In citing the traditional Chinese and Indian liking for silver, Mr. Brownell lays special emphasis on the fact that those peoples constitute a great part of the world's population. After telling us that the peoples of not only Asia, but Africa as well, are "silver using," he states:

The average Asiatic does not aspire to the possession of gold, which is beyond his reach. Silver is what he wants, because silver is the gold of the masses. Any post-war monetary system must recognize the situation of these people, who constitute approximately 1 billion human beings, or nearly one-half of the estimated population of the earth.

If

Not only can the Chinese and Indians more readily supply their silver wants at a low if fluctuating price than at a fixed and high one such as Mr. Brownell's $1.29-an-ounce plan, but they can do so, in the future as in the past, without international bimetallism. they do not ask for bimetallism or for the silver standard, it is not up to us to adopt it for them. In any case, Mr. Brownell seems to overstress the economic importance of the Asiatic half of the world's population. In 1936-the last pre-war year in Asia-their international trade constituted only 13 percent of the world's foreign trade.2

(2) The "shortage of gold."-The "shortage of gold" argument now being used featured the silver discussions of the last century. It was given wide circulation by Mr. Brownell during the silver agitation of the 1930's. It is not a new argument.

Whether there is "enough" gold depends on the purpose one has in mind. Certainly there is not enough gold to supply a 100-percent reserve for every dollar of United States currency outstanding and for every bank-deposit dollar subject to check. Outside the United States this is equally true, for some countries have little or no gold at all. Can there ever be "enough" gold to satisfy anyone who has a "good as gold" substitute to sell?

Mr. Brownell supports his contention of the inadequacy of physical gold by quoting some 1930 predictions of the League of Nations gold delegation as to a gold shortage. What the gold delegation's unrealized predictions mean to this writer is, chiefly, that predictions are risky. The gold delegation could not forsee the steps that would be taken to economize gold, including the increase in price enacted by various governments. Similarly, we cannot today rely too much on Mr. Brownell's predictions.

The accompanying table compares the 1930 predictions of the gold delegation, covering world gold production, including the important gold-mining U. S. S. R., and 1943 estimates of the Federal Reserve Board for the same years, omitting U. S. S. R. data. Despite this important omission and despite the retarding effects of the war on gold mining, the actual output in 1940 was 130 percent greater than the gold delegation had forecast.

According to Foreign Commerce Yearbook data

1 These figures taken from C. O. Hardy's Is There Enough Gold?, Brookings Institution, 1936, p. 85, and here converted into dollars of the present weight, i. e., 1 ounce gold equals $35.

From Banking and Monetary Statistics, 1943, p. 543.

In 1932 Mr. Brownell himself made some predictions when testifying here in behalf of silver-purchase legislation. He then stated:

The more one studies the situation of gold, the more one is convinced of the grave danger that the future production of gold will not be in quantity anything like as much as it is today. And that is regardless of the fact that in the next 1, 2, or 3 years the production of gold will increase to some extent.

And as to China and the silver standard Mr. Brownell predicted:

It is highly improbable, if not impossible, within the next 100 years, to get India and China to abandon the use of silver.

The silver-purchase law Mr. Brownell wanted was soon afterward enacted. But the above predictions were not realized. The mine production of gold was greatly increased by early developments Mr. Brownell could not foresee. And, within 3 years of his prediction, China gave up the silver standard, being driven off it by the very American silver-purchase legislation for the enactment of which Mr. Brownell so busily worked. Only a few years later the Government of British India found the people willing to accept a large reduction in the fineness of the silver coins.

Dr. C. O. Hardy, the well-known economist who in 1936 wrote for Brookings Institution a study called Is There Enough Gold?, in 1944 has the following to say on this question:

All fears are over with respect to the adequacy of the total gold supply to meet total demand for monetary reserves or for international payments. In the late twenties there was much anxiety lest within a few years a dwindling supply of new gold, combined with rigid reserve requirements, would put deflationary pressure on all the monetary systems. The writer has elsewhere indicated his grounds for concluding that even under the conditions that existed in 1925-30 the facts did not warrant any such apprehension. In any case it is clear that such apprehensions are not likely to revive within the next decade or two, unless the whole level of incomes and prices rises far above present levels. In the past decade the monetary

gold stock of the world as measured in dollars has trebled, partly by upward revaluation, partly by transfer of large amounts of gold from the hoards of India into the reserves of the western world, and partly by an enormous increase in the scale of production. In 1930 the gold reserves of central banks and governments amounted to something over 10 billion dollars, or about 17 billion dollars at the present price; now they total over 32 billion dollars. Gold production amounted to 1,250 million dollars in 1941 as compared with about 600 million (at the present price of gold) in 1926-30. The most noteworthy increases of output were in the United States, where production doubled between 1934 and 1940, in Canada where the increase was nearly as great, and in Russia.3

Since the last real use for gold is to settle adverse international balances, of which we have none, and since our gold stock is several times as valuable as it was when gold coin still circulated here, our $22,000,000,000 gold stock ought to last us quite a while.

For the United States, which supported a great boom in the 1920's on a $4,000,000,000 gold stock, our present holdings certainly are not too little. Besides, since the 1920's we have found various devices for economizing the use of gold. So when Mr. Brownell says there is not enough gold, he surely cannot mean here.

Have we, then, too large a fraction of the world's monetary gold? Putting an increased value on the world's silver, as Mr. Brownell desires, whether by international or by United States action alone, will not correct the concentration of gold here. Rather, it will increase the existing idle concentration of the bulk of the world's silver here, a concentration itself the result of earlier silver-purchase acts. In other words, a higher United States Treasury price for silver, under the device of bimetallism, far from correcting the concentration of gold here is certain to follow the pattern of the Silver Purchase Act of 1934 and concentrate still more of the world's silver here.

(3) The price of gold.-Mr. Brownell states that an increase in the price of gold would be equivalent, in dollars, to an increase in the supply of that metal, but he is opposed to such a course for the present. Perhaps he has that in mind for a later date. He gives us this impression when, in discussing an increase in the price of gold, he writes that it "should only be done when clearly necessary." He seems willing enough to have the price of gold increased, once bimetallism is established, "should that [gold price increase] still seem desirable for the purpose of affording a sufficient amount of hard money." From the viewpoint of a gold-and-silver mining company this is an understandable flexibility of attitude. But from the standpoint of a theoretical bimetallist who elsewhere argues that the prices of gold and silver should be "pegged," this flexibility is utterly inconsistent.

As a mining man Mr. Brownell is rightly interested in the long-run future of gold. He asks how long mankind will preserve its belief in the value of gold if it is no longer in circulation and in common use as money. The fact is that almost everywhere a generation has been. growing up that has not seen a gold coin in use- in the United States, in Britain, in Europe generally, in the Union of Soviet Socialist Republics, and in most other countries. If the people of the world do indeed change their views about gold, what of it? Most of us in this country have discarded red-flannel underwear. Should we pass a law making red-flannel underwear compulsory for all, just because a few do not wish to change?

From the Post-War Role of Gold, by Charles O. Hardy, Vice President, Federal Reserve Bank, Kansas City, pp. 12-13. The Monetary Standards Inquiry, No. 8, New York, January 1944.

The fact is that, with us, gold has practically but one real remaining monetary use, the "settlement of international balances." It still has an important psychological value when mentioned in connection with monetary and banking statistics. But in this country gold is no longer the individual's medium of exchange or store of value. Even in jewelry and dentistry it has been losing out to other metals.

(4) Stocks of silver abroad.-Mr. Brownell states that bimetallism can be launched with an estimated 6,000,000,000 ounces of monetary silver in the world, plus an estimated 5,000,000,000 ounces of nonmonetary silver that at a sufficiently attractive price might be sold by its present owners and so become monetary silver. As to the theory that there exists a very great store of old silver which could be readily melted down and turned into money, Mr. Dickson H. Leavens, long a student of the silver question and author of the book, Silver Money, in March this year expressed a contrary view. He sees no "great likelihood of large additions to monetary stocks" from such a

source.

Mr. Brownell estimates that there is 6,000,000,000 ounces of monetary silver in the world. There is in this country alone according

the Treasury Department-3,193,000,000 ounces. Compared with the latter, we have Leavens' estimate of monetary silver in the world in 1933-4,940,000,000 ounces. On this basis, apart from any additions in the past decade, there is only about 1,750,000,000 ounces of monetary silver abroad. Most of our stock consists of bars or $1 coins stored indefinitely in Treasury vaults. The smaller part of our vast silver hoard is in circulation as fractional currency, plus a sprinkling of dollar coins. Abroad no government I know of holds an idle silver hoard. Whatever the amount of monetary silver held abroad may be, practically the whole of it is sure to be in active internal use as coin and therefore unavailable for use to settle international transactions under a bimetallic system. If we adopt a course that materially lifts the price of silver above the present United States-controlled level, foreign silver coins may be melted down again and shipped here, but only if they are replaced by fractional money of some other kind, including perhaps paper notes, the disadvantages of which Mr. Brownell carefully details. If there is a great amount of silver abroad in monetary use as subsidiary coin, either it will remain in such use, or it will be attracted here. In neither event will it contribute to true international bimetallism.

(5) One-country "international" bimetallism.-While the announced aim of many prosilver proposals is international bimetallism, their advocates are usually quite ready to accept something short of it, provided only the price of silver is enhanced. "Bimetallists" have various suggestions as to the ratio at which they want silver pegged to gold-16 to 1 or the like-but I cannot recall one who suggests taking as a bimetallic ratio the existing market ratio. Rather, they always demand a ratio that will lift the price of silver above its current price, as if you could not have bimetallism at the current price of silver as readily as at a higher price.

Throughout his recent pamphlet, International Bimetallism, Mr. Brownell lays special emphasis on the word "international," and in his newest pamphlet, Hard Money, he develops at length a line of argument which he calls "supplementing gold by international bimetallism" [italics mine]. Yet, as I see it, the give-away is when he

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states the fact that the job can be done "by one or more prominent nations." He suggests the United States and Great Britain. Just as in the 1930's the few avowed bimetallists and silver advocates were quite content in the end with a mere subsidy to silver sellers, so in my opinion they today seek merely to assure and improve the existing subsidy, for they are well aware of the congressional attempts to repeal the silver purchase acts now on the books. What in reality is being suggested, then, is protection of these acts. They are suggesting not enhancement and stabilization of the price of silver by true international action, which is unobtainable, but enhancement and stabilization of the world price by the United States Government alone. Only the United States would entertain such an idea.

We have had one recent experience with international action on behalf of silver: The London Silver Agreement of 1933. Eight gov ernments were parties to that agreement, which was devised by Senator Key Pittman, of Nevada. The purchases of silver by five of these governments tended to raise the price of silver over a 4-year period.* Most of the silver bought during those 4 years was bought by the United States Government. The Mexican Government, also a party to the agreement, bought the second largest amount. And when the 4 years were up, the United States Government bought from the Mexican Government its full 4 years' accumulations, and paid it a profit of 9 cents an ounce to boot. An international agreement on silver could be obtained today only at our expense and would leave us holding the bag again. There is no demand from foreign governments for bimetallism, unless perchance the Mexican Government has made one, unannounced.

In connection with Mr. Brownell's willingness to see the United States institute bimetallism all by itself, it is worth recalling that in the last century, while there was still a chance to get an international agreement on bimetallism, the pressure of western mining interests and their willingness to see this country do it all alone led the European nations to step aside and let us do it all alone."

The argument for bimetallism seems to assume that the American Congress can legislate into the people of the world a desire for silver. If this argument is really meant to be taken seriously, a good answer to it is contained in an editorial in the Wall Street Journal of September 28, 1942, which states:

The cessation of free coinage was a governmental action. The rejection of silver as an ultimate price unit was the cause of the governmental action and was an instinctive reaction of the people itself. The people detached silver from gold as a full monetary metal and the governments merely registered that decision. * * *

Governments, in short, do not make a metal a true monetary metal; only the people's consciousness can do that.

(6) A higher price of silver through bimetallism.-That Mr. Brownell has in mind a higher price of silver is clear from his pamphlets. In Hard Money he suggests $1.29 per ounce for silver because it "would fit most readily into various United States statutes." It would also, we may note, help the earnings of the American Smelting & Refining Co., but Mr. Brownell, its chairman of the board, does not mention

For details concerning the London Silver Agreement, see my article, The Silver Episode, in the Journal of Political Economy, October and December 1938.

Seo Henry B. Russell, International Monetary Conferences, New York and London, 1898, passim.