MONEY: Silver Drum

For a whole year Senator Elmer Thomas has been thumping the drum for inflation. He thumped last autumn for dollar devaluation and he got it. He thumped last spring for monetization of silver and he got what, from a distance, looked like it. Having learned how easy it is to get what he wants by thumping his drum in the ears of Treasury officials, he thumped it once again last week. Said he:

“The Treasury has authority, under legislation passed last session, to buy as much as 1,000,000,000 ounces of silver and to issue certificates against it. But virtually nothing has been done and a deflationary process is increasing in vigor.

“If the President will order action, we will go to the country in defense and in explanation of his program. If the President is unwilling to act, we will be compelled to take the issue to the people.”

In the Treasury, Secretary Morgenthau, sunburned and jovial after a month on a Montana ranch, heard the new drum thumping, was not greatly alarmed. To the Press he promptly gave a tart answer:

“If the Senator had telephoned me I would have been glad to tell him what we really were doing.”

Next day what the Treasury “really” was doing was explained to the public. It was waiting for the Bureau of Printing & Engraving to turn out new silver certificates. The first instalment, some $12,000,000 each of $1 and $5 bills, was just ready. The Treasury expects to get some $23,000,000 more in $10, $20 and $100 bills printed before Oct. 1.Altogether these silver certificates are backed by some 63,000,000oz. of silver for which the Government paid $47,000,000.

Significant point about the announcement was that none of this silver was bought under the Silver Purchase Act. Some of it was received as token payments from foreign governments on their War Debts. Some of it was bought at 64¢ per oz. from U.S. silver producers under the President’s proclamation of last December (TIME, Jan.1). Some of it came from melting down old coins. But how much, if any, silver the Government had bought in the open market, in the U. S. or abroad, remained a dark secret.

Senator Thomas snorted at Secretary Morgenthau’s answer to his drumming:

“What is $50,000,000 to this country? Why, our running expenses of government are $20,000,000 a day. Fifty millions would last only two and one-half days. Secretary Morgenthau forgets that the Government is spending money faster than he is printing it.”