Breaking the Silver Bonds

Sixty-five years after William Jennings Bryan thundered his famous war cry, "You shall not crucify mankind upon a cross of gold," John F. Kennedy finally severed the Democratic Party's emotional ties to silver. Moving to abandon F.D.R.'s 1933 silver-support program. Kennedy last week ordered the Treasury to stop its sales of stockpiled silver at an arbitrary 91-c- an ounce. Simultaneously, the President opened a drive to abolish the practice of backing U.S. currency with silver as well as gold, which was adopted in the early days of the Republic.

Buying Spree. The Government's role in the silver market, which originally was to buy silver to keep prices up, had become an untenable anachronism. Largely because of new uses for the metal in the electronics and aerospace industries, the U.S. last year consumed 150 million ounces of silver, v. domestic production of only 36.8 million ounces. As increasing demand put an upward pressure on prices, the Treasury was able to maintain the market price at 91-c- only by selling huge amounts of its stockpiled silver.

Demand proved too great even for the Government's hoard. In the past few weeks, a new buying spree cut the Treasury's silver holdings, over and above the amount legally required for currency backing, by nearly one-third to a scant 22 million ounces.

Surging Stocks. Rather than embark upon a massive new silver purchase program, Kennedy decided to take the Government out of the silver market and to have the Treasury meet its needs for coinage silver out of its currency-backing reserves. As a first step, he ordered that the 10% of $5 and $10 bills now backed by silver should gradually be replaced by Federal Reserve notes, a move that will ultimately free 500 million ounces of the reserve silver for use in coins. He also promised to ask Congress for authority to discontinue silver backing for $1 and $2 bills. If Congress agrees, the entire 1.7 billion ounces of silver now held as paper currency backing can be used for coins, giving the Treasury enough coin silver for the next 35 years.

Among economists and financiers, the decision to reduce silver to a free market metal, like copper or tin, won resounding applause. On the silver market itself, the immediate repercussions were a jump in prices from 91-c- to just over a dollar an ounce and a sudden upsurge in silver-mining stocks. Whether this upward trend continues will determine how the battle lines will be drawn when Kennedy formally asks for legislation to discontinue silver as currency backing in the next session of Congress. If prices soar much higher, industrial silver users will surely put up a howl. But if the price should drop because of increased foreign production, silver-state Congressmen can be counted upon to make a fight against freeing the entire silver reserve.

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