Mr. SPAHR. I do not get that out of the bill. Senator MURDOCK. Well, if they are in the 'jewelry business, and let us assume Mr. SPAHR. Oh, I see. Buying at the market price, you are talking about? Senator MURDOCK. Yes. Mr. SPAHR. Yes. Senator MURDOCK. What you do is to say to one very small, small group of citizens, "Your ten dollar silver certificate is worth 20 ounces of silver, but the ordinary average American can only come in here and get silver at $1.29 an ounce." Mr. SPAHR. But do you realize, Senator, what you said? Mr. SPAHR. You are merely expressing in other terms the extent to which silver is overvalued by the Treasury for money against its market value. Senator MURDOCK. Silver is not overvalued by the Treasury. Silver is valued by the law of the land; and the Treasury, even in its own statement, refuses to abide by the law, and carries a part of the monetary stocks at the cost value, and the other part of the silver monetary stocks at the statutory value. Mr. SPAHR. May I ask a question, Senator? Do you object if I ask you a question? Senator MURDOCK. Oh, no; I should like very much to have you do so. Mr. SPAHR. To help bring out discussion. I do not see why you people interested in silver production-and I am certainly sympathetic with that point of view--I do not see why you do not say, "Let us turn this silver loose to industry and keep our mines going just as fast as we can. How do you know that the price of your silver would not go up? Senator MURDOCK. Because this country has established certain monetary laws. It has established a policy of maintaining its monetary stocks at one-fourth silver and three-fourths gold. I think the wisdom of those laws has been amply shown and demonstrated since the adoption of the Silver Purchase Act. Today, in my opinion, the greatest individual asset in the United States in our war program is this vast tonnage of silver, and I think Donald Nelson, head of the War Production Board, agrees with me on that. Mr. SPAHR. Well, why not let it go into war use? Senator MURDOCK. I am perfectly willing to let any silver that is needed go into war use. Mr. SPAHR. Then, why not the Green bill? Senator MURDOCK. And that is being done every day, but I think this, that when the people have purchased this 100,000 tons of silver down there, and it has a purchasing power of $1.29 an ounce, that silver will purchase at that rate just as much as any other dollar in the Treasury. Mr. SPAHR. That is right. Senator MURDOCK. Now, after the people have accumulated that silver, I am unwilling then to take the profit that the people have made and turn it over to a little group here engaged in the fabrication of silver. I have absolutely no objection to the utilization of all the silver in the Treasury for war purposes at the statutory value, but I do not like to rob the people of the United States of their money whether it is represented in Federal Reserve notes or in silver. Senator BARKLEY. Have you a written statement prepared that you want to present? Mr. SPAHR. I have, Senator. I think I can dispose of all this rather briefly. Thank you. I should like to urge the passage of the Green bill provided certain amendments are made. The main purpose of the bill is to put Treasury silver at the disposal of industry-war industries first, civilian second. The importance of accomplishing this purpose should be so obvious as to be beyond debate. The bill is defective, however, in the fact that it will convert silver certificates into an irredeemable paper money. This provision is most unwise, and there is no good reason for it. On this aspect of the bill I should like to call your attention to a statement made on November 25 by 54 monetary economists. I have the statement attached, and I should be glad to read it if your time permits, or insert it. That is the one [indicating]. Senator DANAHER. Is this a copy of it [indicating]? Whatever the chairman's pleasure is. Senator DANAHER. I suggest, Mr. Spahr, that you put it in the record. (The statement referred to, dated November 25, 1942, is as follows:) FIFTY-FOUR MEMBERS URGE AMENDMENT OF THAT PROVISION IN THE GREEN BILL, S. 2768, WHICH WOULD CONVERT SILVER CERTIFICATES INTO AN IRREDEEMABLE PAPER MONEY (Economists' National Committee on Monetary Policy, New York City) NOVEMBER 25, 1942. The Green bill, S. 2768, now pending before the Senate Committee on Banking and Currency, carries a provision which would convert silver certificates into an irredeemable paper money. We approve the passage of a measure which will place the Treasury's hoard of silver at the disposal of industry-war industries first, civilian industries secondfor consumptive as well as nonconsumptive uses, reserving what is necessary to meet the Nation's demands for fractional silver coin and silver dollars. But, as the silver behind silver certificates is withdrawn, a corresponding amount of these certificates should be retired. The Green bill provides that the silver held against silver certificates may be loaned by the Government for nonconsumptive purposes-for example, as bus bars in electric plants-and that, while employed in this manner, it may at the same time serve as security for the silver certificates outstanding or to be issued. Under these conditions, the silver "certificates" would become irredeemable in silver. They would be a Government certification of what is in fact not true. Provision might just as well be made for the issuance of silver certificates against silver held in our mines or in any other inaccessible place. Federal Reserve notes in $1 and $2 denominations can be issued to meet any demand of the public for paper money of small denomination as silver certificates are retired. These notes would have the advantage of being anchored to gold and of being maintained on a parity with it by a system of redeemability, though indirect, which operates through a reserve of gold certificates held by the Federal Reserve banks and which are redeemable by these banks in gold for the purpose of exportation. Silver certificates under the Green plan would not be convertible, directly or indirectly, either into our over-valued silver or into gold. No responsible Government, not bankrupt, would issue to the people a paper money carrying a promise to deliver upon demand what the Government cannot deliver and does not intend to deliver. Consequently this provision of the Green bill should be revised. (Signed) Eugene E. Agger, Rutgers University; Charles C. Arbuthnot, Western Reserve University; Leonard P. Ayres, the Cleveland Trust Co.; Don C. Barrett, Haverford College; James Washington Bell, Northwestern University; Ernest L. Bogart, New York University; Frederick A. Bradford, Lehigh University; J. Ray Cable, Washington University; Wilbur P. Calhoun, University of Cincinnati; Edward H. Collins, New York Herald Tribune; Garfield V. Cox, the University of Chicago; William W. Cumberland, Wellington & Co., New York; Charles A. Dice, the Ohio State University; D. W. Ellsworth, E. W. Axe & Co., Inc., Tarrytown, N. Y.; William D. Ennis, Stevens Institute of Technology; Fred R. Fairchild, Yale University; Clyde Olin Fisher, Wesleyan University; J. Anderson Fitzgerald, the University of Texas; Herbert F. Fraser, Swarthmore College; Roy L. Garis, Vanderbilt University; Harry D. Gideonse, Brooklyn College; Lewis H. Haney, New York University; Hudson B. Hastings, Yale University; William F. Hauhart, Southern Methodist University; Frederick C. Hicks, University of Cincinnati; John Thom Holdsworth, the University of Miami; Edwin W. Kemmerer, Princeton University; William H. Kiekhofer, the University of Wisconsin; David Kinley, University of Illinois; William H. Kniffin, Bank of Rockville Centre Trust Co., Long Island; Frederick E. Lee, University of Illinois; J. L. Leonard, University of Southern California; James D. Magee, New York University; A. Wilfred May, New York City; Mark C. Mills, Indiana University; Melchior Palyi, the University of Wisconsin; Ernest Minor Patterson, University of Pennsylvania; Clyde W. Phelps, University of Chattanooga; Chester A. Phillips, the State University of Iowa; Charles L. Prather, Syracuse University; Leland Rex Robinson, 76 Beaver Street, New York; R. G. Rodkey, University of Michigan; Olin Gleen Saxon, Yale University; Joseph A. Schumpeter, Harvard University; Walter E. Spahr, New York University; William H. Steiner, Brooklyn College; Charles S. Tippetts, Mercersburg Academy; James B. Trant, Louisiana State University; Leonard L. Watkins, University of Michigan; Russell Weisman, Western Reserve University; Nathaniel R. Whitney, the Procter & Gamble Co., Cincinnati, Ohio; Edward Wiest, University of Kentucky; Max Winkler, College of the City of New York; Ivan Wright, Brooklyn College Mr. SPAHR. To amplify the statement of the 54 monetary economists, I should like to add one of my own on Why the Silver Certificate Provision of the Green Bill, S. 2768, Should Be Amended. That refers to the irredeemable-currency provision of the silver certificates. Now, there is a statement printed and at your disposal on that, and I can either read it or insert it. Senator BARKLEY. I suggest you put it in the record. (The document referred to is as follows:) WHY THE SILVER CERTIFICATE PROVISION OF THE GREEN BILL, S. 2768, SHOULD BE AMENDED (By Walter E. Spahr, secretary, Economists' National Committee on Monetary Policy) Although this statement is published and distributed by the Economists' National Committee on Monetary Policy, Educational Building, 70 Fifth Avenue, New York City, the views expressed are solely those of the secretary. No individual in this committee may speak for any other member. 1. The bill would convert silver certificates into an irredeemable paper money.Congress cannot issue a good paper money against silver used as bus bars in electrical plants any more easily than it can issue a good paper money against silver in our silver mines or silver held abroad. Such paper money would be as irredeemable in the first instance as in the others. Senator Green's statement that "I cannot see where it (silver) would be any less security for the silver dollar if it is in a Government-controlled electrical establishment than if it is underground at West Point" (Hearings, October 14 p. 14) overlooks the important difference between silver held as a reserve against certificates, though perhaps it is not used to a great extent, and a leased "reserve" of silver which cannot be used for redemption purposes. The fact that the reserve of silver at West Point can be used is a matter calling for consideration and understanding. 2. The bill would put our Treasury in the position of issuing a paper money which would carry promises that the Government could not fulfill and would not intend to fulfill. Provision for such a paper money, once its nature is understood by those who now advocate it, would reveal a most flagrant case of bad faith on the part of Congress with respect to the maintenance of a good currency system for the people of the United States. 3. The provision for irredeemable silver "certificates" would impair the reserve structure of the Federal Reserve and their member banks.—Federal Reserve banks are required to maintain a reserve against their deposits of not less than 35 percent in gold certificates or other forms of lawful money. Silver certificates are a part of the lawful money used in these reserves. The Green bill would convert these certificates into an irredeemable paper money. Although gold certificates, backed 100 percent by gold, are part of the legal reserves which Federal Reserve banks must maintain against their deposits, the Green bill would permit irredeemable silver certificates also to serve as part of this required reserve, just as though they would be as good as the gold certificates. The reserves of member banks of the Federal Reserve System are deposits on the books of the Federal Reserve banks. Against these member bank reserves the Green bill would provide an irredeemable paper money. Federal Reserve notes, though secured by a reserve of not less than 40 percent in gold certificates, are made redeemable in lawful money since gold certificates cannot circulate legally outside the Federal Reserve banks. The Federal Reserve notes are therefore redeemable in silver or silver certificates. The Green bill would make Federal Reserve notes redeemable in an irredeemable paper money. Although Federal Reserve notes, secured by a minimum of 40 percent in gold certificates, cannot serve as a reserve against deposits in Federal Reserve banks, the Green bill would permit silver certificates with no reserve behind them to serve as reserve against these deposits. 4. The irredeemable paper money provision of the Green bill is not only indefensible but completely unnecessary.-If the proposed silver certificates are not to depreciate in terms of gold, they must be made, at least in practice, ultimately redeemable in gold through the medium of gold certificates. It is probable that their depreciation would be prevented by the Treasury arranging for their conversion into our other money which, under our present system, is indirectly convertible into gold. It is conceivable that it might be necessary for the Secretary of the Treasury to employ the parity clause of section 6 of the Gold Reserve Act of January 30, 1934, to make parity effective. In any case, the burden of maintain ing the gold value of such an irredeemable paper money would fall upon our gold stock, even though this paper continue to be called and dishonestly so silver certificates. Under our present system of indirect conversion of much of our currency into gold, honesty, as revealed in the implied or outright promises on some of our paper money, has been stretched to the breaking point. But there are elements of good faith in this system of indirect conversion that would be totally missing in the proposed silver certificates. All that Congress need do to avoid the injection of this new and thoroughgoing piece of bad faith into our monetary structure is (a) to provide for the retirement of silver certificates as the silver reserve behind them is leased or sold, and (b) to amend section 16 of the Federal Reserve Act to authorize the issuance of Federal Reserve notes in $1 and $2 denominations in order to meet the public's need for paper money of small denominations. Gold certificates, secured 100 percent by gold, would fill any gap left by the retired silver certificates in the reserves of lawful money held by the Federal Reserve banks against their deposits. Federal Reserve notes, secured by not less than 40 percent in gold certificates, would fill any gap in the paper money in circulation. All our paper money would then be at least indirectly redeemable in gold, and it would carry promises which can be and are fulfilled by the Government in the manner provided in the present system of indirect conversion. 5. The proposed irredeemable silver certificates are not to be confused in nature with paper money indirectly redeemable in gold. It is sometimes said that since all our paper money, except silver certificates, is irredeemable it should make little difference if Congress should convert the silver certificates into an irredeemable paper money. The answer to this assertion is (a) that our other money is redeemable in, or convertible into, gold at least indirectly, and has restrictions thrown around its use that cause its value in terms of gold to be maintained, (b) that the proposed silver certificates must be made redeemable in, or convertible into, gold in some manner if their gold value is to be maintained, and (c) that if they must have this close relationship to gold there is no reason why they should be called silver certificates, which they would not be, or why they should not be replaced by a paper money that is what it professes to be. Even though the nature of the mixing of the proposed irredeemable paper money with a better currency be understood (see topic 3 of this statement), is not the fact that the Treasury probably will not let the irredeemable money depreciate in terms of gold sufficient proof that the question of the irredeemability of the proposed silver certificates is unimportant? This issue resolves itself, in the final analysis, into a question of the degree of integrity which our Government is willing to embody in its monetary contracts. To those who would question the value of absolute integrity in this case, let it be said that even though we are rich in gold and can pay off all our paper money in gold whenever we choose, an unfulfillable promise to pay silver is very different from a promise to pay gold-even though only indirectly and chiefly for the purpose of exportation. If our gold reserve were relatively low, the burden of these irredeemable silver certificates would then be real and perhaps sinister. Then the degree of integrity in the Government's promises would be put to the test. The obligations with respect to gold certificates and Federal Reserve notes could and probably would be fulfilled, but there would be nothing with which to redeem the proposed silver certificates. Must only the nation poor in gold, but not the rich, respect its promises? Does the fact that certain promises can easily be fulfilled warrant the making of promises that must and will be broken? The Green bill, unless amended, provides a devious road to "Greenbackism' or fiat money. Mr. SFAHR. I can state briefly what the contention is. The bill also needs amendment in certain other particulars. I have embodied these in the form of an amended bill, and I will cover briefly what that is. (The suggested amendments are as follows:) SUGGESTED AMENDMENTS TO THE GREEN BILL [Omit the part in black brackets and insert the part in italic] A BILL To authorize the use for war purposes of silver held or owned by the United States SECTION 1. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That notwithstanding any other provision of law, the President is authorized, through the Secretary of the Treasury, [upon the recommendation of the Chairman of the War Production Board] to sell, lease, or otherwise dispose of, upon such terms as the Secretary of the Treasury shall deem expedient, to any person, partnership, association, or corporation, or any department of the Government, or to the government of any country whose defense the President deems vital to the defense of the United States, for use not inconsistent with the war effort, this to be determined by the Secretary of the Treasury in consultation with the Chairman of the War Production Board, including but not limited to the making of munitions of war and the supplying of civilian needs contributing to the war effort, and the converting of existing plants to those purposes, any silver held or owned by the United States: Provided, That the Laverage] price for all silver sold under this Act shall not be less than [fifty cents] the average cost to the government per fine troy ounce: Provided further, That at all times the ownership and the possession [or control] of an amount of silver |