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of its objectives—a price of $1.29+ an ounce and a 1 to 3 ratio of monetary silver to monetary gold—came close to being realized. The acquisitions—by purchase from domestic producers under the December 21, 1933, proclamation, by the "nationalization" of domestically held stocks of silver on August 9, 1934, and by purchases on the open market under the Silver Purchase Act—initially drove the price of silver from around 44 cents an ounce just prior to the December 1933 proclamation to a high of 81 cents an ounce on April 26, 1935. The price then fell to around 45 cents in early 1936 and did not rise appreciably until the inflation of World War II. By the end of the war the price had risen above the government's support price for domestically mined silver, so in 1946 an act was passed reducing seignorage to 30 percent, implying a support price of 90 ½ cents per ounce. The market price was pegged at this level by Treasury purchases and sales until 1961. After government intervention ended, the price Anally rose above the legal monetary value, as silver participated in the postwar inflation. And then the price rose high enough to send even drastically undervalued minor silver coins to the melting pot or the numismatic market.

As to the second objective, the ratio of monetary silver to monetary gold never rose above 1 to 5 during the 1930s—a long way from the 1 to 3 objective. The massive additions to the gold stock that were produced by the increase in the legal monetary price of gold to $35 an ounce offset the effects of the massive silver purchases.

Domestic Effects

The silver legislation had only one significant domestic effect—the provision of a major subsidy, at taxpayer expense, to domestic producers of silver. They responded by greatly increasing their production, from 33 million ounces in 1934 to 70 million ounces in 1940. Economic growth would in any event have led to increased production of silver because much of it is a by-product of the mining of copper, lead, and zinc. However, the subsidized price stimulated the mining not only of silver but also of copper, lead, and zinc.

The silver bloc regarded the stimulation of silver production as a good thing in itself because it provided employment in the silver states. However, to get the support of other interests, notably the farm bloc, supporters of silver also argued that the purchase program would contribute to general inflation by increasing the money supply and would promote exports by increasing the purchasing power of countries using silver as money, notably, according to them, China and India.*

The Treasury paid for its silver purchases by printing silver certificates, and these did add to the money supply. However, there are many other ways to increase the money supply, and their actual monetary effect was simply that the silver certificates were printed instead of Federal Reserve notes. Put differently, nothing about the purchase program prevented the Federal Reserve from sterilizing the monetary effect of the silver purchases.

The effect on silver-using countries, as we shall shortly see, was precisely the opposite of what was claimed: great economic difficulty.

All in all, the major short-run domestic effect was simply that the taxpayers paid to have silver dug out of the ground, refined, coined, and shipped for storage in Washington and at other government depositories—a make-work program producing little if any useful output, if ever there was one. In the long run, even the domestic silver interests were harmed, because the effects on other countries destroyed what had been a major market for their output, namely, the use of silver for monetary purposes.

As late as 1933, by which time China was the only populous country still on a silver standard, 43 percent of the total visible stock of silver and more than 30 percent of all the silver produced from 1493 to 1932 was in monetary use (Leavens 1939, p. 369). By 1979, coinage accounted for only 5 percent of total consumption of silver. Throughout most of the postwar period, industrial consumption