Willoughby: The story of silver foretells the founding of Aspen
December 15, 2018
Prospectors struck silver at the right time for Aspen. Earlier, neither interest nor capital existed to develop the city at large scale. Later, silver would count as a mere byproduct from mining other minerals. The story of silver pinpoints Aspen's placement on history's time line — as Goldilocks would say, "just right."
On the heels of 1849's California Gold Rush, the discovery of silver at the Nevada Comstock district ignited a new mining boom in 1859. Acting alone, a prospector could pan pure gold from a river. And simple processes extracted gold from mined ore. But silver production called for long tunnels, steep shafts and complicated processes.
The Comstock operations introduced a way of mining that used square-set timbering to support large, mined-out spaces called stopes. The Comstock also introduced methods to process ore, particularly the final steps that separated silver from other minerals and waste rock. These advancements required capital, obtained by forming mining companies. Large numbers of shareholders hoped to strike it rich and generated a lively stock exchange.
At the time of the Comstock discovery, America used a bimetallic monetary system. Gold or silver backed paper money and were minted into coins such as the silver dollar.
Then the country fell into its first major recession, the Panic of 1873. The post Civil War years saw major expansion of the railroads. Speculation in railroad and mining stocks drove the market. As with other recessions and the Great Depression, easy credit and speculation with borrowed money eventually undermined the economy.
Low employment and multiple bank failures characterized the Panic, and an age-old battle ensued. Banks wanted tight money, so currency would not inflate and loans would be paid off with consistent dollars. Others wanted to stimulate the economy and drive inflation so debtors would pay back loans with inflated currency.
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The bank failures drove a policy that most economists believe was the worst way to deal with the crisis: tightened money. The government quit buying and minting silver in 1873. The outgrowth of congressional debate, The Specie Payment Redemption of 1875, essentially put America on the gold standard.
The Coinage Act of 1873, dubbed "The Crime of 73," put an end to silver currency. Compared with a peak price around the time of the Civil War and before the Panic, silver plunged in value by half and continued to fall.
At the end of big silver production, the Comstock discovered its most valuable and largest deposit: a lode of gold. Through development, operators increased the quality and quantity produced. But a frenzy of speculation and notorious swindles scared off serious investors.
After a couple of years, funds dried up at the Comstock. But investors who had left the market returned when prospectors discovered silver in Leadville and then in Aspen. They eagerly invested in mines not connected to California and Comstock speculations.
Slow recovery from the Panic of 1873 spawned a new political initiative to inflate the value of currency. Representative Richard Bland of Missouri teamed up with Senator William Allison of Iowa to push a bill that would return the country to bimetallism. The act required the government to purchase a minimum amount of silver to back money. The Bland-Allison Act of 1878 brought about a quick rise in the price of silver.
The year 1879 marked the discovery of Aspen's silver, an increase in silver's value and a rise in investors' confidence. For the founding of Aspen, it was the perfect storm.
Tim Willoughby's family story parallels Aspen's. He began sharing folklore while teaching Aspen Country Day School and Colorado Mountain College. Now a tourist in his native town, he views it with historical perspective. Reach him at email@example.com.
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