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or THE


Jffice Correspondence

Chairman Secies

Date January 27, 1947
Subject* Brief on "Silver as

You will recall that at tlie September meeting of the Board of Governors of the International Fund a resolution introduced by Mexico was passed
by the Board providing that the Fund should gather material, statistical
or otherwise, concerning the silver question in order to facilitate "discussions on the subject in an international conference among interested
member countries11 • The Fund was not asked to sponsor such a conference.
However, Mr* Francis EL Brownell, Chairman of the Board of Directors of
the American Smelting and Refining Company, has prepared a "Brief on
Silver as Money" for presentation to the Board of Governors of the International Monetary Fund, and he has sent copies to you and to me as members
of the U.S. Delegation at the September Conference.
The "Brief" proposes that the United States should peg the price
of silver, foreign or domestic, at 90 cents per fine ounce, and further
suggests that whenever gold or U.S. dollars must be paid into the Fund
silver should be accepted by the Fund as a substitute "to the extent of,
say, 10 per cent of such payment".
Mr. Brownellfs defense of these proposals involves all tlie
hackneyed arguments of th.3 "hard money" sckool with which I am stare you
are painfully familiar. Mr. Brownell believes that the world1 s metallic
reserves are in danger of becoming too small, and delivers himself of the
following astoimding judgment which he thought important enough to place
in italics:
"The breakdown of the gold standard was not
caused by World War II. It happened before
that war began—several years before. The
physical insufficiency of gold was the main
Mr. Brownell speaks of the acquisition of foreign silver as
"costless"—indeed he argues that it is quite profitable because of the
seigniorage. He also expresses tlie amazingly naive view that by raising
the price of silver we would increase the wealth of the United States because of the increased paper value of its existing silver stocks. He

"A third objection made to the restoration of silver as a monetary metal is that so
doing will benefit tlie silver mines. It entirely
overlooks the fact that such benefit is insignificant
compared with the benefit accruing to the United

-2*States itself as a government. Its silver
amounts to over 3>184>QOO,OOO ounces which at
90/£ an ounce has a value of nearly $3 billion.
If the price should fall to 25$ per ounce, this
silver would be worth less than $1 billion, or
a decrease of over $2 billion dollars.11
I must confess that aside from the merits (or demerits(?))
of the argument in this paper, I simply cannot understand why it should
be put out by the Chairman of an industrial company which so obviously
has a vested interest in the matter.


Mr. Thomas
Mr* Dembitz and Miss Maroney