Willoughby: Understanding silver mining in Aspen, Part II – economics

Tim Willoughby
Legends & Legacies

The economics of Aspen’s silver era may be best understood when compared with today’s oil market. Standard rules of supply and demand apply to both commodities, and these two products of the underground play a role in the overall economy.

Investors trade oil by the barrel on public markets, and bet on their future prices. As a universal product easily traded between countries, oil acts as a proxy for international currency. For years Saudi oil traded not in U.S. dollars, but in gold. Silver held similar trading value. In addition to utilitarian uses for jewelry, utensils, and decorative items such as candleholders, silver worked as currency, both in coinage and as collateral to back paper money. The British Empire operated on pounds sterling.

Silver, unfortunately, competed with gold as established currency, and usually lost. Because gold is more rare it, outvalued silver ounce for ounce at a ratio between 20 to one and 16 to one. Inconsistent production of each brought booms and busts. When silver grew scarcer, you could trade it for gold. But when silver production increased rapidly, even an official change in the exchange rate might not entice a trade. As one of the causes of the Panic of 1893, silver producers traded silver for gold at a time when silver values were sliding downward. The world gold standard usurped silver as a backing for currency, and that action produced its own unintended consequence: slower economic growth.

Comparing oil prices with silver prices illuminates the significance of silver during that era. In the mining days, newspapers quoted the price of silver daily. The price would fluctuate wildly like the price of oil does today. Silver ranged from $.20 to $1.20 per ounce, and at a high during the 1890s it reached $1.25 per ounce. During 2020 the price of a barrel of crude oil ranged between $11 and $40.

Prices of each commodity react to world events and competition. For decades the production of silver in China changed the price in the U.S. On the demand side, India used silver for currency. When that country stopped buying sliver, the U.S. price dropped dramatically.

Investors poured scads of money into silver mines. Investors in England put up much of the capital for American mines. Today’s investors buy and sell oil in response to significant world events. Each commodity increases in value at the advent of war.

Silver and oil lure investors with quick profits, and attract the same kind of people. My grandfather offers a good example. His father came to Colorado during the gold rush and stayed long enough to pass the mining gene to his son. But oil was grandfather’s first love. An oil field opened in Kansas around 1915, and he followed the boom. Soon afterward, he pursued Aspen’s silver.

The production of silver and oil involve more than extraction. Oil has to be processed. Oil from one field may be different enough from that of another field that a refinery cannot process both at the same time. Similarly for silver, the mix of minerals in the ore differed from mine to mine. Milling and smelting were designed to address those differences.

Each industry had its captains, and they were the processors not the producers. Oil had its Rockefeller and silver its Guggenheim. The greatest consistent profit came from the cut from every barrel of oil or from every ton of ore owed for processing it.

Fluctuations between $.20 and $1.20 per ounce of silver, and between $11 and $40 per barrel of crude oil, creates havoc, a pit of job losses for workers and a gusher of challenges for investors. More on that next week in Part III.

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