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Scwwsfcer 27, 19&L

Deer Mr. President:
The Tre&swy torn, as y«a requested, beea etw!ying far eon* t&ee the
usee of silver la our monetary aysteeu Informal croiif*re»3«a h o w *lacbeen held with otber depertaeBta is your Adalaiatratiett, with the federal
E m m , and with lee&lqg iwpreeestetivee of both ailwr pra&jcieg aad
congualn^ interest*. It bgm eeens appropriate to reciwwend aeveral ehessea
ia our *il¥*r procedure*, largely bee**a* of the eteg» that hue talaeit place
in the vcrld poeitlcsi of silver.
The indwtrlel usee of »llrer have bees expending greatly and the i*tdoatrial couaaBptloo of silver ia steadily to&reaofs'gf it tam tam * t© be
ased extessively in the ertaj it la seeded JLn our coinage. Ail together,
the industrial, artistic end eotBage twett of t l i w are asrresfcly « e n m l %
•are then ISO silliest ouaee* of silver per year in the Onitod State*. the
total werld-vlde eoasuepttsa Is eetiaeted et acre then 300 itUlae. Produc­
tion, b c w m r f falls far short of these totals. wsrld-vid* i t It oiurvuiljr
eetlasted et g*?
«»»*« signally, of ehieti only rtW j l r t l t l a a
ia produced in the Bolted statee. The laiieeted gs? bet»*M*S'world" pro&uetioa
and world comuoptio©, «pertTro« cheagea la inventories, ia tho* sen r«taiin£
et about 65 miilixn ouacea.

ffci* gap* aai it ie a gcwiM oat, bee for eons U m tew filled by
sale* froat the stock* of ''free a t W * held by the Waited State* ?rea*ury.
Theee etoeke were scemulated in earlier jeer* vhos total fetutf. we* crash
l
lower and purchaees by the United state* Treasury, a* the mininaa price
eetabllabed by the Coa^ra** for aeaetary purpceee, absorbed virtually all
new dearstie production. The T-m^ur^a supply < f ft*« i l l w reached it#
a
peak la April, 1959* at 229 atiHoo ounces. Sine* that tia», porchaeew
have steedily decreased ani ealea taws laereaaed ead the Tvwwwry** *teefe
of fiw t U w r he* declined. $ r the esd cf 1959 it wee 17% will&Mi owweei
j
by the tol tf 19^0 it bed fallen to 123 ■ H o m oeej o* of today, follow­
ll n m
ing wraewally rapid ulai ia recent iwen, it hae f t & a to
fine «ant.
It ia eleer that under foremast procedure* title steak «mld mc» be
entirely «xheueted aad tlwt the Treamvy wcNild th e ttm tame i» fwrther
mm r
•ilnr errailahle for public eal*. St aleo n e w elaar on the taalt of
thee* teveXopweste that thnw la m reoeiaiag ae«A for Sowmwmt mvfort
of the eiltwr price at S >*5 oesta^ a* provided wader curremt l*arlaleti«i»
K
la the ab**oo* of fwrther Ckawmerot ealea of free ailwur^ the private
■
arfcet 1* ^uite obriouely pcrepered to aheorb all doaagtie prodaetioa a t
f
or tten the prioe or 90«5 eeeta*
oowmewmt etill 1 m b mnwr, neacrly y- fcnn«« «ub^« in a fralm, o
f
lioQ rwsarvw held aeaiaet the iaawime of * pert of our paper w n m e y .




H
-

-2 -

Soaghly aaa quarter of tte toted is helA sgnlnat 4<Mrafl $10 silver aacfcifiettM, although existing legislation also permits i a n n n of $5 and $10
•etat fg tte federal a m m y mA these latter notes represent veil oik
er
90 percent of t t* outstanding cwrreacy of thtn Amaiartlm* Tte otter
i
"tferee qasrtara of the silver bullion m « m la used to support il sad ta_
•ilwr «vtifiatM| under «Usliag
only aliver etrUfloitM are §•
*
tborlsed for currency af tteae denominations.
la view of tte large rad growing aggregate deannfl far sllwr* It does
sot c m to at to te either via* or ftMlblt to eoatlaae to lapnttnd a «*stentisl holding of silver bullion la tteea ewreoey n M n w » Z propew
tfaet aa ao« tegln aa sctnsl, tteagfe ga&aal, nitbdraml of alivasr bullion
frtm the currency reserves, paralttlng atftatitatiea of Federal gaaarvt
aotee for tiit sllvar certificates vitMravn, mod wing tte bullion thereby
rilttMd t > MN& W
4
ly fM f y
Hly
?#<g0CLMM2St6e At tte O K
tlae, aafiar tte authority of existing laa, I propose to mg&aAJCm&Mr.
aalaa of allaer to the aertot. X farther w o i r t that appropriate leg*
UUtioa W
prt^ptly to rutnre tte t n w w ry froat aa active role
la 1 te aarteta for tte pareteaa and a*le of siltar, eod to parait trading
la t U a r aa a porlatry eoaoodlty. KtaaaJilla, tli t n a m r ,» Ttasinlnc
stocks of free silver ahoeld te aoeaarwd far peaalbla aaa la aaatrlfciitlfig
to artirly

eo^itksii ^nUany annrtiarnt tf tht zmsmttarr

•

If yoa ateald daslre to Uflawent tills general foU^r, tte first eta?
vould la a Presidential directive to tia fieetatary tf tte Tr— wry to
y staspaad fartter aalaa fro* the iwatetni stock of frm eilatr. Owe of
thlA M ttlfilaf itoek tea? gdbiliim r eolttutt

bt t m d M i i i .

to

■
ail
&m As I twaM wisi
Kmi t i litiiv frq» draditkB t
i
tXaaowk af
for ttla purpoaa* tS»««a rotlrsd eartlficafcM wall te sa^loead fg M i n i
er
FmUtliag tMs aotlaa It sould tedzakla to taeoawm to Coagntaa*
A
\/ wt»a it recoevenes, tte laeediste rapaal ef the SllTsgJBBrrhBSO >ftt of 193^j.
r*
ta iie11 sa tba Acts ralatlag to sllYiar <ar ^ai/ 5* 2329* aad JuJgr 51# lg^;«
Siam tte axlatlag tax aa tna»f«ra of laiaraat la ilUiw bwllion ia aeoas*
any aaly to aapport
laslalactiaBf it fffif »i«»« te dMlnbla to {miom
filt
alntltaaaawljr to Cs^prafla tfaat tte lalavaak part of tbt latarasl s u m i
Cote bi M n M l B d mi u

to allmr*

to M X i l t ihs t e w l M n n c t erf s f!cwi ftitwii agyi»t

Y i&illis Z fiiffrtit ttal iou co m liif rMonatalltta: td rniicnraiiii tbi

\ ant af lagialatlea axtberlxiag tte Fadaral E a t w ^yataa to Issue radarsl
ia <waifarttai af laaa ttea $5* ttea pravjUUas sa orderly,
far replacing or wpjlaaanl fat tte aafply of silver certlfleataa saft ttereajr fndag tte iaplte af tilwr ttet will te aeaJsd to
eovar fatara oolnsge xafdnaau*
hitbMtr

yotm,

(signed) Douglas
Tte fxaalteat
The White House
OS:



RVRoosa;maf 11-27-61

Dfluelss

mum

Dillon


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102