The Silver Scandal
September 2, 1942
New York Times

No amount of argument can alter the fact that our national silver policy has become a national scandal. Our Government holds stocks of nearly 3,000,000,000 ounces of silver, most of which, in view of our huge gold reserves, are utterly unneeded for monetary purposes. Yet these is a shortage of the metal for industrial use. War industries are having difficulty obtaining silver for consumption; other industrial users are having difficulty obtaining silver for consumption; other industrial users are being needlessly driven out of business. Having created this artificial scarcity by our policy of subsidizing domestic producers, we have now decided to increase the subsidy to foreign producers and even to subsidize the revenues of a foreign government in the hope of getting more silver from abroad.

There is no dispute about where the blame for the situation lies. It lies squarely upon the little group of silver Senators and their inflationist allies in both houses of Congress who have fastened upon the country and stubbornly keep there laws requiring the Treasury to offer for all domestically produced silver a price of 71.11 cents an ounce, which is twice the recent market price, and forbidding the Treasury to sell silver at less than $1.29 an ounce, which is nearly four times the recent market price.

The Treasury is not responsible for these laws. It has been openly unsympathetic with them. It has repeatedly advocated their outright repeal. Moreover, it has endeavored, within the restrictions imposed by the silver legislation, to make some of its holdings available to war industries by "lease-lending" its "free silver," by stopping its purchase of foreign silver and by postponing the delivery of newly mined domestic silver in the hope that industrial users will be able to outbid the offer it is required by law to make. Nor was the Treasury itself directly involved in the recent increase in the price of foreign silver, as was incorrectly stated in these columns recently. In this case it was two other branches of Government. The State Department held some conversations with Mexico the gist of which was that it would be a nice thing if Mexico could get a higher price for silver so as to encourage production and permit the Mexican Government to levy an additional tax thereon. The increase agreed upon was 10 cents an ounce, 3 cents to subsidize the Mexican producer and 7 cents to subsidize the Mexican Government. Then the OPA obligingly raised the ceiling on foreign silver from 35 to 45 cents an ounce.

Although the Treasury is not responsible for the situation, it wittingly or unwittingly played into the hands of the Congressional silver bloc in its statement of last Monday. The Treasury declared that of its 1,350,000,000 or so ounces of "free silver" the entire amount was being "lend-leased for use in war plants," and that "substantial amounts of this free silver are already being delivered." There was nothing new in this statement, but the manner of its presentation was calculated to give the impression that ample supplies of silver were being made available for all essential purposes and that the recent talk of a silver shortage was ill-founded. What are the fact, so far as they have been official disclosed?

The Treasury's lend-lease silver plan, as announced last April, provides for the loan of silver to the Defense Plant Corporation, but within strict limits. The silver must "not become a part of the product of the war production plaints." It must not be "used up." It may be used only in such forms as permits its return to the Treasury after the war, as, for example, in substituting for copper in the making of bus bars. It may not be "consumed," as, for example, in substituting for in in solder. In short, the plan does not provide an ounce of silver for actual consumption. What has been the result? Between last April, when the plan was announced, and Aug. 27 the total amount of this free silver transferred to the Defense Plant Corporation and other users was 110,565,715 ounces, or about 8 per cent of the 1,350,000,000 ounces available.

Presumably the program, despite the months that have passed, is only just beginning to function and larger amounts will soon be used. But that is the official record to date, as disclosed in the Treasury's daily statement. It is certainly open to question whether the entire amount of free silver now said to be allocated to lease-lend can be employed in the limited uses to which it may be put. Even if it can, that does not solve the problem. With the huge glut of silver held by our Government, ample supplies of the metal ought to be available for consumption. It ought to be available to take the place the tin from which our enemy Japan has cut us off. It ought to be available, not by the devious method of lease-lending silver that will have to be ripped out and returned but by the clean-cut method of outright sale at a fair price. There should be released to meet the needs of industry not merely the Treasury's free silver but also the silver now pledged against outstanding silver certificates, a reserve which we have ample gold to replace. This can be accomplished only by the repeal of the absurd silver legislation now on the books.