Turning Silver Into Gold

Silver, to us, is the second metal--well, even the second medal--among precious metals. I mean, leaving aside Platinum, which didn't come into common currency until relatively recently. But, for much of history, silver was on par with gold. What changed? The discovery of the two most massive strikes of silver in history, one at Potosi, and one at Mount Davidson, near Virginia City, Nevada. Before those two strikes, silver had very rarely been discovered in great abundance, and certainly not enough of it to do things like, turn it into a tea service, for example.

In two stunning instances, whole empires were brought to their knees but its sudden abundance. The Spanish, round about the time of their strike at Potosi, began a trade between the West coast of South America and the Philippines. To pay for goods (and to avoid the large swath of the world ceded to Portugal) the Spanish used what was most easily transported by them: silver. They found that China had not yet caught up to the fact of silver's sudden abundance, and made a tremendous profit turning their overvalued silver into goods that could be transported back to Europe and turned into gold.  

The British perfected this little scam in later centuries by doing wide scale currency speculation, in which they bought goods from China in silver, and then locally traded them for gold, while also destabilizing China with opium. The results were devastating inside of China as currency suddenly became scarce, at the time that opium addiction created a massive public health crisis. Credit being short, the crisis became worse than it would have otherwise been, as a downward spiral of opium addiction and lost economic opportunity completely destabilized the previously impenetrable Chinese mainland.

The French, apparently, did not learn much from the Chinese experience, for they got into some trouble of their own with a sudden discovery of silver.  At the culmination of the Franco-Prussian War, in which the French were humiliated, the French were forced to pay their war debt by purchasing gold Deutschemarks with French Francs, made of silver. At the same time, failed Petaluma, California farmer John Mackay, pulled out several million dollars worth of silver from the ground outside of Virginia City, Nevada, which very nearly bankrupted France.

Americans tried to convince their government to monetize silver for most of the last quarter of the 19th century, but to no avail, culminating in the charge by Democratic presidential candidate William Jennings Bryan that America was being "nailed to a cross of gold." The truth was, whenever and wherever silver had been monetized in the modern world, it had been, as efficiently as possible, turned into gold. Potosi and Virginia City had permanently changed people's view of the metal which, for most of history, had been valued equally with gold. It was now permanently second fiddle--or sorry, metal.

Sources:

Ujifusa, Steven. Barons of the Sea.

Tomes, Ethel Van Vick. Rocket of the Comstock.

Frankopan, Peter. Silk Roads.

Feis, Herbert. Europe, the World's Banker.

Zinn, Howard. People's History of the United States.

Atherton, John M. Free Silver Fallacies.