US Silver Purchase Act of 1934
By LARRY ROMANOFF – September 14, 2020
Steve Hanke, an Economics Professor Johns Hopkins University in Baltimore, wrote a good article on this topic in the November, 2010 issue of Globe Asia, titled, "America's Plan to Destabilise China - Currency: The Secret Weapon". It is available online and worth reading. [1]
On August 9, 1934, President Roosevelt implemented yet another Executive Order, this time number 6814, called The Silver Purchase Act,[2] that specified essentially two things. One, the seizure of all silver in the US, and two, a huge program to purchase silver on the open market at almost three times the then current market price. From any rational standpoint, this action was bizarre.
On a spurious pretense of being under pressure from domestic silver producers (who were not suffering at all), Roosevelt defied overwhelming criticism from every side by enforcing this act (originated by the FED) which directed the Treasury (or the FED) to purchase silver at a price of at least US$1.29 per ounce, which was nearly three times the then market price of 45 cents. The US government did indeed nationalise the US silver stocks, but by purchasing that silver from Americans at the old price of $0.45. Only after that did the Treasury offer to purchase silver at the much higher price. This action vacuumed up billions of scarce government funds at the depth of the Great Depression when most Americans were struggling to survive and avoid starvation and bankruptcy. The people paid an enormous price for a policy of no apparent benefit to anyone. Silver producers benefitted marginally and temporarily, but the entire industry employed only a few thousand people, so this massive program was definitely not intended for them, regardless of the propaganda narrative.
But there's more to the bizarre nature of this Silver Purchase policy. The legislation primarily authorised the Treasury and the FED to purchase silver "from foreign countries" on the open market - on the New York Futures Exchange. But that purchasing on ‘the open market’ never occurred, nor would it. All we need to do is think. Not even a crazy person would spend money buying something at $1.29 when that commodity was widely available on world markets everywhere at $0.45. So what really was driving this new policy?
Well, aside from the nonsensical and clearly fabricated story of helping non-struggling domestic silver producers, there was another charitable intent - to "help" China, a plan that had been several years in the making. As Steve Hanke noted:
"... China was on the silver standard. Silver interests asserted that higher silver prices – which would bring with them an appreciation of the yuan against the US dollar – would benefit the Chinese by increasing their purchasing power. As a special committee of the US Senate reported in 1932:
"Silver is the measure of their wealth and purchasing power; it serves as a reserve, their bank account. This is wealth that enables such peoples to purchase our exports."
To this time, China had been on a silver standard for its currency for hundreds of years, the only currency in the world fully backed by precious metal, and responsible for creating a solid and stable economic base. It was for this reason that China managed to escape altogether the Great Depression that was ravaging the rest of the world. The American silver policy of course dealt a devastating blow to this centuries-old stability because the Americans were not purchasing silver from foreign countries on the open market, but only in China through the American banks like Citibank, Morgan and Chase. These US agents offered Chinese three times the market price for their silver, naturally resulting in a flood of silver flowing into these banks and from there to be shipped to the US.
The first effect, of course, was that the exchange rate between the US dollar and the Chinese currency collapsed. The high silver price did indeed make imports cheaper but the country's exports totally collapsed and the GDP plunged almost instantly by about 25%. The second result was that the flood of silver attracted to the American banks was immediately shipped out of China, eventually destroying the silver-standard backing for China's currency, which destroyed China's financial system and left the economy in chaos. Massive deflation ensued that destroyed the agricultural sector and left millions of farmers and peasants suddenly destitute. Even worse, most businesses carried silver-backed debt that would now have to be repaid at three times the price; of course, no businesses had the cash flow to service such obligations and countless tens of thousands of them went bankrupt, collapsing the job market. China's total financial system was also on the brink of collapse, all of which served to suddenly dump China into the middle of the Great Depression, eliminating decades of painful effort to rebuild the nation after a century or more of plundering by the West. At that point, China had no choice but to abandon the silver standard and adopt a paper currency.
China did of course attempt to implement severe export controls on silver but these were largely unsuccessful because most silver was smuggled out of China through the US banks - Citibank, J. P. Morgan and Chase - who were immune from Chinese export regulations and who had at hand the services of the US military with its warships to transfer silver out of China without effective challenge.
Hanke again:
"In an attempt to secure relief from the economic hardships imposed by US silver policies, China sought modifications in the US Treasury's silver purchase program. But its pleas fell on deaf ears. After many evasive replies, the Roosevelt Administration finally indicated on October 12, 1934 that it was merely carrying out a policy mandated by the US Congress. Things didn't work as Washington advertised. It worked as "planned", however. As the dollar price of silver shot up, the yuan appreciated against the dollar. In consequence, China was thrown into the jaws of the Great Depression.”
One compassionate author wrote, "What economic folly - and lack of statesmanship, one might say - it was to prioritize the well-being of 5,000 people [silver producers] at the expense of the American public and the 450 million Chinese who did nothing to invite this misery. Needless to say, the silver purchase bill was bad economics. But it was bad politics as well. The damage it caused extended far beyond the economic sphere. It spilled over into US-China relations." Laudable sentiments, but quite naïve.
So who gained? The American banks and the cabal of European Jewish bankers who controlled the White House and the world economy. China's economy was growing and the country was emerging in strength beyond the ability of the bankers to restrain it, so something had to be done to maintain the income disparity between the Empire and the peasants. The Grand Prize was the permanent destruction of China's silver-backed currency and the setting back of China's economic progress by perhaps twenty years. US silver producers profited for a short time, but the American people lost heavily when their government (on the urging of the foreign-owned FED and its European Jewish bankers) wasted billions of dollars to collapse China's economy instead of rebuilding America's, this policy probably extending the depression by years. Perhaps the only good result was that this fiasco contributed in a major way to the collapse of public confidence in Chiang Kai-Shek and his US-supported Nationalist government, paving the way for Mao to take over and expel all the foreigners (and the Jews) from China.
I find it distressing that even today the standard narrative in all the American history and economics textbooks begins with, "Although the Silver Purchase Act was intended primarily as a commodity support program for silver producers in the United States ..."
To add some additional context to this, Chiang Kai-Shek's Nationalist government was still in control of China during this period, with the heavy support of the US government and military and, while the US government was working to destroy China's economy from the outside, the American-educated and American-loyal, T. V. Soong was helping Chiang to destroy China from the inside. I frankly doubt Chiang had much of an understanding of economics or much else, but Soong was brilliant and, with his guidance, Chiang quickly managed to nationalise all Chinese banking, then operate the government almost entirely on debt, thus running the economy into the ground.
And it was Soong who, in 1928, founded the "State Bank of the Republic of China", a new (Jewish) foreign-owned Chinese Central Bank that was patterned on the US FED. It was also Soong who promoted the Americans' Silver Purchase program, who then adopted a paper currency, and forced all Chinese to surrender their silver to Chiang's new Central Bank - a bank which, conveniently, was exempt from silver export restrictions. One could conclude that both Chiang and Soong were involved in exporting their own country's silver to the US, all in keeping with the Zionist plan for China.
It was this partnership that finally sealed the doom of Chiang's government while nearly destroying China in the process. But again, it was this that paved the way for Mao to gain overwhelming support and wrest control of the country from the Americans and the Jewish bankers and place it back in the hands of the Chinese people.
The First World War put a final end to the opium trade and to the kidnapping of Chinese for the slave trade, both operated by the same Jewish families in China – the Rothschild, Sassoon, Kadoorie, Hartung and others, and this effort using T. V. Soong as an internal agent in a US-controlled Chinese government, was their final attempt to loot the entire remaining wealth of China. It was done in conjunction and in cooperation with Citibank, J. P. Morgan and other Jewish banks, to relieve the Chinese government and all Chinese citizens of their entire stock of both gold and silver. They nearly succeeded. If not for the rise of Mao Zedong, China would today be a pool of destitution.
I would add that Soong was brilliant enough to understand precisely what was happening, and capable enough to have stopped it if he had cared to do so. I have not fully researched Soong, but all the evidence suggests he was a Jewish-American agent, a kind of Chinese Zionist, working on the inside. Certainly the man was not so stupid as to not understand the results of his own actions in assisting Chiang with the adoption of a paper fiat currency and a collection of bankrupt national banks that resorted to printing money as a replacement for revenue.
Because of the looting of most of China’s silver at three times the market value, Chiang's Nationalist government had to print so much currency that money depreciated by a factor of more than 1,000, resulting in a devastating hyper-inflation all under Soong's watchful eye. It was so bad that government currency printing presses were unable to maintain the necessary pace, and Chinese currency was being printed in England and flown into China over the Himalayas in US military C-47 aircraft.
Just so it doesn't go unsaid, the US was attempting something similar in the period after 2005, producing for a decade an almost overwhelming amount of media noise and political pressure to force another massive upward revaluation of the RMB, on the fraudulent basis that the Chinese currency was "at least 25% to 40% undervalued". Had China acceded to this pressure, the country would have plummeted into the depths of yet another severe depression - which was the plan.
Notes
[1] https://www.cato.org/publications/commentary/americas-plan-destabilize-china
[2]
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Larry Romanoff is a retired management consultant and businessman. He has held senior executive positions in international consulting firms, and owned an international import-export business. He has been a visiting professor at Shanghai's Fudan University, presenting case studies in international affairs to senior EMBA classes. Mr. Romanoff lives in Shanghai and is currently writing a series of ten books generally related to China and the West. He is one of the contributing authors to Cynthia McKinney's new COVID-19 anthology 'When China Sneezes'. He can be contacted at: 2186604556@qq.com.
Copyright © Larry Romanoff, Moon of Shanghai, 2020
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