On 13 Jul 2014; I imposed a declaration in opposition to Ed Huntress's motion to modify THE PRELIMINARY INJUNCTION in support of the CROSS MOTION TO VACATE THE PRELIMINARY INJUNCTION. So noted by the Federal Court of Usenet Justice proceeding preliminary declaration, news:gsIwv.542677$ snipped-for-privacy@fx10.iad:
Excellently put, Ed Huntress. I was hoping for a more thorough conversation on the issue then I was getting.
I always assumed that it was Peace and Morgan dollars that were exchangeable in surrender of silver certificates. As such I believed a one dollar silver certificate could be returned for only 0.77344 troy ounce.
The interesting story is that Britian needed to keep it's promise to India that British government banknotes could be converted into silver to the bearer upon demand. The Germans convinced India to cash in their chips, so to speak... and the Brits did not have that silver!
While I realise the 1918 act was pre-depression, I was not referring to the Pittman London Silver Amendment, which if I recall was designed to halt hoarding of silver by the public.
Though was not the Pittman London Silver Amendment added to the Second (1938) Agricultural Adjustment Act, and NOT the The Silver Purchase Act that came out one year later - like you said? Again, I could be worng about that as I am just trying to remember my history, here... though I think I am correct in this instance.
I was indeed referring to the original Pittman act. As that was the price paid to miners per ounce of fine silver, silver would likely have never been mined at the free market value. A free market value which in itself was artificially low due only to government subsidies that were creating a supply equilibrium at that $1/oz. In other words, buyers back then would have got a nice discount since the government covered much of the mining costs.
For example the original Pittman act paid miners $1 per ounce, of which they otherwise could not economically mine silver. Though granted you are correct, this is also the same price that the US sold silver to the UK - the reason for doing so was to meet demand for the British banknotes all ready in circulation.
Had this "exchange value" and subsidized payments not been available, the demand for silver very well might have been greater then the supply. In a real free market this would increase the price of silver until it reached a value that miners could afford to produce...
In fact had the Pittman act not *fixed* the price that *mining companies would be paid*, as well as melting silver dollars to meet demand... It could be possible silver would have jumped well past $1/oz. With the cashing in of UK notes and demand not being met, if Americans caught wind of this - they too could be demanding silver in fear of their own currency.
Though gold was different as you noted, silver too was nationalized in much the same way in 1934. The Silver Purchase Act of 1934 is of course a whole other ball game, which nationalized domestic silver stocks - somewhat like it did gold, though only in order for it's self to hoard large amounts of silver in West Point. Not in gold's case to make it appear Fed notes had full gold backing.
When the government does fix a price, whether directly or through subsidizing the cost to continue production. It get's harder to estimate the true free market price of anything in fiat currency, especially several years afterwords.