Wednesday, May 9, 2012

Silverbugs I: The Lure of Gold and Silver

The stock market crash of 1929, and the resultant Great Depression, caused financial panic and infectious distrust of paper currency. This led to widespread withdrawals of cash from banks, rampant bank failures, and feverish and incessant purchases of gold and silver bullion and coinage – hard currencies. In 1933, President Franklin Delano Roosevelt signed an executive order that made the ownership and possession of investment gold – including gold bars, ingots, or gold by the ounce – illegal for American citizens.

Two Texas oilmen, the Hunt brothers, had become immensely rich from oil exploration and drilling worldwide in the 1950s and 1960s. The oldest brother, Nelson Bunker Hunt, was considered the richest man in the world as the 1970s approached. He was making nearly $40 million a year from his Libyan oil leases alone, at a time when a barrel of oil went for $3.50. (Yes, that's three dollars and fifty cents!) William Herbert Hunt and Nelson Bunker Hunt thought the world was a very financially unstable place in the early 1970s, made worse by turmoil in the Middle East, runaway inflation, and the Vietnam War. Since gold was still illegal as hard currency storage, the Hunts went after the next best thing, silver.

The brothers began purchasing silver in 1970 as a hedge against inflation or more severe economic calamities. They were paying $1.50 an ounce, and from 1970 through 1973, amassed eight tons of the precious metal. The Hunt brothers' buying pressure doubled the price of silver, and their investment rose to $3 per ounce. Near the end of 1973, Bunker and Herbert Hunt decided to ramp up their purchases, and soon these two men possessed 55 million ounces of silver. This was about 10 percent of the world's supply, weighing in at 1,964 tons.   

Bernard Welch ID photo from the Adirondack Correctional
Treatment and Evaluation Center in New York
Convicted burglar Bernard Welch was shipped out of Attica Prison in New York on November 13, 1973. He had survived the worst prison riot in the history of the United States a little more than two years earlier. Prison officials felt he was ready for a less severe environment at the Adirondack Correctional Treatment and Evaluation Center (ACTEC) in Dannemora, New York. Welch was due for a parole hearing in 1975. 

By spring 1974, the price of silver rose to $6 per ounce. This increase was caused mainly by the persistent attempts of the Hunt brothers to corner the silver market. On August 14, President Gerald Ford signed a bill (Pub.L. 93-373) that ended the ban on gold ownership. Gold started a steady climb to $200 per ounce over the next two years.

Bernard Welch had read newspaper accounts of the flood of buyers of gold coins and bullion in the prison library. Welch couldn't wait for a parole hearing in 1975 when he knew there were small fortunes of gold and silver in the hands of private owners right now, just waiting for the taking. On September 14, 1974, Bernard Welch, along with ACTEC prisoner Paul Marturano, broke out of the state prison at Dannemora. They soon stole some cash, a gun, and a car, then crashed through a police roadblock. This was the first escape ever from Dannemora, and Bernard Welch would not be back in police custody for more than six years.
– Jack Burch


  1. Interesting article. I recently read about the value of old coins It is very interesting that the coins value depends on the amount of their issue. If we draw an analogy with the bandits, then one thing is clear, that all what has been a success, should be commendable.

  2. Ever since the dawn of our modern economy there has been much talk about our dollar, the American dollar. the silver dollar economy Debate after debate shows the contempt many economists and business law grads have for our suspicious economy.