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.
SUMMARY
Silver is used both for money and in the arts, the former use being the more important and more essential. In some countries, especially those producing silver in large amounts, it is the money standard, either alone or with gold. In other countries on a gold standard, silver is used for subsidiary coinage. In India and China it is used for the settlement of foreign trade exchange balances. Normally about two-thirds of the silver produced annually is used in the arts, mainly for the manufacture of jewelry and luxurious household wares, though some is consumed in the photographic, chemical, and other essential industries. During the war more silver went into coinage and less into the arts than formerly, as the large issues of paper money made corresponding increases in the number of silver coins desirable. Large amounts have been exported to the Far East. The war has shown that silver should still be considered an essential metal of the world’s finance and trade, despite the increasing amounts consumed in non-essential uses.
About one-half of the silver output of the world is obtained as a secondary product in the mining of other metals, notably lead and copper, from deposits of all geologic ages. The high-grade silver ores are derived chiefly from Tertiary deposits, and it is probable that in the future Mexico and the Rocky Mountain-Andes region will be the chief sources of ores of this type.