Comstock and the End of the European Silver Standard

Simon Rostron

By Simon Rostron
LBMA Consultant

Discovered in 1859, the Comstock Lode, centred on Virginia City, Nevada, was and remains the largest deposit of high-grade silver ore found in North America.

The numbers are eye-watering. According to website Western Mining History, some 7,000,000 kg of silver (and 225,000 kg of gold) were produced from the Comstock mines between 1862 and 1953, with 80% of that production occurring in the first 20 years – towards a total value of $17 billion at today’s prices (and, by some calculations, over $1 trillion in equivalent purchasing power).

As we’ll see, the Comstock Lode lifted the four ‘Silver Kings’ to become the wealthiest men of their time, but it also cost many others their life savings and sometimes their lives. More broadly, the Lode required the development of new and important mining techniques that are still in use many decades later, caused a change of monetary policy in much of continental Europe and, furthermore, given the depth of the diggings, prompted a Nevada law – still in force – which made it illegal to talk to a hoist operator while he was working!

Henry Comstock

The Blue Stuff

It was a party of Mormons on their way to the California gold fields in 1850 who set the Comstock silver rush in motion. Blocked by the onset of winter from crossing the Sierra Nevada – the mountain range which separates present day Utah and Nevada from California – they camped by the Carson River and tried their hand at a bit of prospecting, at which they were successful. The river running through what is now called Gold Canyon yielded between half an ounce and one ounce of gold per day – enough to live on but hardly the riches reputedly available on the western side of the mountains.

The Mormons moved on and were replaced in the succeeding decade by a new series of hopefuls, including two Irishmen, Peter O’Reilly and Pat McLaughlin, who worked the rivers of what was then known as the Washoe Region and who are generally credited with the great discovery.

Legends of the Comstock Lode by Beebe and Clegg takes up the story. “Actually they [Pete and Pat] were prospecting for gold, and the heavy blue clays in which they discovered its traces were but a source of annoyance in the recovery of the precious metal. But one day in the autumn of ’59, a specimen of the “blue stuff” found its way back to a sophisticated assayer in Grass Valley in the Californian Mother Lode and within a few hours, the Western world was hysterical with the intelligence that the despised “blue stuff” was silver in unfamiliar geological form but of almost incredible richness [yielding some $3,000 per tonne at a time when silver was trading at $1.60 per oz].“The rush eastwards across the High Sierra was on, and with a scale of concentration and hurrah which dwarfed to insignificance every aspect of the earlier California gold rush.”

No sooner had COMSTOCK been made a partner in the mine than he placed himself at the front in everything about it. He constituted himself superintendent, did all the talking and none of the working, and was always ready to tell strangers about the mine.

Old Pancake

Beebe and Clegg may not have overstated the scale of the initial rush given the nearby presence in California of many wannabe miners who had failed to share in the riches achieved by the early 49ers. But one of their stories, in this case about Henry Thomas Paige Comstock, after whom the Lode is named, is probably wrong.

Comstock, often better known to his contemporaries as ‘Old Pancake’ because he couldn’t be bothered to bake bread, was, like many famous Americans, Canadian. Beebe and Clegg describe him as a “sanctimonious gaffer”, which may have been true, but they also say he cut himself in to Pete’s and Pat’s claim when the silver news came through, which is improbable. It is more likely it was gold that attracted his attention.

Dan de Quille, who wrote The History of the Comstock Silver Lode & Mines, offers a more plausible version of the tale. “The grand discovery [by Pete and Pat] had been made several hours before Comstock knew of it. Toward evening on the day the “find” was made, Comstock, who had been out hunting his mustang, came to where the two men were at work. They were taking out gold by the pound …. Comstock saw the gold and realised that a great strike had been made. He instantly determined to have a share. He at once declared that he had a claim upon the ground. He said he had located it some time before … [and] so blustered about his rights and so swaggered about … that rather than have any trouble, the two quiet miners agreed to take him in and give him a share of the mine.

“No sooner had Comstock been made a partner in the mine than he placed himself at the front in everything about it. He constituted himself superintendent, did all the talking and none of the working, and was always ready to tell strangers about the mine. When visitors came it was always my mine and my everything. Thus people came to talk of Comstock’s mine and Comstock’s vein ….”

Bucket Blood Saloon

The Naming of Virginia

It took a few years before the true scale of the Comstock Lode was recognised and, because of this, few if any of the first footers succeeded either in making, or at least holding on to, anything like the fabulous financial rewards that were eventually generated. Comstock himself sold out for $11,000 and, not long after, died of suicide. A little later, Pat and Pete sold out for $40,000, with the former ending up as a $40 a month cook on a sheep ranch, while the latter died in a mad house.

Of course, $11,000 or $20,000 each were not paltry sums in the 1860s, but life as a prospector on the Comstock was hard and alcohol took its toll.

The story of James Finney who died in June 1861 serves for many, although in this case, his name is still known. A proud Virginian, Finney was commonly known as “Old Virginny” and was described, among other things as “a hard drinker when he could get the liquor, and an indifferent worker at anything”.

According to Beebe and Clegg (there are other accounts), Finney is remembered for naming ‘Virginia City’ when, staggering back to his foxhole after “one epic Saturday night”, he dropped his bottle of ‘Old Reprehensible’ and in fury emptied the remaining drops onto the ground while shouting, “I christen this God damned camp Virginia.” The name stuck (‘City’ was added by Wells Fargo a few years later to make the stagecoach stop sound grander).

Not long after, Finney sold his claim for a horse, a couple of blankets and another bottle of whiskey. It was this that did for him. After a further binge, he fell from his saddle and fatally cracked his head. The fate of the horse is unrecorded.

The Silver Kings and The Big Bonanza

One feature of mining on the Comstock was that the silver ore grade was so high that even apparently played-out mines could be worth reworking – that is, if anyone could take the trouble. A man who did was James Mackay, one of a quartet of Irishmen. Mackay’s enthusiasm ‒ more than ten years after the initial Comstock ‘strike’ ‒ for a couple of despised and worthless properties adjacent to each other in the Comstock profile led to the most important discovery of all, which quickly came to be known as “the Big Bonanza”.

Mackay and his three partners, James Flood, James Fair and William S. O’Brien, had cut their mining teeth in the California gold rush. Fair and O’Brien were 49ers, with the others appearing a year or two later. All did fairly well, and with the money they earned, Flood and O’Brien set up retail businesses in San Francisco, and when these failed in the depression of 1855, they jointly opened a successful saloon. Subsequently, capitalising on Flood’s uncanny ability as a stock trader, they set up a stockbrokerage, focusing on mining businesses – notably, those that launched on the back of the Comstock.

Meanwhile, Mackay and Fair moved to Nevada, where Mackay who, despite any formal education, proved to be an exceptional mining engineer, while Fair became superintendent of the most successful Comstock mine ‒ the Ophir. Both pairs were making good money and, in 1869, formed a partnership which, in 1872, led to the $100,000 purchase of the Consolidated Virginia mine, which was described by the agent of the Bank of California, which owned it, as “a worthless piece of property”.

For several months, this estimation appeared correct. Despite spending $200,000 cutting a new, deeper tunnel into Consolidated Virginia, nothing valuable was discovered. Eventually, however, Mackay’s and Fair’s work revealed a thin and delicate vein of silver ore, which required several attempts to follow but finally widened out to 10 feet. At this point, the stockbroking duo back in San Francisco were instructed to buy all the Consolidated Virginia stock they could lay their hands on. It was a good investment – at 1,500 feet down, the vein proved to be 50/60 feet wide and of the purest silver and gold anyone had encountered.

It was the breadth of this seam that required new square-set timbering structures to enable extraction without cave-ins, as well as the testing of other new mining techniques, such as the use of dynamite and pneumatic drills. It was the scale of the 1873 find that led Consolidated Virginia shares to pay dividends of $1 million a month for the next three years (ten times the mine’s original purchase price), and this in turn established Mackay, Fair, Flood and O’Brien – the four ‘Silver Kings’ – as the wealthiest men of their time.

By 1875, Consolidated Virginia and a second property, the California Mine, latterly purchased by the Silver Kings, were valued at more than $1 billion. Mining share fever hit the San Francisco Stock Exchange and it is said that the city’s Chinese gambling dens had to close for lack of interest! Millions of dollars were made but millions more were lost in speculative – and even fictitious – ventures.


The End of the Silver Standard

Perhaps the most unexpected impact of the huge amount of silver produced by “the Big Bonanza” was its destabilising impact (in parallel with the Californian and Australian gold strikes) on continental European monetary policy. As a 2019 IMF Working Paper (by Johannes Wiegand) notes:

“In 1871-73, newly unified Germany [under Bismark] adopted the gold standard, replacing the silver-based currencies that had been prevalent in most German states until then. The reform sparked a series of steps in other countries that ultimately ended global bimetallism, i.e., a near-universal fixed exchange rate system in which (mostly) France stabilised the exchange value between gold and silver currencies. As a result, silver currencies depreciated sharply, and severe deflation ensued in the gold block.

“France also suspended free silver coinage in September 1873, followed soon by the other members of the Latin Monetary Union (Belgium, Italy, and Switzerland). This ended global bimetallism: thereafter, no one stabilized the gold-silver price ratio any longer… With bimetallism broken, several other European countries moved swiftly to gold, replacing their silver (Scandinavia, the Netherlands) and bimetallic (the other members of the Latin Monetary Union) currencies.”

Virginia City Today

Not many gold or silver rush towns maintained their size as the flow of precious metal gave out. That said, most are still viable communities. Potosi (the site of the silver mountain discovered by the Spanish in the 1670s) is in fact growing and today has a population of some 250,000. Nome, Alaska, the focus of an 1890s gold rush (Alchemist 98) numbers some 3,600 inhabitants (although the count was closer to 12,500 in 1900). Mining operations, however, still continue near both these communities.

By contrast, the last metal dug from Consolidated Virginia appeared in 1955 and, more than 60 years on, the 2020 Virginia City, Nevada census recorded 787 inhabitants, compared to an estimated 25,000 in the mid-1870s. Despite this, the place describes itself as one of the world’s “most active ghost towns”, with more than 70,000 visitors a year all keen to experience something of the area’s fabulously wealthy but anarchic past. And there’s no better place to find it than in the ‘Bucket of Blood Saloon’.

Simon Rostron

By Simon Rostron
LBMA Consultant

Simon Rostron has been Managing Director of Rostron Parry Ltd - media relations consultancy since 1991 and PR and media consultant to LBMA since 2014. In his earlier career he was a Stockjobber, London Stock Exchange and remains a legend in his own lunchtime.