“The Story of Silver” by William L Silber

Silver dollar

With a surname like Silber, a book on silver is perhaps inevitable. And if you thought a book entitled The Story of Silver: How the White Metal Shaped America and the Modern World and published by the venerable and academic Princeton University Press would be a dull, dense, heavily-footnoted tome, you’d be wrong (although not about the footnotes).

The Story of Silver is two different books threaded together. The first is a detailed history of silver—in the United States—with explanations of such things as bimetallic monetary standards and demonization that, in today’s world of free-floating fiat currencies, can seem as quaint as whale-oil monopolies, combined with descriptions of bare-knuckled, blatantly self-interested politics that puts even today’s Washington in perspective.

The second is a page-turner of a financial-political multi-generational thriller worthy of, say, John Grisham, filled with larger-than-life speculators, businessmen, manipulators, crooks and politicians—it not always being easy to tell them apart.

Silber writes with verve—Hunt père “had trouble keeping his pants zipped”.

The Story of Silver: How the White Metal Shaped America and the Modern World, William L Silber (Princeton University Press, February 2019)
The Story of Silver: How the White Metal Shaped America and the Modern World, William L Silber (Princeton University Press, February 2019)

William Silber’s primary objective is to tell the story of the Hunt brothers and their disastrous attempt to corner the world market in silver around the three-quarters mark of the last century. The Hunts drove the price of silver to a record US$50 an ounce in 1980, an increase of some 20-25 times in only a few years; it all came to grief. Silber tells the story of these outsized personalities and financial shenanigans with gusto and evident relish.

But to get there, Silber goes back to the beginning of the republic, passing through Alexander Hamilton, William Jennings Bryan, the initialed presidents FDR, JFK and LBJ and the various treasury secretaries and senate leaders for whom silver was an alternatively an opportunity or a thorn in the side. It’s hard to imagine that any American president has given silver much thought for a generation.

Silber writes with verve—Hunt père “had trouble keeping his pants zipped”—and even perhaps to excess on occasion: comparisons to the Beatles and Babe Ruth’s baseball career make somewhat incongruous, but far from boring, appearances. When commenting on the theory that Kennedy’s assassination was tied to the president’s demonetization of silver, he says

 

murder for the sake of silver dollars seems excessive, a primitive response to a commercial conflict, perhaps understandable in the more violent nineteenth century but inconsistent with the more civilized twentieth. Or not?

 

A page-turner, indeed. Yet in the process, Silber manages to provide cogent explanations of how metal-based currency systems work, or don’t, as well as flesh out some fascinating yet lesser-known denizens of, in particular, the US Senate over the past century and a half. Readers who didn’t know Gresham’s Law before starting The Story of Silver, will by the time they reach the end.

“FDR deserves blame for his willingness to sacrifice China by focusing on domestic considerations without weighing international consequences.”

While the book is very much an American tale, it intersects with Asia in the run-up to the Second World War. One of the most serious problems of the Great Depression was deflation: falling prices, falling expenditure and the consequent falling unemployment. One of the solutions was for the Government to bid up the price of silver. This may seem counter-intuitive—as the value of the silver in a silver dollar goes up, one might think the value of the dollar would go up with it—but it is in fact equivalent to a devaluation: the same quantity of silver amounts to more dollars. And a higher-price for silver pulled more of it out of the ground, and from overseas. This policy was supported by a politically crucial block of Western states, led by Nevada, which is where the mines were; this program resulted in a windfall for silver interests.

China was, at that time, on the silver standard—an important historical and cultural legacy—the only country in the world to still hold to it. Ironically, given what happened, China’s use of the relatively weak silver standard, as opposed to the gold standard that had prevailed elsewhere, had allowed China to sidestep the some of the ravages of the Great Depression. But FDR’s US-guaranteed purchase price for silver greatly increased the value of China’s currency, making their exports uncompetitive and also—all attempts at export control notwithstanding—sucked currency out of the country, resulting in shortages and capital flight.

The resulting economic crisis—about which the Americans were well informed—weakened China at exactly the time it was facing increasing pressure from Japan. China was forced off the silver standard in 1935 but by then the damage had been done. Silber concludes that China

 

might have succumbed to Japanese aggression or to communist forces even with its silver-backed currency but FDR deserves blame for his willingness to sacrifice China by focusing on domestic considerations without weighing international consequences.

 

It is always problematic to assign historical developments to any single cause, but one nevertheless imagines that these examples of pre-WW2 “America First” policies are remembered more distinctly in Chinese circles than American ones.

In the 1960s, the USA ran out of silver-based coins to put in vending machines.

It is something a shame that Silber starts his story only with the founding of the United States, for the history of silver and its effect on the world economy goes back at least to mid-16th century when exactly the same sorts of supply surges from mines in the Americas greased the wheels of the Chinese economy and kicked-started globalization via the vehicle of the Manila galleon.  The US dollar and, it can be argued, the United States as whole owe a great deal to this prior history of silver: a half-million silver pesos, raised in Havana, went to fund the Continental Army at Siege of Yorktown in 1781. There were no small number of other events and personalities onto whom Silber could have turned his entertainingly gimlet eye.

In the meantime, though, The Story of Silver might serve as a useful refresher for those who (still) think that national currencies should be backed one-for-one by precious metals. Perhaps necessary at one time, it nevertheless seems to have been a bottomless source of trouble: even in the 1960s, the country ran out of silver-based coins to put in vending machines. Silber concludes that it “could never happen again” followed by the rhetorical flourish “Or could it?” Perhaps an equally entertaining sequel is in the offing.


Peter Gordon is editor of the Asian Review of Books.