William L. Silber

 

On his book The Story of Silver: How the White Metal Shaped America and the Modern World

Cover Interview of May 08, 2019

The wide angle

The most important practical lesson of the book comes from Franklin Delano Roosevelt’s attempt to use silver as a political weapon to achieve domestic objectives while ignoring international consequences.

During the Great Depression, after the price of silver hit a record low of 24¢ an ounce, Democratic Senator Key Pittman of Nevada, the powerful chairman of the Senate Foreign Relations Committee, urged President Roosevelt to restore the white metal’s full monetary status. In exchange, Pittman promised the support of fourteen senators from western mining states for Roosevelt’s controversial New Deal legislation. FDR agreed and responded with a series of purchase programs for silver by the U.S. Treasury that ultimately doubled the price of the white metal.

The higher price attracted silver from the rest of the world, especially from China, whose currency was backed by the precious metal, and ultimately forced China to abandon the silver standard when that country was most vulnerable. It was 1935 and China, led by American ally Chiang Kai-shek, faced an internal threat from Mao Tse-tung’s communist insurgents, as well as an external threat from Imperial Japan. Roosevelt’s Treasury secretary, Henry Morgenthau, worried that China’s insecure government, weak economy, and susceptibility to Japanese aggression made her especially vulnerable to the dislocations arising from American silver policy. Morgenthau was right to worry. Roosevelt’s pro-silver program to please western senators helped the Japanese military subjugate a weakened China and boosted Japan’s march towards World War II, demonstrating the danger of formulating domestic policy without considering international consequences.

It is a cautionary lesson for putting America First today, especially since the fallout from such narrow-minded policymaking may not materialize until it is too late, just like in the 1930s.