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Gold Standard in China4nd Panama 
 
 Report on the Introduction 
 
 of the 
 
 Gold-Exchange Standard 
 
 into 
 
 China, Panama, and Other Silver-Using Countries, and on 
 the Stability of Exchange 
 
 Submitted to the Secretary of State October 22, 1904, by the 
 Commission on International Exchange 
 
 Hugh H. Hanna 
 Charles A. Conant 
 Jeremiah W. Jenks 
 
 Commissioners 
 
 Washington 
 
 Government Printing Office 
 
 1904 
 
Cornell University 
 Library 
 
 The original of this book is in 
 the Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924030185999 
 
Gold Standard in China and Panama 
 
 * 
 
 W.! 
 
 Report on the Introduction 
 
 of the 
 
 Gold-Exchange Standard 
 
 into 
 
 China, Panama, and Other Silver-Using Countries, and on 
 the Stability of Exchange 
 
 Submitted to the Secretary of State October 22, 1904, by the 
 U^^' - Commission on International Exchange 
 
 Hugh H. Hanna 
 Charles A. Conant 
 Jeremiah W. Jenks 
 
 Commissioners 
 
 Washington 
 
 Government Printing Office 
 
 1904 
 
 r 
 
f\A^H-i 
 
 \'3 
 
GOLD STANDARD IN CHINA AND PANAMA. 
 
 Washington, D. C, October 22, 1^04. 
 To the Honorable 
 
 The Secretary of State, 
 
 Washington, D. C. 
 
 Sir: The Commission on International Exchange begs leave to 
 submit herewith its report on the work done and the results ac- 
 complished since its previous report of October i, 1903, together 
 with supplementary material explanatory of its work and of the 
 general subjects which, under your instructions, it has had under 
 consideration. 
 
 The work done during the last year covers especially certain 
 investigations and suggestions in connection with the reform of the 
 monetary system of China, the currency of the Philippine Islands, 
 an<i the establishment of a new monetary system in the Republic of 
 Panama. 
 
 There are submitted herewith also some data showing a tend- 
 ency toward greater stability in the price of silver bullion, appar- 
 ently as a result of the direct action of governments with whom this 
 Commission conferred last year, especially of the British Govern- 
 ment in connection with the currency of India. This has in itself 
 tended to produce greater stability of exchange, and thus to diminish 
 one of the obstacles to trade between the gold countries and the 
 silver-using countries which was the occasion of the appointment of 
 the Commission. 
 
 After its return from Europe in September, 1903, as explained in 
 its previous report, the Commission designated Mr. Jenks as its 
 representative to go to China to present to the Imperial Government 
 a report on its work in Europe, and, in accordance with the request 
 of that Government, to render it any further assistance that it 
 might desire. The President approved the suggestion, and Mr. 
 Jenks received special instructions for his work in the Orient. Inas- 
 much, however, as the new Philippines currency was not yet fully 
 in operation, and certain questions regarding the currency law were 
 under consideration by the Philippine Commission, it was thought 
 
 3 
 
4 GOLD STANDARD IN CHINA AND PANAMA. 
 
 best that, before taking up this work in China, he should visit the 
 Philippines in order to lay before the Government there suggestions 
 regarding their money system which had grown out of the discus- 
 sions in Europe as well as to gather the results of experience in the 
 Philippines which were likely to prove of service to the Chinese 
 Government in the establishment of its system. 
 
 THE MONETARY SYSTEM OF CHINA. 
 
 The best assistance which could be rendered to China in response 
 to her request, it was thought, was to cooperate with her in every 
 way possible to adopt the wisest plans for the establishment of a 
 new monetary system of her own, based upon a fixed gold value. 
 
 In order to present the general ideas of the Commission on Inter- 
 national Exchange on this subject to the Chinese Government and 
 people as a basis for discussion, a pamphlet was prepared setting 
 forth the main points of its plan as worked out in discussions with 
 the European Government experts, with the reasons for making the 
 suggestions. This pamphlet, printed in both English and Chinese, 
 with the approval of the Imperial Government of China, and in part 
 by its aid, was widely distributed among the officials and most 
 important business men of China. Some of the Chinese papers 
 reprinted the pamphlet in full, while other papers there, both native 
 and foreign, reprinted extracts from it as well as brief articles cov- 
 ering special points which were especially prepared for this purpose 
 by the Commissioner. 
 
 As soon as his credentials were presented to the Government at 
 Peking, Mr. Jenks asked permission before taking up the detailed 
 consideration of the subject with the Imperial Government, to spend 
 some time in visiting the more important treaty ports as well as 
 some of the interior Provinces, in order to study business conditions. 
 The Imperial Government not merely gave its consent,'^but notified 
 officials along the route chosen regarding the intended visit and 
 aided the Commissioner in everyway possible in making his observa- 
 tions. The special purposes in mind in this study were: 
 
 First. To secure a general view of monetary conditions in China 
 and of the methods of doing business under the various conditions 
 found in different Provinces. In the interior many days were passed 
 in localities where no money is employed excepting copper cash 
 and chunks of silver {sycee) which have to be weighed out by scales 
 which each dealer or traveler keeps for the purpose. As oppor- 
 tunity offered, conversations were held not merely with officials of all 
 ranks, but also with bankers, merchants, and even with day labor- 
 ers, local traveling peddlers, roadside workmen, etc. In this way a 
 reasonably accurate idea was secured of the methods of conducting 
 
GOLD STANDARD IN CHINA AND PANAMA. 5 
 
 business without any generally recognized currency and of the 
 probable ability of the people of all classes to deal with a new and 
 uniform money. 
 
 Second. Conference with the officials from day to day, both 
 those of high rank, such as viceroys and governors, and those of 
 lesser rank, such as local district magistrates, gave an opportunity 
 to estimate the qualifications of those in whose hands would need to 
 be placed to a greater or less extent the administration of the new 
 system when it should be adopted. 
 
 Third. The attitude of the people of various classes, officials, 
 business men, and common people, toward a change in the system 
 and toward the new monetary system suggested, was ascertained. 
 
 Fourth. Opportunity was offered to explain in part the main 
 points of the system proposed to the viceroys and other leading men, 
 officials, bankers, merchants, etc., so that thus valuable criticism of 
 the plans from the point of view of those familiar with local condi- 
 tions was secured, and in many cases opportunity was offered to 
 remove from the minds of those who did not understand the pur- 
 pose of the invitation of the Chinese Government or its attitude 
 toward the United States in this matter the natural suspicion regard- 
 ing the motive of the United States in understaking this work; and, 
 furthermore, objections which would naturally occur to those not 
 familiar with the administration of currency systems, were overcome. 
 
 These inquiries covered the inland territory between Peking and 
 Hankow on the Yangtse River, a typical part of the interior of 
 China, which is removed from direct foreign trade; the Yangtse 
 River from Hankow to Shanghai, with visits to the two most im- 
 portant trading posts on the river; a visit to Shanghai, Canton, and 
 Tientsin, the three most important treaty ports on the coast; as 
 well as discussions with the governors at Soochow and Hangchow, 
 the capitals of two very important Provinces, and interviews with 
 the customs taotais at Amoy and Chefoo, important ports in two 
 other Provinces. The subject was thus discussed with the governors 
 or viceroys of ten, and with high officials of twelve out of the eighteen 
 Provinces of China. At Shanghai, too, the subject was discussed 
 in detail in several meetings with the treaty commissioners who 
 have represented China in framing the important commercial treat- 
 ies recently negotiated with Great Britain, the United States, and 
 Japan. 
 
 The results of these investigations and discussions were that 
 many new ideas regarding conditions in China and what was practi- 
 cable for China were secured; that in many cases misconceptions 
 regarding the nature of the reform and of the plans under discus- 
 sion were removed, and that the experience secured and the knowl- 
 
6 GOLD STANDARD IN CHINA AND PANAMA. 
 
 edge gained enabled the Commissioner to understand much more 
 readily the attitude of the higher Chinese officials toward their old 
 systeni and the proposed new system. 
 
 On his return to Peking the subject was taken up for detailed 
 discussion with the Imperial Government. As a result of the treat- 
 ies with Great Britain, the United States, and Japan it has been the 
 intention of the Chinese Government to establish a uniform mone- 
 tary system, and for the purpose of working out plans for that 
 system, as well as for meeting the United States Commissioner, a 
 Commission had been appointed consisting of the members of the 
 Board of Revenue and several other officials, some of high and 
 some of lesser rank. Some of these had been especially designated 
 to have charge of the new mint and to devote their time to the con- 
 sideration of monetary affairs. 
 
 It was found that as a result of discussions in connection with 
 the treaty with Great Britain, of various resolutions passed during 
 the two or three preceding years by foreign chambers of commerce 
 in China, of arguments presented in the newspapers, and of their 
 own study of the question, the Chinese Government officials had 
 apparently informally, although not at all officially, reached the 
 conclusion that they wished ultimately to place their system of cur- 
 rency on the gold basis, but that at present they would establish 
 a uniform silver and copper currency without definite plans for 
 reaching the gold basis. Although the Commissioner was treated 
 throughout with the greatest courtesy and consideration, it seemed 
 at first as if the officials with whom he had to deal at Peking, 
 though interested in the general subject had, relatively speaking, 
 slight interest in the specific plans proposed by the Commission on 
 International Exchange. As the discussions went on, however, and 
 as from the work of both the Chinese and American commissions 
 the disadvantages and difficulties became more apparent of starting 
 on a silver basis without clean-cut, definite plans for the change to 
 the gold basis, and on the other hand, the advantages of having the 
 new coins placed on the gold basis from the beginning, both from 
 the point of view of financial gain to the treasury and benefit to the 
 business interests of the country, keen interest on the part of 
 the Chinese Commissioners was clearly awakened. In fact, before 
 the close of the discussions the Chinese Commissioners themselves 
 said that from this work not merely had their views to a consider- 
 able extent changed, but that their whole interest in the plans of 
 the American Commission had greatly increased. 
 
 The decision of any question of this importance in China is 
 finally made by the Emperor on the advice of the Grand Council. 
 The opinion of the Grand Council, however, is determined to a 
 
GOLD STANDARD IN CHINA AND PANAMA. '] 
 
 great extent, of course, by the high officials in the Government who 
 have especially to do with the subject under discussion; and in this 
 instance the responsibility for the recommendations which would 
 doubtless prove conclusive, rested chiefly upon the Chinese President 
 of the Board of Revenue, His Excellency Lu Chu'an Lin, together 
 with their Excellencies the Manchu President, Yung Ching, and Na 
 Tung, the distinguished official who had been designated the year 
 before to report on the monetary system of Japan. Naturally the 
 opinion of the senior President of the Board of Revenue would be 
 of the greatest influence. His excellency, an official of ripe years 
 and of extended experience in various high official positions, a man 
 of upright and most positive character, had apparently reached the 
 conclusion that the wisest plan for the Empire was to begin on a 
 silver basis in the hope of ultimately reaching the gold standard; 
 but the plan for the change to the gold standard had not been fully 
 worked out by him or by others in the Commission. As there was 
 relatively little opportunity for direct discussion with the President 
 of the Board of Revenue on account of his absence at the summer 
 palace in attendance on the Court, as well as from the pressure of 
 his other duties (since, in his judgment, the matter was already 
 settled), it seemed, until shortly before the American Commissioner 
 was compelled to leave China on account of the limitation of the life 
 of the Commission imposed by Congress, that the plans of the 
 Commission would probably not be adopted or even thoroughly 
 considered by the Imperial Government in the most important mat- 
 ter of all — the prompt establishment of the gold basis — although in 
 numerous minor particulars, even some of considerable importance, 
 the opinion was freely expressed by the officials that they would 
 accept the American suggestions. 
 
 At length, however. His Excellency the -President of the Board 
 of Revenue, was transferred to the presidency of the Board of 
 Works and a new President of the Board of Revenue was appointed. 
 His Excellency Chao Erh Hsiin, the new President of the Board of 
 Revenue, manifested immediately a great interest in the plans under 
 discussion and himself personally honored the American Commis- 
 sioner by meeting him repeatedly day after day for the discussion of 
 the subject. Before Mr. Jenks was compelled to leave Peking for 
 America, the opinion was expressed by several of the high Chinese 
 officials whose positions would place heavy responsibility upon them 
 in connection with the money system, that the American plans were 
 practical if the cooperation of the viceroys of the more important 
 Provinces could be secured; that the Chinese Government, could, 
 if it seemed advisable, secure the financial means necessary for the 
 carrying out of the reform; and that there would be no infringe- 
 
8 GOLD STANDARD IN CHINA AND PANAMA. 
 
 ment of the sovereignty of the Empire or danger to its integrity or 
 usefulness in the employment of such foreign expert aid as might 
 be required for the establishment of a system in accordance with the 
 American plan. 
 
 The Commissioner was assured also by different governors, vice- 
 roys, and commissions, that the American plans would have their 
 support, and some of the highest officials in Peking are of the 
 opinion that in a number of instances, at any rate, the support of 
 the local authorities will be heartily given to the Central Govern- 
 ment if it undertakes these plans. A favorable judgment regarding 
 the attitude of the Chinese Government seems to be quite general 
 also among those foreign residents most experienced in Chinese 
 affairs. The general opinion seems to be well represented by Mr. 
 Conger, the minister of the United States, in his letter to the 
 Department of State, as follows: 
 
 I have the honor to report that Professor Jenks left Peking for home on the 
 27th instant. 
 
 His task was a very difficult one, and at first the prospects were rather discour- 
 aging, but by patience, persistence, and clever presentation of his unsurpassed 
 knowledge of the subject, he has made great progress. He has practically brought 
 the Chinese Government to believe that his plan is the correct one, and ought, if 
 possible, to be adopted ; yet they greatly fear that so radical a change in their finan- 
 cial system can not at present be carried out by a Government which has so little 
 real power over its separate provinces. However, they have promised to at once con- 
 sult the leading viceroys and governors and see what can be done ; but whether or 
 not Professor Jenks's plan is adopted, his instruction and advice will aid the Chi- 
 nese Government greatly in its efforts to adopt a uniform currency as required by 
 the recent treaties, and his further assistance is most likely to be solicited by them. 
 
 Professor Jenks has been treated with the greatest respect and consideration 
 by the Chinese officials. They feel that he has been of great service to them, and 
 it is certain that much good will result from his mission, for all of which he 
 deserves great credit. 
 
 Doctor Morrison, the experienced, impartial correspondent in 
 Peking for many years of the London Times, on the departure of 
 Mr. Jenks from Peking, cabled to his paper as follows: 
 
 PROFESSOR jenks's MISSION ENDS — CHINESE GOVERNMENT IMPRESSED BY HIS GOLD- 
 STANDARD ARGUMENTS. 
 
 Peking, August 2q. 
 
 Professor Jenks, of Cornell University, the Commissioner delegated by the 
 United States to confer with the Chinese authorities regarding the suggested intro- 
 duction of the gold standard in China, left Peking yesterday on his return to America. 
 
 He has been in China since January, and has been treated with exceptional 
 honor. His mission was purely educational and not political. With untiring 
 patience Professor Jenks has been demonstrating to the Chinese the necessity of 
 reforming their currency and the immense gain that would follow the establish- 
 ment of the gold standard. 
 
 Undoubtedly his mission left its mark. The Chinese Government is beginning 
 to realize the vital importance of the question, and it is regrettable that Professor 
 
GOLD STANDARD IN CHINA AND PANAMA. 9 
 
 Jenks should be compelled to return to America when his work is only beginning, 
 for experience teaches that between Chinese expression of approval of a reform and 
 its actual introduction the distance often is considerable. 
 
 Mr. Robert Little, the veteran editor of the North China Daily 
 News and the North China Herald, for many years the most impor- 
 tant foreign publication in China, writes in the North China Daily 
 News, September 8, 1904, as follows: 
 
 CURRENCY REFORM IN CHINA. 
 
 Prof. J. W. Jenks left Shanghai yesterday for the United States in the Mon- 
 golia, and we are glad to know that he leaves these shores with the satisfac- 
 tory conviction that his mission has not been altogether in vain. He has planted — 
 it is for others to water, and the increase will come. Thoroughly conversant as he 
 is with his subject on every side, a clear and cogent writer, a very able speaker, 
 and a man of winning personality, he was the best choice that the United States 
 Government could possibly have made when the Chinese asked for a Commis- 
 sioner to advise them how they might best obviate the loss which the continuing 
 depreciation of silver was causing. His plan, as is generally known, is the adop- 
 tion of the gold standard without a gold currency, to put it as concisely as possi- 
 ble, and he has found the statesmen of Peking as well as the high provincial 
 oflBcials, with whom he has discussed the question in all its bearings, eager to listen 
 to him, to understand, and to adopt in due time his suggestions. Many foreigners 
 too, who were first indisposed to believe that the adoption of the gold standard by 
 China was anything but an impossible dream, have been convinced by his argu- 
 ments; and there is good reason if nothing untoward happens, to believe that 
 something like the reform which has been so unexpectedly and promptly success- 
 ful in the Philippines, will be adopted by China before long. Thus China will 
 come into line with India, the Straits, the Philippines, and Japan, to the permanent 
 advantage of all who do business with gold-standard countries. And mainly to 
 the suave, unassuming, but thoroughly earnest Professor of Cornell University, 
 with his unexcelled mastery of facts and figures, this great and beneficial reform 
 will be due. And there will be a general hope that circumstances will enable him 
 to return to China and give his advice and assistance to those who will be charged 
 with putting his recommendations in action. 
 
 Of Still greater import is documentary testimony from Chinese 
 sources, besides the favorable opinions referred to above which have 
 been expressed informally by business men and officials. The Chi- 
 nese commercial union of Hongkong took formal action. The 
 president of this association (an active Chinese of the chamber of 
 commerce) Mr. Feng Wa Chun, wrote to the American Commis- 
 sioner on the 13th of August, 1904, stating that: 
 
 A meeting of a committee of that institution was * * * held on the 7th 
 instant when it was unanimously agreed that it would be to the interest of China 
 to adopt a gold standard, and that the Chinese residents of this colony would hail 
 such a step with gratification. Inasmuch as it has been held that Hongkong can 
 not go 'gold' so long as China's currency remains unchanged. 
 
 The letter concludes with the hope that the American Commis- 
 sioner's mission will meet with the success it deserves. 
 
lO GOLD STANDARD IN CHINA AND PANAMA. 
 
 More important still, of course, is the official statement from the 
 Chinese Government itself. The Prince of Ch'ing, the President of 
 the Grand Council, who represents officially the Chinese Govern- 
 ment, in response to a request for a definite statement of his opinion 
 to be presented to the President of the United States, wrote to Mr. 
 Jenks on the eve of his leaving Peking, as follows: 
 
 I have the honor to-state that your excellency having been commissioned by 
 your government at this time to come to China, I found myself after conversation 
 with you in hearty accord with your ideas, and having read the various papers and 
 memoranda which you have prepared, I note that they are all exhaustive in their 
 discussions, and set forth plans covering all details, for all of which how can I 
 sufficiently express my gratitude. As to your suggestions regarding the adoption 
 of a. uniform monetary system, all are of great importance. China is just now 
 considering the matter of deciding upon a new coinage system and is deliberating 
 as to the establishment of a national bank, and it is most necessary that she should 
 follow your plans 'and that all those measures which need most urgently to be 
 taken up just now in accordance with those plans should at once be put into execu- 
 tion with earnestness and promptitude. As to the rest, it will be necessary to 
 investigate and consider the feelings of the people, and, as occasion may offer, take 
 these matters under advisement with the expectation that the suggested measures 
 will be developed one after the other in such a way as, I trust, will fulfill your 
 generous wishes for us and secure a good degree of success. 
 
 Your excellency is well known in China and abroad- as a financial expert, and 
 your efforts to formulate plans in our behalf, so sincere and friendly, demand from 
 me profound and grateful thanks. 
 
 I hear that your excellency has made preparations for your return home and 
 that the date of your departure is at hand. Should there be occasion in the future 
 to ask the further benefit of your instruction, I shall then write a special note to 
 inform you. 
 
 I avail myself of the opportunity to wish you the compliments of the day. 
 
 The Commission feels, therefore, that there is every reason to 
 believe that the mission for which it was established, to cooperate 
 with the Chinese and Mexican Governments in establishing sound 
 monetary systems which would fix the rate of exchange between the 
 greatest of the silver-using countries and the gold-standard countries, 
 has been in great part satisfactorily performed. It remains to be seen, 
 of course, how promptly and by what methods the Chinese Govern- 
 ment will carry out its intentions as indicated in the letter of the 
 Prince of Ch'ing, of adopting in the main the plans of the Commis- 
 sion. This much, at least, is clear — that the Government officials who 
 are in the positions of chief responsibility have shown the greatest 
 courtesy and consideration toward the United States Commission; 
 that they have shown themselves open to the fair consideration of 
 sound arguments on this most important and difficult question, and 
 have manifested the open-mindedness and frankness in announcing 
 a willingness to change their opinions which is characteristic of the 
 greatest statesmen; that the Chinese Government has the ability, 
 
GOLD STANDARD IN CHINA AND PANAMA. I I 
 
 financial and otherwise, if, on further consideration, it continues to 
 have the will, to carry out with proper expert advice a good system, 
 and that in the opinion of the best-informed persons in China, this 
 intention and purpose will continue unless some hostile influence 
 intervenes. 
 
 It is the opinion also of many of the best-informed foreign 
 residents in China, as well as of some of the higher of the Chinese 
 officials, that if, under the limitations of the act of Congress, the 
 Commissioner could have remained a few months longer in China 
 he would have had the opportunity of seeing the new system organ- 
 ized and of cooperating with the Chinese Government in whatever 
 way might have seemed to it wise in the organization of the system. 
 The Commission, however, has from the beginning taken the posi- 
 tion that it was doing simply what it could to comply with China's 
 request for assistance without in any way bringing any pressure 
 to bear upon that Government in carrying out its plans; and it is 
 convinced that, difficult as the task before China is (and no other 
 country in modern times in its monetary reform has had a task so 
 difficult), the good sense and wisdom of the Chinese officials upon 
 whom rests the responsibility of the introduction of the new system 
 may be trusted to secure the best expert advice and to take the 
 wisest means of establishing the new monetary system on a sound 
 gold basis. 
 
 THE CURRENCY OF THE PHILIPPINE ISLANDS. 
 
 From December 23, 1903, to January 16, 1904, was spent by 
 Mr. Jenks in the Philippine Islands and in conference with the 
 Philippine Commission over proper measures for transition from 
 the old currency system to the new one provided by the Act of 
 Congress approved March 2, 1903. Immediately following these 
 conferences and public discussions of bills proposed, two acts were 
 passed by the Philippine Commission which seem to have removed 
 most of the difficulties in the way of the successful inauguration of 
 the new monetary system. 
 
 It was found, as a result of experience in the islands, that many 
 business men, especially exporters who were buying in the interior 
 products for exportation, and the large employers of labor who 
 expended considerable sums of money regularly in the payment 
 of wages, as well as other people who employed labor on a small 
 scale and purchased supplies for their daily consumption, were 
 making use by preference of the Mexican dollars and the other 
 local currency because it was cheaper, and they were thus hindering 
 seriously the general use of the new coins. Moreover, under the 
 influence of these classes in the community, whenever the rate of 
 
12 GOLD STANDARD IN CHINA AND PANAMA. 
 
 exchange turned slightly in favor of the islands, there was a tend- 
 ency toward the reimportation of Mexican dollars which had pre- 
 viously been exported. 
 
 To meet these difficulties the Philippine Commission, as has 
 been suggested, passed two laws; the first, a measure prohibiting 
 absolutely the importation of Mexican currency, Spanish-Filipino 
 currency, or any other metallic currency which is not upon a gold 
 basis, with proper exception of small amounts in the pockets of trav- 
 elers; the second, an act restricting after a certain fixed date in the 
 future the use of all moneys excepting the legal-tender currency by 
 imposing a tax, which was to increase in rate as the months went by, 
 upon all checks, drafts, notes, bonds, bills of exchange, and other 
 written contracts of every description made payable in whole or in 
 part in the former local currency, as well as a tax upon bank deposits 
 and upon the conduct of business of any description in the old local 
 currency, proper exceptions being made, of course, for contracts 
 previously entered into, deposits for the payment of old contracts, 
 bills of exchange, or checks or other contracts for the purpose of 
 exporting Mexican dollars, etc. 
 
 In the Manila American of September 22, 1904, is the following 
 editorial covering the same ground fully: 
 
 Vice-Governor Ide, secretary of finance and justice, has given out in his finan- 
 cial statement for August that there is sufficient Philippines currency in circulation 
 in the islands to meet all demands and that the government is prepared to supply 
 all needs in the conduct of insular commerce on the new basis. 
 
 While the work of introducing the new currency has been attended by many 
 discouragements and vicissitudes, it is remarkable how successfully the war against 
 the fiat money has been waged and in a few months to wrhat extent the new currency 
 has found its way into circulation. 
 
 The success attained is largely due to the fixed purpose of the government to 
 carry into effect the currency policy and the fact that no avenue for the distribution 
 of the new coin and no course for the discouragement of the old one has been 
 overlooked in the campaign. 
 
 This success is worthy of special deference, since the great mass of the people 
 offered little or no encouragement or cooperation and rather assumed a prejudiced 
 position against the passing of the fiat money. This prejudice is being rapidly 
 overcome and the bright, new * * * dollar is to-day the favorite where a choice 
 is offered, even of the most ignorant. 
 
 It seems clear, however, that no further legislation will be needed 
 beyond minor measures to meet special needs, such as small changes 
 in the rate of buying or selling exchange, of receiving old copper 
 coins, etc. The government of the Philippine Islands is certainly 
 to be congratulated upon having established in full vigor a gold- 
 standard system adapted to the needs of the people within about a 
 year from the time when the new coins were first introduced into 
 the islands. Rarely has any country accomplished so great a reform 
 so promptly and with so slight disturbance of business. 
 
GOLD STANDARD IN CHINA AND PANAMA. 1 3 
 
 THE CURRENCY OF PANAMA. 
 
 The completion of negotiations between the United States, the 
 French Canal Company, and the Republic of Panama for the con- 
 trol by the United States of the construction of the Panama Canal 
 made it important, in the opinion of the Commission on International 
 Exchange, that some action should be taken ,to ensure the use of a 
 sound currency in the construction of the canal. The matter was 
 -considered to be of considerable importance from the standpoint of 
 the cost of the canal, because uncertainty as to the character of the 
 currency employed would not only involve the risk of injustice in 
 the wages paid to labor, but might add greatly to the amounts 
 charged by contractors for services rendered in order to protect 
 themselves against the consequences of fluctuations in the gold value 
 of the money employed by them in local expenditures on the Isthmus. 
 The fact that the work of constructing the canal would bring the 
 officers and employees of the United States into frequent contact 
 with the citizens of Panama made it desirable also, in the opinion 
 of our Commission, that some degree of harmony should be'brbught 
 about between the currency employed in the canal strip under the 
 control of the United States and that employed in the Republic of 
 Panama. 
 
 The Government of Panama showed from the beginning a dis- 
 position to meet the wishes of the United States and to establish a 
 sound currency upon the gold basis. The evils suffered under the 
 fluctuating currency previously in circulation in Panama had already 
 led to a large use of United States money on the Isthmus and to a 
 strong realization of the importance of establishing a monetary sys- 
 tem based upon gold. Several bills on the subject were pending in 
 the Congress of Panama during the spring, but failed of enactment, 
 because of differences of opinion in regard to the rate at which the 
 old silver currency should be converted into the new, and in regard 
 to other details of the proposed change. The fact that the Govern- 
 ment of the United States should interest itself promptly in securing 
 harmony between the currency systems of the canal strip and the 
 Republic of Panama was set forth for the first time in a memoran- 
 dum regarding the currency of Panama which was submitted by the 
 Commission on International Exchange to the Secretary of War 
 under date of March 26, 1904, and which will be hereafter printed 
 as an appendix to this report. 
 
 This memorandum did not undertake to decide between several 
 ■different systems which were suggested, but simply to emphasize 
 the importance of cooperation between the Governments of the 
 United States and the Republic of Panama. Subsequently, in the 
 latter part of April, the Commission, through one of its members. 
 
14 GOLD STANDARD IN CHINA AND PANAMA. 
 
 was requested by the President and Secretary of War to "prepare a 
 definite project on the subject. This project was submitted in a 
 memorandum entitled "Suggestions regarding the system of cur- 
 rency to be established in the Panama Canal Zone," which was 
 transmitted to Secretary Taft under date of May ig, 1904. The 
 subject was taken up actively by the Secretary of State and the Sec- 
 retary of War early in June because of the pending departure of 
 Mr. John Barrett, the minister of the United States to Panama, who 
 desired to know what representations he should make on the sub- 
 ject to the Government of the Republic. As a result of several 
 conferences at the State Department and the War Department, the 
 Government of Panama was asked to designate a commission to 
 confer with the authorities of the United States on the subject, in 
 accordance with the suggestion originally made by the Commission 
 on International Exchange. 
 
 The Government of Panama promptly complied with this request 
 by designating as its commissioners the Hon. Ricardo Arias and 
 Dr. Eusebio A. Morales, who were already in New York in connec- 
 tion with the disposition of the money paid by the Government of 
 the United States for the canal franchise. Acting under authority 
 of their government and by invitation of the Secretary of War, the 
 Commissioners of Panama met several officials of the Government 
 of the United States at the office of the Secretary of War on Satur- 
 day, June II, 1904. There were present at this conference the Sec- 
 retary of War; the two Commissioners of the Republic of Panama; 
 their counsel, Mr. William Nelson Cromwell; the minister of the 
 United States to Panama, Mr. Barrett; the chairman of the Canal 
 Commission, Admiral John G. Walker; the legal adviser of the 
 Canal Commission, Judge Charles E. Magoon; the Chief of the 
 Bureau of Insular Affairs of the War Department, Col. Clarence R. 
 Edwards; and Mr. Conant, as a representative of the Commission 
 on International Exchange. 
 
 The desirability of harmony between the United States and the 
 Republic of Panama in establishing a sound monetary system on the 
 Isthmus was forcibly set forth by the Secretary of War, and was 
 cordially admitted by the Commissioners of the Republic of Panama. 
 A general discussion followed as to the best method of establishing 
 and maintaining a monetary system acceptable to all parties in in- 
 terest. The Secretary of War emphasized the importance not merely 
 of establishing the gold standard, but of providing for an adequate 
 gold reserve to protect any subsidiary silver which might be issued. 
 The Commissioners of Panama objected to setting aside a large sum 
 upon the ground that the money was not available. Of the $10,000,- 
 000 received from the United States they stated that $6,000,000 was 
 
GOLD STANDARD IN CHINA AND PANAMA. 1 5 
 
 dedicated by their new constitution to posterity. It was the inten- 
 tion, they declared, to invest this money in a permanent form and to 
 apply only the interest to current expenditures of the Government 
 of Panama. The remaining portion of the money paid by the 
 United States for the Panama Canal franchise, they declared, was 
 already appropriated for education, important public works, and 
 similar purposes. The Secretary of War insisted strongly, however, 
 upon the setting aside of a gold reserve to protect the subsidiary 
 silver, if the money adopted by the Republic of Panama were to be 
 employed by the Panama Canal Commission. The Commissioners 
 of the Republic asked time, therefore, to consult their government 
 on this subject and an adjournment was taken for one week. 
 
 At the conference of June i8 the Commissioners of Panama sub- 
 mitted a proposal that the reserve to be set aside should be 15 per 
 cent of the face value of all the silver to be coined. It was suggested, 
 on behalf of the Commission on International Exchange, that if so 
 small a reserve were provided it should at least be strengthened by 
 the addition of the seigniorage profits on the coin minted from new 
 bullion. This proposition was supported by the Secretary of War 
 and was accepted by the Commissioners of the Republic. At a 
 final meeting on Monday, June 20, a letter was drafted by the Sec- 
 retary of War, addressed to the Commissioners of the Republic of 
 Panama, stating that he understood that a measure was pending in 
 the national convention of the Republic, conforming in its general 
 terms to the plan which had already been discussed between himself 
 and the Commissioners, and that if this plan was adopted as outlined 
 in this letter, the War Department would agree to employ the cur- 
 rency of the Republic on the Isthmus and to cooperate with the 
 Government of Panama in so arranging drafts upon the canal funds 
 in the United States as to prevent excessive fluctuations in exchange. 
 This proposal was accepted by the Commissioners of Panama on 
 behalf of their Government, and an act was approved by the Presi- 
 dent of that Republic on June 28, 1904, embodying this agreement. 
 The' substance of the plan agreed upon between the Commis- 
 sioners of Panama and the Secretary of War was that a gold coin, 
 to be known as the Balboa, of the same weight and fineness as the 
 gold dollar of the United States should be the standard of value in 
 Panama; that the gold currency of the United States should be legal 
 tender there; that provision should be made b)' the Republic of 
 Panama for the issue of fractional silver to the face value of |i,soo,- 
 000 in gold; and that upon the request of the Panama Canal Com- 
 mission, if the construction of the canal showed it to be necessary, 
 there should be executed from time to time additional coinage of 
 fractional silver to an amount not exceeding the face value in gold 
 
1 6 GOLD STANDARD IN CHINA AND PANAMA. 
 
 of $1,500,000. Parity of all the silver coined is to be maintained by 
 the deposit in some bank in the United States of 15 per cent of the 
 nominal value of such coin, with the addition to such deposit of 
 the net seigniorage on such amount as may be coined at the request 
 of the Canal Commission. 
 
 This plan departs from the recommendations of the Commission 
 on International Exchange and from the currency system adopted in 
 the Philippines in making the unit of value equal to one dollar in 
 American gold coin instead of fifty cents. The silver coins provided 
 for, however, are nearly the same in size as those provided for in the 
 Philippines. The largest of these silver coins will be of about the 
 size of an American silver dollar, but will have in Panama the value 
 of fifty cents in American gold. It will weigh 25 grams (385.8 
 grains) nine-tenths fine, and is therefore coined at about the ratio of 
 30 to I. While it will represent fifty cents in Panama currency, 
 instead of a complete unit of value, as in the Philippines, this coin 
 is specifically denominated by the new law the peso, in conformity 
 with the existing coinage in circulation on the Isthmus, of which the 
 peso is the unit, and whose present gold value, while fluctuating 
 with the price of silver bullion, is only a little below fifty cents in 
 United States gold. Thus, while the American dollar has become 
 the standard of value, the local subsidiary currency is so nearly 
 adjusted to old conditions that prices and wages will not be affected 
 in the drastic manner in which they might be by the adoption of a 
 subsidiary coinage exactly the same as fhat of the United States. 
 
 The Commissioners of the Republic of Panama have already 
 made arrangements for the execution of proper dies for their new 
 coinage by the officials of the United States Mint at Philadelphia. 
 A part of their new coinage will soon be executed, but it will not be 
 necessary for the Canal Commission to use a large quantity on the 
 canal work until the surveys have been more nearly completed and 
 contracts actually made for the execution of the work. By that time 
 the coinage agreed upon for the Republic will probably be com- 
 pleted, and the officers of the United States will be in a position to 
 determine whether additional amounts of subsidiary silver will be 
 required to provide an adequate circulating medium under the 
 agreement made with the Secretary of War. 
 
 STABILITY OF EXCHANGE. 
 
 The essential object for which the present Commission was ap- 
 pointed was referred to by the President of the United States, in 
 his message to Congress, as being to procure "such measures as 
 will tend to restore and maintain a fixed relationship between the 
 moneys of the gold-standard countries and the silver-using coun- 
 
GOLD STANDARD IN CHINA AND PANAMA. 1 7 
 
 tries." Of the several measures to secure this object which have 
 been considered by the Commission, the one most important and 
 most permanent in its influence has been, in their opinion, the 
 adoption of the gold exchange standard in silver-using countries. 
 Incidentally, however, it is obvious that any measure which should 
 tend to promote stability in the gold value of silver bullion would tend 
 to check the fluctuations in exchange between gold and silver coun- 
 tries, which have been so disturbing to commerce for a generation 
 and which proved especially demoralizing to the commerce of China 
 and Mexico during 1901, 1902, and the spring of 1903. 
 
 As pointed out by this Commission in its report of last year, the 
 exchange between gold and silver co'Untries now depends funda- 
 mentally upon the fluctuations in the gold price of silver. Any step 
 contributing toward stability in the price of silver bullion would, 
 therefore, in itself tend to diminish the fluctuations of exchange, 
 independently of the more important object of separating the mone- 
 tary systems of the silver-using countries from the silver standard 
 and placing them on the gold standard. Some misunderstanding 
 of the objects of the Commission in this regard seemed to arise in 
 some quarters because of failure to distinguish between efforts previ- 
 ously made to raise the price of silver and the efforts made by this 
 Commission to promote stability in the price. Stability in the price 
 of bullion is important because it carries with it comparative sta- 
 bility in exchange. In order, therefore, to prevent paralysis of 
 trade between the silver-using countries and the gold countries, the 
 Commission on International Exchange suggested^to the European 
 powers with whose representative they consulted, an effort to re- 
 duce the violent fluctuations in the bullion market by making such 
 purchases of silver as are actually required for coinage purposes 
 with greater regularity. As shown in our previous report, the sound- 
 ness of this principle was generally recognized by the governments 
 with whom consultations were held. 
 
 It is gratifying to report that this policy had borne fruit in 
 diminishing fluctuations of exchange between gold-standard coun- 
 tries and silver-using countries. The most important influence 
 exerted in this respect has been by the Council for India, at London, 
 in making its purchases of silver bullion to meet the coinage 
 demands of British India. A letter from Sir James Mackay, a mem- 
 ber of this Council, to the chairman of this Commission, states: 
 
 I think you will observe from the prices which the Secretary of State for India 
 paid for the silver which he bought that regularity has, as far as possible, been 
 observed, so as to prevent extreme fluctuations. 
 
 Considering that the value of the silver bought by the Secretary of State since 
 the 6th of March, 1900, up to the end of September, 1904, has amounted to twelve 
 millions sterling, the variation in prices has, I think you will see, been extremely 
 small. 
 
IS GOLD STANDARD IN CHINA AND PANAMA. 
 
 The figures presented by Sir James Mackay give only the aver- 
 age price paid for different lots of silver purchased. They show 
 that while the prices paid in 1903 and 1904 were lower than those 
 paid in 1900, the differences between the average maximum and mini- 
 mum prices were less. The lowest average price paid in 1903 was 
 23-|| pence between December 12 and December 19; the highest 
 average price for a given purchase was 2 7-^|- pence between Sep- 
 tember 15 and October 2, 1903. The average of the prices paid 
 during the period from September 15, 1903, to February 20, 1904, 
 representing the purchase of 35,652,935 ounces, was 26|^ pence. 
 Purchases were then suspended until May 2, 1904. The average 
 price for 18,300,644 ounces purchased between that date and August 
 27, 1904, or nearly four months, was 26^ pence or about two- 
 thirds of a penny less than the average for the previous series of 
 purchases. 
 
 The figures just presented of the purchases for the coinage of 
 British India show a steadiness in the price of silver which has been 
 rare during the past decade. They are not absolutely conclusive, 
 because they represent for each lot of silver purchased the average 
 of slightly varying prices paid over a period of a week or more. 
 More conclusive evidence of the comparative steadiness which has 
 been attained in the price of silver bullion is afforded by the actual 
 maximum and minimum quotations in the London market. These 
 are presented by months in the table below: 
 
 Quotations of silver at London. 
 
 Month. 
 
 Highest. Lowest, 
 
 Highest. Lowest. 
 
 Highest. Lowest 
 
 January ... 
 February.. 
 
 March 
 
 April 
 
 May 
 
 June 
 
 July 
 
 August 
 
 September, 
 October ... 
 November 
 December , 
 
 Pence. 
 26tV 
 
 25A 
 
 24I 
 
 24i 
 
 24tV 
 
 24A 
 24A 
 
 24i 
 
 23« 
 23i- 
 
 22I 
 
 Pence. 
 25| 
 25t\ 
 24^f 
 
 23A 
 23A 
 
 23if 
 
 24A 
 
 24tV 
 
 23A 
 
 23t 
 
 2It¥ 
 
 2It¥ 
 
 Pence. 
 22| 
 22tV 
 22^ 
 25tV 
 25i 
 24A 
 254 
 26| 
 
 27t\ 
 
 27f 
 
 26X 
 
 Pence. 
 21 
 21^ 
 
 11 
 
 1? 
 22^ 
 22| 
 24t¥ 
 24i 
 24t 
 25t\ 
 26i 
 
 27t\ 
 26^ 
 
 25A 
 
 Pence. 
 
 25tV 
 27i 
 
 26f 
 
 25t 
 
 25^ 
 
 26i 
 
 27 
 27 
 
 26J 
 
 Pence. 
 254 
 25I 
 25i 
 
 24tV 
 25i 
 
 25A 
 
 26f 
 
 26A 
 
 26 
 
 26A 
 
 This table shows that the price of silver has varied from Jan- 
 uary I, 1904, to the date of this report within the limits of 27-|- 
 
GOLD STANDARD IN CHINA AND PANAMA. 
 
 19 
 
 pence and 24^ pence, and since April 26, 1904, has been uniformly 
 above 25 pence. The fluctuations in 1901 were from a maximum of 
 29tV pence to a minimum of 24^ pence; in 1902 from 26-3!^ to 21^ 
 pence; and in 1903 from 28^ to 2i-f^ pence, showing a variation this 
 year of only about 10 per cent, as compared with variations of 20 per 
 cent or more in other years. 
 
 The fact that exchange with the silver-using countries has been 
 materially improved by this greater steadiness in the market for 
 silver bullion is set forth in respect to China in the annual report of 
 the American Asiatic Association, and credit is therein given to the 
 recommendations of the Commission on International Exchange. 
 The same tendency to greater steadiness has been true of exchange 
 between London and the British and French dependencies in Asia, 
 and between New York and Mexico. While these exchanges have a 
 tendency to follow the bullion market, it often happens that an 
 active demand for coined money may for a time raise the rate above 
 the bullion value of the metal, while on the other hand an excess of 
 such money may depress the exchange rate relatively to the price 
 of silver bars. In spite of these modifying influences, exchange 
 between New York and Mexico has fluctuated during the current 
 calendar year only within the limit of 226 and 213, and for the past 
 five months has not departed more than three points from 216. 
 These conditions are in marked contrast with those of 1902 and 
 1903, when the range , of fluctuations was from 277^ to 214^, or a 
 variation of more than 20 per cent. The maximum and minimum 
 quotations in each month for the past three years are shown below: 
 
 Quotations of Mexican exchange. 
 
 Month. 
 
 January.... 
 February.. 
 
 March 
 
 April 
 
 May 
 
 June 
 
 July 
 
 August 
 
 September, 
 
 October 
 
 November. 
 December.. 
 
 Maximum. Minimum 
 
 222 
 
 225i 
 227 
 241 
 2365 
 
 234I 
 240f 
 
 2444 
 250 
 
 253^ 
 
 277i 
 26g| 
 
 2l6f 
 
 22lf 
 
 223I 
 
 225| 
 
 233 
 
 232J 
 
 235I 
 
 240f 
 
 242 
 
 250 
 
 252^ 
 
 261 
 
 Maximum. Minimum 
 
 264i 
 
 263 
 
 265 
 
 262 
 
 236 
 
 244f 
 
 243 
 
 230i 
 
 226 
 
 222 
 
 223^ 
 
 233 
 
 259i 
 
 261J 
 
 260 
 
 218 
 
 227 
 
 234 
 
 230J 
 
 214^ 
 
 215 
 
 2I5t 
 
 218 
 
 222 
 
 Maximum. Minimum 
 
 226 
 
 2Ig 
 
 220 
 
 230 
 
 223J 
 
 216^ 
 
 216 
 
 216 
 
 216 
 
 216 
 
 221 
 209 
 216 
 220 
 217 
 213 
 2l6 
 2l6 
 
 216 
 216 
 
20 GOLD STANDARD IN CHINA AND PANAMA. 
 
 The result of this greater stability of exchange has been that ia 
 the Philippines the transition from the silver to the gold standard 
 has been facilitated, and in silver-using countries complaints have 
 been much less acute than before regarding interruptions to trade 
 with gold countries. In all these countries risk of loss has been 
 diminished in making payments for imports, which threatened 
 almost to paralyze trade at the close of 1902 and the beginning of 
 1903, when appeal was made by the Government of Mexico to the 
 United States to aid in stabilizing the exchange between Mexico 
 and China on the one hand and the gold-standard countries on the 
 other. It nevertheless remains true, as declared in the report of the 
 American Asiatic Association, already quoted, that "the menace 
 of the possibility of violent fluctuations continues, however, to hang 
 over commercial transactions between the gold-standard countries 
 and the Orient," and that this menace can be permanently removed 
 only by definite and comprehensive steps in the silver countries for 
 the adoption of a fixed gold standard. 
 
 Hugh H. Hanna, 
 Charles A. Conant, 
 Jeremiah W. Jenks, 
 
 Commissioners.