Evening star., 1933-10-09
ARTICLE NO. IS.
The "Silyer Problem"

No discussion of current monetary
problems would be complete which did
not devote chapter to the much dis
cussed but little understood question
Of silver
One hundred and so years ago
most Of the civilized world was on a
bi-metallic standard That is, it en-
ployed both gold and silver as the
basis OF its monetary system, and gold
and silver coins as the media of cir
culation. This involved. Of course,
maintaining a fixed ratio Of converti-
bility between the two metals
So long as means of transportation
and communication were slow. this
dual system worked fairly we'll. but
once the latter were speeded up it
proved very difficult For spectators
found that they could scalp profits
either by bringing gold from France,
where 1t was worth only 1921 times
silver. to England, where it was worth
l55 times silver, or by bringing silver
from England to France. France. in
cult to retain its silver London its gold.
London Started Reforms.
London. as result. finally led the
way to the abandonment of silver.
when, in 1913, it adopted the gold
standard In the next half century
series of violent upheavals occurred in
the relationship between gold and silver
supplies, which gradually forced the
other countries, with the one com
paratively unimportant exception Of
China. on to the gold standard
During the present century silver has,
modify rather than as standard of
value. It's chief markets are India,
where it is used for ornament and as
a store of value. and in China, where.
in addition to these functions, 1t still
serves as real money.
Up to the outbreak Of the World War
silver ranged in value from so to IS
cents an ounce; but with the war 1t en-
joyed a brief but sensational boom.
Europe was forced to call on the Orient
during this period for materials and
food, and 1t settled for them in silver.
In consequence, the price OF the metal
scared to S1.38 an ounce in 1919. This
boom had unfortunate repercussions so
far as the price OF silver was concerned:
With bullion at l.38 an ounce. token"
silver coins in Europe became for the
first time worth more as bullion than
as money.
Seeing an opportunity for profit. gov
ernments reduced the silver content OF
their coins. Some 400, 100000 ounces Of
the white metal came on to the world
markets as result Of such debasement
between 1914 and 1880. On top of this
came another blow to the silver-pro
ducing interests In 1926, the Royal
Commission on Indian Currency and
Finance recommended that the huge re-
serves of silver in the Indian treasury
be reduced by about 200 100000 ounces
over a 10-year period.
Falls Like Other Commodities.
Silver has had its difficulties in re-
cent years, but it has not suffered any
more than other important commodities.
despite efforts of silver advocates to
create this impression. The extreme
decline in silver from 1926 to 1882 was
from 60 cents to "a cents, or go per
cent. but the fall in the principal staple
commodities in the same period was ap-
proximately 70 per cent.
There is little serious agitation for
return to bi-metallism. for silver advo-
Gates realize that this would require
world action and that Europe is not
interested in bi-metallism. They have
concentrated their efforts, therefore, on
proposals Tor some form of subsidy
which would raise the price Of the metal.
Their most persuasive argument is that
the fall in the price of silver has cut
the purchasing power of half the popu-
lation of the world in two" and that
hence, "the only way to restore world
trade is to restore this purchasing power
by raising the price of silver" To the
financially illiterate this sounds wholly
plausible; actually, it is utterly falla-
cious
In the first place, half the worlds
population" is not on silver. Despite
much loose talk about India and South
America being on a silver standard, the
only country that used the metal as
basis of value is China. and China, with
all It's 4O0-odd millions. accounts for