The Story of Silver

by William L. Silber

  32. From 1927 through the first eleven months of 1933, approximately 1,229,000 ounces were produced by Mexico, Canada, Australia, Peru, and the United States, the five principal world producers at the time. The United States accounted for about 299,000 ounces, or 24% of the total (see “2 Silver Prices Now in Effect,” Wall Street Journal, December 23, 1933, continued on p.7).

  33. “Gold Plan Aids Speculations in U.S. Silver,” Washington Post, November 7, 1933, p. 13.

  34. Ibid.

  35. This quote and the next are from Morgenthau Diaries, vol. 00, p. 82.

  36. This quote and the others in this paragraph are from ibid., p. 94.

  37. Ibid. See the entry for November 2, 1933, which refers to the prior evening.

  38. The price on October 21 was 36⅞ and the price on November 6 was 41½, which is a 12.5% increase. The daily standard deviation of returns during the 90 calendar days prior to October 21 was 1.414. There are 16 calendar days between October 21 and November 6, making the standard deviation over that time period equal to 5.66 (1.414 times the square root of 16). 12.5 divided by 5.66 gives a t-statistic of 2.21.

  39. “Pittman, Silver Pact Author, Sees Export Trade Increase,” Washington Post, December 22, 1933, p. 8.

  40. This quote and the descriptions below are from “Ghost Towns to Be Revived as Government Buys Silver,” Chicago Daily Tribune, December 23, 1933, p. 6.

  41. The following description is from Israel, Nevada’s Key Pittman, p. 95.

  42. “Hint of World Gold Deal,” New York Times, December 23, 1933, p. 1 continued.

  43. Ibid.

  44. Senate Committee on Foreign Relations, Commercial Relations with China, Report No. 1716, 71st Cong., 3d sess., February 17 (calendar day 20), 1931, p. 4.

  45. Sir Arthur Salter, China and Silver (New York: Economic Forum, Inc., 1934), esp. pp. 3–6. Also see Leavens, Silver Money, p. 216.

  CHAPTER 7: CHINA AND AMERICA COLLIDE

  1. Senate Resolution 443, “Advising the President relative to our commercial relations with China, the conditions in China, and the necessity for moral, intellectual, and financial support of the National Government of China,” 71st Cong., 3d sess., January 26 (calendar day February 11), 1931, p.3.

  2. See Eduard Kann, The Currencies of China: An Investigation of Silver & Gold Transactions Affecting China (Shanghai: Kelley & Walsh, Limited, 1927), p. 234.

  3. Ibid., p. 2.

  4. See Leavens, Silver Money, pp. 86–87. Also see “An Act Regulating Foreign Coins, and for Other Purposes,” February 9, 1793.

  5. See Bratter, Silver Market Dictionary, p. 173.

  6. Ibid., p. 172, defines sycee as a measure of fineness, and Kann, Currencies of China, chap. 3, discusses settling transactions with sycee.

  7. Bratter, Silver Market Dictionary, p. 200. This entry refers to the “coinage law promulgated at Nanking on March 8, 1933,” which is about one month earlier than the April 6, 1933, date given on page 173.

  8. This paragraph is based on Franklin D. Roosevelt: “Message to Congress Recommending Legislation on the Currency System,” January 15, 1934. Online by Peters and Woolley, American Presidency Project. http://www.presidency.ucsb.edu/ws/?pid=14868.

  9. For pictures of Madonna and Bieber with gold teeth, see http://www.newnownext.com/pop-stars-summers-it-accessory-grills/08/2013/.

  10. Americans were permitted to own gold as of December 31, 1974, under Presidential Executive Order 11825.

  11. Roosevelt, “Message Recommending Legislation on Currency System.”

  12. See Garbade, Birth of a Market, pp. 242–43.

  13. See section 43 (b) (2) of the Thomas Amendment, reprinted in Leavens, Silver Money, pp. 372–73.

  14. “New Money Is Demanded by Senators in Gold Bill. … Wheeler to Insist on Silver Buying,” Washington Post, January 25, 1934, p. 1.

  15. Leavens, Silver Money, p. 355, table E shows total world production of 169 million ounces for 1933. The next five years averaged 240 million ounces per year. Leavens writes (p. 258): “The compulsory purchase of such a large amount of silver would have sent the price up rapidly toward the 16 to 1 ratio.”

  16. This quote and the next are from “Gold Bill Passed by Senate 66–23; Silver Vote Large,” New York Times, January 28, 1934, p. 1 continued.

  17. “Senate Votes Gold Bill 66 to 23, Killing Silver Rider by Slim Margin,” Hartford Courant, January 28, 1934, p. 1.

  18. “Gold Bill Passed by Senate 66–23; Silver Vote Large,” New York Times, January 28, 1934, p. 1 continued.

  19. Franklin D. Roosevelt: “Message to Congress on Silver Policy,” May 22, 1934. Online by Peters and Woolley, American Presidency Project. http://www.presidency.ucsb.edu/ws/?pid=14882.

  20. “Text of Silver Purchase Bill of 1934,” Wall Street Journal, May 23, 1934, p. 5. Also see U.S. Department of the Treasury, Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1935 (Washington DC: Government Printing Office, 1936), pp. 42–43. Silver certificates were first authorized and issued under the Bland-Allison Act of February 28, 1878 (see Bratter, Silver Market Dictionary, p. 149).

  21. This quote and the previous reference to “permissive provisions” are from “President Asks Silver Base Be Ultimately 1 to 3 Gold; Wants 50% Speculation Tax,” New York Times, May 23, 1934, p. 1 continued.

  22. The price of silver was quoted at 45⅛ for May 9, 1934, compared with 43¾ for May 8, 1933, by Handy & Harman. According to the Wall Street Journal (“Commodity Exchange, Inc.,” May 9, 1934, p. 14) the price increase occurred in response to the news of “an agreement in principle looking to nationalization of existing silver stocks in the United States and inclusion of silver in the metallic reserves.” That news release occurred after 2 p.m. on May 8, which is after the H&H quote for that day, so the H&H quote for May 9 reflects the impact of the news. The 3.1% price increase is significant compared with the .867% daily standard deviation of returns over the previous 90 calendar days. There was no price impact when the bill was reported in the Senate on May 22, 1934, reflecting the report by the Christian Science Monitor (“U.S. Silver Plan Is Not Expected to Upset Prices,” May 23, 1934, p. 2) that “Roosevelt’s silver message had been so accurately forecast that its actual publication had only a slight firming effect.”

  23. Estimates of the ounces to be purchased under the program varied considerably. The New York Times (“President Asks Silver Base Be Ultimately 1 to 3 Gold; Wants 50% Speculation Tax,” New York Times, May 23, 1934, p. 1 continued) reported a maximum of 1.7 billion ounces. Leavens, Silver Money, pp. 278–79, table 17, calculates the initial requirement as 1.3 billion ounces.

  24. “Treasury Pushes New Silver Policy,” New York Times, June 22, 1934, p. 31.

  25. “The Treasury’s Regulations for Federal Transactions in Silver,” New York Times, June 20, 1934, p. 36.

  26. See “Roosevelt Sets Sail Tonight on Vacation at Sea,” Chicago Daily Tribune, July 1, 1934, p. 8.

  27. See “Roosevelt to Retain Close Touch with Affairs,” New York Times, June 29, 1934, p. 20.

  28. The one-page memo, dated June 28, 1934, and accompanying documents are from the President’s Official File (OF) 21, Box 1, Folder “Dept of Treasury, Mar-Aug 1934,” Franklin D. Roosevelt Presidential Library, Hyde Park, N.Y.

  29. Morgenthau Diaries, vol. 2, pt. 1, July 1–December 31, 1934, p. 3, available at http://www.fdrlibrary.marist.edu/archives/collections/franklin/?p=collections/findingaid&id=535&q=&rootcontentid=188897#id188897.

  30. “Spot Silver 48 Cents, Four-Year High,” Wall Street Journal, August 9, 1934.

  31. Morgenthau Diaries, vol. 2, pt. 1, p. 14.

  32. “Pittman Sees End of Silver Question,” in “Leading Countries of World Mark Time and Await Effect of U.S. Nationalizing Metal,” Christian Science Monitor, August 10, 1934, p. 1 continued.

  33. “The President’s New Order Nationalizing Silver Explained,” Chicago Daily Tribune, August 10, 1934, p. 1.

 
34. “Retail Sales Gain Unexpectedly in August; Outlook Brightens,” Washington Post, September 3, 1934, p. 18.

  35. See “Silverware,” Wall Street Journal, September 19, 1934, p. 19; and “New Struggle in Silver Seen,” Wall Street Journal, September 26, 1934, p. 9.

  36. “China Pleads That U.S. Stop Buying Silver,” Christian Science Monitor, September 29, 1934, p. 1.

  37. “American Trained Monetary Expert Steadies China’s Tottering Currency,” Hartford Courant, January 13, 1935, p. D1.

  38. “The Hull and Kung Notes on Silver,” New York Times, October 15, 1934, p. 4.

  39. Ming’s denunciation came in June 1934 in a speech in New York, which was cited in “Denies China Plans Embargo on Silver,” New York Times, September 30, 1934, p. 7.

  40. “Shanghai Silver Again Moves Out,” Wall Street Journal, September 12, 1934, p. 13.

  41. “Silver in the Far East,” New York Times, June 6, 1934, p. 20.

  42. “The Ungrateful Chinese,” Washington Post, September 30, 1934, p. B4.

  43. Ibid.

  44. “Silver Price Again Reaches New High,” Wall Street Journal, October 13, 1934, p. 2.

  45. “The Hull and Kung Notes on Silver,” New York Times, October 15, 1934, p. 4.

  46. Schlesinger, Age of Roosevelt, p. 191.

  47. Hull, Memoirs of Cordell Hull, 1, pp. 207–8.

  48. See Blum, From the Morgenthau Diaries, 1, p. 206, and Dorothy Borg, The United States and the Far Eastern Crisis (Cambridge, Mass.: Harvard University Press, 1964), pp. 75–82.

  49. Cordell Hull to Joseph Grew, telegram, May 1, 1934, 7 p.m., in U.S. Department of State, Foreign Relations of the United States Diplomatic Papers, 1934, The Far East (Washington DC: Government Printing Office, 1934), 3, p. 153.

  50. Cordell Hull to Edwin Cunningham, telegram, May 18, 1934, 11 a.m., in ibid., 3, p. 437.

  51. This quote and the remaining in this paragraph are from “Dictated on November 27th,” in Morgenthau Diaries, vol. 2, pt. 2, p.194, available at http://www.fdrlibrary.marist.edu/archives/collections/franklin/?p=collections/findingaid&id=535&q=&rootcontentid=188897#id188897.

  52. “Deflation in China Gains Momentum,” New York Times, December 9, 1934, p. N7.

  53. “China Losing Her Silver,” New York Times, December 7, 1934, p. 17.

  54. “Chinese Silver Coins Imported by Chicago Firm,” Chicago Daily Tribune, December 16, 1934, p. B8.

  55. Ibid.

  56. “China Is Hard Hit by Loss of Silver,” New York Times, December 16, 1934, p. N13.

  57. Morgenthau Diaries, vol. 2, pt. 2, p. 301ff.

  58. Ibid., p. 303ff. The excerpts of the conversation reported below are from the full transcript of the telephone call.

  CHAPTER 8: BOMBSHELL IN SHANGHAI

  1. Morgenthau Diaries, vol. 2, pt. 2, p. 294ff.

  2. Ibid., p. 345 and unnumbered page following p. 347.

  3. This quote and the next are from Morgenthau Diaries, vol. 3, pt. 1, January 1–February 28, 1935, p. 53, available at http://www.fdrlibrary.marist.edu/archives/collections/franklin/?p=collections/findingaid&id=535&q=&rootcontentid=188897#id188897.

  4. Ibid.

  5. Arthur N. Young, interview by James R. Fuchs, February 21, 1974, oral history interview, Harry S. Truman Presidential Library & Museum at https://www.trumanlibrary.org/oralhist/young.htm. Young had a PhD degree in economics from Princeton University and served as an adviser to the Chinese government from 1929 until 1947.

  6. See “American Trained Monetary Expert Steadies China’s Tottering Currency,” Hartford Courant, January 13, 1935, p. D1, and “Books of the Times: The Soong Dynasty,” March 14, 1985.

  7. This quote and the next are from Morgenthau Diaries, vol. 3, pt. 1, p. 53.

  8. For Bullitt’s background see: “Bullitt Confirmed as Envoy to Soviet,” New York Times, January 12, 1934; “The Strange Case of William Bullitt,” New York Review of Books, September 29, 1988; and Moley, After Seven Years, pp. 136–37.

  9. FDR to William C. Bullitt, August 14, 1934, in For the President Personal and Secret: Correspondence between Franklin D. Roosevelt and William C. Bullitt, ed. Orville H. Bullitt (Boston: Houghton Mifflin Company, 1972), pp. 94–95.

  10. FDR to William C. Bullitt, August 29, 1934, in response to Bullitt to FDR, August 5, 1934. Bullitt, For the President Personal and Secret, pp. 92–93, 95.

  11. The telephone conversation is condensed from Morgenthau Diaries, vol. 2 pt. 2, pp. 338–43. See Bullitt, For the President Personal and Secret, pp. 40, 42, for the earlier interaction between Bullitt and Morgenthau.

  12. Morgenthau Diaries, vol. 3, pt. 1, p. 1.

  13. Ibid., p. 84.

  14. This quote and the remaining in this paragraph are from Chicago Daily Tribune, January 2, 1935, p. 1.

  15. See Tai-chun Kuo and Hsiao-ting Lin, T.V. Soong in Modern Chinese History (Stanford, Calif.: Hoover Institution Press, 2006), pp. 3–5.

  16. This quote and the remaining in this paragraph are from the communication from Soong to Bullitt in U.S. Department of State, Foreign Relations of the United States Diplomatic Papers, 1935, The Far East (Washington DC: Government Printing Office, 1935), 3, pp. 532–33. “Copies were given by Mr. Bullitt to the President” appears in the footnote to the document.

  17. See “Japanese Attack Towns in Chahar,” New York Times, January 24, 1935, and “Japanese Planes Kill 44 Chinese as Chahar-Jehol Dispute Rages,” Hartford Courant, January 26, 1935, p. 19.

  18. “Japan’s New Move Starts Old Alarms,” New York Times, January 27, 1935, p. E5.

  19. These quotes and those in the next two sentences are from “Japan to Offer China Union in Economic Bloc,” Chicago Daily Tribune, January 28, 1935, p. 5.

  20. “China to Melt Ornaments for Silver Stocks,” Chicago Daily Tribune, February 15, 1935, p. 31. Leavens, Silver Money, p. 308, writes that the Chinese dollar was held “about 25 percent below parity with the world price of silver.” The article in the Chicago Daily Tribune does not describe the regulations that were imposed and Leavens (p. 310) simply states “the government attempted to attract miscellaneous old silver jewelry.”

  21. This incident and the quotes are in Morgenthau Diaries, vol. 3, pt. 2, p. 305, available at http://www.fdrlibrary.marist.edu/archives/collections/franklin/?p=collections/findingaid&id=535&q=&rootcontentid=188897#id188897.

  22. The quotes are from Arthur N. Young, China’s Nation-Building Effort, 1927–1937 (Stanford, Calif.: Hoover Institution Press, 1971), p. 227, 227n17. Young was a financial adviser to China and states that a copy of the telegram is in his files. The substance of the telegram is confirmed in Morgenthau Diaries, vol. 3, pt. 2, p. 305.

  23. Morgenthau Diaries, vol. 3, pt. 2, p. 305.

  24. See U.S. Department of State, Division of Far Eastern Affairs, “China: Silver Situation, Problem and Suggested Solution,” February 14, 1935, in Morgenthau Diaries, vol. 3, pt. 2, pp. 300–303. The State Department’s solution was a suggestion (p. 302) “to the Chinese that they consider asking for a cooperative loan from several of the powers for assistance of China in a program of currency reform.”

  25. These monthly averages, which are for the first three months of 1935, come from the House Subcommittee of the Committee on Appropriations, “Treasury Department Appropriation Bill for 1938”: Hearings, 75th Cong., 1st sess., p. 27. According to Leavens, Silver Money, pp. 278–79, table 17, silver had increased from 12% of monetary reserves to a little over 16% since mid-1934, but the required amount rose because of gold inflows to the United States.

  26. The one-billion-ounce estimate is from Leavens, Silver Money, p. 279, and also appears contemporaneously in “Upward Revision in Statutory Price Level Viewed,” Wall Street Journal, April 12, 1935, p. 1.

  27. “Everybody’s Business,” Boston Globe, April 11, 1935, p. 23.

  28. The close on April 10 was 64⅛, which is an increase of 1.77% compared with 63 on April 9 and is statistically significant given the average daily standard deviation of .56% calc
ulated over the previous 90 calendar days.

  29. “President Puts Price of Silver Up to 71 Cents,” Chicago Daily Tribune, April 11, 1935, p. 27.

  30. According to the Wall Street Journal, April 13, 1935, p. 8: “The 68½ cent price for silver is the highest price fixed in New York since January 9, 1926.” The price increase on April 11 was 2.5% and on April 12 it was 4.1%, both of which are statistically significant given the average daily standard deviation of .56% reported above.

  31. “Upward Revision in Statutory Price Level Viewed,” Wall Street Journal, April 12, 1935, p. 1.

  32. Manchester Guardian, April 12, 1935, p. 19.

  33. “Markets of World Quickly Respond to Silver Increase,” Wall Street Journal, April 12, 1935, p. 1.

  34. “Everybody’s Business: Speculation in Silver Sweeps the Market Bare and Makes Manipulation Easy,” Boston Globe, April 24, 1935, p. 13.

  35. The new subsidized price at the Treasury is 77.57¢ per ounce of 1000 fine silver and Handy & Harman adjust this to 77¢ for the industry standard 999 fine and selling fees (see “Silver: Daily Quotations by Handy & Harman,” Wall Street Journal, April 26, 1935, p.12). The Wall Street Journal, April 29, 1935, p. 8, reports Handy & Harman quotes for the free market price of 77¢ on April 25 and 81¢ on April 26.

  36. New York Times, April 25, 1935, p. 2.

  37. The quote is from Morgenthau Diaries, vol. 4, pt. 3, March 1–April 22, 1935, p. 227, available at http://www.fdrlibrary.marist.edu/archives/collections/franklin/?p=collections/findingaid&id=535&q=&rootcontentid=188897#id188897.

  38. This quote and the remaining in this paragraph are from Morgenthau Diaries, vol. 5, pt. 1, April 23–May 30, 1935, pp. 28–29, available at http://www.fdrlibrary.marist.edu/archives/collections/franklin/?p=collections/findingaid&id=535&q=&rootcontentid=188897#id188897.

  39. Ibid., pp. 30–31, for this quote and the following condensed conversation.