Evening star., 1942-03-01

abandonment of the gold standard and
the impetus to production given by the
high price greatly increased surplus
world stocks of gold. The inflow of gold,
due chiefly to a flight of capital from
European countries and an excess of our
exports over imports, increased the me-
tallic base of our monetary system.
Desired Ratio Not Attained.
The more rapid increase in gold stocks
than in silver stocks served to give a
treadmil character to the program un-
der the Silver Purchase Act. At the time
of the enactment of the law, silver stocks,
computed at their monetary value, were
about 10 per cent of total gold and silver
stocks. In 1888 the percentage reached
a little more than 10, but it dropped
thereafter and stood at about Is through
out 194l. At the end of ls41 the silver
held by the Treasury had a monetary
value of about four and a quarter bill
lions as compared with gold stocks Of
a little less than twenty three billions.
There is no present likelihood that silver
stocks ever will reach Is per cent of
total metallic monetary stocks.
The Treasury long since has aban-
doned all. efforts to force the price of
silver upward to its monetary value of
s129 an ounce. Through the purchase
of foreign silver the Treasury boosted
the market price up as high as 81 cents
an ounce in 1885, but adverse effects
upon foreign countries led to change
in policy. The price was allowed to drop
gradually until it reached IS cents in
1899.
First purchases of newly mined do
mestic silver were made in December,
1888, ostensibly in compliance with the
so-called Pittman agreement of the Lon
don World Economic Conference, under
which silver producing nations we're to
absorb domestic stocks while other ma
tions were to impose restrictions on the
sale of surplus stocks. The price paid
for this domestic silver has never been
less than about IS cents an ounce, more
than double the market price a. the be-
ginning of the Roosevelt administration.
The London silver agreement was in
tended to promote Stabilization OF sill
yer prices at a higher level. The silver
partisans believed that the goal should
be a value which would have a fixed
relationship with gold, such as the 16-to-1
ratio existing when the price of gold
was S20.67 an ounce and the monetary
value of silver was represented by the
77/10o of an ounce in the standard silver
dollar, $1.29 an ounce. The experience
under the silver program has shown that
nations using silver as currency desired
stable but not high prices. The higher
prices as well as extreme fluctuations In
1884 and 1885 had injurious effects upon
economic conditions in er-using coun-
tries and also demoralized their none
tary systems.
China Hurt by g. S. Program.
Instead of promoting a wider use of
silver in monetary systems of the world
the American program had the effect of
discouraging is use for this purpose in
other countries China, the only impor-
tant nation whose monetary system was
based on a full silver standard, was
forced to abandon it. Other nations
which used considerable amounts of sill
yer in subsidiary coinage were obliged,
when the bullion value became greater
than the currency value, to substitute
paper and other metallic money.
Instead of promoting American export
trade with China, as advocates Of the
program had contended would result,
higher prices of silver caused def1ation
and depression in that country. The
greater value of its monetary standard
had the effect Of lowering the general
price level, decreasing the purchasing
power of its people and curtailing i'm
ports from the United States.
Foreign nations which unloaded silver
on the United States at high prices re-
ceived American goods in exchange. Un-
Willingly the United States helped
Japan, Italy and Germany to finance
their war preparations.
The silver program was one of a num-
ber of monetary and other devices in
tended to advance the general price
level in the United States There is
little evidence that the new silver cur
rency has had any appreciable effect
upon prices, although 1t has served to
increase excess banking reserves which
have inflationary potentialities. The