Senator MCCARRAN. To war essentials.

Senator BARKLEY. And that it would be released at $1.29 an ounce? Senator MCCARRAN. That is it.

Senator BARKLEY. In coin of the realm; that is what you mean? Senator MCCARRAN. That is it exactly; yes, sir.

Now, does that cost the Treasury of the United States anything? Not one sou marque, because the law says that that silver will be acquired from the American miner, and it is worth $1.29, and that the Treasury will issue silver certificates at $1.29. The real truth of the matter is that if this plan were carried out a profit would inure to the Treasury of the United States.

Senator BARKLEY. What effect would that have on the price at which the Treasury buys silver?

Senator MCCARRAN. It would buy silver at $1.29 less mintage. Senator BARKLEY. Yes. In other words, it would automatically raise the price from the 71 cents which it is now paying to $1.29?

Senator MCCARRAN. That is right. And now let me follow it up: What would we do? You want copper and you want lead and you want zinc; the War Production Board is clamoring for those metals; 90 percent of your silver American-produced comes from copper, lead, and zinc. Keep that in mind; 90 percent of your silver comes from the production of copper, lead, and zinc.

Senator BARKLEY. Your solution of that problem would not help the manufacturers of silverware at all? They could not even get it at that, could they?

Senator MCCARRAN. They can get it now.

Senator BARKLEY. I know, but they could not get any of this money, this that is in the Treasury? They do not get any of that now?

Senator McCARRAN. No.

Senator BARKLEY. And they would not get any of it under your proposal?

Senator MCCARRAN. No. They can buy it in the open market now. If Treasury "free" silver is made available for consumptive war uses there would then be an abundance of foreign silver available at 45 cents an ounce for the manufacturers of silverware and jewelry. The interruption sets me off a little bit, Senator.

Senator BARKLEY. Well, pardon me. I do not get that at all. Senator MCCARRAN. It is all right, Senator. Let me explain. John Smith is the owner of a copper mine. In every ton of copper that he produces there is a certain number of ounces of silver. His copper mine, in copper, is too low to ship today. If you raise the price of the byproduct, silver, to its monetary value, namely, $1.29 his commodity-his bsae metal, copper-will then have the value that will pay him to ship, and he can mine it and ship it.

The same is true in zinc; the same is true in lead; all war essentials, every one of them. In place of paying a bonus to the copper miner for the production of copper, if you will pay him the monetary value of the silver-content of his ore, you will not have to pay him a bonus. He can then pay wages that will lure back to the mines the men who have been taken from the mines by high wages paid in war activities elsewhere.

What is more than that, I went through this before the Committee on Finance. Every time you increase the value of a ton of ore produced from the American mine, you increase the taxable wealth of

this country. The Treasury would collect more taxes by the plan that I propose than it is collecting now. American labor would collect more wages by the plan that I suggest. Industry would get silver if the War Production Board will just raise the ceiling and let silver come in from abroad for industrial purposes, or it would get silver from American mines as it can get silver from American mines now if it will pay the price.

During the last war, during the World War, the very industry that wants silver now at 50 cents per ounce paid $1.38 per ounce. The very industry-the industry that makes jewelry and tableware and flatware and the like-paid $1.38 per ounce during the last war. Now, why should they take the money out of the Treasury at 50 cents per ounce?

Mr. Chairman, if you feel that you must continue, I will ask following the statements to be made by others I may have a moment or two.

The CHAIRMAN. You have had 2 hours now. Senator.

Senator MCCARRAN. Well, I think I could have finished in an hour and a half.

The CHAIRMAN. No.

Senator MCCARRAN. But we have gone off on various subjects, which was the proper thing, and I rather like it.

The CHAIRMAN. Thank you very much.

Is Mr. Spahr here?

Mr. SPAHR. Here.

The CHAIRMAN. Whom do you represent, Mr. Spahr?
Mr. SPAHR. Myself.

STATEMENT OF WALTER E. SPAHR, SECRETARY, ECONOMISTS' NATIONAL COMMITTEE ON MONETARY POLICY AND PROFESSOR OF ECONOMICS, NEW YORK UNIVERSITY

Mr. SPAHR. While I am secretary of the Economists' Committee, I cannot speak, Senator, for the committee. No man on the committee can speak for anybody else. The only way that committee speaks

Senator BARKLEY. What Economists' Committee do you mean?

Mr. SPAHR. The Economists' National Committee on Monetary Policy, of which I am secretary. That committee speaks only over the signatures of the individual men, and 54 of them have signed a statement covering one aspect of the Green bill. I can tell you about that.

The CHAIRMAN. You can?

Mr. SPAHR. But the rest of it has to be my statement."

The CHAIRMAN. What is that; a governmental committee now? Mr. SPAHR. No; it is a private committee made up chiefly of academic economists.

Senator DANAHER. Mr. Spahr, it is in the record at page 63 of this document, with the names of all the members who were signatory to it.

Mr. SPAHR. That is right. I was referring, Senator, to a later statement which was filed November 25 on one aspect of the Green bill. This committee, if I may say so, so far as it has gone on record

on the Green bill, is for the Green bill. The signers would like to see this silver put at the disposal of industry-war industries first, and civilian second.

The only issue on which these 54 men have expressed their views is the irredeemable silver certificates. Mainly it is believed that if the silver behind the certificates is removed and put at the disposal of industry those silver certificates should be retired and, if that makes a scarcity of currency, then substitute Federal Reserve notes for it. Otherwise, silver certificates are going to be an irredeemable currency. The CHAIRMAN. They would be what?

Mr. SPAHR. They would be an irredeemable currency.

Senator MURDOCK. Is it not true that the very purpose of your committee and the very purpose of every statement that you have made, and your purpose of being here today, is to discredit silver as money?

Mr. SPAHR. Not at all. Not at all. This committee has never issued a statement, to my knowledge, having anything to do with discrediting silver. The only interest they have in this is to get this silver into use as a war metal in industry and then not have silver certificates converted into an irredeemable paper money. Just those two things. And it is very simple.

Senator MURDOCK. Do you have any objection to the suspension of redemption during the war?

Mr. SPAHR. Yes, they would; they have gone on record against that.

Senator MURDOCK. There is no redemption in gold, and I have not heard your committee say anything about that.

Mr. SHAHR. There is an indirect redemption in gold of all of the other currency, through the Federal Reserve System; indirect redemption, and it works.

Senator MURDOCK. Well, surely; I understand your indirect redemption. But there is no direct redemption in gold, is there?

Mr. SPAHR. All Federal Reserve notes and gold certificates are directly redeemable by the Federal Reserve banks in gold for exportation.

Senator MURDOCK. Yes; but your gold certificates are not in circulation, are they?

Mr. SPAHR. They are held by the Federal Reserve banks.

Senator MURDOCK. When you go down and try to redeem a Federal Reserve note in gold today you cannot do it.

Mr. SPAHR. That is quite right.

Senator MURDOCK. Then, if you are so sincere and so persistent in getting silver into industry, why not for the duration of the war suspend the redemption of silver certificates?

Mr. SPAHR. Because it injects an irredeemable paper money into circulation. Gold certificates, while you said they are not

Senator MURDOCK. Temporarily you could not go down and redeem it in silver.

Mr. SPAHR. Oh, yes; you can. You can redeem a silver certificate

in silver.

Senator MURDOCK. Well, I mean if you would adopt the same plan with reference to silver that you have with reference to gold, then your silver certificates would not be redeemable in silver, temporarily.

78102-42-pt. 2--3

Mr. SPAHR. But you would have to confine your silver certificates to the Federal Reserve banks as gold certificates are confined, and set up a reserve against them, of hundred percent gold against themor a hundred percent silver, to put them on a par with Federal Reserve notes. That is what you would have to do. Now, you do not want, perhaps, to cut off your paper money circulation; the public may demand it, may need it, and as silver certificates are retired thereafter you can just let Federal Reserve notes go in and replace them.

Senator MURDOCK. I am sure that the bankers of the country and the people that are against silver take that position: That if we can possibly get all the silver certificates out of circulation at this time and replace them with Federal Reserve notes, which cannot come into circulation

Mr. SPAHR. Oh, yes; they can come into circulation.

Senator MURDOCK. Except by the creation of debt, that that is exactly what you want to do.

Mr. SPAHR. Federal Reserve notes are going into circulation, but not particularly by creation of debt. They are secured by 106 percent gold today.

Senator MURDOCK. Well, the formula for the issuance of Federal Reserve notes is 40-percent gold plus 60-percent eligible paper. Mr. SPAHR. That is right.

Senator MURDOCK. Or, with the consent of the Federal Reserve Board of Governors, the direct obligations of the United States, such as bonds, may be used as a backing to the amount of

Mr. SPAHR. The bonds are not being used.

Senator MURDOCK. Well, they are not being used, I am sure, because of the attitude today of the Federal Reserve Board; but if and when the Federal Reserve Board wants to make it possible under the law today, your direct obligations of the Government may be used as a 100 percent backing for your Federal Reserve notes. That is true, isn't it?

Mr. SPAHR. Yes; in part they may be used as backing.

Senator MURDOCK. Yes.

Mr. SPAHR. But they are secured by 106 percent gold today. Senator MURDOCK. Oh, I know that there is enough gold in the Treasury to back them up to the point of a hundred-whatever the percentage is.

Mr. SPAHR. Yes.

Senator MURDOCK. We have more gold in the Treasury-that is true-by far, than the Federal Reserve notes in circulation.

Mr. SPAHR. Well, now, may I make a statement?
Senator MURDOCK. There is no question about that.

Mr. SPAHR. May I make my contention very simple, Senator: So far as I can determine, and so far as these 54 members of this committee can determine-and they are spending their lives in the field of money and banking; they are probably as close students of it as any men that you can find, and they certainly have no personal interest except the interest of the country-there is enough silver available to accommodate the war industries, and even essential peace industries too, if this free and nonfree silver can be placed at the disposal of industry and help win this war.

Now, this country does not want irredeemable paper currency floating around, and silver certificates would become that.

Senator MURDOCK. The very position the silver Senators take is exactly that, that we do not want irredeemable silver certificates, or any other kind of certificates, in circulation.

Mr. SPAHR. Well, you have the Federal Reserve notes in circulation, and they can perform in that respect any function that silver certificates perform if you will reduce the denomination from 5 down to 1 and 2 dollars. That is the one amendment you can make-section 16 of the Federal Reserve Act. Those Federal Reserve notes are secured by a minimum of 40 percent gold. If you would market the silver that is back of the silver certificates they would only be worth today about 35 cents, using the world price of 45 cents for Mexican silver as a base. In other words, that gold behind those Federal Reserve notes, as a minimum, would make your Federal Reserve notes worth more than your silver certificates are worth in terms of silver.

So there is nothing about this to impair the currency. The proposal is that this can be done, and if it can help win the war you can get this silver into use, and you can strengthen your currency, not weaken it. You do not contract your currency. It is a very simple problem, and the Green bill is on the right track, at least in our opinion, and it would be a shame to stop the thing.

Senator MURDOCK. Let me ask you this question: Whether or not you admit that the silver policy of this administration is correct or erroneous, the Treasury of the United States under that law has accumulated this vast tonnage of silver, practically in excess of a hundred thousand tons of silver. Now, every ounce of that silver is worth the same as every other ounce; isn't that true?

Mr. SPAHR. That is right.

Senator MURDOCK. Under the law.

Mr. SPAHR. That is right.

Senator MURDOCK. Every ounce of the silver, immediately on going into the Treasury, becomes a part of our monetary stocks. Mr. SPAHR. That is right.

Senator MURDOCK. And every ounce of it is valued at $1.29 an ounce, under the law, as a part of the silver monetary stocks. Now. what the Green bill does is this: it says to a very small part of our population, it says to a group of men who are engaged in a nonessential industry, that you can come down to the Treasury and with a $10 silver certificate you can get 20 ounces of silver; is that right? Mr. SPAHR. That is right.

Senator MURDOCK. But the people in Arkansas and the people in my State and the people in Texas and all other parts of the United States, when they come down to the same Treasury with their $10 in the form of a silver certificate, can only redeem that in silver at the rate of $1.29 an ounce; is that true? Is that true or not?

Mr. SPAHR. I probably missed something. I think what you said is true if I understood you.

Senator MURDOCK. Well, you could go down there today, could you not, with a silver certificate amounting to $10 and redeem it in silver at the monetary value of $1.29 plus?

Mr. SPAHR. That is right.

Senator MURDOCK. But the Green bill says to a little group of jewelers and silver fabricators and silver manipulators that you can come down here with a $10 silver certificate and get 20 ounces of silver under the Green bill.