Summary:
The Brooklyn Daily Eagle reports that 1919 marked a break-out year for silver: New York hit a record $1.37¾/oz, while London’s price reached 79⅛d/oz (roughly $1.73½/oz at pre-war exchange). With bullion now worth more than the metal in coins, silver change was disappearing across the British Empire and much of Europe, prompting export controls and fears of widespread melting.
Against this, three outsized demands were set to overwhelm supply: (1) settling trade balances with India, China, and the broader Orient; (2) rebuilding reserves to back the wartime flood of unsecured paper money; and (3) coinage needs. World output had slipped from a ~248M oz peak in 1910–11 to about 145M oz in 1919, with once-prolific districts like Cobalt, Tonopah, British Columbia, and Broken Hill past their prime and Mexico constrained, leaving production unable to meet rising needs. Observers expected prices in the $1.27–$2.00/oz range.
Policy makers therefore floated coinage reform and reserve-building. Proposals included lowering silver content in U.S. coins and effectively setting a new “par” near $1.75–$2.00/oz (Chairman Platt’s bill cited $1.777), while nations accumulated silver as a 25% reserve to re-validate depreciated paper currency. The article closes with Bernard Baruch’s testimony on nitrate strategy in WWI—an analogy underscoring how timely industrial policy and stockpiling can avert strategic shortages.
World Faces Silver Shortage In 1920; Demand Universal
By: Coleman & Reitze
January 11, 1920
Brooklyn Daily Eagle
Authority Sees Possibility of Coinage Revision– Metal needed as Paper Money Reserve. Production Decreasing.
The year 1919 will go down into the world's history as marking a new era in silver. The highest prices in history were reached by silver in 1919 and as the year closes the movement is scarcely more than begun. In New York the high record price was $1.37 3/4 per ounce. The so-called "par" of silver in the old days of 16-to-1, prior to 1873, was $1.29 per ounce. The record low price of silver was 46 1/4 cent per ounce in early 1915.
The London, or "world" price of silver reached a record high of 79 1/8 pence per ounce British standard. This would have amounted to $1.73 1/2 per ounce for American silver were British money worth the normal exchange value of $4.8665 to the pound sterling.
The coinage of the British Empire and the rest of the world except the United States has reached the point where the coin value of silver coins is less than the bullion value of the metal. An ounce of silver goes to make up 66 pence in British coins, but the same ounce of British silver is worth over 75 pence in silver. This must result in the melting down of British coinage and its sale as bullion. The British Government has tried to prevent this, but prevention is impossible. The exportation of silver from Great Britain has been prohibited except under license. The same condition of disappearance of silver coinage (as of gold), only worse, has long assailed France, Germany, Italy and the rest of Europe and Mexico and the Orient.
There are four great world demands of silver. Each of three of the four requires more silver than the world can possibly produce. These three demands are:
- To pay the trade balance due such countries as India, China and other silver nations that, fortunately, will be satisfied to receive silver instead of gold in payment for their goods.
- To act as a "backing" for the billions of unsecured paper "money" issued during the war, variously estimated at $12,000,000,000 to $22,000,000,000 at normal exchange value, which must continue as valueless "shin plasters" unless secured by either gold or silver reserves of some sort.
- Silver coinage. Demands enumerated here as Nos. 1 and 3 have each year in recent years, each of them alone, required more silver than has been produced or than is possible of production.
1919 Production
The world's production of silver in 1918 was about 10,000,000 ounces. In 1919 it was about 145,000,000 ounces. The maximum world production was 248,000,000 ounces a year in 1910-11. That was when the great silver mining districts of Cobalt, of Tonopah, of Mexico and of British Columbia and Broken Hill (Australia) were in their prime. All of these districts have definitely passed their best days, except Mexico. It will be utterly impossible for Tonopah, Cobalt or Broken Hills ever again to supply their former quotas of silver production to the world. Nor has any new silver district come up in the world to replace them. Such new districts as Divide, Candelaria, Rochester and other points in Nevada, and some of the new British Columbia districts can add only a drop in the bucket in filling the void created by the decline and approaching end of the great silver producing districts of former days in Nevada, Canada and Australia. And as regards Mexico, "normal" production is impossible of attainment for at least two years.
Demand for Silver
The first great demand for silver must be to pay the net yearly trade balances of about $400,000,000 due British India and about half as much more due to China and the rest of the Orient. Formerly a quarter of the trade debt was paid in gold, a quarter in silver, and about half represented in "loans" and investments– paper. It will be out of the question to longer sink the world's scanty supply of gold in the Orient; paper has nearly reached its limit; silver will have to bear the burden, and the burden is one of continually increasing volume due to growing trade debt and increasing interest payments on former debts and including the loan of $500,000,000 made by India to Britain during the war.
Over $300,000,000 a year will have to be paid in silver to India, China and the Orient, in net trade balance and interest payments, and that is net, after allowing for all the gold and paper they can conceivably handle. That would require 600,000,000 ounces of silver a year at former prices of 50 cents an ounce for silver, or 200,000,000 ounces at $1.50, or 150,000,000 ounces at $2.00 per ounce. Whatever amount of silver the world can possible spare for India and the silver nations will go to those nations. The price of the metal will depend on the amount of money owed and the number of ounces silver possible to send. Most authorities look for a price of silver between $1.27 and $2.00 an ounce. Few who understand the situation look for silver prices between $1.25 and $1.50 per ounce.
Europe's Silver Coins
We have pointed out that silver money in the British Empire is now worth over 75 pence for each ounce of silver in the coins, whereas the coins are worth only 66 pence coin value. German marks, French francs, Italian lire, Russian rubles and European coins in general are much worse off than British, as regards the coin value being less than the bullion value. New coin standards must imperatively be created. The new coins much contain less silver than the old. It means that , allowing for high prices of silver, the new coins much contain an amount of silver that would make it impractical to melt them for bullion. It is generally anticipated that between $1.75 and $2 per ounce will be established as the new "par" value of silver, and the new world silver coinage will be remodeled accordingly. Already in the United States, Chairman Platt of the House Committee on banking and Currency has introduced in Congress a bill to create a new silver currency, placing less silver in the half-dollar, quarter and dime, and placing $1.777 as the "par" value of the silver in the new coinage.
The coinage demand in recent years has varied from 220,000,000 to 300,000,000 ounces of silver a year by the mints of the world and producing $300,000,000 to $420,000,000 of new silver money. It is obviously out of the question to keep up such a rate of coinage. It is impossible to keep supplying such a quantity of silver. There will be fewer ounces available, and then, to supply the world's needed new "change," each ounce of silver will obviously have to command a higher fixed value.
A Silver Reserve
It is quite conceivable that the nations of the world may limit new silver coinage, and instead buy great quantities of silver to hoard in the national treasury as a "reserve" or backing to validate outstanding issues of paper money. The great cry of leading nations is lack of available money that will pass muster among other nations. It would be a titanic step forward to validate the issues of unsecure paper put out during the war. If a 25 percent reserve could be set up in silver or gold in national treasuries, it would serve to bring up amount $5,000,000,000 of paper money to somewhere nearer par value than present greatly depreciated values of the paper "money." Such a reserve would require $1,250,000,000 in silver (or gold, or both silver and gold) to be built up in the next few years, say ten years, or $125,000,000 a year. It is probably true that the leading nations could better utilize silver "money" in this way, than in issuing great quantities of actual silver coins. Of course a certain amount of silver coins would always be necessary– enough to establish some sort of par or fixed value for silver.
If the "par" value of silver be fixed by new coinage regulations or otherwise at, say, around $1.75 per ounce, or $2.00 per ounce, the number of ounces of silver available would permit the validation of a larger and larger quota of paper "money" as the value per ounce of silver goes higher and higher.
Summed up, the situation is this: with only 150,000 ounces of silver obtainable next year, India, China and other silver nations will call for $300,000,000; $200,000,000 will be needed for coinage; about $125,000,000 silver a year for a period of ten years to validate part of the paper money issued during the war, and about 60,000,000 ounces for industries and the arts.
Nitrate Plant Save U.S. $300,000,000, says Baruch
Bernard M. Baruch, who was in charge of the nitrate section of the War Industry Board during the war, was the principle witness before the Congressional Subcommittee investigating war expenditures at the Custom House yesterday.
"If the Germans had had the foresight to buy up Chile's supply of nitrate when they had been producing it, even if they had only taken it up for a year ahead, it would have so seriously crippled both the explosive production facilities of both the American and the Allied powder factories that they would have had to close down within a period of 30 to 60 days and it is horrible to contemplate what the consequences for us would have been," said Mr. Baruch.
He was endeavoring to show that the Mussel Shoals plants involving the expenditure of some $84,000,000 were an absolute necessity in view of reports and urgent request received by him.
He declared that the Mussel Shoals plants would have saved their cost many times over even if they had never produced a single pound of nitrate. These pants, he said, brought down the price of Chilean nitrate to such a level that the total saving was more than $300,00,000.
