Willoughby: The price of silver
December 18, 2016
The few books that outline Aspen's history all end in 1893. Aspen ceased to reign as a mining town, those books say, when government no longer supported the price of silver. Readers may remember from earlier editions of this column that Aspen produced more silver after 1893 than before. A review of the history of silver prices dispels the myth of early demise and reveals a more tarnished story.
Aspen produced silver for about 70 years. Silver was monetized during only 13 of those years. From 1872 to 1878, the country returned to the gold standard. Eventually a need arose for more coinage and for silver bullion to back treasury notes. In 1878, the Bland-Allison Act guaranteed a government market for silver to be used in dollar coins. A year later Aspen prospectors staked their first claims.
President Hayes vetoed the act because the value of silver in a silver dollar at that time was between 8 and 10 percent less than the value of gold in a gold dollar. But Congress overrode his veto. When silver dollars were minted in 1880, silver hovered around $23 per ounce (all figures converted to 2010 values). Through the rest of the decade, silver fluctuated between $22 and $24.
In 1890 Congress passed the Sherman Silver Purchase Act. It doubled the amount of silver purchased by the treasury, as much as 4.5 million ounces a month. This new market far exceeded the silver American mines produced and the government turned to foreign silver, a large quantity from China. Silver peaked at $25 in 1891 and fell to $20 in early 1893.
An international effort to make all countries adhere to the gold standard raised doubts about silver. An Indian mint that had bought large quantities of silver suddenly stopped buying it. The price plummeted to $7, briefly.
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The value of the metal relative to gold declined and President Cleveland pushed to end the policy that supported both metals. Congress repealed the Sherman Act and silver settled at around $17, about 25 percent less than the average over the previous decade.
From 1894 through 1902, silver ranged between $15 and $17, around today's price. It fell briefly to $14 in 1903, fluctuated between $15 and $16 for several years and then slowly dropped to around $11. World War I pushed the price back up to $14. Wartime prices for lead and zinc ratcheted up Aspen's profits.
Although silver never returned to the peak prices paid in the early 1890s, mines stepped up production to compensate. More efficient mills and mining methods kept the industry alive. All the while, prices kept dropping — all the way to between $9 and $13 in the 1920s.
After the stock market crash of the Great Depression (1929), silver plummeted to a sobering $3. Then President Franklin Roosevelt and Congress established an artificial price, $11. They aimed to inflate prices of all goods as a consequence of the increase.
In 1950, more than a half-century after the mythological shutdown of 1893, silver mines closed nationally. Despite low prices, mine owners and workers had endured for decades. In the end, foreign mines that paid their workers much less put U.S. mines out of business.
The myth of the 1893 shutdown revolves around the intricacies of government intervention, prices, supply and demand. A closer look at history reveals ongoing American innovation, resilience and risk-taking in the face of unpredictable rewards. The cloudier story — markets won through the exploitation of human labor — offers neither a silver lining nor an apparent end.
Tim Willoughby's family story parallels Aspen's. He began sharing folklore while teaching for Aspen Country Day School and Colorado Mountain College. Now a tourist in his native town, he views it with historical perspective. Reach him at firstname.lastname@example.org.
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