mined silver. Actually the commercial demand for silver now is so great that all foreign offerings are being bought in at something above the Government price. One private use to which silver currently is being put is to replace prioritycontrolled tin in the coating of beer cans. The Silver Act of January, 1934, required the Government to buy silver until it reached the theoretical coinage price of 1.29 dollars an ounce, but there was no stipulation as to how quickly this aim was to be attained. The Treasury began by offering 60 cents an ounce (abciut 15 cents above the then prevailing commercial price) for all silver, both domestic and foreign. For more than a year American Government buying seemed to have no marked effect on the world silver situation, 'out in the fall of 1935 the silver price skyrocketed. President Roosevelt jacked up the Government's silver buying price by successive stages to about 78 cents, but the world price continued to run rapidly ahead even of this figure. it became apparent that foreign speculators were deliberately bulling the market for their own profit, and also the swiftly mounting price was draining Mexico, China and other countries of their silver currencies and otherwise producing serious international repercussions.

Political Uses _ In face of this situation the American Government suddenly reversed its policy. It ceased buying foreign silver and pegged its price for American-mined silver at 64.64 cents an ounce. When the world price dropped below 50 cents the Treasury resumed a limited buying of foreign silver, its policy apparently being to gradually ease downward the world price. As stated above, the Government's offer for foreign silver now is 35 1-8 cents an ounce. In the summer of 1939 the administration ran into a political jam. Republicans, seeking to repeal the Government's authority to buy both silver and gold, entered into an alliance with Democratic senators from silver-producing States. In return for Republican support of an amendment boosting the Government price for domestically-mined silver to 78 cents an ounce, the silver senators supplied the votes necessary to repeal all of the President's other powers of currency manipulation.

But after House opposition had thrown the whole bill into conference the silver senators turned tail and made a counter deal with the administration by which all of the President's currency manipulation powers were retained at expense of the 71.11 cent price for domestically-mined silver, which still prevails. The Treasury currently is buying domestic silver at a rate of approximately 5,000,000 ounces a month, representing a bounty to American producers of about 21,000,000 dollars annually. This gratuity, however, is relatively inconsequential in comparison with the hundreds of millions of dollars of American taxpayers' money that silver-buying has placed in the pockets of foreign producers and speculators.

Bimetalism Delusion Two arguments initially were offered in favour of silver buying. One was the old William Jennings Bryan theory that cheapening of the dollar by bimetalism would increase commodity prices and, by reducing debts, soak the rich and help the poor. The other was that increase in value of silver would prove a great boon to China, Mexico. Peru and other silver currency countries and stimulate trade between these countries and the United States. Silver buying obviously has not influenced American price levels in the slightest, for the reason that the Government never acquired enough of this metal to remotelv compete with gold as a monetary" stabiliser. Not even gold devaluation appreciably affected buying power of the dollar. As for foreign countries, China yelled holy murder whenever the silver price rose. Because it produces no silver, the effect of the American policy on China has been to increase value of its currencv and therebv depress .conimodity prices. Mexico and Peru like American silver buvmg only to the extent thev have profited from higher prices than thev otherwise would have received for their silver production.—Auckland otar and N.A.N.A.