The Silver Purchase Act of 1934 authorized the president to nationalize silver in United States, mandating people to deliver their holdings to the mint in return for payment from the federal government. In 1932, the Senate Banking and Currency Committee had advised the federal government to purchase silver bullion in order to increase the money supply and inflate the economy. Jerry W. Markham, in his book "A Financial History of the United States," said that the Silver Purchase Act was Roosevelt's effort to appease the populist advocates of silver. President Franklin Roosevelt signed Executive Order 6814 on Aug. 9, 1934, requiring silver in the continental United States to be sold and delivered to the United States government.
Delivery of the Silver
The Silver Purchase Act of 1934 required silver-holders to deliver their silver to the government within 90 days of the law's passage. The act promised that the secretary of the treasury would reimburse silver-holders for the costs associated with delivery, such as the transportation and insurance costs.
Executive Order 6814 specified the types of silver that people were required to deliver to the government under the Silver Purchase Act. Section II of the order listed the exempted types, including silver coins; silver with a fineness of 0.8 or less that “has not entered into industrial, commercial, professional, artistic, or monetary use”; and silver that is owned by foreign governments or central banks.
Licenses for Exemption
Section 6 of the executive order empowered the secretary of the treasury to issue special licenses that allowed silver-holders to keep their silver. These exemption licenses could be issued for those who could prove that silver was required to perform their work in industry, art or their profession. Licenses could also be issued for those who wanted to withhold their silver for purposes deemed by the president and the treasury secretary to be in the “public interest.”
In his 1939 book “Silver Money,” Dickson H. Leavens said that a total of 109,000,000 fine ounces of silver was obtained within the 90-day time limit set by the Silver Purchase Act of 1934. Another 4 million ounces were received before the act was rescinded in 1938. Any profits made on silver sales were taxed at a rate of 50 percent; this did not apply to the silver sold to the government through the Silver Purchase Act.
Movement of Silver Price
The market price of silver was stuck around 45 cents per ounce during the first half of 1934. It rose to 49 cents per ounce by Aug. 9, the day when the Silver Purchase Act was passed. The act artificially set the price of silver at a nationalized rate of 50.01 cents per ounce, which was somewhat above the market rate. The nationalization order had been ready since June 1934, and the Roosevelt administration had been waiting until the market price for silver was approaching 50 cents per ounce before nationalizing the metal.
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