COMMERCIAL CONTROL
Through Ownership of Mines.
—The production of silver in the United States is all controlled by United States capital. One-third is controlled by lead-mining interests, one-third by copper-mining interests, and the remaining third by silver miners. Moreover, United States capital owns Mexican mining property normally capable of producing over half of that country’s output. Central American production and the by-product silver of Peru are similarly controlled. About one-quarter of the Canadian production comes from properties owned in the United States. In all, the capital of the United States controls over half of the yearly output of silver throughout the world.
Most of the Canadian and all of the Australian, Indian, and African silver is controlled by British capital, as is one-quarter of the Mexican production and some from Bolivia, Peru, and Chile. In all, Great Britain controls a third of the world’s output.
Germany probably controls close to 10 per cent. of the world’s silver production. A part of this is produced locally, but the main German control is in Mexico, the mines owned by Mexicans being taken as, in the main, German properties.
Mines owned by Japanese, Spanish, French, or Chilean capital are responsible for substantially all the remaining 5 per cent. of the world’s silver output.
Financial Control Through Ownership of Mines
| Capital | 1913 output, percentage controlled |
|---|---|
| United States | 52 |
| British | 33 |
| German | 10 |
| Japanese | 2 |
| Spanish | 2 |
| French, etc. | 1 |
| 100 |
Through Ownership of Reduction Plants.
—As would be expected from the geographic location of the silver deposits, the United States and Mexico are the centers of silver smelting and refining. Important silver-smelting interests are as follows
| Company | Situation of smelters |
|---|---|
| The American Smelting & Refining Co. | United States and Mexico |
| The United States S., R. & M. Co. | United States and Mexico |
| The International Smelting Co. | United States |
| Anaconda Copper Mining Co. | United States |
| Consolidated Mining & Smelting Co. | Canada |
| Compañia Metalurgica Mexicana. | Mexico |
| Compañia Metalurgica de Torreon. | Mexico |
| Compañia Minera de Peñoles. | Mexico |
Through ownership of reduction plants, the United States exercises control over a somewhat larger share of the world’s silver than it does through mine ownership. Much of the Canadian and Mexican as well as most of the South and Central American silver production enters the United States either as refined bullion or as ore and base bullion.
It is estimated that control through reduction plants is about as follows:
United States, ⁴⁄₇; Mexico, ¹⁄₇; Canada, ¹⁄₁₄; Europe and Asia, ³⁄₁₄.
As regards silver, this type of control is not at all powerful. Silver-bearing materials can bear a high transportation charge as soon as the first process of freeing from gangue has been completed. Consequently, ownership of mines, rather than of reduction plants, is the vital factor of control over silver resources, so far as production is concerned.
Through Trade Combinations.
—The world’s output of silver is controlled by the London market. To a small extent this may be due to a trade combination; to a large extent it is due to the relations of the London market with consumers.
Four firms form the London silver market. Silver prices are fixed daily in London, and this “fixed” quotation controls the price of the metal in every important financial center throughout the world.
There are three refineries in London that handle practically the whole of the silver bullion that comes on the London market. No silver can be bought or sold in London unless assayed by one of the four official assayers to the Mint, Bank of England, etc. Silver treated by the London refineries and certain bars from European government refineries are exceptions to this rule.
The London refineries produce silver of the fineness ⁹⁹⁶⁄₁₀₀₀ to suit the Indian market. Other silver current in the London market has a fineness of ⁹⁹⁹⁄₁₀₀₀.
In the words of Benjamin White: “The care taken to safeguard the reputation of the London silver market, the high standing of the firms that comprise it, and the confidence built up by the methods and practices adopted to protect the interests of buyer and seller alike, provide a strong guarantee that in the future, as well as in the past, silver will find its business center in London.”
Through Relations with Consumers—England’s Control of Silver.
—As already indicated, India and China are the great consumers of silver. For the five years preceding 1914, fully 40 per cent. of the world’s silver output was shipped from London to those two countries, which, with a combined population of over 700,000,000, represent the buying side of the world’s silver market, just as North America represents the selling side.
Since 1914 the capacity of these countries to absorb silver has steadily increased and in 1918 it was mainly a question of where the silver could be obtained. Current production was inadequate to meet the demands, and old stocks of the precious metal were of necessity put on the market.
The world’s silver business consists in getting the metal from the Americas to the East. Why send it via London, exposing the precious metal to greater marine hazards and losing interest while in transit? The main reason is that the chief trade of China and India with western nations is with England, and the great banking houses that finance this trade are in London. These banks purchase silver in London to adjust exchange balances. Funds to purchase such silver usually originate in London, whether from bills on London, loans from London banks or in other ways. In addition, London has been the center of the world’s finance and foreign trade, and also the center from which the mail steamers, the swiftest and cheapest routes to the principal consumers of silver, have radiated.
When the submarine became a menace the United States shipped silver direct from San Francisco to India and China. A large part of the United States production was thus diverted from London, and in 1918 exports of silver from London were far below normal. However, the officials of the American Smelting & Refining Co., refiners of over one-third of the world’s silver output, say that they do not expect these conditions to continue. The established business of the London silver trade, and, of more importance, the relationship between commercial London and the silver-consuming countries, will no doubt quickly re-establish the normal status of London—importer of American silver, exporter of the silver needed in the Far East.
The American refiner or silver producer is glad to have a steady and broad market for his silver, such as is furnished by the four London firms. Smelting interests and mines are able to dispose of their product through London; otherwise they would have to deal with brokers or banks in the Far East. The London firms keep in close touch with the big bullion dealers of Bombay, Calcutta, and other cities, which are the centers from which silver is distributed throughout India. Silver for the Indian imperial coinage, however, is purchased in London by the government.
Through the Pittman Act in the United States.
—The above silver trade flow-sheet has recently (1920) been materially changed by the program of the Government of the United States to purchase domestic silver at $1 an ounce. If the world price for silver remains below this figure, all American silver will be absorbed by the Government for about four years, or until the 207,000,000 ounces specified in the Pittman Act are bought. If silver, however, should rise above $1 the flow to market as sketched above would be resumed.
Position of China and Japan.
—Chinese foreign exchange rates depend to a large extent on the price of silver. All importers or exporters dealing with China must deal in the silver market. Although copper “cash” is the basis of Chinese currency, silver is the standard legal tender for transactions involving large amounts, and weights of silver are used as units. Fineness and weight of Chinese coins are manipulated so that coins issued by the silver-producing states, e.g., Mexican dollars (two varieties), British dollars, Spanish dollars, etc., are prized by the Chinese because they are uniform in value.
Japan produces considerable silver, a great deal coming from her electrolytic copper refineries. Gold is the money standard and silver is not used extensively in the arts. Consequently Japan produces more than enough silver to satisfy local consumption. The government is alive to the importance of silver in connection with all dealings with China. In 1918, Japanese banks bought up Chinese silver supplies, paying prices in excess of all other traders. It is believed that American silver has been flowing into Japan via China and that Japan seeks to control the Chinese silver market. A large silver reserve is being built up in Japan. On account of the international importance of the whole Chinese problem, Japanese activity in silver should be noted.