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-AIR MAIL April 21, 194S Honorable Marriner S . Eccles Chairman of Board of Governors Federal Keserve System Washington, D . C . Dear Sir: M y attention has been called to a rdcent statement made by you, suggesting the suspension of silver purchases, with the object of increasing production of lead, copper, e t c . I am afraid your remarks are based on a misapprehension, Villi you pardon a man w h o should be qualified by age, experience, and life-long study, if he ventures to submit some facts that have probably missed your attention? .1) Very few silver mines in the United States are now operated - or are susceptible of profitable operation,-the ores of which do not contain substantial amounts of lead, or copper. Thus the silver is in one sanse a r ^ b j product: the mines are producers of urgently needed base-metals; the silver helps to pay the costs, and permits the mining of lead and copper that, without the silver content, would not be produced. Few and relatively unimportant silver mines exist, the closing of which would permit diversion of men and materials for increased output of lead or copper elsewhere. Bor is the labor, available today in most silver-mining crommunit i e s , such that it could be diverted, or uprooted, without serious trouble. The younger and the more enterprising m e n have left for the Army or for defense-plants to which labor is attracted by higher p a y . The men who are left stay because of their homes and families in the community; because they are too old, or because they are unsuited, b y temperament or life-long h a b i t , for organized factory w o r k . You could prevent them from w o o i n g ; but in a large percentage of cases, you could not induce them to move elsewhere, without compulsion. 2) Just n o w , silver is at the threshold of what m a y prove to be a new epoch. Its unique properties (best conductor of heat; best conductor of electricity; safest germicide; best bearing-metal alloy; strongest solder alloy) might at any moment render our silver stock and output invaluable for w a r purposes, in which price is not the controlling factor. It would be short-sightea to do anything to reduce its output at this t i m e . Within a y e a r , silver m a y conceivably become as indispensable as magnesium is today: and unlike in the case of magnesium, we have no sources of raw material from w h i c h greatly expanded production might be quickly m a d e . . 3) 3!he present demand for w a r materials is temporary, and will doubtless be followed b y a period of reduced metal consumption and low prices. Honorable Marriner S . Eccles April 21, 1948 f2 It is plainly to be seen that the base-metal producers in other districts do iiot welcome increased production from rthe Rocky Mountain area; competition v/hich m a y be irksome to them later. j?hey therefore decry the possibilities of large output here, and dwell on the precious-metal content of many Rooky Mountain ores as giving them an unfair competitive advantage; omitting to add that cheaper labor and other conditions more than offset i t . Nor should we assume that, in mines containing base and precious metals, their relative importance will remain unchanged. You m a y not rememb e r , as I d o , that Anaconda itself started out as a silver district. Red M o u n t a i n , in Colorado, which is how remembered for its exhausted silver bonanzas, is in m y opinion a potentially important base-metal district, which should be producing needed critical metals n o w . What is certain is that the Rocky Mountain deposits (containing silver or gold) are capable of making a greatly increased production of lead, zinc and copper; and that no other known deposits in the United States can do s o . Is this increased production needed? If so, how can it be made available? Q?o reduce the value of the gold and silver which are also locked in these ores until separated b y smelting and refining of the metals, will tend to reduce the total production of the metals, now seen to be critioal: n o t to increase i t . 4) What interferes with realization of this potential increase? Private capital is not available for venture mining, because a) It needs the incentive of possible large reward; but this, if realized, will be confiscated by excess-profit taxes. b) Fear of reduced price of silver, which will offset the premium offered b y Metals Reserve Company for over-quota production of copper, lead and zino. o) Fear of further increases in wages and other elements of cost, and in efficiency of labor, as the best men are drawn off into the armed forces, or into munition plants. d) Knowledge that, after the war ends, a determined attack will be made on Rocky Mountain producers, through discriminative increases in freight rates and smelting charges, as in 1919-21. e) Withdrawal of priority rights from base-metal mines, the product of w h i c h contains thirty per cent of its total value as gold and silver. Because of these, I have come to the conclusion that, if the increased production is n e e d e d , it must b© brought about by Government financial a i d , which is not now available. loans from Reconstruction Finance Corporation are not obtainable n unless ore is "blocked—out and completely accessible for examination b y the corporation's engineers. A large proportion of these mines have been idle S ™ ? ! the close of the last warrto reopen them for the purpose of exaninatio Sojaorable Marriner S* Bcoles ipril 21 y 194S (3 Shortly after Pearl Harbor, it became obvious, to me at least, that it would be found necessary to expand metal production within our own borders* I therefore proposed to War Production Board to turn over such m mines as were owned or controlled b y myself for operation without charge, or operate them without profit. This offer has not been accepted: possib l y some special authority from Congress might be necessary. I believe many other owners of mines would do the same, subject to a small allowance for depletion of the minerals extracted under Governmental operation or control. Should the opinion of the senior Senator from Colorado prove corr e c t , a much more stringent scarcity of these metals m a y be expected within six months. I trust n o t , for the deficiency in output is sufficiently evident n o w . But should a worse need develop, it would then be impossible to do much torwards getting increased production from Colorado for another y e a r , most of our mine^feeing at altitudes of 9,000 to 13,000 f e e t . If action is to be taken, now is the time for it. But above all, it is useless to expect increased production from Rocky Mountain copper, lead, and zinc m i n e s , without correspondingly increased production of gold and silver to help p a y the cost* Sven if you think the present output of base-metals is sufficient, this is no time to cut off a substantial part of it b y cessation of silver purchases. George E . Collina April 19*42. Mr* George E* Collins, Boston Building, Denver, Colorado* Dear Mr. Collins: As Chairman Eooles is temporarily absent from the city, I wish to acknowledge your letter of April 21 in regard to his views on silver* Ho is, of course, aware of the faot that silver is, as you say, a good deal of a by-product and that the essential metals suoh as copper, zino, lead, etc*, are urgently needed in ever-increasing volume* Ho has taken the position, however, that if the Government considers it to be in the public interest to continue to pay a subsidy for domestic production of silver, then it should be frankly recognised as a subsidy and disentangled from all the monetary fetishism that has characterised and, he thinks, hurt the case frequently made for it* He has said that he would infinitely prefer to pay a higher price or a subsidy directly for the production of copper, lead, etc*, which are needed in the war effort rather than to go on paying the subsidy on the silver which we do not need, certainly from any monetary standpoint, but only bury at Vest Feint* Se has taken the position that if we are going to continue to subsidise silver, then it ought to be released for industrial uses at the commercial price, letting the Government take the loss, that is, the difference between that price and what the Government has to pay for it* Yours is a dispassionate and thoughtful letter which I aa sure lir* Eccles will be interested to read upon his return* Sincerely yours, (Signed) Elliott Thurston Elliott Thurston, Special Assistant to the Chairman* ET:b