The Story of Silver

by William L. Silber

  50. The following quotes are from the Senate Committee on Banking and Currency, “Gold Reserve Requirements”: Hearings on S. 797, S. 743, S. 814, 89th Cong., 1st sess., February 2, 3, 4, 9, 10, 1965, pp. 142–44.

  51. Congress would sever the last link between precious metals and domestic money creation in the United States in 1968. On March 18, 1968, President Johnson signed PL 90–269 eliminating the requirement that each Federal Reserve Bank maintain reserves in gold certificates of not less than 25% of its Federal Reserve notes (currency) in actual circulation. See “President Wins Battle to Remove Gold Cover,” at https://library.cqpress.com/cqalmanac/document.php?id=cqal68-1283478.

  52. This quote and the remaining two in this paragraph are from Robert Barro, “United States Inflation and the Choice of Monetary Standard,” in Inflation: Causes and Effects, ed. Robert E. Hall, 104 (Chicago: University of Chicago Press, 1982).

  53. “Mr. Fowler’s Unwieldy Legacy,” Wall Street Journal, April 1, 1965, p. 12.

  CHAPTER 13: PSYCHIATRIST’S MELTDOWN

  1. Eugene Lichtenstein, “Our Silver Dolors,” Fortune, March 1965, p. 126ff.

  2. Ibid., p. 128.

  3. “U.S. Won’t Mint Cartwheels,” Boston Globe, May 25, 1965, p. 28.

  4. The details of Henry Jarecki’s life are based on an autobiographical manuscript referred to as Jarecki Manuscript, as well as on interviews with him.

  5. Ibid., chap. 1, p. 5.

  6. Ibid., chap. 1, p. 15.

  7. Ibid., chap. 2, p. 22.

  8. Ibid., chap. 3, pp. 7, 30–31.

  9. Ibid., chap. 4, pp. 7–9

  10. Ibid., chap. 3, pp. 34–36.

  11. Quote is from an interview with Jarecki and the subsequent story is in Jarecki Manuscript, chap. 5, p. 6.

  12. Jarecki Manuscript, chap. 4, p. 14.

  13. Ibid., chap. 3, p. 7.

  14. Ibid., chap. 4, p. 14.

  15. Russell Barnhart, Beating the Wheel (New York: Kensington Publishing Company, 1992), p. 93.

  16. “Treasury Halts Silver Dollar Run, Offers Bullion for Paper Money,” Washington Post, May 26, 1964, p. A1.

  17. Interview with Jarecki and in Henry Jarecki, An Alchemist’s Road: My Transition from Medicine to Business (privately printed, October 1989), p. 1.

  18. Ibid.

  19. “Treasury Acts to Guard Silver,” New York Times, May 19, 1967, p. F55.

  20. Handy & Harman, The Silver Market in 1967, 52nd Annual Review (New York, 1968), p. 7.

  21. Ibid.

  22. According to the New York Times, “Silver Futures All Set Records,” May 19, 1967, p. F61. The news on Thursday, May 18 came out after the close of trading, although “there was a riptide of enthusiasm for silver futures” even before the announcement. The $1.49 price quotation is for the close of business on Friday, May 19, for the spot May contract on Comex (see Wall Street Journal, May 22, 1967, p. 4, “Silver Price Spiral Is Seen Affecting Gold as Crises, New U.S. Rules Shake Markets”). The previous peak price for silver comes from the U.S. Department of the Treasury, Annual Report of the Secretary of the Treasury, for the Fiscal Year Ended June 30, 1920 (Washington, DC: Government Printing Office, 1921), p. 595.

  23. The CRB database shows July silver futures rising the daily permissible limit of 5¢ on Thursday, May 18, Friday, May 19, Monday, May 22, and Tuesday, May 23. It closed at $1.544 on Wednesday, May 24, up 2¢ on the day, which means that was the first unconstrained response in futures contracts to the May 18 announcement.

  24. Jarecki, Alchemist’s Road, p. 1.

  25. See http://sabr.org/research/mlbs-annual-salary-leaders-1874-2012 and https://sportslistoftheday.com/2011/12/05/major-league-baseballs-average-salaries-1964-2010/.

  26. Jarecki suggests that delivery cost is about four cents an ounce in Jarecki Manuscript, chap. 6, p. 6, but writes in the Alchemist’s Road, p. 1, that silver must be above $1.35 an ounce compared with $1.29 to cover costs, suggesting a six-cent delivery cost. But he adds in “nuisance” in the latter estimate so that slightly less than five cents was probably the best estimate.

  27. There were $547 million silver certificates outstanding in May 1967, according to the Board of Governors of the Federal Reserve System, Banking and Monetary Statistics: 1941–1970, p. 621.

  28. See New York Times, August 3, 1967, p. 48.

  29. This story is from Jarecki, Alchemist’s Road, p. 3.

  30. Washington Post and Times Herald, July 7, 1967, p. F7.

  31. This quote and the next are from Jarecki, Alchemist’s Road, p. 5.

  32. Public Law 90–29, 90th Cong., “An act to authorize adjustments in the amount of silver certificates outstanding and for other purposes,” in U.S. Department of the Treasury, Annual Report of the Secretary of the Treasury, for the Fiscal Year Ended June 30, 1967 (Washington, DC: Government Printing Office, 1968), p. 400. Also see Handy & Harman, The Silver Market in 1967, 52nd Annual Review (New York, 1968), p. 6.

  33. “Treasury Halting Sales of Its Silver at $1.29 An Ounce,” New York Times, July 15, 1967, p. 32.

  34. Ibid.

  35. The closing price of the spot contract (July) on Comex, Monday, July 17, 1967, was $1.795 compared with the closing price of $1.6985 on Friday, July 14, 1967, for a 5.7% increase.

  36. “Silver Certificates and Certain Nickels Draw Premiums as Dealers Seek Easy Gain,” Wall Street Journal, August 14, 1967, p.18.

  37. Jarecki, Alchemist’s Road, p. 6.

  38. “Treasury to Restrict Silver Sales to Grades Needing More Refining,” Wall Street Journal, October 13, 1967, p. 19.

  39. “Prices of Silver in Sharp Advance,” New York Times, October 14, 1967, p. 30.

  40. Franz Pick, Silver: How and Where to Buy and Hold It, rev. and enl. 3d ed. (New York: Pick Publishing Corporation, [1974]), p. 39.

  41. Ibid., p. 41.

  42. The conversation is from Jarecki, Alchemist’s Road, pp. 9–10.

  43. The data are from the spot silver series of the CRB database.

  44. This quote and the remaining in this paragraph are from “Silver Now at Bryan’s 16 to 1 Ratio,” New York Times, December 25, 1967, p. 42. The $2.10 spot price was reached on December 12 and remained there through the end of the year.

  45. This quote and the next two are from “Price Rise Beginning to Worry Experts,” Washington Post and Times Herald, December 24, 1967, p. B1.

  46. Economic Report of the President, transmitted to the Congress, February 1968, together with the Annual Report of the Council of Economic Advisers (Washington, DC: Government Printing Office, 1968), p. 96.

  47. “Commodities: Speculators Continue to Trade Precious Metals,” New York Times, November 28, 1967, p. 75.

  48. Handy & Harman, Silver Market in 1967, p. 22.

  49. Ibid., p. 24.

  50. “British Devalue Pound,” Boston Globe, November 19, 1967, p. 1

  51. “How Sound Is Your Dollar?” Chicago Tribune, October 30, 1967, p. 16.

  52. See “Gold Pool Dropped to End Speculation: Two Prices Adopted by 7 Nations,” Washington Post, May 18, 1968, p. A1; and “The Gold Rush Threatens the Entire System,” New York Times, March 17, 1968, p. E3.

  53. These are the spot gold and silver prices from the CRB database.

  54. This incident and the quotes are from Jarecki, Alchemist’s Road, p. 15.

  CHAPTER 14: BATTLE LINES

  1. This paragraph and the next are based on “Two Men Are Seized, Charged with Illegal Melting of Coins,” Wall Street Journal, December 5, 1968, p. 29; and “State Man Seized in Coin Melting,” Hartford Courant, December 5, 1968, p. 12.

  2. “Two Men Are Seized, Charged with Illegal Melting of Coins,” Wall Street Journal, December 5, 1968, p. 29.

  3. Recall that the silver content of subsidiary coins is worth $1.38¼. The premium at $2.00 per ounce is 44.7%.

  4. This quote and the next are from “Opening Statement of the Secretary before the Meeting of the Joint Coinage Committee,” May 12, 1969, reprinted in U.S. Department of the Treas
ury, Annual Report of the Secretary of the Treasury on the State of the Finances, for the Fiscal Year Ended June 30, 1969 (Washington, DC: Government Printing Office, 1970), p. 379.

  5. Ibid., p. 375, for this quote and the next.

  6. See the Board of Governors of the Federal Reserve System, Banking and Monetary Statistics: 1941–1970, p. 621.

  7. There were $547 million silver certificates outstanding in May 1967, backed by .77 ounces of silver for a total of 421 ounces. There were $2.68 billion in subsidiary coin outstanding in December 1965, containing .72 ounces of silver for a total of 1.929 billion ounces, which is more than 4.5 times bigger than 421 million ounces.

  8. Jarecki, Alchemist’s Road, p. 22.

  9. “Speculators and Melters Rush for Silver Coins,” Christian Science Monitor, May 15, 1969, p. 17.

  10. This quote and the next are from Jarecki, Alchemist’s Road, p. 18.

  11. The book was published in 1971 by J.B. Lippincott, New York.

  12. Interview with Henry Jarecki.

  13. The 1684 date is in “Along Wall Street: London’s ‘Four Just Men,’” Wall Street Journal, June 13, 1937, p. 47. The 1720 date is in “Notes on ‘Precious Heritage: three hundred years of Mocatta & Goldsmid,’ ” available at http://www.barrow-lousada.org/PDFdocs/PreciousHeritage.pdf.

  14. “U.S. Silver Plan: Leading London Bullion Firm Believes Purchase Program May Not Be Completed,” Wall Street Journal, January 21, 1937, p. 4.

  15. “London Gold Market Reopened for First Day’s Trading Since ’39,” New York Times, March 23, 1954, p. 35.

  16. “Broker Forecasts a Silver Shortage,” New York Times, January 3, 1961, p. 41.

  17. Jarecki, Alchemist’s Road, p. 23.

  18. “Suzy Says: London Doings,” Chicago Tribune, May 6, 1969, p. B1.

  CHAPTER 15: NELSON BUNKER HUNT

  1. Wall Street Journal, April 25, 1966, p. 12. The headline reads “Big Oil Discovery Well.” I have transposed the words Well and Discovery to make it read properly.

  2. “Dallas Was Trying to Polish Image Tarnished by Rightists,” Washington Post and Times Herald, September 28, 1964, p. A18.

  3. “The Biggest Pipeline,” Daily Telegraph, December 14, 1964, p. 15.

  4. For Margaret’s quote see Margaret Hunt Hill, H.L. and Lyda (Little Rock, Ark.: August House Publishers, 1994), p. 251; and for Getty’s observation see Jerome Tuccille, Kingdom: The Story of the Hunt Family of Texas (Ottawa, Ill.: Jameson Books, 1984), p. 268.

  5. Tuccille, Kingdom, p. 227.

  6. The $6 to $8 billion estimate is in Bryan Burrough, The Big Rich: The Rise and Fall of the Greatest Texas Oil Fortunes (New York: Penguin Press, 2009), p. 296. Fifteen years later, in 1982, the first year Forbes published its list of wealthiest Americans, there were only 13 billionaires in the world. See http://www.forbes.com/sites/seankilachand/2012/09/20/the-forbes-400-hall-of-fame-36-members-of-our-debut-issue-still-in-ranks/.

  7. The quote is from Bunker Hunt’s testimony in Congress in 1980 and appears in House Subcommittee of the Committee on Government Operations, “Silver Prices and the Adequacy of Federal Actions in the Marketplace, 1979–80”: Hearings, 96th Cong., 2d sess., March 31; April 14, 15, 29, 30; May 2, 22, 1980, p. 313.

  8. “Suzy Says: London Doings,” Chicago Tribune, May 6, 1969, p. B1.

  9. This quote and the remaining in this paragraph are from “Decies Sold to Texan for 110,000 Guineas,” The Times, December 5, 1969, p. 15.

  10. Hill, H.L. and Lyda, p. 50.

  11. Burrough, Big Rich, p. 119, for these details.

  12. Hill, H.L. and Lyda, p. 243.

  13. Harry Hurt III, Texas Rich: The Hunt Dynasty from the Early Oil Days through the Silver Crash, (New York: W.W. Norton & Company, 1981), p. 106.

  14. Tuccille, Kingdom, p. 227.

  15. Hurt, Texas Rich, p. 106.

  16. Burrough, Big Rich, p. 157.

  17. Tuccille, Kingdom, p. 228.

  18. Hill, H.L. and Lyda, p. 15.

  19. Ibid., p. 253.

  20. Ibid., p. 229.

  21. Fay, Beyond Greed, p. 14.

  22. Hill, H.L. and Lyda, p. 239.

  23. Hurt, Texas Rich, p. 370.

  24. Tuccille, Kingdom, p. 312.

  25. Hurt, Texas Rich, p. 371.

  26. The 1957 date is given in “Britain Protests Libya’s Seizure of Oil Operations,” Wall Street Journal, December 9, 1971, p. 4.

  27. Tuccille, Kingdom, pp. 227–28.

  28. Burrough, Big Rich, p. 296.

  29. Hurt, Texas Rich, p. 21.

  30. Burrough, Big Rich, pp. 62–65, 124–25, 274–75.

  31. Hill, H.L. and Lyda, p. 264.

  32. Hurt, Texas Rich, p. 379.

  33. “U.S., British Rights Threatened by Coup,” Chicago Tribune, September 2, 1969, p. 4.

  34. “Libya Rocks Mideast,” Christian Science Monitor, September 3, 1969, p. 1.

  35. “New Libyan Regime Charts Radical Course Except for Oil,” Boston Globe, December 28, 1969, p. 25.

  36. “Libya Seizes BP Plants Worth 60 Million Pounds,” Guardian, December 8, 1971, p. 1.

  37. “Libya Denies Threat of More Takeovers,” Guardian, December 10, 1971, p. 4.

  38. “Libya Summons Oil Men,” New York Times, June 10, 1972, p. 40.

  39. “Libyan Bid Eyed by U.S. Oilmen,” Washington Post, November 6, 1972, p. A20.

  40. Ibid.

  41. “Libyan Chief, Citing U.S. Aid to Israel, Seizes Oil Concern,” New York Times, June 12, 1973, p. 1.

  42. “U.S. Oil Firm Nationalized by Qaddafi,” Washington Post and Times Herald, June 12, 1973, p. A1.

  43. This and the following quotes are from “Libya Seizes Hunt’s Stake in Sarir Oil Field; Nigeria Negotiates 35% Holding in Shell BP,” Wall Street Journal, June 12, 1973, p. 17.

  44. Burrough, Big Rich, p. 352.

  45. “Consumer Prices up .7% for June; Food Again Leads,” New York Times, July 23, 1973, p. 57.

  46. Economic Report of the President, Transmitted to the Congress, February 1974, together with the Annual Report of the Council of Economic Advisers (Washington, DC: Government Printing Office, 1974), p. 21.

  47. “Controls a Way of Life,” New York Times, July 15, 1973, p. 136.

  48. Hurt, Texas Rich, p. 325.

  49. According to the CRB database, the cash price of silver was $2.47 on June 24, 1968, the date silver certificate redemption ended, and sold for $1.80 on December 31, 1969. The low price for silver was $1.288 on November 3, 1971.

  50. The quote is from Handy & Harman, The Silver Market, 1970 (New York: Handy & Harman,1971), p. 2.

  51. The January 1970 date for Bunker Hunt’s first investment in silver is from page 1 of “Silver Chronology,” a document submitted in connection with the lawsuit Minpeco S.A. v. ContiCommodity Services, September 3, 1987.

  52. Hurt, Texas Rich, p. 317.

  53. “N.B. Hunt Purchases Mississippi Project,” Los Angeles Times, August 20, 1972, p. J8.

  54. “U.S. Investors Scurry for Land in Australia’s Big Northern Territory,” Wall Street Journal, February 9, 1970, p. 1.

  55. “When It Is Far Cheaper to Buy than Breed,” Observer, February 20, 1972, p. 18.

  56. “Yanks’ New Owners Got Deal They Couldn’t Refuse,” New York Times, January 11, 1973, p. 45.

  57. “Dahlia, American-Owned Filly, Captures Richest English Race,” New York Times, July 29, 1973, p. S1.

  58. Handy & Harman, The Silver Market in 1968, 53rd Annual Review (New York, 1969), p. 8.

  59. J.R. Welch, “Silver,”in U.S. Bureau of Mines, Minerals Yearbook 1973, vol.1, Metals and Minerals (except fuels) (Washington, DC: Government Printing Office, 1975), 1, p. 1123, available at http://digital.library.wisc.edu/1711.dl/EcoNatRes.MinYB1973v1.

  60. For an analysis of the dominance of the New York Stock Exchange, see Kenneth D. Garbade and William L. Silber, “Dominant and Satellite Markets: A Study of Dually-Traded Securities,” Review of Economics and Statistics 61, no. 3 (1979): pp. 455–
60.

  61. Handy & Harman, The Silver Market in 1972, 57th Annual Review (New York, 1973), p. 8.

  62. See Handy & Harman, The Silver Market in 1974, 59th Annual Review (New York, 1975), p. 5. The 1973 Annual Review (p. 5) states: “the Handy & Harman price, which is issued at noon each business day, reflects the level of prices on Comex at that time.”

  63. For a discussion of price discovery, see Kenneth D. Garbade and William L. Silber, “Price Movements and Price Discovery in Cash and Futures Markets,” Review of Economics and Statistics 65, no. 2 (1983), pp. 289–97.

  64. The New York Times (March 10, 1974, p. 157, “The World of Gold”) writes, “Dr. Jarecki … heads the nation’s largest gold bullion and coin trading house.” Mocatta became a major Kodak supplier according to Jarecki Manuscript, chap. 9, p. 8.

  65. Michael MacCambridge, Lamar Hunt: A Life in Sports (Kansas City, Mo.: Andrews McMeel Publishing, 2012), p. 82.

  66. Ibid., p. 91.

  67. Ibid., pp. 99–100.

  68. Burrough, Big Rich, p. 302.

  69. This quote and the next are from Roy Rowan, “Talkfest with the Hunts,” Fortune, August 11, 1980, p. 164.

  70. Jerome F. Smith, Silver Profits in the Seventies (West Vancouver, BC: ERC Publishing Company, 1972).

  71. Ibid., p. 5.

  72. Ibid., p. 18.

  73. Ibid., p. 24. The 40% silver half-dollar was discontinued by Public Law 91–607 signed by President Nixon on December 31, 1970. See Handy & Harman, The Silver Market in 1970, 55th Annual Review (New York, 1971), pp. 8–9.

  74. Smith, Silver Profits, pp. 26, 44.

  75. Ibid., p. 43, invokes the 16 to 1 ratio and applies it to gold at $70 for an implied silver price of $4.38. I take the same 16 to 1 and apply it to data for September 28, 1973, the last trading day of the third quarter and right before the Hunts began to buy in bulk. The $100 price for gold is the afternoon fixing from the London bullion market for September 28, 1973. I used the London bullion market $2.70 quote for silver on the same date.

  76. Tuccille, Kingdom, pp. 312–13.

  77. This quote and the next are in Smith, Silver Profits, p. 48.

  78. Ibid., p. 47, for this quote and the remaining in this paragraph.