Q. David Bowers
Review of the Silver Market
The following review of the market in silver from 1843 through 1893 and the causes of its depreciation since 1872 is from the Annual Report of the Director of the Mint, 1893:
"During the calendar year 1848 the average price of silver in the London market was 59 3/4d. per ounce for silver 0.925 fine (British standard), equivalent in United States money to $1.3098 per ounce 1,000 fine. The price from this time gradually advanced until 1859, when it reached an average for the year of 62 1/16d.
"The advance in the price between 1850 and 1859 was due to the very large increase in the production of gold to California and Australia, which added to the world's supply of that metal without any material increase in the supply of silver. The advance in the price was also greatly stimulated by the large loans made in silver to India for public improvements and for expenses incidental to the suppression of the Sepoy mutiny of 1857.
"Between 1860 and 1866 a decline took place, the yearly average price ranging from 61-11/16d to 61-1/8d. The latter figure was maintained until after the close of the Civil War in the United States, by reason of the limited supply of, and the increased demand for, silver. Cotton was at this time cultivated very extensively in India, because of the small quantity of it obtainable from the United States, and large amounts of silver were required for shipment to that country to pay for it.'
"The variation in the average yearly price, from 1867 to 1872, was only 4/16d. The average price of silver in 1873 was 59-1/ 4d., equal to $1.29883. Since that time the yearly average decline has been steady, withonly four exceptions. The average price for the month of October 1893, was 33.608d., equal to $0.73672, a decline, over a period of a little over twenty years, of $0.56211 per ounce."
"The causes of this great decline, stated briefly, are as follows:
"First, Germany, in 1871 and 1873, enacted laws demonetizing silver, making gold the sole standard of value, and calling in all silver coins previously issued and circulated in the several states of the German Empire. To procure the gold necessary for the purposes of coinage, Germany sold, between 1873 and 1879, large amounts of silver from her store of melted silver coins, including the amount received from France in payment of the indemnity imposed upon her at the close of the Franco-Prussian war. The effect of this legislation was to create a demand for gold in Germany and to increase the supply of silver bullion, or melted coins, in other countries, and to cause a depreciation in the price of the white metal.
"Second. In 1872, Norway, Sweden, and Denmark entered into a monetary treaty demonetizing silver, which was formally ratified by Sweden and Denmark in 1873 and by Norway in 1875. By this treaty they adopted the single gold standard and made silver a subsidiary metal, to be coined on government account only, for change purposes.
"Third. Holland, which had been on a silver basis since 1847, practically followed the example of Germany in 1875, for although in that year it nominally adopted the double standard at the ratio of 1 to 15-5/11, it, as a matter of fact, prohibited the coinage of silver, thus becoming, like Germany, gold monometallic.
"Fourth. The price having fallen to a point at which it becomes profitable for brokers to purchase silver in Germany and ship it to the states comprising the Latin Union for conversion into 5-franc pieces, the parties to that monetary treaty decided, in 1874, to limit the amount of 5-franc pieces to be coined by each. This, however, did not have the effect to steady the price, and in 1878 the mints of the Latin Union were closed to the coinage of full legal tender silver coins, and have remained so ever since.
"Fifth. In September 1876, Russia suspended the coinage of silver except as to such an amount as might be required for trade purposes with China. Notwithstanding the fact that the silver standard legally prevailed in Austria-Hungary until 1892, the free coinage of silver has been suspended in that country since 1879. In 1892 it formally adopted the single gold standard. By the Act of 1873 the coinage of full legal-tender silver was tacitly prohibited in the United States and gold made the sole standard of value, but as we were then on a proper basis, the price of silver cannot be said to have been appreciably affected by that act, especially as it provided for the receipt of silver from individuals for coinage into trade dollars, and the further fact that large purchases of silver were made for the subsidiary silver coinage under the acts of 1873 and 1875, to replace the fractional paper currency which had been used for change purposes since 1862. The Act of February 28, 1878, authorized the coinage of silver dollars of the weight of 412-1/2 grains, as provided for by the Act of January 18, 1837, and which were a full legal tender. Under the Act of 1837 the coinage was free to individuals, but the Act of 1878 provided for the coinage of full legal tender silver dollars on government account only. It also provided for the purchase for this coinage of not less than $2 million, nor more than $4 million worth of bullion each month, at the market price. But notwithstanding the magnitude of the purchase of silver required to be made under the Act of 1878 the decline in price continued. Further legislation by the United States, still more favorable to silver, was enacted by the Act of July 14, 1890, which provided for the purchase of 54 million ounces annually, the estimated production of our domestic mines. The effect of this act was to cause a temporary advance in the price of silver, but the high price could not be maintained owing to the largely increased output by the silver-producing countries of the world, and the price commenced to decline in September 1890, and continued to do so.
"Sixth. On the 26th of June 1893, the Legislative Council of India passed a bill closing her mints to silver coinage for individuals, and her action has been followed in the United States by the repeal of the purchasing clause of the Act of July 14, 1890. The present price of silver in the London market is 32-1/4d. for silver .925 fine, equivalent in United States money to $0.70-7/10 for silver 1,000 fine.
"Seventh. The great increase in the production of the metal. In 1873 the world's production of silver was estimated to be $81.8 million, and in 1892 at $196,605,000-an increase in the annual supply, in twenty years, of over 140%. Considering the enormously increased production of silver and the decreasing demand for it for coinage purposes, it would be a matter of surprise if the price had not very greatly declined. The increase of the production has had more to do with the depreciation of silver than has its demonetization by some countries and the suspension of its coinage by others."
Distribution of Silver Dollars
The distribution of silver dollars for fiscal year ended June 30, 1893 was detailed in the Annual Report of the Director of the Mint, 1893:
In the mints July 1, 1892: Philadelphia, 50,083,000; San Francisco, 36,301,366; New Orleans, 9,701,300; Carson, 4,126,636.
Coinage of the fiscal year: Philadelphia, 1,356,715; San Francisco, 700,000; New Orleans, 1,920,000; Carson, 1,367,000.
In mints July 1, 1893: Philadelphia, 50,447,000; San Francisco, 35,813,683; New Orleans, 7,085,250; Carson, 5,398,455.
Distributed from mints: Philadelphia, 992,715; San Francisco, 1,187,683; New Orleans, 4,536,050; Carson, 95,181.