About twenty years ago, the great financial historian Peter Bernstein published a short history of gold, that substance that “has been an icon for greed, a vehicle for vanity, and a potent constraint as a monetary standard” (The Power of Gold: The History of an Obsession [2000], p. 375). But humanity's greed, vanity, and monetary standards have roamed far beyond that golden icon over the millennia. Wherever there is scarcity, we have seen substitutes: silk in nineteenth-century Japan, rice in medieval Korea, cryptocurrency in 2018 nearly everywhere.
If gold reigns above all others in our popular monetary imagination, there remains one heir apparent: silver. And now, William Silber, writing in the Bernsteinian tradition, gives silver its overdue history. The Story of Silver is a wonderful, broad book, full of verve and insight into why various generations—from Queen Elizabeth I to Warren Buffett, Alexander Hamilton to, especially, the infamous Hunt brothers—have been so focused on this slippery stuff.
The bad news first, for it is brief: as with any history covering millennia, the vignettes will sometimes hit specialists’ ears a little sideways. Nineteenth-century historians might wince as the Crime of 1873—the demonetization of silver with nary a public debate—is partially attributed to sibling rivalry between the famous Sherman brothers (I've never heard of this, and no evidence is offered to support it). Calling the John Birch Society the 1950s equivalent of the Tea Party will also trip up readers who are familiar with the increasingly sophisticated historiography of American conservatism that shows the Birchers as something much more secretive, much more coordinated, and much less successful electorally in midcentury politics than the modern-day Tea Party (whatever that latter category means in the era of Trump).
But these are minor points. The book is a major accomplishment for one of the enduring realities of human history: that silver is indeed sometimes a substitute for gold from the perspective of monetary theory, but as a substitute has created a wide range of differing monetary and investment strategies with real political bite.
Let me share two examples where Silber on silver shines brightest and where I learned the most: the international linkages of silver in the great monetary debates of the early New Deal and the spectacular decade-long boondoggle of silver via the Hunt brothers in the 1970s.
The story of FDR's abandonment of sound money—a key part of his 1932 campaign, to the chagrin of some outsiders like Marriner Eccles, but regarded as Democratic orthodoxy by people like Carter Glass—is well documented, including recently in a very good book by Sebastian Edwards (American Default: The Untold Story of FDR, the Supreme Court, and the Battle Over Gold [2018]). What I knew less well was how much—and how controversially—silver played into these same dynamics. The remonetization of silver in 1934, and the U.S. Treasury's commitment to support silver at 49.5 cents per ounce, suggested a “government takeover of silver bullion” that had the effect of “a giant rock thrown into a small pond” (p. 64). This was great news for the purveyors of “silver coins, silverware, bric-a-brac, antiques, [or] golf clubs,” as Silber's sources note, but this was devastating news to the fragile Chinese government and economy (p. 65). Senator Key Pittman from Nevada, the silver enthusiast, was no macroeconomist. He had argued that the inflation of silver would be good news to China; it was not. China's yuan was a silver-backed currency. As a first-year economics student could tell you, substantially higher prices in the commodity that backs the currency means that exports will drop and interest rates will rise as a country seeks to defend its currency against commodity withdrawals. The consequence: economic collapse.
Silber's analysis of the links between China and the United States on silver are based not only—and not even primarily—on economic theory, but on contemporaneous evidence. As the Washington Post described at the time, “Those philanthropic members of Congress who strove so valiantly to aid the Chinese by increasing the price of silver and presumably increasing Chinese purchasing power have been cruelly rebuffed by the very people whom they sought to benefit” (quoted on p. 66).
China would fall to Communists in 1949, fifteen years after the Silver Purchase Act exploded inside the Chinese economy. Silber's discussions of the macroeconomic consequences of FDR's monetary policies bring home the argument that Jiang Jieshi—a flawed politician, a flawed general—faced his people and his civil war with a path to victory made much narrower by FDR's silver policies.
The largest single episode documented in the book is in the colorful history of the Hunt family. Here, the primary research is on fullest display, and the Hunts—whose patriarch, H. L., was essentially a polygamist, and the main protagonist Nelson Bunker a conspiracy theorist and anti-Semite—do not disappoint. Although the family's wealth originated in oil, soon the instability of the Middle East in the late 1960s and hostility toward the idea of the central bank led Bunker to speculate in silver. At their peak, on Silver Thursday, the brothers held a third of the world's silver and drove the price to a staggering forty-nine dollars per ounce.
Silber's is now the definitive book on every step of that strange saga. Some facts and analysis I did not know before reading this book: the Hunts used silver as a hedge against inflation, betting (correctly) in 1970 that gold was an unsteady substitute given market uncertainties about its use by governments and silver a better one because of its freedom from such constraints; the Hunts’ strategy was not a short-term one—it began in earnest in 1973 (seven years before the crash), if not earlier, when two of the brothers bought futures that totaled the silver industrial output of France (when silver was trading at three dollars an ounce); and the Hunts’ silver manipulations were not secret, but covered widely in the press for years before the 1980 crash.
The book is also a fascinating legal and regulatory history, from the creation of the Commodity Futures Trading Commission (aimed at least in part at the Hunts’ silver manipulations) to the self-regulatory organizations and their new rules that succeeded in puncturing the Hunts’ holdings entirely.
I'm not yet sure I agree with Silber's ultimate conclusion that the Hunts were innocent of the charges of price manipulation, but I am provoked by it to recognize that I no longer have the opposite passive certainty picked up from somewhere I can no longer identify. And although this episode is overemphasized in a book that aims at a more comprehensive history of humanity and silver, it is a very good one to emphasize.
The end result is clear: Silber is to silver as Bernstein was to gold. Scholars and traders alike will enjoy the history, the politics, the economics, and the gossip about the eccentric Hunts in this excellent book. Silver really has, as Silber writes, “shape[d] world events” for millennia, and Silber has shaped silver's history in ways that will provoke discussion for a long time to come (p. 251).
