By HAROLD W. ROLAND OF THE DEARBORN INDEPENDENT STAFF
Speaking of the value of a dollar – Well, there have been a food many remarks about it lately, most of them to the effect that a dollar is worth only about fifty cents.
The despised silver dollar, the much scorned “cart wheel has come into its own. That is, it would come into its own, if one were obtainable. But let me explain: Along with almost everything else, the price of silver has gone up, as a “result of the war.” The silver miners have demanded more and have received it, the cost of the materials that go to make up the necessary adjuncts to silver mining has increased greatly, and, in fact, all the costs of mining have risen so that with this increase, the price of the product naturally has soared.
Incidentally, the same condition has obtained in gold mining; but because the price of gold is fixed at a
certain figure, in many cases the mining of gold in the Northwest and in Alaska has proved quite unprofitable and the miners have been shut down. In South Africa, where much gold is mined, there is discussion of state subsidy to permit the gold miners to work their diggings at a profit. Think of it!
But in the case of silver there has been no such price restriction, and as a result a silver dollar now is
worth – much more than its coinage value that not only has it become profitable to export the silver, but
such a trade has been worked up amounting to millions of dollars’ worth of shipments. This condition has demoralized not only the silver dollar market but the one- and two-dollar silver certificate market as
well. Any one of the three has become so scarce that a justifiable complaint from merchants all over the country has been heard in Washington.
The reason, of course, for the lack of the silver certificates is that they are redeemable at the treasury
for silver dollars which in turn can be disposed of for more than a dollar. The business interests of the country, it is stated authoritatively, are in such shape today that they are unable to do the business that is required of them on account of the lack of one- and two-dollar bills. Perhaps that is why two-dollar hats are costing five, and three-dollar shoes, ten!
The only reason ten cent and two for twenty-five cent cigars are not costing similarly tragic amounts is
that as yet the price of silver has not made it profitable to convert the smaller coinage, because of its lightness in weight in comparison with the weight of the dollar.
To remedy, insofar as possible, the condition, there has been introduced in the Senate by Senator Smoot of Utah, at the instigation of the Treasury Department, a bill providing “that gold certificates of the United States, payable to bearer on demand, shall be and are, hereby made legal tender in payment of all debts and dues, public and private.” The measure also repeals all former acts or parts of acts inconsistent with the one here mentioned.
“What has brought about the shortage of one- and two-dollar bills.” said Senator Smoot in discussing the measure and the relief it is intended to give, “is the withdrawal from circulation of all silver certificates. I say ‘all.’ Of course that is a sweeping statement, but practically all silver certificates have been withdrawn
The reason is that as soon as silver advances beyond $1.29 (per ounce) the silver certificate that can draw silver from our Treasury on presentation is at a premium; in other words, the silver dollar can be taken today and sold as bullion for more than the dollar is worth as a circulating medium.
“That is the situation in which we find the government today and we must provide some way to meet the demands of the business of the country by issuing paper currency of some kind and in smaller denomination. Every part of this country is calling on the government for one- and two-dollar currency”
It appears that under war emergency legislation known as the Pittman Act, authorization was given to the Secretary of the Treasury to melt or break up silver dollars. One section of the act to prevent contraction of currency, also provides “that the Federal Reserve Banks may be either permitted or required by the Federal Reserve Board, at the request of the Secretary of the Treasury, to issue Federal Reserve Bank Notes, in any denominations including denominations of $1 and $2 authorized by the Federal Reserve Board, in an aggregate amount not exceeding the amount of standard silver dollars melted or broken up and sold as bullion.”
So heavy has been the demand for silver, principally from Oriental countries, that there was exportation,
from April 23 (when the Pittman Act came into force) until December 31, 1918, of silver amounting to $258,209,000. From January 1. 1919. to October 3I, 1919, the exports of silver amounted to $167,335,000, a total since the passage of the Pittman Act of $423,544,000. Figures for November as yet are not available.
This tremendous demand for silver has caused an increase in the price of silver bullion until the quotations have ranged recently from $1.29 to $1.37 1-2 per ounce, the average being much greater than $1.2929, which is the coinage value of silver. As a consequence silver dollars are being exported at a profit, and silver certificates, redeemable in silver dollars, have practically disappeared from circulation. The decrease in silver certificates, from $315,732,326 to $156,135,714 indicates the vast amount of silver that has been sent abroad at a profit to those who have disposed of it.
“Should the bill become a law,” said Senator Smoot, explaining its introduction, “the banks would no longer
have any object in holding United States legal tender notes, and would immediately release them to the Treasury in exchange for one- and two-dollar notes. The supply of gold certificates would be more than ample for the needs of those desiring to make legal tenders on contracts or debts, and the gold certificates would be found much more Convenient for this purpose than gold com itself.
“I would like to see a prompt passage of the bill, for the need of additional currency of $1 and $2 denominations is most imperative, and the business and industry of the country will be seriously hampered if this need is not supplied at once.
“While the present price of silver makes the circulation of silver certificates and silver dollars impossible, the advance has not been sufficiently great to interfere with the subsidiary silver coinage, for the relative silver content of a half dollar and smaller coins is less than that of a dollar. The price of silver would have to advance to above $1.38 an ounce to make the melting up of subsidiary coins profitable.”
When Senator Smoot introduced the legislation, Senator Thomas, of Colorado, said that if the Committee on Banking and Currency considers ‘the sound money sentiment of the nation, and its insistence upon the use only of gold in payment of debts as long as gold is worth more than silver. I trust that the committee, when the bill is reported back, will have stricken out the word ‘gold’ in the proposed bill and inserted the word ‘silver.’ because we cannot afford, under any circumstances, to even seem to authorize the payment of
either public or private debts in a depreciated currency.”
Article first appeared in the Dearborn Independent on December 27, 1919 (Here)
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