Senator BARKLEY. Of course, that is true, but they had the right to issue that money under the Federal Reserve Act. Senator MURDOCK. They did; and the Secretary of the Treasury had the right, and I think was under the command of law passed by this Congress, to issue silver certificates, certainly, when the Treasury needed money to go out and purchase war munitions. Now, the Secretary of the Treasury may answer that by saying that the issuance of silver certificates is inflationary, but certainly the answer to that position of the Secretary of the Treasury is that the issuance of a silver dollar cannot be more inflationary than the issuance of a Federal Reserve note. The CHAIRMAN. May I ask you right there: How much of the silver that the Secretary of the Treasury has is foreign silver, not mined here at all domestically? Senator MCCARRAN. The total purchases of foreign silver through August 1941, amounted to 2,009,000,000 ounces; but Treasury purchases of foreign silver ceased in November 1941. The CHAIRMAN. Well, it is a substantial sum, isn't it? I understood that. Senator MCCARRAN. I would say so. We have reduced our purchase of silver from foreign countries very materially. We have bought none at all since last November. The CHAIRMAN. None has come in here, of foreign silver? Senator MCCARRAN. No; the Treasury purchased none at all during the past 12 months. The CHAIRMAN. None has come in, has there, since, because the silversmiths cannot get it now, can they? They cannot get any foreign silver? Senator MCCARRAN. They did get foreign silver until November 15, 1942. Since then they could not get it without a priority from the War Production Board. The CHAIRMAN. Yes; exactly. Well, that means the same thing. Senator MCCARRAN. There has been none at all come in since last November. That is, we have not acquired in the Treasury, I mean, silver from foreign sources since last November. The CHAIRMAN. Well, I found, that is, I read somewhere- Senator MCCARRAN (interposing). I do not mean last month; I mean a year ago. The CHAIRMAN. Yes. I read somewhere Senator BARKLEY (interposing). If I might comment on Senator Murdock's statement, I would not believe that it would be sound financing for the Treasury to use its silver, or its gold either, for the purpose of issuing paper money to pay the debts of the Government. I think debts of the Government must be paid out of taxes and not out of paper money issued. Senator MURDOCK. I certainly did not take that position. Senator BARKLEY. No. Senator MURDOCK. The position I took, if the Senator did not understand me, is this: That I think the Secretary of the Treasury is confronted with the necessity of furnishing money for the purchase of war materials. He takes the position, or has before our committee, that the issuance of silver against the already-held silver down there would be inflationary, while at the same time he has watched, and I think acquiesced in and approved, the issuance of $3,311,000,000 of Federal Reserve notes. Now, I am in full agreement with you that the issuance of either silver or Federal Reserve notes is equally inflationary. Senator BARKLEY. Yes. Senator MURDOCK. And I think that at this time, in order to avoid being inflationary, we should tax for Federal revenues rather than issue currency. But if we must issue currency to aid the war effort, then I think it is the duty of the Secretary of the Treasury to utilize, at least as far as it will go, the people's silver that lies today idle in the Treasury, instead of issuing interest-bearing Federal Reserve notes. Senator BARKLEY. Of course, they are issued by two separate agencies. The issue of Federal Reserve notes is by the Federal Reserve Board. Senator MURDOCK. Yes, sir, I understand that. Senator BARKLEY. Based not upon silver but upon a partial coverage of gold. Senator MURDOCK. Forty percent gold and 60 percent eligible paper. Senator BARKLEY. Sixty percent based upon commercial paper. So that presumably those $3,000,000,000 were not issued for the Government to use in purchasing war material or paying its debts in any way; it is presumably used for commercial purposes. Senator MURDOCK. Surely Senator BARKLEY. It may find its way into the Treasury through the various processes, by taxation, but Senator MURDOCK. That is the very point that I make. Certainly. Senator BARKLEY. I would not favor the issue of Federal Reserve notes, or silver certificates either, in order to pay the Government's debts or to enable it to buy material. I think the only way the Government can get money is by taxation. Senator MURDOCK. That is true Senator BARKLEY. And that is what we are seeking to do. Or by bond issues. Senator MURDOCK. But when we are spending hundreds of billions of dollars in a year we cannot raise it all by taxation. Senator BARKLEY. No; we have to borrow some of it Senator MURDOCK. Yes. So that, then, in borrowing you borrow how? You borrow by the issuance of Federal Reserve notes through the banks. And at the very time that the Government is borrowing money we see the Treasury-the Secretary of the Treasury-refusing to utilize Government money that is there in the vaults of the Treasury, and still issuing bonds to raise money. Senator McCARRAN. Mr. Chairman. The CHAIRMAN. I want to clear up one question in my mind, and then I am finished for a while, I hope: The foreign silver bought by the Treasury is bought at a lower price, of course, than domestic silver? Senator MCCARRAN. That is right. The current Treasury buying price is 35 cents. That is also the lowest Treasury silver buying price in all our history. The CHAIRMAN. Yes. Now, in figuring out the total amount of money paid for by the Treasury it does amount to about 50 cents an ounce; does it not? Senator MCCARRAN. Practically. The CHAIRMAN. I am speaking of the free money now. The CHAIRMAN. I understand that is what it amounts to about 50 cents. Senator MCCARRAN. In other words, you mean the average cost? The CHAIRMAN. Yes; the average. Senator MCCARRAN. May I say to you that that is approximately true. I have never figured it out exactly. Someone probably has, and you probably have the correct figure. But let me say to you that the reason for purchasing more foreign silver than domestic silver was that foreign silver could be acquired at the abnormally low price of 35 cents per ounce. The CHAIRMAN. Yes. Senator MCCARRAN. And the difference between 35 cents and $1.29 inured to a greater profit to the Treasury of the United States. The CHAIRMAN. Yes. Senator MCCARRAN. Hence it was to the benefit of the Treasury of the United States to acquire the foreign silver rather than the domestic silver. Now, that leads to another subject here. I must apologize to the committee for taking up its time. It is a subject that is so inexhaustible that I would not go anywhere near the length, and I do want to come to an end of my discussion of this matter, but every now and then something comes up. I am going to get back, somehow or another, to your question as to how Senator Green and I can get together. Some way I will get back to that, just as sure as you live. Senator MALONEY. You have not been on that subject yet, Senator. Senator MCCARRAN. Oh, yes; I have been on it. I have been on it. Very much on it. Let us go back to the two classes of silver in the Treasury. The one stands behind the currency, and the other does not. The War Production Board said they wanted to use 47,000 tons of free silver for nonconsumptive use. Now, then, supposing that the 47,000 tons of free silver were to be used for war essentials for consumptive use. Now get that: The 47,000 tons of free silver in the Treasury—it is slightly less than 47,000 tons now- were to be used through the agency of the War Production Board for war essentials for consumptive use. And then the 39,780 tons of bullion silver that is in the Treasury standing behind the outstanding currency of America should be moved over on the books of the Treasury into its place and could be used through the agency of the War Production Board for nonconsumptive use. We would then have 39,780 tons of bullion silver in the Treasury utilized during the emergency for nonconsumptive use, under the direction of the War Production Board, always the property of the Treasury of the United States, to be returned, always standing behind the outstanding currency of America; and 47,000 tons would be used for war-essential consumptive purposes. I repeat: For waressential purposes, for consumptive use. And then what is the value of that money-of that silver as it passes out of the Treasury? The law says what it is. It is $1.29 per fine ounce. The CHAIRMAN. You are speaking of the free silver now? The CHAIRMAN. Of all the silver? Senator MCCARRAN. Worth $1.29 per fine ounce. Now, it should not leave the Treasury at a loss to the Treasury and the people of the United States. Senator MALONEY. Senator, if I might interrupt you, how can you call it a loss? When the Treasury buys it for 35 cents and sells it for 50 cents, where is the loss? Senator MCCARRAN. All right. Let me answer. I have a $1 bill here in my pocket-a couple of them. The CHAIRMAN. Lucky. [Laughter.] Senator MCCARRAN. A couple of them. If I sell that [indicating a $1 bill], that is worth $1, isn't it? Senator MALONEY. Yes. Senator MCCARRAN. It represents 371% grains of pure silver, in the Treasury of the United States. If I give it to you for 50 cents, do I lose or do you lose? Senator MALONEY. You lose, Senator. Senator MCCARRAN. Certainly I do. Senator MALONEY. But that has no relationship to what I asked you. Senator MCCARRAN. It has, exactly. Senator MURDOCK. Certainly; the same thing. The CHAIRMAN. We are talking about the silver now, are we not? Senator MALONEY. Free silver. The CHAIRMAN. That is what we are talking about, the free silver. Senator MCCARRAN. "Free silver." There is no such a thing as free silver. The law says that it shall be issued by the Treasury in silver certificates. Senator MALONEY. Including the foreign silver. Senator MALONEY. Purchased by the Treasury? Senator MCCARRAN. Certainly; there is no distinction in the law. Senator MALONEY. Do you think it would be a mistake to raise the price to $2.29? Senator MCCARRAN. Not at all, if you keep it in proper ratio to gold, which it always should be. And if you will raise the ratio of silver to gold, gold at $35 an ounce, you will put silver to $2.18 an ounce. We have never asked for it. Senator BARKLEY. Of course, the reason why the silver, so-called, is said to be worth $1.29 an ounce is that the amount of silver in a dollar does not cost the Government of the United States what it really represents in value; and that when you compare the amount of silver in the dollar with the dollar itself it makes the silver presumably worth $1.29 an ounce, but it is not put out at that. Senator MCCARRAN. Oh, yes, it is, Senator; you are mistaken in that. That $1.29 comes by reason of the ratio of 16 to 1 when gold was $20.67 per ounce. The ratio was not adhered to when we decreased the gold content of the gold dollar. When gold was $20.67 per ounce, silver was $1.29, and it comes out of the ratio of silver's production in the world of 16 ounces of silver to 1 of gold. The nations of the world recognized that. However, the all-time production ratio is only 12% to 1. The CHAIRMAN. May I ask you a question right there, Senator? Senator MCCARRAN. Certainly. The CHAIRMAN. Let us assume we are talking about 20,000 tons of the silver in the Treasury that is foreign silver, which means it was purchased, say, at around 35 cents an ounce. Senator MCCARRAN. Yes; whatever it was. The CHAIRMAN. By taking that amount and putting it in, say, industrial use of some kind, and charging the investor or whoever he is 50 cents an ounce, the Treasury still is making some money on that transaction, is it not? Senator MCCARRAN. I doubt very much, Senator, if that would work out at all as a profit to the Government. But if you were to base it on your own money, of course, that is all right; but I am not The CHAIRMAN. I am speaking about the foreign silver, now, that is in our Treasury, and here we have silversmiths and others and this is not backed up by anything now. Senator MCCARRAN. What is not? The CHAIRMAN. This 20,000, or whatever the amount is, of tons of foreign silver. Senator MCCARRAN. You mean it does not back up anything. The CHAIRMAN. It does not back up anything now; it is free silver. Senator MCCARRAN. Senator, that is not true; and that is where the fallacy comes in. The Secretary of the Treasury has no authority to sell silver at less than $1.29. The so-called "free" silver in the Treasury does not and cannot circulate in the monetary system unless it is coined or unless silver certificates are issued against it at the full monetary value. And because it does not circulate as money has no more bearing on its monetary value than does gold lying idle in the Treasury which was purchased by the Treasury at $20.67 an ounce. The Secretary of the Treasury would not approve the sale of that gold at the price at which he bought it. Just because these precious metals may not be in circulation offers no reason for disposing of either metal at less than its current monetary value. The CHAIRMAN. I am assuming these facts are true: That is, on the basis of taking this 20,000 tons of free silver, foreign silver. Senator MALONEY. Of course, you know, Senator, that is exactly what has gone on for years. Until very recently these commercial users of silver could buy it themselves. We have tied their hands. The CHAIRMAN. They cannot go out and buy it now. Senator MCCARRAN. I would contradict that statement. They can buy silver. This is not a question of utilization of silver; this is a question of the price of silver. They can buy silver. They can get domestic silver if they will bid over 71 cents. They can get foreign silver if the War Production Board and other agencies will remove the barrier. Mexican silver will come in as it did come in to Handy & Harman and others who have controlled this industry for years and who have made their fortunes out of it. This is a brokerage game, and that is all it is. The able Senator from Connecticut speaks for his splendid industry. They have been subject to the will of the brokers who furnished the silver to them. And what did those brokers do not very long ago? I am not speaking personally now; I am speaking impersonally, and I am speaking of the brokerage agencies that have handled silver to the trade, from the industry out to the trade. The CHAIRMAN. In my own State there are a number of silversmiths who have written to me, who have no relationship with any broker, if any. |