THE CABINET: Something on Silver

One afternoon last week as the price of silver was falling below 66¢per oz. to its lowest point in four months, Secretary of the Treasury Morgenthau passed some hot, bedevilled hours. Finally at 6 p. m. he called newshawks into his office to confess:

“There have been so many inquiries, so many rumors—the telephone ringing and things like that—that I thought I had better break my usual rule and say something about silver. . . . We bought more silver today than the total annual domestic production in 1934, which is estimated at 25,500,000 ounces. We have not stopped buying at all; we have bought on other days in proportion.”

By this means Secretary Morgenthau hoped to silence the telephone which had filled his ear with the profuse complaints of silver men, demands that the Treasury ought to step in and halt the fall of silver prices. Ever since Franklin Roosevelt in June 1934 pacified the Senate silver bloc by promising to buy silver until 1) it reached $1.29 per oz., or 2) the Treasury held one-third as much silver as gold, Secretary Morgenthau has been held personally accountable for the price of silver.

Last April when the Treasury boosted its purchasing price for domestic silver, to keep it above the world price, speculators took the bit in their teeth and ran the world price up to 81¢ per oz. Mr. Morgenthau, who has little sympathy with speculators, promptly got out of the market. Soon thereafter the price of silver began to coast down hill—down, down, down to last week’s level which caused angry silverites to assume that the Treasury had quitbuying for good. Secretary Morgenthau’s announcement that he had bought more than 25 million ounces of silver in one day was aimed to deflect their wrath.

It did nothing of the kind. Senator Thomas of Oklahoma was incensed. That Secretary Morgenthau should let the market drop out from under the speculators, that he should build up a silver reserve as cheaply as possible instead of spending as much as possible in doing so, seemed treason to the most politically precious of metals. “I thought,” said Senator Thomas, “that we had a silver policy. But we haven’t any — other than to buy silver at the lowest possible price.” Next day Senator Thomas and his silver friend, Senator McCarran of Nevada, took their revenge. As the price of passing the tax bill (see p. 17) they got the Senate to insert a provision repealing: 1) the Treasury’s authority to nationalize silver; 2) the tax of 50% on the profits of silver speculators; 3) the requirement that Government licenses must be secured to import or export silver. The effect of these laws enacted in 1934 was to pre vent speculation in silver in the U. S., put the silver futures market out of busi ness, leave the Treasury in complete control of the U. S. silver situation. Since Mr. Morgenthau had not exercised that control to suit the silver bloc, it was content to reopen the silver market, give con trol back to the speculators.