Again, Silver

"I bought silver Monday. I bought silver Tuesday. I bought silver Wednesday. I bought silver every day this week."

With these solemn words Secretary of the Treasury Henry Morgenthau Jr. last week defended himself from the reproaches of the silver world. The reproaches had been leveled at him because the U. S. Treasury had just subjected the silver markets of London, Shanghai, Bombay, Manhattan and Montreal to as pretty a market crash as a speculator could have devised.

One day in London, international silver market, 20,000,000 oz. of silver were offered for sale. Because no buyers appeared, the bottom dropped completely out of the market. Incensed were silver traders at seeing their market wantonly disorganized. Incensed was many a U. S. silver man whose wrath rises if the price of silver moves in any direction except up.

What happened was simple. A year and a half ago the silver bloc in Congress, headed by Senator Key Pittman of silvery Nevada, passed a law instructing the U. S. Treasury to buy silver until the U. S. held one-third as much silver as gold in its reserves or until the price of silver reached $1.29 an oz.

The object was to raise the price of silver. Under that law the U. S. bought silver, 704,831,000 oz. of it up to last week, and the price rose from 25-c- per oz. in 1933 to more than 65-c- an oz. early last week. As the price of silver mounted all the world began to sell silver to the U. S. China alone of all countries was on a silver standard.

To protect herself from the deflationary results of the U. S. silver policy, China lately abandoned the silver standard (TIME, Nov. 11), adopted a managed currency. Thereafter she could sell silver to the U. S. as profitably as she could sell any other commodity for which the U. S. would pay a high price. So China's silver joined the silver of the whole world in seeking a profitable market in the U. S.*

If J. P. Morgan & Co. had set out to buy U. S. Steel stock until steel securities made up one-fourth of its assets or the price of steel was $129 a share, the result would have been similar: The House of Morgan would have found itself alone in buying what everybody else was eager to sell at such prices. And if Morgan & Co., finding it was being made a monkey of, suddenly ceased buying, the bottom would have dropped out of the market for steel shares. Had that happened the Securities & Exchange Commission would have descended on Morgan & Co. with severe reproaches. When Secretary Morgenthau suddenly ceased buying in quantity in the London silver market last week, there was no international SEC to crack down on him but silver men the world over had plenty to say.

Mr. Morgenthau's solemn declaration that he had bought silver every day last week did not alter the case, for he refused to say how much he had bought or where he had made his purchases. His purchases may have been negligible and, wherever made, they were not made in London. After driving all other purchasers out of the great international silver market, he had suddenly turned his back and left that market to go to pot. World silver trading stopped dead in its tracks. From 65-c- the price on various exchanges dropped to 63 1/4, 61 1/4, 58 1/2-c--- nominal figures at which little or no real business was done. Nobody knew what the price of silver should be today since the U. S. had kept silver at an artificial level for nearly two years.

Worse still was the uncertainty of not knowing whether the U. S. had abandoned its silver purchases, or merely postponed them. Secretary Morgenthau swore the U. S. was sticking to its silver policy but what that was to be hereafter was anybody's guess. Silver traders the world over swore and bit their nails. U. S. financiers admitted they could not fathom it. In Reno Senator Pittman sat down and dictated a long signed statement for the Press. Excerpts: "Certain governments and certain banking institutions and speculators in ... foreign countries desire to know what our government is going to do. It's none of their business. They never tell us what they are going to do. . . . We know what the U. S. policy is and that is sufficient."

Great Britain, he explained, was the villain of international currency manipulation, but the U. S. would foil her. Said the Nevada Senator proudly: "It's a great game of poker in which the kitty wins and the public loses. There is no government in the world that can stand this asinine policy as well as the government of the United States."

*Actually the Chinese Government "nationalized" silver but large quantities of Chinese silver have been smuggled out through Japan. In October Japan, which has negligible silver resources, exported some 21,000,000 oz. Where that silver came from was no mystery. It was smuggled from China.

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