^r^) /'. 
 
 y' 
 
 
 
 ^i 
 
 \ %*^i 
 
 j^ 
 
 
 1 j^^'i 
 
 P-, 
 
 " '-v 
 
 
 ; •* 
 
 ■Xjy^ 
 
 
 I/- ^^ 
 
 ■^a 
 
 V."' 
 
 L-fv'- 
 
 
 
 #*■ 
 
 ^ 
 
 1 
 
 1 ■ 
 
 >=— '' 
 
 
 
 .. jji 
 
 
 /. ■^, -. .:' 
 
 
 ' ifr 
 
 CORNELL 
 
 UNIVERSITY 
 
 LIBRARY 
 
 FROM 
 
 A.. C. Pur and 
 
 ^0:^^ 
 
Cornell University Library 
 HG297 .U58 
 
 Gold standard n international trade. 
 
 olin 
 
 3 1924 032 521 241 
 
 * J^r A 
 
 / /■ 
 
 
 'ijK 
 
 r.v»v<v 
 
 ■^,,^f.,>Si5 
 
 '^^.^ 
 
 ^ h 
 
HGc 
 

 DATE DUE 
 
 
 1 
 
 
 
 
 'Mfii 
 
 3/9R7liii 
 
 
 
 
 ~ 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 GAYLOHD 
 
 
 
 PRiNTEDINU.S.A. 
 
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/cu31924032521241 
 
Gold Standard in International Trade 
 
 REPORT ON THE INTRODUCTION OF THE 
 GOLD-EXCHANGE STANDARD 
 
 into 
 
 China, the Philippine Islands, Panama, and Other Silver- 
 Using Countries 
 
 and on the 
 
 STABILITY OF EXCHANGE 
 
 Submitted to the Secretary of State, October 22, 1904, by the 
 O.5. Commission on International Exchange 
 
 HUGH H. HANNA 
 CHARLES A. CONANT 
 JEREMIAH W. JENKS 
 
 Commissioners 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OFFICE 
 
 1904 
 
4wr/5r^' 
 
CONTENTS, 
 
 Page. 
 
 President's Letter of Transmittal '. 7 
 
 Secretary Hay's Letter op Submittal 9 
 
 Report of the United States Commission ' 13 
 
 1. The work in China 14 
 
 3. Late developments in the reform in the Philippines 21 
 
 3. The monetary reform in Panama . _ . : 33 
 
 4. Stability in exchange _ 36 
 
 Report of Jeremiah W. Jenks, special commissioner selected to carry on 
 
 the work in the Far East 30 
 
 1. The work in Japan 30 
 
 3. The work in the Philippine Islands 33 
 
 3. The work in China. r 41 
 
 Monetary and business conditions '. 41 
 
 Banks and banking 47 
 
 Business in the interior 52 
 
 Opinions of foreigners, Chinese officials, and business men 
 
 regarding monetary reform 58 
 
 Relations of officials and business men. 68 
 
 Dealings with the Chinese Government 70 
 
 APPENDIXES TO THE REPORT. 
 
 Appendix A. — China. 
 
 I. Memoranda on a new monetary system for China. 75 
 
 Pamphlet prepared by Mr. Jenks, outlining the American suggestions, 
 
 in English and Chinese, for distribution in China 75 
 
 1. Note of Chinese Government 75 
 
 3. Message of President Roosevelt 79 
 
 5. Suggestions of plan for China 80 
 
 4. Considerations regarding monetary plan 83 
 
 (a) Advantages of a good system 83 
 
 (6) Difficulties of a change in China 84 
 
 (e) Introduction of the new system 88 
 
 (d) Need of expert assistance ..^... ...". 92 
 
 (e) Outline of proposed system. 93 
 
 (/) Maintenance of parity with gold 96 
 
 (g) Establishment of a gold reserve 100 
 
 {h) Banknotes 103 
 
 (i) Work already done - - 103 
 
 0') Continuance of the work 105 
 
 5. EflEectsof balance of trade 106 
 
 3 
 
4 CONTENTS. 
 
 Page. 
 
 II. Considerations on a new monetary system for China - - 
 
 Pamphlet containing abstracts of arguments, estimates of cost, etc., 
 prepared by Mr. Jenks in English and Chinese for presentation to 
 the Chinese Government commission , and distributed in China 113 
 
 1. Introduction. " ■ 
 
 2. Uniformity of coinage 11' 
 
 3. Methods of fixing values of subsidiary and minor coins 118 
 
 4. Advantages of a fixed gold value for the Chinese currency 119 
 
 5. Reasons for adopting a gold value for the silver and copper coins 
 
 at the beginning of the system 133 
 
 6. Methods of maintaining the silver and copper coins at a fixed 
 
 value with gold 125 
 
 7. The gold reserve 132 
 
 8. Cost of establishing the new monetary system 143 
 
 9. Administrative organization 147 
 
 10. Revision of treaties . . 151 
 
 11. Comparison of the two plans of starting the new monetary 
 
 system 153 
 
 12. To begin the monetary system on a gold-exchange basis without 
 
 a loan ..__ --. 156 
 
 13. Coinage specifications -- 158 
 
 14. Foreign experts for the Chinese monetary system 160 
 
 15. Summary of points in connection with the Chinese monetary 
 
 system ___._ 164 
 
 16. Government procedure 169 
 
 17. Answers to objections and final suggestions. 172 
 
 III. Comments and suggestions on the Chinese monetary reform 176 
 
 1. Memorandum on a gold-standard currency, by Mr. Alfred E. 
 
 Hippisley 176 
 
 3. Chinese memorials ., 190 
 
 (a) Memorial to the Empress Dowager and the Emperor, by 
 
 the Chinese minister to Russia . . _ 190 
 
 (b) Memorial regarding gold reserve, by Board of Revenue 201 
 
 (c) Memorial regarding National Bank, by Monetary Commis- 
 
 sion -.- 303 
 
 3. Extract from Report on Foreign Trade of China for the year 1903, 
 by Mr. J. W. Jamieson, commercial attache to His Majesty's 
 legation in Peking, No. 3280, Annual Series Diplomatic and 
 Consular Reports _ 303 
 
 IV. Data regarding the present currency in China 210 
 
 1. Extracts from special reports of the imperial maritime customs. 310 
 (a) The Haikwan Banking System and Local Currency at the 
 
 Treaty Ports. V. OfBce Series, Customs Papers No. 12. . 210 
 (6) Sycee: Weights, Value, Touch. V. Ofiflce Series, Customs 
 
 Papers No. 47 337 
 
 ' (c) Scarcity of Copper " Cash ": Mr. Woodruff's remedial sug- 
 gestions. V. Offtce Series, Customs Papers No. 50 350 
 
 (d) China's Defective Currency: Mr. Woodruff's remedial sug- 
 
 gestions (with notes by Dr. J. Edkins) Customs Papers 
 
 No. 52 254 
 
CONTENTS. 5 
 
 IV. Data regarding the present currency in China — Continued. Page. 
 
 3. Extracts from special report of H. B. Morse, statistician of the 
 imperial maritime customs, printed in the Journal of the China 
 Branch of the Royal Asiatic Society. New Series, Vol. XXIV, 
 
 Shanghai, 1890.- ___ 358 
 
 3. Money System of Manchuria 376 
 
 (a) Report from the American consul at Newchwang 376 
 
 (6) The defeat of" the traveling rouble. Extract from "Man- 
 
 chu and Muscovite," by B. L. Putnam Weale 278 
 
 Appendix B. — The Philippine Islands. 
 1. Extract regarding currency from the Report of the Secretary of Finance 
 
 and Justice, 1903 283 
 
 3. Extract from Report of the Chief of the Bureau of Insular Affairs, War 
 
 Department, 1904 294 
 
 3. Act (No. 1043) prohibiting the importation into the Philippine Islands 
 
 of certain kinds of coins _ - 307 
 
 4. Act (No. 1045) to maintain parity of Philippine coins by imposing a tax 
 
 upon written contracts payable in certain kinds of currencies, a license 
 
 tax for conducting business in certain currencies, etc 308 
 
 5. Order of Secretary of Finance and Justice changing rate charged for 
 
 exchange 313 
 
 Appendix C. — Panama. 
 
 1. Law proposed in Panama 313 
 
 3. First memorandum of American Commission 315 
 
 3. Press reports of negotiations 319 
 
 4. Project of the American Commission 332 
 
 5. Agreement between the Secretary of War and the commission of 
 
 Panama 329 
 
 6. Act of Panama in pursuance of agreement 331 
 
 Appendix D. — Mexico. 
 
 1. Mexican monetary problem, Commission's final recommendations and 
 
 reports - - 334 
 
 2. Explanatory statement by the Minister of Finance, and bill sent to Con- 
 
 gress 423 
 
 Appendix E. — The Straits Settlements. 
 The Reform of the Straits Currency, by Dr. E. W. Kemmerer, chief of 
 division of the currency of the treasury, Philippine Islands, from Politi- 
 cal Science Quarterly, December, 1904. ___ 451 
 
 Appendix F.—The situation. 
 
 1. The dislocation of the exchanges. Its effect on gold and silver coun- 
 
 tries, by Charles A. Conant 461 
 
 2. The end of the Mexican dollar, by Prof. A. Piatt Andrew, Quarterly 
 
 Journal of Economics, May, 1904 _ _ 470 
 
 3. Comments on the monetary situation --. 491 
 
 (a) Extract from Report of Bank of Indo-China 491 
 
 (6) Extract from ' ' Revue Economique Internationale " 493 
 
 4. Coinage, currency and exchange, 1903, from Indian Financial State- 
 
 ment, 1904-5 494 
 
 5. Stability in price of silver on account of regular purchases for India 497 
 
 6. Pixley and Abell's bullion circular for 1904 - 499 
 
 Appendix Q.— Statistical data - 501 
 
LETTER OF TRANSMITTAL. 
 
 To the Senate and House of Representatives : 
 
 I transmit herewith the final report of the Commission on Inter- 
 national Exchange, constituted under the authority of the act of 
 March 3, 1903, in compliance with the requests of the Governments of 
 China and Mexico. 
 
 The work of the Commission has assisted greatly in the establish- 
 ment of the new monetary systems of the Philippine Islands, Mexico, 
 and the Republic of Panama. The work done in China has, from the 
 letter of the Prince of Ch'ing, the head of the Executive, been very 
 helpful to that Government. Such improvements in the monetary 
 systems of the silver-using countries bring them into closer connec- 
 tion with the gold-standard countries and are of very great benefit to 
 the trade of the United States, and every effort should be made to 
 encourage such reforms. 
 
 The attention of Congress is invited to the accompanying report of 
 the Acting Secretary of State, whose request for a suitable appropri- 
 ation for carrying on this valuable work in the manner which seems 
 to him most practicable I heartily indorse and recommend to your 
 favorable consideration. 
 
 Theodore Roosevelt. 
 
 The White House, 
 
 January £6, 1905, 
 
LETTER OF SUBMITTAL. 
 
 The President : 
 
 I have the honor to submit herewith the final report of the Commis- 
 sion on International Exchange, constituted under the authority of 
 the act of March 3, 1903, and continued last year by means of a special 
 appropriation. The chief purpose of the Commission was to bring 
 about, as far as possible, a fixed relationship between the moneys of the 
 gold-standard countries and the silver-using countries. This result 
 could be accomplished chiefly by the establishment in the silver-using 
 countries of new monetary systems on the gold exchange basis, the 
 'new silver and copper coins in those countries being given a fixed 
 value in terms of gold. 
 
 The work of the Commission, considering the difficulties of its task, 
 has been on the whole very successful. The new monetary system in 
 the Philippine Islands, established under act of Congress approved 
 March 2, 1903, which in the main has furnished the model for the 
 further work of the Commission, was in operation, but serious difficul- 
 ties were met with in the transition from the old currency to the new. 
 A member of the Commission was sent to study the situation and 
 counsel with the Philippine Commission regarding these conditions. 
 Tavo measures were passed by the Commission, the results of which 
 were immediately beneficial, so that within three months after they 
 went into full effect the new coins were in great demand and the new 
 currencj' system of the islands was firmly established upon the new 
 
 basis. 
 
 Since the report of the Commission on International Exchange 
 was presented to this Department the Eepublic of Mexico has passed 
 a law carrying out the purpose announced by her Government in 
 seeking the cooperation of the United States to establish a stable cur- 
 rency system for that Republic. This action was a natural sequence 
 of the measures taken by the Commission on International Exchange 
 while in Europe and by Mexico at home to facilitate the transition 
 from the previous system of fluctuating exchange to one which would 
 promote her trade with the United States and other gold-using 
 countries. The beneficial effect of this law has already been felt in 
 the exchanges between Mexico and New York. The giving to its 
 
 9 
 
10 ■ LETTER OF SUBMITTAL. 
 
 silver coins a fixed value in terms of gold has been rendered much 
 easier by the relative stability during the last year of the price of 
 silver bullion. This relative steadiness has been brought about 
 largely by the regularity of the purchases of the silver needed by the 
 Government of British India, which method of purchase was sug- 
 gested by the Commission on International Exchange. 
 
 The Eepublic of Panama had a silver currency of which the value, 
 measured in gold, constantly fluctuated. Inasmuch as great expendi- 
 tures would need to be undertaken in connection with the building of 
 the canal, and as losses and confusion in making contracts would 
 inevitably be incurred by the Government under such a system, it 
 seemed extremely desirable, if not essential, that that country be 
 placed upon the gold basis. On the suggestion of the Commission on 
 International Exchange, the matter was taken up by our Government 
 with the Government of the Republic. The result was the establish- 
 ment of a new monetary system for the Republic of Panama in 
 accordance with the terms of an agreement with the United States 
 along the lines recommended by the Commission. It will now be- 
 feasible for the United States Government, in its financial operations • 
 in connection with the building of the canal, to employ this new cur- 
 rency, thereb^r avoiding the risks which would come from fluctua- 
 tions in the price of silver, while meeting local conditions by a 
 currency similar to that which the people have for many years been 
 accustomed. 
 
 In conjunction with the Republic of Mexico the Government of 
 China at the beginning of 1903 also requested the assistance of the 
 United States in the sam'e direction. In consequence, after the 
 commission had consulted the European governments, one of its 
 members, Mr. Jenks, was sent to China to report the results and to 
 give to the Chinese Government any further assistance which it might 
 desire. The commissioner was received with cordiality. Every facil- 
 ity for investigation of the local conditions in China was given him, 
 and the Chinese Government appointed a commission to study the 
 question. The difficulties before the Chinese Government in the estab- 
 lishment of its new monetary system are of course enormous. Time 
 will be needed to enable it to accumulate a sufficient gold reserve; to 
 persuade provincial authorities to give up their present custom of 
 independent coinage; to change the habits of the peojile regarding 
 the use of bullion; to provide for proper expert assistance, and to 
 overcome other difficulties. Yet before the commissioner was com- 
 pelled to leave China, under the limitations of the act of Congress 
 of last year, the opinion was freely expressed that very much had 
 been done toward hastening the complete accomplishment of the 
 desired reform. Prominent officials connected with the monetary 
 system expressed favorable opinions, and the Prince of Ch'ing, the 
 
LETTER OF SUBMITTAL. 11 
 
 head of the Executive Government, stated in a letter to the com- 
 missioner, transmitted with this report, that their monetary reform, 
 they were convinced, must in the main follow the lines suggested by 
 the American Commission. 
 
 The movement toward the fixing of the rates of exchange between 
 the gold and silver countries is one of great importance to the devel- 
 ■ opment of our international trade. The great difficulties in the estab- 
 lishment of such a system as the one proposed are by no means under- 
 estimated, but they have been overcome in different countries and can 
 be overcome in China. Certainly nothing else so feasible as the 
 American plan has been anywhere proposed. In spite of difficulties 
 which may attend any such plan, it tends to remove obstacles to our 
 export trade directly and to a still greater extent to stimulate it indi- 
 rectly by promoting the building of railways and the extension of 
 internal commerce in the countries adopting a stable system. This 
 effect is already being felt upon the introduction of American capital 
 into Mexico ; and similar effects, it is probable, would be felt in China 
 with the adoption of similar measures. The work in China should 
 therefore be persistently carried on until the new system is firmly 
 established. As opportunity offers the matter should be brought to 
 the attention of the South American States and to other countries 
 whose monetary systems are not established on a sound basis. 
 
 It is recommended that an adequate appropriation be put by Con- 
 gress at the disposition of this Department, for the continuation of 
 this work in such manner as it may think proper. 
 
 EespectfuUy submitted. 
 
 Francis B. Loomis, 
 Acting Secretary of State. 
 Department of State, 
 
 Washington, January 26, 1906. 
 
GOLD STANDARD IN CHINA AND PANAMA. 
 
 KEPORT OF THE COMMISSION. 
 
 Washington, D. C, October 22, 190^. 
 
 Sir : The Commission on International Exchange begs leave to sub- 
 mit herewith its report on the work done and the results accomplished 
 since its previous report of October 1, 1903, together with supple- 
 mentary 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 inves- 
 tigations and suggestions in connection with the reform of the mone- 
 tary system of China, the currency of the Philippine Islands, and 
 the establishment of a new monetary sjj^stem in the Republic of 
 Panama. 
 
 There are submitted herewith also some data showing a tendency 
 toward greater stability in the price of silver bullion, apparentlj"^ as a 
 result of the direct action of governments with whom this Commis- 
 sion conferred last year, especially of the British Government 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 rep- 
 resentative 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 re- 
 ceived special instructions for his work in the Orient. Inasmuch, 
 however, as the new Philippines currency was not yet fully in opera- 
 tion, and certain questions regarding the currency law were under 
 consideration by the Philippine Commission, it was thought best 
 that, before taking up his work in China he should visit the Philip- 
 pines, in order to lay before the government there suggestions regard- 
 ing their money system which had grown out of the discussions in 
 Europe as well as to gather the results of experience in the Philip- 
 pines which were likely to prove of service to the Chinese Govern- 
 ment in the establishment of its system. 
 
 13 
 
14 GOLD STANDARD IN INTEKJNAXiUJN Ai. XJliiJjji. 
 
 THE WORK IN 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 jjrepared 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 widelj' distributed among the officials and most impor- 
 tant business men of China. Some of the Chinese papers reprinted 
 the pamphlet in full, while other papers there, both native and for- 
 eign, reprinted extracts from it as well as brief articles covering 
 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 mereljr gave its consent, but notified 
 officials along the route chosen regarding the intended visit and 
 aided the commissioner in every way 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 opportunity 
 offered, conversations were held not merely with officials of all ranks, 
 but also with bankers, merchants, and even with day laborers, local 
 traveling peddlers, roadside workmen, etc. In this way a reasonably 
 accurate idea was secured of the methods of conducting 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 
 
GOLD STANBABD IN INTEKNATIONAL TKADE. 15 
 
 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, busi- 
 ness 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 conflitions was 
 secured, and in many cases opportunity was offered to remove from 
 the minds of those who did not understand the purpose of the invita- 
 tion of the Chinese Government or its attitude toward the United 
 States in this matter the natural suspicion regarding the motive of the 
 United States in undertaking this work ; and, furthermore, objections 
 which would naturally occur to those not familiar with the admin- 
 istration of currency systems, were overcome. 
 
 These inquiries covered the inland territory between Peking and 
 Hankow on the Yangtse Eiver, 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 important 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 sub- 
 ject 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 treaties 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 practicable 
 for China were secured ; that in many cases misconceptions regarding 
 the nature of the reform and of the plans under discussion were 
 removed, and that the experience secured and the knowledge gained 
 enabled the commissioner to understand much more readily the atti- 
 tude of the higher Chinese officials toward their old system and the 
 proposed new system. 
 
 On his return to Peking the subject was taken up for detailed dis- 
 cussion with the Imperial Government. As a result of the treaties 
 with Great Britain, the United States, and Japan, it has been the 
 intention of the Chinese Government to establish a uniform monetary 
 system, and for the purpose of working out plans for that system, as 
 
16 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 well as for meeting the United States commissioner, a commission had 
 been appointed consisting of the members of the board of revenue and. 
 sever ill other officials, some of high and some of lesser rank. Some 
 of these had been especially designated to have chairge of the new 
 mint and to devote their time to the consideration 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 hj 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 ' appar- 
 ently informally, although not at all officially, reached the conclusion, 
 that they wished ultimately to place their system of currency 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 dis- 
 cussions 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 treas- 
 ury 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 
 considerable 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 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 liU Chu'an Lin, together with their Excel- 
 lencies the Manchu president, Yung Ching, and Na Tung, the dis- 
 tinguished official Avho 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 
 
GOLD STANDARD IN INTERNATIONAL TRA.DE. 17 
 
 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 oppor- 
 tunity 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 matter 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 Excel- 
 lency 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 commissioner by meet- 
 ing 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 monej'^ 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 advis- 
 able, secure the financial means necessary for the carrying out of the 
 reform; and that there would be no infringement of the sovereignty 
 of the Empire or danger to its integrity or usefulness in the employ- 
 ment of such foreign expert aid as might be required for the estab- 
 lishment 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 Government if it 
 undertakes these plans. A favorable judgment regarding the atti- 
 tude 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 min- 
 S. Doc. 138, 58-3 3 
 
18 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 ister of the United States, in his letter to the Department of State, as 
 follows : 
 
 I have the honor to report that Professor Jeiiks left Peking for home on the 
 27th instant. 
 
 His task was a very difficult one, and at first the prospects vi^ere rather dis- 
 couraging, 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 financial 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 consult the leading viceroys and governors and see what 
 can be done ; but whether or not Professor Jenks's plan is adopted, his instruc- 
 tion and advice will aid the Chinese 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 : 
 
 PBOPESSOB JENKS'S MISSION ENDS — CHINESE GOVEBNMKNT IMPKESSED BY HIS GOLD- 
 STANDARD ABGUMENTS. 
 
 Peking, August 29. 
 
 Professor .Tenks, of Cornell University, the commissioner delegated by the 
 United States to confer with the Chinese authorities regarding the suggested 
 introduction 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 
 reforming their currency and the immense gain that would follow the estab- 
 lishment of the gold standard. 
 
 Undoubtedly his mission left its mark. The Chinese Government is begin- 
 ning to realize the vital importance of the question, and it is regrettable that 
 Professor 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 con- 
 siderable. 
 
 Mr. Eobert 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 : 
 
 CTJKRENCY 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 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 19 
 
 planted — it is for otliers to water, and tlie increase will come. Tlaorougbly 
 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 commissioner 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 adoption of the gold standard without a gold cur- 
 rency, to put it as concisely as possible, and he has found the statesmen of 
 Peking, as well as the high provincial officials, 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 arguments ; and there is good 
 reason if nothing untoward happens, to believe that something like the reform 
 which has been so unexpectedly and promptly successful 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 member of the Chinese cham- 
 ber of commerce) , Mr. Feng Wa Chun, wrote to the American com- 
 missioner 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. 
 
 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 Government, 
 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 conversa- 
 tion 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 exhaust- 
 ive 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 
 
20 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 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 neces- 
 sary 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 execution with earnestness and prompitude. 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 fuliill 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 Government 
 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 Commission. This 
 much, at least, is clear — that the Goverment 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 argu- 
 ments on this most important and difficult question, and have mani- 
 fested the open-mindedness and frankness in announcing a willing- 
 ness to change their opinions which is characteristic of the greatest 
 statesmen ; that the Chinese Government has the ability, 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 resi- 
 dents 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 organized and of 
 cooperating with the Chinese Government in whatever way might 
 have seemed to it wise in the organization of the system. The Com- 
 mission, however, has from the beginning taken the position that 
 
GOLD STANDAED IN INTERNATIONAL TRADE. 21 
 
 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 coimtry 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 respon- 
 sibility of the introduction of the new system, may be trusted to 
 secure the best expert advice and to take the wisest means of estab- 
 lishing 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 cur- 
 rency 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 theii- 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 exchange turned 
 slightly in favor of the islands, there was a tendency toward the 
 reimportation of Mexican dollars which had previously been exported. 
 
 To meet these difficulties the Philippine Commission, as has been 
 suggested, passed two laws; the first, a measure prohibiting abso- 
 lutely the importation of Mexican currency, Spanish-Filipino cur- 
 rency, or any other metallic currency which is not upon a gold basis, 
 with proper exception of small amounts in the pockets of travelers ; 
 the second, an act restricting after a certain fixed date in the future 
 the use of all moneys, excepting the legal-tender currency, by im- 
 posing 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, 
 
22 GOLD STANDARD TN INTERNATIONAL TRADE. 
 
 bills of exchange, or checks or other contracts for the purpose of 
 exporting Mexican dollars, etc. 
 
 In the Manila American of September 11, 1904, is the following 
 editorial covering the same ground fully : 
 
 Vice-Governor Ide, secretary of finance and justice, has given out in liis finan- 
 cial statement for August tliat tliere is sufficient Pliilippine currency in circula- 
 tion in the islands to meet all demands, and that the government is prepared to 
 supply ail needs in the conduct of insular commerce on the new basis. 
 
 While the woric 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 what 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 distri- 
 bution 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 preju- 
 diced position against the passing of the flat money. This prejudice is being 
 rapidly overcome and the bright, new Conant dollar is to-day the favorite where 
 a choice is offered, even of tlie 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-stand- 
 ard 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. 
 
 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 insure 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 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 23 
 
 with the citizens of Panama made it desirable also, in the opinion 
 of our Commission, that some degree of harmony should be brought 
 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 svibmitted 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 difr 
 ferent 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, was requested 
 by the President and Secretary of War to prepare a definite project 
 on the subject. This project was submitted in a memorandum en- 
 titled, " Suggestions regarding the system of currency to be estab- 
 lished in the Panama Canal Zone," which was transmitted to Secre- 
 tary Taft under date of May 19, 1904. The subject was taken up 
 actively by the Secretary of State and the Secretary 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 subject to the Government of 
 the Republic. As a result of several conferences at the State Depart- 
 ment 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 Plon. Ricardo Arias and Dr. 
 Eusebio A. Morales, who were already in New York in connection 
 
24 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 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 Saturday, 
 June 11, 1904. There were present at this conference the Secretary 
 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 Commis- 
 sion, Admiral John G. Walker ; the legal adviser of the Canal Com- 
 mission, Judge Charles E. Magoon; the Chief of the Bureau of Insu- 
 lar Affairs of the War Department, Col. Clarence E. 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 cor- 
 dially 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 interest. 
 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 dedi- 
 cated by their new constitution to posterity. It was the intention, 
 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 pur- 
 poses. 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 18 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 
 
GOLD STANDARD IN INTEKNATIONAL TRADE. 25 
 
 bullion. This proposition was supported by the Secretary of "War 
 and was accepted by the commissioners of the Eepublic. At a 
 final meeting on Monday, June 20, a letter was drafted by the Sec- 
 retary of War, addressed to the commissioners of the Eepublic 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 Eepublic 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 Eepublic on June 28, 1904, embodying this agreement. 
 
 The substance of the plan agreed upon between the commission- 
 ers 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 by the Eepublic of 
 Panama for the issue of fractional silver to the face value of $1,500,000 
 in gold, and that upon the request of the Panama Canal Commission, 
 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 of $1,500,000. Par- 
 ity 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 deposits 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 maldng the unit of value equal to $1 in American 
 gold coin instead of 50 cents. • The silver coins provided for, how- 
 ever, are nearly the same in size as those provided for in the Philip- 
 pines. 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 50 
 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 1. 
 While it will represent 50 cents in Panama currency, instead of a 
 complete unit of value, as in the Philippines, this coin is specificallj' 
 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 
 
26 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 IDrice of silver bullion, is only a little below 50 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 con- 
 ditions that prices and wages will not be affected in the drastic man- 
 ner in which they might be by the adoption of a subsidiary coinage 
 exactly the same as that 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 coin- 
 age agreed upon for the Republic will probably be completed, 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 Conamission 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 countries." Of the sev- 
 eral 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 anj' 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 countries, which have been so dis- 
 turbing 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 countries now depends funda- 
 mentally upon the fluctuations in 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, inde- 
 pendently of the more important object of separating the monetary 
 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 
 
GOLD STANDAED IN INTERNATIONAL TRADE. 27 
 
 quarters because of failure to distinguish between efforts previously 
 made to raise the price of silver and the efforts made by this Commis- 
 sion to promote stability in the price. Stability in the price of bul- 
 lion is important because it carries with it comparative stability 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 representatives they consulted, an effort to reduce 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 soundness 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 dimin- 
 ishing fluctuations of exchange between gold-standard countries 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 member of this council, to 
 the chairman of this Commission, states : 
 
 I think you wiU 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 present extreme fluctuations. 
 
 Considering that the value of tlie 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. 
 
 The figures presented by Sir James Mackay give only the average 
 price paid for different lots of silver purchased. They show that 
 while the prices paid in 1903 and 1 904 were lower than those paid in 
 1900, the differences between the average maximum and minimum 
 prices were less. The lowest average price paid in 1903 Was 23f| 
 pence between December 12 and De(3eniber 19; the highest average 
 price for a given purchase was 27f| pence between September 15 and 
 October 2, 1903. The average of the prices paid during the period 
 from September 15, 1903, to February 20, 1904, representing the pur- 
 chase of 35,652,935 ounces, was 2(>f| pence. Purchases were then sus- 
 pended 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 H 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 Brit- 
 ish India show a steadiness in the price of silver which has been rare 
 during the past decade. They are not absolutely conclusive, because 
 
28 
 
 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 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 maxi- 
 mum and minimum quotations in the London market. These are pre- 
 sented by months in the table below-: 
 
 Quotations of silver at London. 
 
 Month. 
 
 January... 
 February.. 
 
 March 
 
 April 
 
 May 
 
 June 
 
 July 
 
 August 
 
 September 
 October ___ 
 November 
 December . 
 
 1902 
 
 Highest. Lowest. 
 
 Pence. 
 26A 
 
 24A 
 
 m 
 
 22i 
 
 Pence. 
 
 2SU 
 
 21il 
 
 190S 
 
 Highest. Lowest. 
 
 Pence. 
 
 mi 
 
 25} 
 
 26f 
 
 27i 
 26A 
 
 Pence. 
 Zlih 
 21f 
 
 m 
 
 22t 
 
 m 
 
 24} 
 
 27A 
 
 1904 
 
 Highest. Lowest, 
 
 Pence. 
 
 ^' 
 
 27i 
 
 25} 
 
 s^ 
 
 26} 
 
 27 
 
 27 
 
 26} 
 
 2611 
 
 Pence. 
 25} 
 25J 
 
 25} 
 
 25} 
 26} 
 
 26 
 
 26A 
 
 This table shows that the price of silver has varied from January 
 1, 1904, to the date of this report within the limits of 27| pence and 
 24 tV pence, and since April 26, 1904, has been uniformly above 25 
 pence. The fluctuations in 1901 were from a maximum of 29^ 
 pence to a minimum of 24|| pence ; in 1902 from 26iV to 21{^ pence ; 
 and in 1903 from 28^ to 21|| 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 sil- 
 ver 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 
 m 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 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 29 
 
 per cent. The maximum and minimum quotations in each month 
 for the past three years are shown below : 
 
 Quotations of Mexican exchange. 
 
 Month. 
 
 1902 
 
 1903 
 
 1904 
 
 Maximum. 
 
 Minimum. 
 
 Maximum. 
 
 Minimum. 
 
 Maximum. 
 
 Minimum. 
 
 
 2251 
 
 227 
 
 241 
 
 2361 
 
 234f 
 
 240f 
 
 ?Mi 
 
 250 
 
 253i 
 
 2771 
 
 269) 
 
 216i 
 
 221J 
 
 223J 
 
 2251 
 
 233 
 
 2321 
 
 235 
 
 Z40 
 
 242 
 
 250 
 
 2521 
 
 261 
 
 264J 
 
 263 
 
 265 
 
 262 
 
 236 
 
 244} 
 
 243 
 
 2801 
 
 226 
 
 222 
 
 2231 
 
 233 
 
 2591 
 
 261J 
 
 260 
 
 218 
 
 227 
 
 234 
 
 2301 
 
 2141 
 
 215 
 
 2151 
 
 218 
 
 222 
 
 226 
 
 219 
 
 220 
 
 230 
 
 2331 
 
 2161 
 
 216 
 
 216 
 
 216 
 
 216 
 
 221 
 
 
 209 
 
 
 216 
 
 Api-il 
 
 220 
 
 May 
 
 217 
 
 
 213 
 
 July 
 
 216 
 
 August 
 
 216 
 
 
 216 
 
 October 
 
 216 
 
 
 
 
 
 
 
 
 
 The result of this greater stability of exchange has been that in 
 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 Ameri- 
 can 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 adop- 
 tion of a fixed gold standard. 
 
 Hugh H. Hanna, 
 Charles A. Conant, 
 Jeremiah W. Jenks, 
 
 Commissioners. 
 
 The Secretaet of State, 
 
 Washington, D. 0. 
 
REPORT OF JEREMIAH "W. JENKS, COMMISSIONER DESIGNATED 
 BY THE COMMISSION ON INTERNATIONAL EXCHANGE, WITH 
 THE APPROVAL OF THE PRESIDENT, TO CARRY ON THE "WORK 
 OF THE COMMISSION IN THE FAR EAST. 
 
 After the return of the Commission on International Exchange in 
 the fall of 1903 from the work in Europe, as explained in detail in the 
 earlier report of the Commission, I was designated by the Commission 
 to continue its work in the Far East. Acting under special instruc- 
 tions issued by the Secretary of State, October 24, 1903, as printed on 
 page 97 of the previous report, the work was entered upon immedi- 
 ately. 
 
 JAPAN. 
 
 On my arrival in Japan a special commission of twelve members, 
 with Mr. Sakatani, the vice-minister of finance, as the chaii'man, was 
 appointed to discuss in detail the plans of the American Commission. 
 The other members of the Commission consisted of the presidents of 
 the Bank of Japan and of other leading banks of the country, together 
 with representatives of the departments of foreign affairs, finance, 
 commerce and industry, agriculture, etc. A more representative busi- 
 ness commission or one with a stronger personnel could not have been 
 selected. The names of the members, with their positions, as well as 
 the formal resolutions A^hich they adopted at the close of the confer- 
 ences are printed on page 162 of the preceding report. The following 
 I^aragraph from that report should be reprinted here : 
 
 " In view of the present condition of China, it is too much to expect 
 that the currency can be started at once on a perfect system, and as it 
 is considered highly disadvantageous to delay the said reform on that 
 account, it is advisable to adopt the suggestions of the American 
 Commission as a matter of expediency. But it must be admitted 
 that the utmost skill and care are needed to overcome the great diffi- 
 culties which necessarily accompany the operation of the system." 
 
 It will doubtless aid in understanding the situation in the Far East, 
 and the nature of the difficulties which the American Commission had 
 to overcome in order to secure the approval of its plans, to indicate, in 
 brief, the nature of some of the discussions held in Japan. 
 
 The commissioners appointed by the Japanese Government seemed 
 at first somewhat divided in their opinions. One group was strongly 
 inclined to agree with the conclusions of the English commission and 
 30 
 
GOLD STANDARD IN INTERNATIONAL TRADE, 31 
 
 to recommend that China adopt, in the first instance, a uniform mone- 
 tary system on a silver basis, leaving the question of its establishment 
 on a gold basis for the future, with the understanding, nevertheless, 
 that it would be desirable for the country to reach the gold basis as 
 soon as that might be practicable. The arguments used to support 
 this view were not urged strongly, but were apparently the same in 
 substance as those heard in Europe and were simply to the effect that 
 China did not have a gold reserve and that it would be difficult for a 
 gold reserve to be secured within a brief time. • It was further urged 
 that the adoption of a system on a gold basis would require more 
 skilled financiers than China possessed, and that there would probably 
 be practical difficulties in persuading China to engage proper for- 
 eign help and give to such foreigners a sufficient degree of discretion. 
 
 Others of the commission thought it woidd be wiser for China to 
 adopt a monetary system with a gold basis from the beginning. 
 Their idea was, however, that there should be no half-way measures, 
 but that the new coins issued by China or the national-bank notes 
 issvied by a new Chinese national bank to be established should be 
 redeemable in gold within the counti-y itself at the option of the 
 holder of the notes or of the silver coins. 
 
 While these views were indicated and incidentally outlined through 
 questions and discussions, the main part of the time was taken up liy 
 the commission in listening to the plans of the American Commission, 
 and in questioning and discussing the difficulties and merits of those 
 plans. The commission consisting largely of bankers, special em- 
 phasis was naturally laid upon the questions which were connected 
 with foreign exchange. The practical difficulty was emphasized of 
 fixing a rate of exchange at which the Chinese Government treasury 
 would sell bills on foreign countries and of having that rate some- 
 what above what might be considered the normal banking rate, in 
 accordance with the system adopted in the Philippine Islands and 
 recommended by the American Commission in Europe, as explained 
 in the previous report on pages 130 et seq. A somewhat detailed 
 discussion of this subject, however, seemed to convince the com- 
 mission that if the management of the system were put into the 
 hands of thoroughly skilled financiers, who understood the subject 
 fully, the plan could be carried through successfully. The experience 
 of the Philippine Islands during the last year has doubtless served 
 to confirm the opinion of all persons familiar with the subject, that 
 the plans of the American Commission in this regard are entirely 
 practicable. 
 
 The difficulties which might possibly arise from an unfavorable 
 balance of trade in China did not impress the members of the Japan- 
 ese commission to the same extent as they did many of the members 
 of the European commissions. The reason for this doubtless is that 
 
32 GOLD Sl'ANDAED IN INTERNATIONAL TRADE. 
 
 Japan herself, under the leadership of several of these same men who 
 were members of this commission, had succeeded in maintaining the 
 gold standard in Japan in the face of an adverse balance of trade for 
 several years, so that they understood thoroughly well the practical 
 measures which it might be desirable or even necessary to take in 
 order to secure the end desired, of maintaining unquestionably the 
 parity. The commission in no way minimized the difficulties ; in fact, 
 the practical nature of those difficulties and the exact way in which 
 they would arise were pointed out with a clearness and precision 
 which was not surpassed in any of tlie discussions elsewhere. Possi- 
 bly, however, no other country had had the same experience in this 
 regard as had Japan, and nowhere else were the methods to be fol- 
 lowed pointed out in quite the same detail as in the discussions in 
 Tokyo. 
 
 It has already been noted that, at the close of the discussions, 
 the Japanese commission adopted a series of favorable resolutions. 
 While intimating that the single gold-standard system, like the one 
 for example in Japan, is the end which it is desired to reach, it 
 declared, nevertheless, that in view of the present conditions in China 
 it is advisable to adopt the suggestions of the American Commission 
 as a matter of expediency. Attention Avas of course called to the 
 difficulties in the way and to the need of expert help of the highest 
 quality. 
 
 This direct indorsement of the views of the American Commission 
 and the cordial treatment of this whole subject by the Japanese 
 Government could not fail to have a good influence upon the Chinese 
 Government in its discussion of a question which is of so great impor- 
 tance in connection with the welfare of China. 
 
 THE PHILIPPINES. 
 
 The new Philippines currency for which provision Avas made in 
 the Philippine coinage act, approved by the President March 2, 1903, 
 began its circulation in the Islands July 23 of that year. As the in- 
 sular treasury began immediately the payment of the Government 
 employees and of its bills to a considerable extent in the new cur- 
 rency, rather large sums went without difficulty into circulation. It 
 soon became evident, however, that for many purposes the old local 
 currency, consisting of Spanish-Filipino dollars and of Mexican 
 dollars, was practically as effective in purchasing power in certain 
 directions as were the new Philippine coins, although the latter were 
 worth $0.50 gold and the former worth from, say, $0.40 to $0.45. 
 Prices having been fixed formerly in terms of the Mexican dollar 
 would naturally remain at the same rate unless especial effort were 
 made to change. Inasmuch as it was more profitable for the dealers 
 
GOLD STANDARD IN INTERNATIONAL TKADE. 33 
 
 i.o receive a more valuable coin, they at first allowed their prices to 
 remain the same in the new Philippines currency as in Mexican. 
 
 In consequence of the above conditions it was found that very many 
 of the Government officials, after receiving their pay in the new coins, 
 were able to make a profit of from 10 to 15 per cent by exchanging 
 these coins for Mexican and Spanish-Filipino coins and paying for 
 their purchases of goods, and especially of provisions at the markets, in 
 the cheaper coins. The local sellers of produce were, generally speak- 
 ing, willing to sell at the old rates, although the European shops and 
 occasionally the native shops demanded the new coins. In the latter 
 case, however, they frequently, if not generally, attempted to get as 
 many of them as they had formerly demanded of local dollars. 
 
 Likewise house servants and laborers in general, as well as the 
 plantation sellers of hemp and of sugar, had not in the first four 
 months after the introduction of the new coins learned to any very 
 great extent the advantage that might come to them from demanding 
 their pay in the new currency. This was the case, even though it was 
 known by those who had kept themselves informed, that after the 
 1st of January, 1904, the Mexican dollars would be demonetized and 
 no longer received by the Government. A good many individuals, 
 however, did after the 1st of January demand the new coins, and 
 there was a very patriotic movement on the part of very many, if not 
 even of most Government officials and other Americans, to pay wages 
 to their servants in these new coins at the same rates which they had 
 formerly paid in the Mexican coins, in order to encourage the use of 
 the new money and to help, the Government. 
 
 Importers, government officials, and a good many of the merchants 
 who felt that their interests would be largely promoted by stability 
 in the rates of exchange very promptly changed their accounts into 
 the new currency, and made efforts in every possible way to aid the 
 government in the introduction of the new coins. On the other hand, 
 exporters, whose interests were advanced by buying their goods for 
 export in the old local currency, very generally did not change their 
 system of accounting; and they encouraged the use of Mexican and 
 Spanish Filipino coins to the discredit of the new currency. 
 
 It had been part of the plan formulated by the Philippines cur- 
 rency act that whenever bills of exchange were sold in Manila against 
 the gold-reserve fund in New York, the new coins which were received 
 m payment for these bills of exchange would be withdrawn from 
 circulation, and that this withdrawal, producing a contraction of the 
 currency, would lead to a fall in the rates of exchange in terms of 
 the new currency. During this earlier period, however, of the intro- 
 duction of the new coins, before the old local currency had become to 
 any noteworthy extent exhausted, and also before any legal action had 
 g. Poc. 138, u«-ij '4 
 
34 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 been taken to prevent the importation of Mexican dollars from Hong- 
 ■ kong and elsewhere, this selling of bills of exchange against the gold 
 reserve in New York in order to maintain the parity of the new 
 Philippine coins did not work exactly in the way that had been 
 anticipated under the law, and in the way that it doubtless will worlc 
 now that the old local currency is practically eliminated from cir- 
 culation. 
 
 Owing in part to the very large importations of rice, in part also 
 to the great scarcity of money in New York, which led the New York 
 banks to wish to secure additional money for circulation in that State, 
 there was, through September, October, and November, 1903, a strong 
 demand for bills of exchange on New York to be paid for in the 
 Philippines currency. It was temporarily, of course, to be withdrawn 
 from circulation. These demands for exchange came largely from 
 the Manila banks which had either their main offices or other branches 
 in New York City. The readiness of the people to continue the use 
 of Mexican and Spanish-Filipino dollars, and the ease with which 
 Mexican dollars could be imported, made it practically impos- 
 sible to contract the currency sufficiently by the sale of these bills of 
 exchange and the withdrawal of this currency from circulation unless 
 some further means were devised to prevent the reimportation of 
 Mexican dollars. As a matter of fact, owing to the withdrawal of 
 these coins paid for bills of exchange, there were actually fewer 
 Philippine coins in circulation among the people on the 1st of Janu- 
 ary, 1904, than on the 1st of December, 1903, and by the middle of 
 Januarjj^, 1904, about half a million of Mexican dollars had been 
 imported. Owing to the fact that the currency legislation for the 
 Philippines was thus apparently in certain respects not working satis- 
 factorily, and that supplementary legislation might very possibly 
 be needed, the Secretary of War had asked the member of the Com- 
 mission on International Exchange who was going to the Orient, to 
 visit the Philippine Islands, there to take counsel with the Philippine 
 Commission, and after study of the local conditions to make to the 
 Commission any suggestions for legislation which seemed advisable. 
 In consequence, on his arrival in the Philippine Islands about the 
 middle of December, the American commissioner entered into a 
 detailed study of the local-currency situation with the commission, 
 particularly with the aid and counsel of the very efficient chief of the 
 division of the currency, Mr. E. W. Kemmerer. He visited all of the 
 leading bankers and the heads of many of the leading business houses, 
 and talked over the situation as fully as possible with representative 
 business men of various classes and interests. After these investiga- 
 tions and detailed discussions with the members of the commission, 
 the commission decided upon further legislative action. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 35 
 
 In order to meet the conditions mentioned above and to make it, on 
 the whole, less profitable to use Mexican dollars than to use the new 
 Philippines currency, as well as also to enable the government to 
 bring about a real contraction of the currency by the sale of bills of 
 exchange in case of necessity, the following action was taken : 
 
 On the 31st of December, 1903, the Government passed an act pro- 
 viding for the demonetization of Mexican coins, and stating that they 
 woidd no longer be received by the Government. Spanish-Filipino 
 coins were to be redeemed by the Government until July 1, 1904, at 
 a rate substantially equivalent to the buying price in Mexicans of 
 gold at the banks, this rate to be changed from time to time by the 
 Government, in accordance with local conditions. This act placed 
 a valuation upon the Spanish-Filipino coins of something like 10 per 
 cent above their bullion value. It was, however, felt to be only fair 
 to the people to enable them to dispose of their local Spanish-Filipino 
 coins at substantially the same rate as Mexican dollars were worth. 
 The Government agreed likewise to continue the receipt of Spanish- 
 Filipino coins in payment of Government obligations until Sep- 
 tember 30, 1904 ; after that it was to receive them only at their bullion 
 value. 
 
 On the 14th of January, 1904, a second act was passed for the pur- 
 pose of maintaining the parity of the Philippines currency by pro- 
 hibiting the importation into the Philippine Islands of Mexican cur- 
 'rency, Spanish-Filipino currency, and any other metallic currency 
 which is not upon a gold basis. The penalty for violation of the law 
 was forfeiture of the entire importation, one-third of the bullion 
 value of the sum so forfeited to be payable to the person upon whose 
 information the seizure of the money was made, the other two-thirds 
 to accrue to the gold-standard fund. Money actually on shipboard 
 at the time of the passage of the act was exempted, and passengers 
 were permitted to bring in small sums — first-class passengers to an 
 amount not exceeding in value 50 Philippine pesos : second-class pas- 
 sengers, a value of 20, and each third-class passenger a sum not 
 exceeding 10. In addition to the forfeiture, a fine of not more than 
 10,000 pesos or imprisonment not exceeding one year or both, might 
 likewise be imposed. 
 
 Inasmuch as before the passage of this act it had proved impossible 
 to contract the currency by withdrawing from circulation the new 
 Philippine coins paid into the Treasury in exchange for bills of ex- 
 change on New York, since any relative scarcity would be made up 
 by the importation of Mexican dollars, it had become necessary to 
 take some such action as that provided for in this bill. It was realized, 
 of course, by the Government, that there might be more or less illicit 
 importation on account of the wide extent of the coasts; but, in spite 
 
36 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 of that fact, it was felt that importations could not be made in very 
 large sums, and moreover, that, as soon as the new currency was once 
 firmly established, there would be no further temptation to evade the 
 law. It would not be possible, therefore, within the comparatively 
 short period when smuggling would be profitable, to import contrary 
 to law sufficient quantities to affect materially the establishment of the 
 new system. 
 
 It was thought, however, that this act alone might not prove suffi- 
 cient. So long as the old local currency, Mexican dollars, Spanish- 
 Filipino pesos, and the old minor coins were in circulation at a less 
 value than the new Philippine pesos, the effort would be made by ex- 
 porters, employers of labor, and others buying provisions from local 
 dealers to keep these old coins in circulation. It seemed desirable, if 
 possible, to devise some means by which the new Philippine coins 
 would be made cheaper for use by the common people than the old 
 local coins, while at the same time they would possess the added ad- 
 vantages of a fixed value in terms of gold or of United States cur- 
 rency, of well-established ratios of value among themselves, and of 
 the other advantages which went with them, such as certificates, etc. 
 
 The suggestion was made emphatically hy many of the business 
 men in Manila, particularly it seemed by those who would have the 
 opportunity of becoming large holders of the old local coins, that the 
 Government redeem them at a value somewhat higher than their regu- 
 lar market value, the most common suggestion being that it redeem 
 them at par with the new Philippine coins. The Government felt, 
 however, that it was under no obligation whatever to redeem the Mexi- 
 can coins which had been received by their present holders at their 
 bullion value, and that, if it redeemed the Spanish-Filipino coins 
 at their regular circulation value — that is to say, a A^alue equal to the 
 Mexicans and about 10 per cent above their bullion value — it would be 
 doing full justice to the holders. Any price above that would stimu- 
 late speculation, would place an additional and probably unnecessary 
 burden upon the taxpayers, would tend to demoralize markets by a 
 sudden change in prices, and would probably enable a comparatively 
 few of the more shrewd or more powerful to profit at the expense of 
 the mass of the people. 
 
 It therefore decided that the most nearly just plan on the whole, as 
 well as the one which could be carried out with the least disturbance to 
 L>usiness, was to impose a tax upon the use of the old local currency, the 
 tax, however, not to take effect for several months, in order that the 
 liolders might have a fair opportunity of disposing of coins in their 
 possession at reasonable rates. The act leA^ing such a tax, together 
 with other pro-\dsions, was passed and went into effect January 27, 
 1904. The tax itself, however, was not to be imposed until October 1, 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 37 
 
 the rsite gradually increasing month by month from 1 per cent Octo- 
 ber 1 until it reached a 5 per cent rate December 31, 1904. Due 
 exceptions were of course made so as to avoid injustice to those who 
 had made previous contracts in terms of the local currency; also 
 suitable provisions with reference to moneys collected for purposes of 
 export, etc. 
 
 It was further provided that an announcement published in all of 
 the principal languages and dialects of the islands be prepared and 
 circulated, which should explain the new currency and the more im- 
 portant laws and regulations pertaining to its use, as well as the 
 methods provided for the withdrawal of the local currency from cir- 
 culation. These proclamations were to be sent to the provincial gov- 
 ernors, provincial and municipal treasurers, presidents, and munici- 
 pal councilors throughout the islands, and were to be posted and 
 advertised as widely as possible everj'where. These two acts, so 
 important in their nature and so effective in their ultimate results, 
 are printed in full in Appendix B, 3, 4. 
 
 Before the American commissioner left the islands, he was requested 
 by the governor to make further recommendations regarding any 
 other action which might prove desirable, in order that the system 
 be carried fully into effect. 
 
 After consultation, therefore, with the chief of the division of the 
 currency, with members of the commission, and others, it was further 
 suggested : 
 
 1. That provision be made so that the insular treasurer in redeem- 
 ing Spanish-Filipino coins should receive as of equal value with them 
 such other copper coins as in ordinary use circulated in the islands at 
 a parity with Spanish-Filipino copper coins. This copper money 
 was of course to a very considerable extent the money of the common 
 people. It was rarely found in the banks, and the exchange could 
 readily be made only by the Government or by some persons acting 
 as agents of the Government. Of course such coins as those of Brit- 
 ish North Borneo- and of the Straits Settlements, some of which were 
 in circulation in the islands, would be redeemed at something of a 
 loss, but it was very desirable that the copper money be taken out of 
 circulation and the new copper be introduced. For this reason it 
 seemed best for the Government to stand a slight loss, if necessary, 
 in order to get rid of these coins which could not be exported in most 
 cases by private individuals without a loss. 
 
 It was thought that it would be wise, therefore, for the insular 
 treasurer to place redemption agents in the principal market in 
 Manila and in the other leading markets throughout the provinces to 
 make these exchanges, the suggestion bein^ that the attempt be made 
 first in a small way in Manila and that the service then be extended 
 elsewhere if it should prove advisable. 
 
38 GOLD STANDAED IN INTERNATIONAL TBADE. 
 
 The exchange for the minor silver coins should be made at the estab- 
 lished Government rates, but the people should be allowed to exchange 
 their copper coins in sums certainly as small as 50 centavos. Wliere it 
 would not be possible to make the rates for the copper coins exactly 
 the same as those for the larger ones, because it was customary for 
 four copper coins to pass as equal to 5 centavos, it seemed that the 
 fractional benefit should be given to the people. The rates of ex- 
 change should be posted and agents who could speak the language 
 should be employed to make the exchanges. 
 
 2. If the price of Mexican currency were to fall so low that it 
 could be profitably purchased as bullion, it was recommended that 
 the Government purchase it promptly. The same principle should 
 also hold with reference to the small Chinese and other silver coins. 
 
 3. Under the gold-standard act it was provided that the Govern- 
 ment charge for exchange sold on New York by the Government in 
 Manila be three- fourths of 1 per cent for sight drafts, and 1^ per cent 
 for telegraphic transfers, the same rates to be charged for drafts sold 
 in New York on the treasury in Manila. The power was, however, 
 granted to the secretary of finance and justice to change these rates 
 temporarily by special order. 
 
 Experience seemed to have shown that, OAving to the nature of the 
 business between the Philippine Islands and other countries, espe- 
 cially that with the United States, it would not infrequently happen 
 that drafts on New York would be sold in Manila at the Government 
 rates. The chief purchasers were the banks, who bought drafts in 
 large sums and then sold smaller drafts at slightly higher rates to 
 their customers. Of course the larger importers bought from the Gov- 
 ernment directh'. . No drafts, however, were sold by the Government 
 agent in New York on the treasury in Manila, and as time went on it 
 became evident that from the nature of the ordinary business and 
 trade such bills would not be sold so long as the rates remained as 
 fixed in the law. It was considered extremely important that, since 
 comparatively large sums were drawn from the gold fund in New 
 York by drafts sold against it in Manila, this fund should be replen- 
 ished usually by drafts on Manila paid for in gold in New York. It 
 was suggested, therefore, that from conditions as they appeared at 
 that time, a change in the rate of drafts on Manila be made. The 
 rate of one-half per cent for demand drafts and three-fourths per 
 cent for telegraphic transfers seemed to the commissioner to be about 
 riglit. 
 
 4. Inasmuch as it probably would be best ultimately to rely mostly 
 upon selling exchange for the maintenance of the parity of the new 
 coins and for the regulation of the quantity of the currency of vari- 
 ous kinds in the isiands, it would probably be wise if some of the gold 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 39 
 
 in the treasury in Manila were sold or transferred to tlie Uuiled 
 States, where it would draw interest. 
 
 5. It was thought also that later, although not immediately, it 
 would probably be found wise to stop the practice of redeeming the 
 Philippines currency in United States currency as provided in para- 
 graph 3 of section 5i of the gold-standard act. 
 
 6. It was also advised, in conjunction with Mr. Kemmerer, the chief 
 of the division of the currencj', that the Government deposits in the 
 banks be determined upon and maintained solely in the interests of 
 the gold-standard fund and the convenience of the Government in 
 putting money into circulation without attempting in any way to 
 relieve monetary stringency or other commercial trouble by increasing 
 or withdrawing deposits from the banks. It seemed the best policy to 
 interfere as little as possible with the normal movements of business 
 and so to arrange the Government control, whenever any control is 
 necessary, as to permit the monetarj^ system to work as nearly as pos- 
 sible automatically. If the Government were to state fully and com- 
 pletely its method in the law and then would not change its policy, it 
 was felt that the new system would work substantially as would a 
 regular gold-standard system. 
 
 7. The system of bank-note issue in the Philippines is not complete 
 at the present time, only one bank issuing notes, and that under the 
 Spanish charter. There seems to be some legal question as to whether 
 the Spanish bank has not, under the law, a monopoly, so that no more 
 complete system can be organized without its consent. It seemed, 
 however, desirable that at the proper time the matter be taken up, 
 and that, if possible, some arrangement be made by which a more 
 satisfactory bank-note system could be established. 
 
 Soon after the passage of the act taxing the local coins, and after 
 the proclamations had been issued explaining the new monetary sys- 
 tem, the treasury department established in the principal market in 
 Manila a stall for the exchange of the old copper coins for the new. 
 It had been found -that there was a very small demand for the new 
 copper coins. The experience of the first few days, when an effort 
 was made to persuade the market women and the customers to ex- 
 change the old money for the new, showed that at the regular rates 
 established for silver it was unprofitable for the people to make the 
 exchange and that comparatively few cared to get the new coins. This 
 was the experience from that time until the tax went into effect, so far 
 as the removal of the old copper coins is concerned. 
 
 On the other hand, there has been little hesitation about accepting 
 the new copper coins. There has been a great scarcity for some years 
 of small change in both Manila and the provinces, and the new coins 
 were heartily welcomed. In a good many cases, owing in part to con- 
 
40 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 fusion on the part of the people, the new coins became a source of 
 speculation in the provinces. As has been stated before, 4 of the old 
 coins passed for 5 cents Mexican. The new copper coins, of course, 
 could be obtained 100 for a peso. If they could be passed off as the 
 old coins were, 80 for a peso, there was a large margin of profit. It 
 was found that in many cases people with coilsiderable means, and 
 even, in some instances. Government officials in the provinces, were 
 making an effort to secure control of rather large quantities of these 
 new copper coins, either by asking that their entire salary for the 
 month be paid in the coins or by bringing silver to the provincial or 
 municipal treasurer and exchanging it for these coins. These, then, 
 were bought 100 for tlie peso, and were paid out in many cases at the 
 rate of 80 to a peso. Comparatively soon, however, it became generally 
 known that the Government stood ready to furnish the copper cen- 
 tavos in any quantity at the rate of 100 to the new Philippine peso, 
 and this speculation has apparently largely stopped. 
 
 Under date of November 3, 1904, the secretary of finance and justice 
 issued the following order regarding the rates at which bills of ex- 
 change should be sold in New York against the gold fund in Manila. 
 The order came as a cablegram, in the following form : 
 
 Advise depositors in the United States of gold-standard fund to sell demand 
 drafts on the Philippine treasury at three-eighths of 1 per cent and telegraphic 
 transfers at three-fourths of ] per cent in sums not less than $5,000. Rate 
 temporarily fixed by Secretary of Finance and Justice in accordance with sub- 
 section 1 of section 7, Act 938. 
 
 This action of the Philippine government seems to be such that 
 the gold-standard fund, under these rates, will probably become auto- 
 maticalh" self-sustaining. In case it should be found that the de- 
 mands continue practically permanently too strong on either side, 
 of course the rate can be readjusted by a new executive order. It, 
 however, is extremely desirable that as soon as possible the rate be 
 found -nhich will best sustain the gold-standard fund and likewise 
 best meet the needs of business. Then no further change should be 
 made, in order that business men may count absolutely upon the rate 
 remaining unchanged. In all probability that rate has already been 
 found. 
 
 It will be noted from what has been said above that the Philippine 
 r'lirrency question may be considered substantially as settled. In the 
 last report of the chief of the Bureau of Insular Affairs in the War 
 Department in this connection the following statement is made: " 
 
 The Philippine currency act was passed by Congress April 3, 1903. The first 
 new Philippine peso was placed in circulation July 23, 1903. 
 
 Since th.at time the Government has eliminated .30 or 40 millions of debased 
 
 a The report on tliis subject is printed in full In Appoudix 15, 2. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 41 
 
 currency and has substituted for it a currency based upon tbe gold standard 
 without serious jar or dislocation — all accomplished within seventeen mouths. 
 In the minds of financiers and bankers this accomplishment is considered a 
 wonderful achievement, unique in the history of the world. 
 
 This is certainly a remarkable showing, and one that may properly 
 afford to the Philippine government and to those interested in its 
 success great satisfaction. 
 
 CHINA. 
 
 The general plan of work followed by the American commissioner 
 in China has already been outlined in the general report of the com- 
 mission, beginning with page 14. The pamphlet which was prepared 
 for distribution in China to form the basis of discussions with 
 Chinese officials is printed in full as Appendix A 1. The pamphlet 
 apparently awakened considerable interest. The Government had 
 already committed itself to a revision of its monetary system, and 
 there had been many publications from various bankers and business 
 men in China advising the Government regarding the best methods 
 of carrying out the reform. Moreover, inasmuch as the Chinese Gov- 
 ernment had invited the assistance of the Government of the United 
 States, the pamphlet assumed somewhat more of an official character 
 than had been the case with those which preceded it, and the highest 
 officials, knowing that they would probablj' ultimately be called upon 
 to express to the Government some opinion regarding the merits of 
 the plan, felt compelled to look somewhat carefully into the subject, 
 and the pamphlet was eagerly read. Some of the Chinese papers 
 printed it in full in installments. 
 
 The general nature of the work of the commissioner having already 
 been outlined, it remains here only to enter somewhat more into detail 
 in an explanation of the present monetary and business conditions 
 in China, as well as of the attitude of the different classes in the com- 
 munity — government officials, business men, etc. — toward this reform, 
 with a more detailed statement of the reception of the proposals made. 
 
 1. MONETARY AND BUSINESS CONDITIONS. 
 TRADE WITH FOREIGNERS. 
 
 The conditions under which trade with foreigners is carried on in 
 China are so different from those which obtain in the internal trade 
 that it is best to consider those conditions under separate heads. The 
 import and export business is practically all in the hands of a com- 
 paratively few foreign firms. These firms, through their native 
 Chinese compradores or managers, make their purchases from the 
 
42 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 native shippers and producers in the interior, and in the same way 
 through these nati\'e dealers sell to the Chinese consumers the goods 
 which they import. The foreigners themselves in many cases have 
 practically nothing to do with the actual transaction of business 
 with the natives themselves. They look after the selling of the 
 goods which they are exporting to foreign countries. They see to 
 the purchase in foreign countries of the goods which they are im- 
 porting. They do the banking business .both ways with the foreign 
 countries ; their real dealings in China itself are practically intrusted 
 entirely to their native manager, the compradore. 
 
 In their dealings with foreign countries they generally use as a 
 monetary basis the pound sterling. Of course, if they are dealing 
 with the United States or Japan or France, they may use the dollar 
 or the yen or the franc. Even then, however, in many cases the ex- 
 changes are made on the sterling basis and the matter of settlement 
 is simply another step beyond the exchange from the native monetary 
 unit into pounds sterling or visa versa. 
 
 In their dealings with the natives, through their compradores, they 
 must, of necessity, use the native unit, which is, generally speaking, 
 the tael. The tael, however, as is well known, is no invariable unit in 
 general use throughout China. The largest business houses are at 
 Shanghai. There, of course, the so-called Shanghai tael is the unit. 
 If the person is doing business in Canton, he will find the Canton tael 
 as its unit. In Tientsin, that city has its separate tael. In Peking, 
 two are in common use — the Kungfa tael for ordinary commercial 
 dealings; the K'up'ing tael for dealings with the Government, pay- 
 ment of taxes, etc. 
 
 Moreover, the importer or exporter in paying his dues to the Im- 
 perial Customs Service makes use of the Ilaikwan tael, which is some- 
 what heavier still than any of the others mentioned. 
 
 The foreign business man in Shanghai, for example, becomes thus 
 familiar with the Shanghai tael and more or less with the Haikwan 
 tael. He learns to know thoroughly well the ratios which these bear, 
 each to the other (100 Haikwan taels=11.4 Shanghai taels). He ii 
 fully familiar with the tael fluctuations in the value of the Shanghai 
 tael as compared with the pound sterling, inasmuch as the tael is a 
 mere weight of silver and in consequence its value fluctuates from day 
 to day with the market price of silver bullion. His compradore, how- 
 ever, or his other agents who have dealings with the natives in the 
 interior have a much more bewildering variety of moneys to deal with. 
 In practically every different city of consequence, as they go into the 
 interior selling their goods or making purchases, a new tael will be 
 found, having a new ratio of exchange with the Shanghai tael, and in 
 every case the reckoning must be made from one money into the other. 
 Mr. Morse, in an article in the Journal of the China Branch of the 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 43 
 
 Royal Asiatic, enumerates 78 different taels, with their relative 
 weights and values. (See Appendix A, IV, 2. 
 
 In Shanghai itself, for ordinary business dealings among for- 
 eigners as well as among the natives in their local transactions there, 
 the Mexican dollar is the common unit of payment. The merchant 
 must, therefore, be familiar, not merely with the ratio of the pound 
 sterling and the tael, but also with the ratio of the tael and the Mexi- 
 can dollar. His goods have been paid for in pounds sterling. They 
 will be sold for Mexican dollars. The Mexican dollar being itself a 
 coin with no legal tender qualities has its value dependent mainly 
 upon its value as bullion. Inasmuch, however, as in some parts of 
 China the Mexican dollar is the generally accepted monetary unit, 
 and, as such, the most convenient money there for trade purposes, it 
 has a special use of its own, and its value varies often by several 
 hundredths from the bullion value which forms the chief basis for its 
 exchange value. 
 
 If the merchant is one of importance, whose business extends pretty 
 generally into the different parts of China, his business methods 
 become still far more complicated than is implied in the foregoing. 
 In Shanghai the chief monetary unit in retail trade is, as has been 
 said, the Mexican dollar. If one goes up the Yangtze River for a day 
 or so, he will find places where the unit of most general acceptability 
 in the towns is the Carolus dollar, an old Spanish dollar which was 
 introduced into the country many years ago and which has retained 
 its reputation in certain localities to a surprising extent, inasmuch as 
 its value is generally maintained at a rate considerably above its 
 bullion value. In certain localities the reputation of the Carolus 
 dollar has been so astonishingly satisfactory that, at the present time, 
 evQn well-made counterfeits, which are known to be counterfeits, have 
 a regular fixed value and circulate readily. For example, one witness 
 states that in a town where he lived a Carolus dollar of the standard 
 type passed for 100 units. One counterfeit of the same dollar, which 
 was well known and comparatively easily recognized, passed for some- 
 thing like 92 per cent of the original, while a second counterfeit, also 
 well known and easily recognized, passed for only some 83 per cent of 
 the original. 
 
 On ascending the river as far as Hankow the province of Hupeh is 
 reached, which has a separate coinage of its own, and the Hupeh dol- 
 lars are practically the only ones seen in common circulation and the 
 only ones which are readily accepted. The Hupeh mint has possibly 
 the best reputation of any of the independent mints of China; the 
 coins are well made and their reputation seems rapidly extending. 
 The Peking-Hankow railroad on its southern end has been making 
 use of these Hupeh dollars. The contractors building the line, in 
 order to save themselves the trouble of carrying tons of " cash," have 
 
44 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 used the dollars, or dollar notes, in paying off their laborers ; the rail- 
 road itself will take in payment for railway fares nothing but these 
 dollars or the Hupeh provincial notes issued in terms of these dollars, 
 so that, on the whole, their range of validity in use is rapidly extend- 
 ing, and has now even gone considerably beyond the bounds of the 
 province itself. I have already indicated the fact that the Hupeh 
 government has issued government notes based on these dollars, and 
 these notes on account of their greater convenience are becoming pop- 
 ular. There has been no hesitation whatever as yet on the part of the 
 government in redeeming them on demand, and they pass at par with- 
 out the slightest difficulty. 
 
 If, instead of going toward Hankow, one were to go from Shanghai 
 to Canton, a separate dollar — the Canton dollar — would be found. If 
 the traveler were to go north to Tientsin he would find in common use 
 the Peiyang dollar coin in Tientsin, or, perhaps equally common, the 
 British dollar coined at Hongkong. In Peking the British dollar is 
 preferred to the Peiyang dollar, even though the latter is coined in the 
 same province and the former is a foreign coin. The natives have 
 discovered that the British dollar is likely to be of a rather better 
 quality of silver, and in consequence it is preferred :^or purposes of 
 melting. It is not unusual, when making a small purchase and hag- 
 gling over the price, to have the local dealer finally accept an offer on 
 condition that he be paid in the " man " dollar instead of the Peiyang, 
 the British dollar being generally called among the natives the "man" 
 dollar on account of its having the device on the dollar of a figure of 
 a human being. Sometimes even, in these localities, one finds the 
 Kirin dollar from Manchuria, although on account of the poor quality 
 of the silver which it sometimes contains it is not generally acceptable. 
 
 Besides the dollars already mentioned, which are found in the larger 
 places and which are not exactly interchangeable one for the other in 
 large quantities in any place, some being always rather more in de- 
 mand than others and in consequence at a slight premium, there are 
 other dollars found in Nanking, Fuchow, and elsewhere. 
 
 It should be kept in mind also that, although practically all of these 
 native dollars are supposed to represent seventy-two one-hundredths 
 of the K'up'ing tael, while the British dollar is very nearly the same in 
 weight — 416 grains— no one of the mints has a reputation absolutely 
 above suspicion. As has been intimated, the Kirin dollar from Man- 
 churia is generally unacceptable in other provinces further south, but 
 the Peiyang dollar and the Canton dollar are also, it is generally 
 known, at times light in weight or deficient in quality, and even the 
 Hupeh dollar, which is probably best in reputation of them all, is not 
 entirely above suspicion and is occasionaly discounted. 
 
 The difficulties of the dealings of the foreign merchant would, how- 
 ever, only be well begun with what has been said above if he were to 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 45 
 
 attempt to extend his trade himself into the interior away from the 
 treaty ports and the best known lines of travel where the best known 
 dollars and taels are in common use. The difficulties of the internal 
 trade along similar lines will be spoken of somewhat later. It is bet- 
 ter, while we are dealing with the import and export trade, to confine 
 ourselves somewhat more closely to the special difficulties along that 
 line of business. 
 
 Although the great variety of moneys in use makes business difficult, 
 the greatest risk and difficulty in connection with the monetary sys- 
 tem comes from the fact that all of these moneys in China are on a 
 silver basis, while the importer or exporter in most cases must settle 
 his home trades on a gold basis. He may make a purchase in London, 
 for example, when the pound sterling would be worth, say, 8 Shanghai 
 taels, and may even have arranged to sell his goods on that basis to be 
 paid for on delivery. By the time the goods reach Shanghai, how- 
 ever, a fall in the price of silver may well have made 8 taels worth no 
 more in terms of gold than 6| or 7 would have been at the time the 
 purchase was made, and his prospective profits may thus have been 
 turned into a loss. 
 
 This continual fluctuation in the value of the tael as compared with 
 the pound sterling has made the import and export trade partake so 
 much of the nature of gambling that, although some fortunes have 
 been made, others have been lost through no fault of the merchants 
 concerned or with nothing to their credit. Such a state of affairs 
 pFactically forces the most conservative business man into paying 
 undue attention to the conditions of the money market at the expense 
 of the care which he should give to his mercantile business proper. 
 Fortunes are so easily made or lost through the fluctuations in ex- 
 change that many merchants have not the stability of character to 
 enable them to give a sufficient amount of care to studying the wants 
 of the native Chinese customers and attempting to supply these wants 
 through legitimate trade measures. Of course, many of the risks 
 on specific purchases are avoided by arranging with the banks for 
 forward rates of exchange. This, however, is always expensive and 
 unsatisfactory and does not remove, though it shifts somewhat, the 
 speculative element. There can never be a sound importing or ex- 
 porting business carried on until China is given a monetary system, 
 the unit of which shall be substantially stable in comparison with 
 those of the gold-standard countries. 
 
 THE LIKIN. 
 
 Aside, however, from this question of the monetary difficulties, 
 others, which are only indirectly connected with the monetary system, 
 hamper the import and export trade. The most important of these 
 other hindrances is found in the likin duties, which are levied in 
 
46 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 many places in China. These duties are practically internal transit 
 duties, which are collected on goods in transit, passing various likin 
 stations, established ordinarily by the provincial authorities. A 
 smaller tax is the octroi, levied by various cities at the city gates, 
 especially, of course, on country produce brought into the city for 
 sale. Under various treaties with foreign powers attempts have been 
 made to a'bolish these likin duties and to substitute in their stead a 
 certain fixed charge, which shall be added to the customs duties when 
 goods are imported. In many cases this result has been attained, and 
 the importer whose goods are destined for consumption in the inte- 
 rior may pay his additional customs duty, usually 2^ per cent in 
 addition to the 5 per cent customs. The new treaties with Great 
 Britain, the United States, and Japan permit a surtax of one and one- 
 half the customs (i. e., 12^ per cent in all) on imports and of one-half 
 the export duty with a maximum total of 7^ per cent. When these 
 taxes are paid, the dealer may receive a pass which entitles his goods 
 to transit into the interior or to the coast without further payment to 
 the likin officials. 
 
 The trade is, nevertheless, in many cases seriously hampered. The 
 likin officials must be visited, the pass presented, and its validity 
 passed upon. In many cases the officials, in order to make some per- 
 sonal profit, so delay the transit of the goods in the examination and 
 the demanding of passes that the small bribe desired is frequently 
 paid in order to save time. Moreover, the dispute as to exactly what 
 is intended by the payment of these transit duties is not yet entirely 
 settled. The foreigners, who are naturally anxious to have their 
 trade burdened as little as possible, insist that the goods are to be 
 free from duties until they are practically in the hands of the con- 
 sumer. The native official, on the other hand, claims that as soon as 
 they are stopped in their regular transit and are delivered to the 
 consignee at the interior port, the validity of the transit pass ends, 
 and the goods may then be subjected to further local taxation before 
 they are finally placed in the hands of the consumer. 
 
 Much has been done, especially under the late treaties, to remove 
 this burden of the likin, but it is not felt that the desired end has yet 
 been reached. The Chinese Government, however, apparently has 
 seen the desirability of meeting fairly these demands of the foreigners. 
 Committees have already been at work to see if it were possible to 
 provide satisfactory substitutes in the form of taxes of another kind 
 to take the place of the revenue which will be lost to the provincial 
 officials from the actual abolition of the likin duties unless the cen- 
 tral Government makes compensation, and it is to be hoped that in 
 the not distant future this evil will be removed. 
 
 One chief trouble, which has come through the payment of these 
 likin duties when transit is not provided for as above, is that they 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 47 
 
 are naturally made payable in each separate province, or even minor 
 political subdivision, in the local money. If, therefore, the shipper 
 offers to pay in dollars the demand will probably be made in taels. 
 If he is familiar with the Shanghai tael it may well be that the 
 demand will be made in terms of a local tael, and whenever the 
 opportunity offers for changing from one system of taels to another 
 the advantage is, of course, always taken by the local official or local 
 money changer who is acting with the official in making the exchange. 
 These customs of taking advantage of the exchange are, of course, 
 found not merely among the officials in their governmental dealings, 
 but are generally found elsewhere as well. The foreign banks, for 
 example, when changing pounds sterling into dollars for European 
 customers, reckon first the rates of exchange into taels with, of course, 
 the visual exchange jsrofit, and then the taels into dollars with a sec- 
 ond profit. A similar mode of procedure is, of course, adopted by 
 every person who has it in his power to perform the service of ex- 
 changing money, and the exchange business, while profitable in itself, 
 has thus become an extremely troublesome hindrance to mercantile 
 business, both in the export and import trade and in the more strictly 
 internal trade. 
 
 BANKS AND BANKING. 
 
 The banking business in China is of great antiquity, the general 
 principles having apparently been fairly well understood and the 
 business practiced in China long before any such business was estab- 
 lished in Europe. 
 
 So far as the foreigners who are engaged in foreign trade are con- 
 cerned, their business is done mostly through foreign banks, of which 
 there is a sufficient number with suitable branches and agencies to 
 supply reasonably well the foreign demand. The principal foreign 
 banks are the Hongkong and Shanghai Banlfing Corporation, the 
 Chartered Bank of India, Australia, and China, the Yokohama Specie 
 Bank, the Eusso-Chinese Bank, the German-Asiatic Bank, and the 
 Bank of Indo-China. These banks do a considerable deposit and dis- 
 count business, but the chief interest, after all, is in their exchange 
 business. There is a tendency, of course, as local business develops 
 and foreign business houses are established for the local trade, for the 
 discount and deposit business to increase, but as yet the exchange 
 business is of first importance. These banks are also active in finan- 
 cing local investments made by foreigners, some of them in arranging 
 for loans to the Chinese Government, and in general in doing finan- 
 cial business of all kinds for foreigners in their business in China, 
 whether dealing with one another or with the native Chinese. 
 
 These banks do their business in China without any contract with 
 the Chinese Government, and with no charter issued by that Govern- 
 
48 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 ment. They are there simply on tolerance, with the protection that 
 comes from the influence of their respective governments and with the 
 privileges granted to foreign property holders and foreign business 
 men in the international settlements, including, of course, so far as 
 the right is extended to ordinary business men, that of extraterri- 
 toriality. 
 
 It is to be noted also that several of these banks issue bank notes 
 under the authority of their charters from home, but without any 
 charter or other grant of the privilege from the Chinese Government, 
 either central or provincial. The bank notes form a convenient 
 medium of circulation in some of the treaty ports and within narrow 
 limits outside of those ports. They are issued ordinarily in terms of 
 dollars, although there are also tael bank notes. The dollar notes 
 are regularly payable, of course, in the dollar common in the city 
 where they are issvied ; for example, in the Mexican dollar in Shang- 
 hai, in the British dollar in Canton or Peking, where that dollar is 
 the one usual in circulation, etc. The same principle would hold with 
 reference to the tael — those issued by the banks in Shanghai, for 
 example, being payable in the Shanghai tael. It is worthy of remark 
 (and frequently is the occasion of severe remarks) that the notes 
 issued by a foreign bank in one city in the Chinese Empire are not 
 necessarily acceptable at par by other branches of the same bank situ- 
 ated in different cities. A Shanghai bank note, for example, is very 
 generally discounted if jDresented to the Tientsin or Peking or Hong- 
 liong branch of the same bank, the discount sometimes being as high 
 as 5 per cent. A Tientsin note is sometimes discounted in Peking as 
 much as 1 per cent, although the two cities are only some three hours 
 apart by railroad, and the Peking branch issvies no notes of its own. 
 
 The discount of bank notes by different branches of the same bank 
 situated in different cities is so great that it makes a very appreciable 
 source of loss to travelers who are not especially careful with refer- 
 ence to the kind of money which they are carrying, and this discount 
 places of course a decided check upon many kinds of local traffic, 
 although it forms a decided source of profit to the banks themselves. 
 When the Chinese Government establishes an imperial bank in con- 
 nection with the establishment of its new monetary system, one of the 
 most important of its reforms would of course be to make its notes 
 acceptable at any of its branches or agencies anywhere within the 
 Emjoire. 
 
 Inasmuch as the number of banlis is quite limited, and since in 
 some of the rather important ports not all of them have branches, it 
 enables them in many cases to work harmoniously enough each with 
 the other so as to enable them to secure pretty large profits from 
 their cxchimgc charges. The most important of the banks have made 
 \'ery large profits since their establishment. Some of tho newcomers 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 49 
 
 doubtless have not been able to secure so high profits. The banks are, 
 generally speaking, known for their accuracy and carefulness in car- 
 rying out their contracts and in meeting their obligations. But they 
 occupy a position of such advantage in many ways that it seems likely 
 that their high profits are obtained in part at the expense of the devel- 
 opment of trade in other directions in spite of the fact that, one may 
 add with even more emphatic truthfulness, without the facilities 
 which they have offered, it would have been utterly impossible for 
 trade to have developed anywhere nearly so well as has been the case. 
 
 NATIVE BANKS." 
 
 Native banks are found everywhere in China, and are perhaps to 
 be designated as exchange banks, loan banks, and cash shops, although 
 the distinction is in part simply the different types of business done. 
 
 As in the case of foreign banlcs, so also regarding the native banks, 
 the Chinese Government has no general law prescribing conditions 
 for their incorporation or method of organization. If a group of 
 men wish to organize a bank, they do so, choosing their place, the 
 amount of capital, their method of doing business, etc. 
 
 Their detailed methods of doing business are not well known among 
 foreigners, but there can be no doubt regarding their efficiency. In 
 most of the large cities there exist bankers' guilds, to which belong 
 the local loan banks, as well as those engaged in the business of trans- 
 ferring money from one part of the country to another, and these 
 guilds have brought the banking business to a high degree of 
 efficiency. 
 
 The most famous bankers' organization, especially that which has 
 to do with the transferring of money and credit particularly in the 
 north of China, is the Shan-si Bankers' Guild. It is well known that 
 in China it is the custom not merely among bankers, but in general 
 among artisans and business men of all kinds, for children to follow 
 the occupations of the parents. In consequence, the leading bankers 
 may be said to have inherited their capacity for the banking busi- 
 ness, and, of course, they have been thoroughly trained in that busi- 
 ness. As the Shan-si bankers have been so successful for many 
 generations, they enjoy great prestige. It is commonly believed 
 that if they will themselves take up heartily the question of mone- 
 tary reform on any good plan, their influence alone will go very far 
 toward making it a success. If they oppose any system, it will be 
 extremely difficult to make it successful. The following quotation 
 
 a This account of native banks is to a considerable extent taljen from " Chi- 
 nese Business Methods and Policy," by T. R. Jernigan, former American 
 consul-general at Shanghai. Some of the information has been talten from 
 other books, some derived from personal conversation with Chinese bankers. 
 
 S. Doc. 128, 58-3 i 
 
50 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 from Jernigan's book » gives a brief account of the method of organi- 
 zation and management: "The bankers themselves, being Shan-si 
 men, always aim to employ only natives of the province of Shan-si, 
 and, when possible, select men of their own village. When a man is 
 appointed to a post at one of the branch offices, his family is taken in 
 charge by the bank and held as security for his fidelity and good 
 behavior. But it is understood that the family is not actually held 
 in prison, though kept under the strictest surveillance. 
 
 While at his post the employee is not permitted to write to any 
 member of his family under seal, but all such letters must be open 
 and sent through his employer. No salary is paid, but all necessary 
 expenses incurred on his behalf are actually kept and discharged by the 
 bank. The term of the appointment is for three years, and after the 
 expiration of that time the employee goes to his employer's house, 
 taking with him an account of the money expended during the term, 
 when he is closely searched, even to his clothing. After a full 
 examination has been made, and the accounts found satisfactory, and 
 the affairs of the bank have been prosperous during the three years, 
 the reward is made remunerative, and the employee joins his family, 
 who then no longer remain under surveillance. But in the event that 
 the investigation, both of the accounts and the condition of the bank, 
 prove unsatisfactory, the effects of the employee are seized and his 
 family continue, as it were, in bondage, until a suitable fine is paid, 
 or the employee may be imprisoned. 
 
 It is the means thus employed by the Shan-si bankers to secure 
 their banks against losses by defalcations or otherwise that have 
 intrenched them in public confidence, and they are often used by the 
 central Government as the medium for the transmission of revenue 
 from the provinces; and their customers may be found among offi- 
 cials of the highest rank. 
 
 As an additional protection, the head managers of the banks asso- 
 ciate together in a guild, and, when the occasion demands, they 
 formulate a line of policy to meet the particular emergency. The 
 rules to govern in the general banking business relate to the subjects 
 which enter into the daily operations, such as the rate of exchange, 
 as regidated by the tables posted on the boards of the bank guilds, 
 and the bank violating any of the rules is fined a certain sum. There 
 is also a rule that the books of a bank shall be carefully examined, 
 and that the discovery of any underhand dealing, or any attempt 
 to conceal a transaction, is punished with suspension. 
 
 Each bank issues its own bills, which are made payable to bearer, 
 and customarily on demand, but sometimes are payable so many days 
 after being issued. When a bill is presented, the holder has. not the 
 
 «Page 93 et seq. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 51 
 
 option to say what shall be given him as the equivalent, though 
 his preference is generally respected; the bank can pay the bill in 
 either cash, the current bills of another bank, or in silver or gold, 
 according to the current of exchange." 
 
 As is customary in other matters concerning the welfare of the com- 
 mon people, banks are also likely to feel the displeasure of the people 
 if they fail to meet their obligations. In some localities the holder 
 of a bill, on which payment is refused by the bank, is permitted to 
 take anything about the bank which he sees which is substantially 
 equal in value to the bill itself, and if he does so, the act is not con- 
 sidered theft and he is not liable to punishment. Doubtless this 
 privilege is at times abused, and the unpopular bank is practically 
 plundered by hostile bill holders and the rabble. 
 
 Sometimes, too, when a bank is in a precarious condition, but still 
 knows that it would be able to meet its obligations if a run were pre- 
 vented, the services of a local official are requested in order to prevent 
 a run upon the bank, and the bank itself is permitted to state that 
 it will pay later all its obligations. It is comparatively rare, how- 
 ever, that banks of any particular importance fail. The genius of 
 the Chinese for organization and mutual responsibility is such that 
 the bankers' guilds, knowing substantially accurately the condition 
 of each member, assist the weaker ones to tide over a period of depres- 
 sion and thus prevent the evils which come from bank failures. The 
 Chinese have also clearing houses, which enable them still better to 
 keep track of the credit of each individual bank and to prevent 
 employment of irregular methods. 
 
 Though the Government does not require that those about to 
 engage in the banking business obtain permission, and although no 
 general law exists, the Government is nevertheless often very severe 
 in case banks fail. In such events the Government may make the 
 most careful investigations, and if the managers are at fault they are 
 likely to meet with very severe punishment. Decapitation of the 
 principal offenders is by no means unknown, provided it is found 
 that the failure has occurred through their dishonesty, or even 
 through their negligence. Their relatives also will later be held 
 responsible for the debts of the bank, their property, if necessary, 
 being confiscated, and they themselves perhaps being heavily punished 
 besides. 
 
 It will be seen that with these somewhat rigid methods of native 
 banking, and particularly with their widely extended guilds, which 
 reach practically every section of the country, it is entirely possible 
 for the foreigners wlio wish to make purchases in the interior 
 through the connections which the foreign banks have with the 
 native banks to make payments anywhere in China and to transfer 
 money without risk of loss and at rates that may be, on the whole. 
 
52 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 under the circumstances, considered reasonable. The charges for 
 transfers run often as high as 7 or 8 per cent for thirty days, and if 
 money is borrowed for a considerable period of time rates of 11 per 
 cent, or even higher, per annum are charged. 
 
 Besides the banking business mentioned above, which refers, of 
 course, primarily to the exchange and loan business, should be men- 
 tioned that of the cash shops which are found everywhere in China, 
 in many cases several in comparatively small cities. Inasmuch 
 as in the interior, and for that matter in the native trade in 
 the open ports, the business is done entirely with copper cash and 
 with chunks of silver (sycee), it is desirable that each person have 
 the opportunity to secure readily copper cash in practically any 
 quantity needed for local business. It is the business of the cash 
 shops to exchange cash for silver, and vice versa. In very many 
 cases also these cash shops issue their cash notes after the manner 
 already indicated in connection with the more important loan banks. 
 These notes are often for very small sums, representing often not 
 more than $0.50 or $0.25 gold, and sometimes as low as $0.05. 
 
 BUSINESS IN THE INTERIOR. 
 
 The Chinese have usually -been considered by foreigners not merely 
 unprogressive but also unenterprising. It is often thought that they 
 are largely hand laborers, probably because we see so many engaged 
 in hand labor in this country. The Chinese are dpubtless dominated 
 by custom to a somewhat greater extent than we are in this country. 
 Invention has not been stimulated there, and there is less mechanical 
 Ijrogress by far than here. In their own way, however, the Chinese 
 are by no means unenterprising, and probably a larger proportion 
 of the Chinese have a shrewd instinct for trade and trading than the 
 citizens of any other country. The Chinese is a born speculator 
 Avhatever his nominal occupation may be. Whenever he engages in 
 labor he usually prefers, if it is possilale, to work by the job, in order 
 that he may make something extra by unusual diligenqe or may so 
 arrange his work as to manage his time to suit himself, in many 
 cases engaging assistants to help him in his work. 
 
 All through the interior of China there are great highways which 
 for centuries have been important trade routes. Over these roads 
 in many cases go huge caravans of camels, or mules and donkeys, or 
 carts, carrying goods from one section to another, or from the interior 
 to the frontier, where they will be transported to foreign countries. 
 Over the minor traffic routes there are continually going men with 
 wheelbarrows, carrying from two to six hundred pounds of local 
 freight for distances of from ten to one or two hundred miles in 
 order to secure the profit that comes from bringing goods into a 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 53 
 
 locality where they are more in demand than at the place of their 
 origin. There are many local factories producing, for example, 
 earthenware, or incense, or a peculiar kind of material for clothing 
 or ornament, or other native product which is in demand for from 
 fifty to two or three hundred miles from the place of manufacture. 
 Such local goods are very frequently transported by pack muleS, 
 wheelbarrows, or on the shoulders of men, who, with a pole some 6 
 feet in length over their shoulder, with a bundle on each end, will 
 carry for distances of, say, 100 miles from 50 to 150 pounds. In 
 very many instances, probably almost universally, these individual 
 traders are not hired men carrying goods for wages, but are, rather, 
 individual speculators, who buy their goods from the factory and 
 carry them to a place of sale, making their wages from the profits. 
 For example, in the Province of Honan, between Changte and 
 Taok'ou, many wheelbarrow men were met who wepe carrying on 
 their barrows earthen jars from the south to the north a distance of 
 some hundred miles, and bringing the powdered wood of the hills 
 back again. Nearly all of the work of distributing the bluish-white 
 coarse pottery of T'suchou is done by these wheelbarrows. Two men, 
 or a man with a donkey, will carry on a wheelbarrow a load of from 
 four to six hundred pounds, with a capital investment of from $5 
 to $6.. The trip takes them from four to five days, they making 
 some 20 miles a day. They hope for a profit of some 6 or 7 cents 
 a day over and above food and fodder for themselves and beast. 
 
 Two men, one pushing, the other pulling a heavy wheelbarrow 
 load, said that they were wheeling 400 catties (533 pounds) of incense. 
 This, when mixed with the powdered bark of a tree and rolled into 
 sticks, makes the joss sticks so often seen burning in temples and 
 before shrines. These men went about 20 miles a day, and were 
 going altogether a distance of 100 miles. They thought they would 
 make enough profit to paj' their expenses fairly well. 
 
 Others were hauling millstones on low " jumpers " with a cow or 
 donkey to haul it. In this case they seem to make somewhat more 
 profit. A stone costing 1,000 cash at the quarries brings 5,000 cash at 
 its destination. The traveling expenses for five days for man and 
 beast would amount to not more than 3,000 cash, thus leaving a profit 
 on the two stones of, say, 8,000 cash — say, $4 or $5. 
 
 In North China some interviews with pole men — that is, men carry- 
 ing loads on each end of a pole balanced across their shoulders — gave 
 somewhat similar results. One man, for example, making a round trip 
 from Mongolia to T'ung-chou, near Peking, every fifteen days, would 
 carry 700 cheap fans. He would buy them at the rate of 5 cash for 
 two fans and sell them for 10 cash each, making thus a profit of 7^ 
 cash per fan. He would thus be making wages, if he sold promptly 
 his stock and kept busily at worlc, of some $0.18 a day, out of which he 
 
54 GOLD STANDARD IK INTERNATIONAL TRADE. 
 
 would board and lodge himself. Another man with cheap straw hats, 
 of which he could carry 200, buying at 25 cash each and selling at 40, 
 would make a profit of 15 cash, or 3,000 cash— say, $1.50 to $2— for his 
 fifteen days' work, this being less profitable than the other. Even 
 these, however, do a munificent business as compared with the dung 
 gatherers, who are able to pick up on the roads from one to two baskets 
 of dung a day, which they sell from 10 to 20 cash each, giving them an 
 income of from half a cent to 2 or 3 cents a day. It should be kept in 
 mind, however, that these dung gatherers are mostly elderly men who 
 are too feeble to work at hard labor, or children who have not yet be- 
 gun the serious work of life, so that it is not to be expected that their 
 income would be in proportion to that of regular workers. That the 
 work is carried on at all, however, is a most striking instance of the 
 thrift of the Chinese and of their willingness to use their time in some 
 industrious way, even though the returns are very small. 
 
 A better estimate as to wages may be made from the statement 
 of one of the largest railway contractors, a Chinese, on the Peking- 
 Hankow Railroad. His company had some five or six thousand men 
 at work doing grading and such other unskilled labor. When hiring 
 men by the day in the winter, when there was little demand, he paid 
 140 real cash, say, in the neighborhood of $0.09 ; in the summer time, 
 when the demand for laborers on the farms was much greater, he paid 
 possibly double that. Instead of hiring men by the day, he often con- 
 tracted with them to remove earth by the cubic feet, his rate being in 
 winter 160 cash per 100 Chinese cubic feet — in round numbers, 110 
 cubic feet. In the summer time for the same amount he would have 
 to pay 300 cash ($0.15 to $0.20) at least. 
 
 These men, small as is their income, are nevertheless not unintelli- 
 gent, and the smallness of their earnings makes it imperative that they 
 do their work as thriftily as possible. In most cases, buying as they 
 do in one locality and selling their goods in another locality somewhat 
 remote, they are almost certain to be trading in two or more kinds of 
 money. Often the cash which are employed in one locality are of a 
 different quality from those in the other locality where their goods 
 are sold, and it is quite possible that on their way from the place of 
 purchase to that of sale they have had to pay their expenses in cash 
 of still a different kind. Attention has already been called to the fact 
 that the taels in the different ports vary, but the variations are no less 
 frequent in the interior. 
 
 At Wei IIwei-Fu, in the province of Honan, it was desired to send a 
 telegram. The agent was given 20.73 Kungfa taels, which he 
 weighed and said were equal to 19.98 Wei Hwei taels. The price of 
 the telegram was reckoned first in cash, amounting to 14.688 cash, 
 at 1,030 cash to the tael according to his rate of exchange, or 14.26 
 Wei Hwei taels. In Hupeh dollars, in which he wished to be paid, 
 
GOLD STANDARD TK INTERNATIONAL -TRADE. 55 
 
 he figured the bill at $18.36. It will be noted from the above calcu- 
 lation that 1 Kungf a tael equals 0.9637 of a Wei Hwei tael. 
 
 At T'su-chou, near the border of the province of Chili, we learned 
 that the local T'su-chou commercial tael was to the K'up'ing tael, 
 the official tael of Peking, as 1,021 to 1,000. The K'up'ing tael is to 
 the Chingping tael, also usfed locally in that department, as 1,000 is 
 to 1,060, whereas the K'up'ing tael is to the Kungfa tael, the common 
 tael in commercial use in Peking in the same province, as 1,000 to 
 1,042. It is interesting to note that in that locality, T'su-chou, 49J 
 real cash count as 100, while in T'ung-chou, near Peking, 48 real cash 
 count for 100. 
 
 Almost invariably the number of cash which passes for 100 is 
 somewhat less than 100, one or two at least — it being assumed, we 
 suppose, that the person who strings them may deduct one or two cash 
 for the furnishing of the string and the trouble of stringing them. 
 What is still more puzzling, however, is the fact that a large propor- 
 tion of the cash now in use are counterfeit (or perhaps one should 
 rather say are made by private individuals), are often small in size 
 and of very poor quality. In certain localities, where this is common, 
 the cash -shops, and in consequence the ordinary dealers and small 
 traders of the kind mentioned above, have by custom agreed tlaat 
 there shall be say from 10 to 50 small poor cash in every thousand, 
 or, instead of this, the number of good cash which shall count for a 
 tliousand may be reduced. 
 
 The most bewildering system of cash counting in the Empire 
 probably is found in Peking. One of the emperors, Hien Fung, 
 about the middle of the last century, thinking it" desirable to have 
 somewhat larger coins, made some 10-cash pieces; but finding the 
 system very profitable, he did not make them 10 times as large as the 
 former 1-cash piece, but only about twice as large. Then he made an 
 over issue. The consequence is that the average cash piece found 
 in Peking at the present time is marked as a 10-cash piece and coimts, 
 if few cash are used, as a 2-cash piece when compared with the real 
 cash found elsewhere. In local counting, however, when one begins 
 to count cash by the hundreds or by the tiao (thousand), there is a 
 curious combination. Each piece counts as 1 cash until as many as 10 
 are used. Above 10 each piece counts for 20 in the local language, 
 that is to say, 200 cash means actually 10 of these 10-cash pieces; 
 therefore 1 tiao (a thousand cash) means only 50 pieces; but with the 
 usual discount that is made by the string one finds actually only 48 
 pieces — that is to say, the 48 pieces equal in count, not necessarily in 
 value, 960 pieces of the ordinary cash, the two being allowed for the 
 string. In T'ung-chou, a few miles away, the string which counts for 
 a. thousand would be nominally 500 cash, as each one in that locality 
 is supposed to be equal to two, but as a matter of fact, two being taken 
 
56 GOLD STANDAED IN INTERNATIONAL TEABE. 
 
 out for the string, there are really 496 pieces to the thousand. About 
 10 per cent there, it is understood, may be poor cash. 
 
 These examples, of course, might be multiplied many-fold if one 
 were to travel through China and note the specific customs found in 
 the different places. When one takes into consideration, therefore, 
 the fact that the Chinese are all traders, and that a verj' large propor- 
 tion of the common people are buying and selling to probably a 
 greater extent, so far as the proportion of their income is concerned, 
 than the residents of almost any other country, it becomes a question 
 whether in any other country in the world a common people can be 
 found who would so readily understand the intricacies of monetary 
 practice or who would so readily learn the peculiarities of a new 
 system of money. 
 
 The fluctuations in the price of silver as compared with the price of 
 copper make the rates of exchange mentioned above variable, so that 
 although the ratio of the Shanghai tael, for example, to the K'up'ing 
 tael, is substantially invariable, the value of either in terms of copper 
 cash varies from day to day, as well as in terms of gold. The value 
 of silver during the last twenty years has diminished more in terms of 
 gold than has the value of copper cash. Sir Charles J. Dudgeon, 
 chairman of a special committee to investigate the subject, reported 
 that, as compared with gold, silver between 1882 and 1902 had depre- 
 ciated 49.7 per cent, while copper cash had depreciated only 26.6 per 
 cent. The same matter is stated in a somewhat different and more 
 illuminating way by Mr. J. W. Jamieson, commercial attache of the 
 British legation, in the following table: 
 
 [Dattim. — In 1882, 5s. 2d.=:l Haikwan tael = l,690 cash. In 1902, 2s. 7.2d. = l Haikwan 
 
 tael = 1,240 cash.] 
 
 In terms of gold — Per cent 
 Taels have depreciated 49.7 
 
 A fall from 62d. to 31.2d. 
 Cash have depreciated ^ 31.4 
 
 In 1882, 1,240 cash bought 3s. 9^d. 
 
 In 1902, 1,240 cash bought 2s. T^d. 
 In terms of cash — 
 
 Taels have depreciated 2G. G 
 
 A fall from 1,690 cash to 1,240 cash. 
 Gold has appreciated 45.9 
 
 In 1882, 2s. 7|d. bought 850 casli. 
 
 In 1902, 2s. 7id. bought 1,240 cash. 
 In terms of silver — 
 
 Cash have appreciated SQ.i 
 
 In 1882, 1,090 cash--=l tael. 
 
 In 1902, 1,240 cash=l tael. 
 Gold has appreciated j qq 
 
 In 1882, 1 tael=5s. 2d. 
 
 In 1902, 1 tael=2s. 7}d. 
 
GOLD STANDABD IN INTERNATIONAL TEADE. 57 
 
 The samples given above of the income derived by traders and 
 workingmen of different classes serve to show also how very esseijtial 
 it is that in the introduction of any monetary system into China there 
 be a unit coin which is very small in value, one comparable with the 
 present 1-cash piece, which may, in round numbers perhaps, be spoken 
 of as one-twentieth of an American cent. 
 
 In several of the provinces, in order to avoid in part the difficulties 
 which arise from carrying such large quantities of coins so small in 
 value, as well as to secure the profit which comes from coinage, the 
 viceroys have been introducing new coins — 10-cash pieces. These 
 pieces are issued nominally at their face value, 10 of what are called 
 the real cash. When they, however, are put into circulation at some 
 distance from the place where they are minted, they often do not pass 
 at their full value. For example, at Wei Hwei-Fu, in the province 
 of Honan, the local magistrate reports that occasionally copper 10- 
 cash pieces of the central government are seen there, which have been 
 sent down from Peking by the Board of Revenue to be introduced 
 into the circulation. So also some other 10-cash pieces have come from 
 the province of Hupeh, where they are coined by the viceroy, and are 
 in pretty general use ; but so far from home they pass for only 6 cash. 
 
 Still another source of confusion which disturbs local trade in con- 
 nection with the monetary system is the variation of the commercial 
 rate of the tael in most places most decidedly from the Government's 
 rate. In the interior the only money actually in circulation in ordi- 
 nary local traffic is the cash. The Government officials, however, 
 have had their salaries fixed in taels, and the taxes which they are 
 compelled to remit to the central Government are also in taels. Their 
 salaries, having been fixed many j'^ears ago, since silver has fallen in 
 value, have very greatly declined. In consequence a salary which 
 formerly might have been reasonable is at the present time entirely 
 insufficient. The central Government has perhaps been able to bear 
 its own troubles by increasing the number of taels demanded from 
 the local official, but it is not possible for him nominally to increase his 
 own salary. He has, however, in most cases been able to raise the 
 rate at which taxes levied in taels must be paid in cash. 
 
 For example — to give one out of many instances — at one of the 
 smaller places in the interior province of Honan the local magistrate 
 said that the tael in circulation there exchanged in trade at the rate 
 of 1,100 cash (in another town 30 miles away the rate was 1,130). 
 The rate, however, at which he collected taxes was 2,600 cash to the 
 tael (Several other magistrates had stated that they collected at the 
 rate of 2,400 per tael, while one collected at 1,800 only. This kindly 
 magistrate was soon removed, to the great sorrow of his constituents, 
 who, on his departure, almost buried him under complimentary 
 red umbrellas). Of the 2,600 cash collected from the people, 1,200 
 
58 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 was sent to the capital for every tael of taxes which had to be remitted. 
 The; remaining 1,400 was kept, as the magistrate explained, for " local 
 expenses." His interpreter, a friendly Chinese of foreign training, 
 who saw no objection to the facts being known, explained in an aside 
 that " local expenses " meant the magistrate's own pocket. This is the 
 usual explanation of the use that is made of the difference between the 
 local commercial rate for the tael and the official rate. By doubling 
 the number of cash per tael which the people must pay, and retaining 
 half for his own use, the magistrate manages to increase his salary to 
 a living sum. 
 
 Besides the bank notes which have already been mentioned in con- 
 nection with the banks above, some of the provinces issue provincial 
 notes. For example, as already stated, the province of Hupeh issues 
 one-dollar notes, payable on demand in the Hupeh dollar, one of the 
 best silver dollars issued in China and substantially equal in weight 
 and value to the British dollar of Hongkong. There is said to be a 
 large silver reserve back of these notes, although there is no specific 
 requirement in the law as to the amount of this reserve. So far, how- 
 ever, there has been no trouble regarding their redemption, and the 
 notes pass at par. 
 
 In the province of Honan the provincial government issues bills 
 for a thousand cash (say, $0.50), and even for sums as small as 500 
 cash (say, $0.25). These notes have been in circulation for some five 
 or six years, pass at par with silver, and are redeemed regularly at par 
 by the Government. Although there is no provision made for their 
 direct redemption in the outlying cities, nevertheless the local magis- 
 trates at times receive them in payment of Government dues. 
 
 The above statements with reference to the methods of doing busi- 
 ness in China, both in connection with the foreign trade and with the 
 local trade in the interior, show beyond question the dire confusion 
 which exists in connection with the use of money and the very great 
 advantage that of necessity would come if a uniform system were 
 provided throughout the country. The qiiestion as to the relative 
 advantage or disadvantage of having the system on a silver basis or 
 on a gold need not be discussed liere, as that is taken up in detail in 
 Ajipendixes A, I and II. 
 
 OPINIONS REGARDING THE MONETARY SYSTEM. 
 
 A factor of possibly equal importance with actual business condi- 
 tions, however, is that of the opinions of business men and of the 
 common people who are doing business in a small way. If they are 
 content with their present system, the change will come slowly. If, 
 however, they are intelligent, and their content simply comes from 
 the fact that they have never thought of anything better, there is no 
 reason why they should not readily adopt an improvement when its 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 59 
 
 advantages, as compared with those of the present system, are once 
 clearly put before them. 
 
 (a) Foreigners. — Among the foreign business men of all nationali- 
 ties in China there is practically but one opinion regarding the grave 
 evils connected with the present monetary confusion and the need for 
 reform. As has already been explained in the first volume of the 
 Commission's report, the foreign chambers of commerce of Tientsin, 
 Shanghai, and Hongkong have discussed the question, and have 
 urged upon the Chinese Government the desirability of bringing 
 about a reform as soon as possible. Acting largely on their sugges- 
 tions, also, the treaty commissioners of the United States, Great 
 Britain, and Japan, in making their new commercial treaties with 
 China, brought forward this question, and secured in their treaties a 
 section which pledged the Chinese Government to establish a uniform 
 monetary system, the coins of which should be legal tender through- 
 out the Empire. Nothing was said in the treaty as to whether these 
 coins should be silver coins with their value fixed by the weight, or 
 whether they should be given a gold value, and be themselves really 
 token coins. 
 
 The only point of difference that appears in the discussions regard- 
 ing the monetary reform among the foreigners in China is as to the 
 method by which such a reform should be brought about. All are 
 agreed that the system should be a uniform one throughout the 
 Empire. All are agreed that the imperial coins should be legal tender 
 everywhere in the Empire and should be received by the Government 
 at full value in the payment of Government obligations. All seem 
 likewise to agree in the opinion that these coins should be given a gold 
 value. 
 
 The one question at issue is whether this gold value can be given 
 the .coins at the time they are issued, so that the new system may 
 really be inaugurated on the gold basis, as was done in the introduc- 
 tion of the new monetary system in the Philippine Islands, or 
 whether this is too much to expect from China, and whether it would 
 be best to strive simply for uniform silver coins, with the hope that 
 some time or other, in some unknown way, these coins might be given 
 a fixed value in gold. The merits of the two plans are discussed at 
 length in Appendix A, II. It is worthy of note, however, that a good 
 many of the foreign residents who had formerly been of the opinion 
 that it would be useless for China to attempt to begin the system on a 
 gold basis, after a more detailed study of the question in connection 
 with the American commissioner, changed their views and said that 
 they believed that the American plan was entirely practicable, and 
 that, on the whole, it would be easier than the plan advocated by 
 themselves earlier, provided China intended to attempt at any time 
 within a reasonable period to give to her silver coins a fixed gold value. 
 
60 GOLD STANDARD IN INTBENATIONAL TRADE. 
 
 (i) The Chinese.— 1\\ speaking of the opinions of the Chinese 
 regarding monetary reform, one should keep in mind separately, first, 
 the officials; second, the larger business men; third, the common 
 people. 
 
 THE orriciALS. 
 
 Speaking generally, the officials at the time the American commis- 
 sioner visited China had not studied the question at all carefully, and 
 of course most of them have not studied it at the present time. In the 
 next section certain characteristics of the officials in connection with 
 their governmental work will be brought out, but it should be men- 
 tioned here that the officials, from their training and from their prac- 
 tice in governmental matters, have very little knowledge of business 
 or of business methods excepting so far as they concern the collection 
 of taxes and the expenditures which they make. Even in these mat- 
 ters, however, they deal, not in accordance with what are ordinarily 
 called business principles, but rather in many cases in an arbitrary 
 way, so that their experience gives them little insight into business 
 principles. It is not meant to assert, of course, that the officials are 
 not men of ability. In very many cases, in doubtless all cases, so 
 far as the higher officials are concerned, the men have ability, often 
 of a very high order indeed, but their minds have been turned in 
 other directions and they often exhibit most astonishing ignorance of 
 the most fundamental principles of monetary science. 
 
 The central Government demands of its officials, as a rule, that 
 there be no disturbance in their provinces or districts, and that the 
 people, so far as possible, be kept content and prosperous. If there 
 is no complaint from the locality, the official is ordinarily considered 
 successful. The effect of this attitude of the central Government is, 
 however, always in favor of the maintenance of existing conditions, 
 and is decidedlj' against the making of experiments which may pos- 
 sibly prove unfortunate. 
 
 Most of the higher officials had some knowledge of the intentions of 
 the central Government toward monetary reform on account of the 
 provisions in the foreign treaties, and they had heard the matter some- 
 what discussed. Many of the lower officials, however, even some as 
 high in rank as the governors of provinces, had merely heard the ques- 
 tion suggested and had never attempted to look into the matter at all 
 carefully. Such men, of course, had no information whatever. 
 
 Those who had heard the question discussed naturally found their 
 first inclination in favor of changing the present system as little as 
 possible, or of adapting the new system in some way to the present 
 one, so that the people would not notice any material change. In 
 consequence, if they were people who had dealt largely with persons 
 in the interior, they were inclined to believe that it would be wise 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 61 
 
 for the new unit to be the tael, provided a uniform system were 
 adopted. The higher officials who had any information on the sub- 
 ject were unanimous in the opinion that some uniform system should 
 be established, although they did not hesitate to say in many cases 
 that it would be very difficult to establish such uniformity on account 
 of the probable unwillingness of the viceroys to give up the profits 
 from their provincial mints, and their belief that the central Govern- 
 ment, if it assumed the management of the.mints, would deprive the 
 provincial officials of these profits. 
 
 The higher officials, who had been more or less familiar with for- 
 eign trade from residence in the treaty ports, or who had recognized 
 the disadvantage under which China had been placed in the payment 
 of the indemnity and of the foreign loans on a gold basis on account 
 of the fall in the price of silver, were quite generally of the opinion 
 that the new system should be not merely a uniform one throughout 
 China, but that it should be placed on the gold basis as soon as that 
 could be done. With their idea that changes should be made as grad- 
 ually as possible, and that old customs should be adhered to as long 
 as possible, they rather inclined at first to think that it would be better 
 to begin the system with the coinage of silver and copper coins, which 
 should gradually be made uniform throughout the Empire, and that 
 later on the question of giving to these a gold value should be taken 
 up. They had, however, with practically no exceptions, not studied 
 carefully the matter of making the change, and had no knowledge of 
 what such a plan involved. In many cases they had apparently taken 
 their views from publications of some of the English business men 
 mentioned above, some of whom have since changed their own opin- 
 ions on the question. 
 
 It is interesting to note, also, that some of these same officials, when 
 the matter had been thoroughly discussed with them, and particu- 
 larly when the relative costs of the two methods had been presented 
 to them as outlined in Appendix A, II, changed their views, and 
 said frankly that they believed the Chinese Government would be 
 compelled either to adopt as a whole the plan recommended by the 
 American Commission, or to abandon entirely for the present the 
 idea of securing any but a silver system. More and more, however, 
 of the leading thinkers among these officials, as they studied the ques- 
 tion, gradually came apparently to the view that it would be wise, if 
 a sufficient support could be secured from the Adceroys, to adopt the 
 plans of the American Commission, and to put them into effect as 
 soon as that could conveniently be done. 
 
 The chief objection apparently in their minds and the one which it 
 seemed most difficult to remove was the apparent necessity of employ- 
 ing foreigners as experts to advise regarding the management of the 
 new system. They felt that since a system on the gold basis was so 
 
62 GOLD STANDARD IN INTERNATIONAL TBADE. 
 
 decidedly different from anything that they were accustomed to, no 
 Chinese officials had sufficient expert knowledge to put it into effect. 
 Naturally, from their unfortunate experiences with foreigners, they 
 hesitated to give into the hands of foreigners any more control than 
 should be necessary in a matter so important. Naturally, also, they 
 suspected decidedly the motives of foreigners who were offering as- 
 sistance and giving advice. As the plans of the American Commis- 
 sion developed, however, it is interesting and important to note that 
 the suspicion apparently gradually waned until, when the motives of 
 the American Government were clear, it disappeared. Those who 
 studied the matter thoroughly with the United States commissioner 
 seemed to be convinced finally of the fact that the United States Gov- 
 ernment had no designs whatever upon the sovereignty of the Chinese 
 Empire, and no thought of attempting to secure control of the mone- 
 tary system, and that it was expecting to derive its benefits from the 
 reform solely from the improved business conditions which would 
 result if the reform were put into effect. 
 
 Even when this matter apparently became clear, it is probable that 
 there was some feeling on the part otf some of the officials at least 
 that, if the system recommended by the American Commission were 
 adopted, it would deprive them of some of the power and prestige 
 which they would enjoy under a system which could be managed by 
 themselves without foreign expert assistance. 
 
 The experience of the Chinese Government with the imperial mara- 
 time customs service was evidently in the minds of many of the 
 officials. Although the customs service is managed by Sir Robert 
 Hart with the greatest ability ; although the Chinese officials appreci- 
 ate this fact and trust Sir Robert's integrity; and although they 
 recognize very many of the benefits which have accrued to China from 
 its efficient management, they still feel that the chief credit for this 
 management has gone to foreigners ; that Sir Robert has so managed 
 the service that its power through the high offices is entirely in the 
 hands of foreigners, and that apparently no effort has been made so 
 to train native Chinese that they may gradually take, control of the 
 management of the service, and ultimately replace the foreign- 
 ers. They feel very bitterly in many instances toward Sir Robert 
 and the foreign management, because thej' see no likelihood of the 
 Chinese being able in the near future to replace the foreigners in that 
 service. They are determined that no other similar opportunity 
 shall be given for foreigners to secure control of another important 
 department of Chinese administration. The motive which they 
 assign is naturally a patriotic one. They believe that Chinese matters 
 should really be managed by the Chinese and for the Chinese. Little 
 fault can be found with them for having this feeling. 
 
GOLD STANDABD IN INTERNATIOKAL TRADE. 63 
 
 The foreign critics of the Chinese officials, and in part the native 
 critics as well, are, however, of the opinion that their chief grievance 
 is of a different nature. As has been intimated in the discussion of 
 the tael system, and of the methods by which the local officials obtain 
 their salary through fixing special official rates of exchange different 
 from the commercial rates, the system of securing salaries and incomes 
 in indirect ways is widely developed among the Chinese officials. 
 This system of securing profit by indirect methods, such as that 
 indicated by commissions or other similar plans, usually classed to- 
 gether under the one general head of the " squeeze," is very widely 
 extended even outside of official circles. One's servant, for example, 
 receives rather- low wages, but he expects to supplement these wages 
 by taking a small commission on everything that he buys for his 
 employer. If he goes with his employer to make a visit he expects 
 to receive fees from the host. The commission which he takes is 
 ordinarily pretty well fixed in custom, and, as a rule, he takes only the 
 customary fee and doubtless does not look upon the matter as dis- 
 honest. 
 
 In large establishments, such as the legations or the hotels, when 
 local dealers in curios or other goods which the foreigners or well-to- 
 do Chinese buy, come to the establishment to make sales, the head boy 
 or general managing servant always expects a commission on all pur- 
 chases made. This commission is then divided in an agreed upon 
 percentage with the other servants. When the commission runs from 
 5 per cent up to as high, perhaps, as 20 per cent in the case of sales 
 made at hotels frequented by foreigners, it can be seen that the serv- 
 ant's wages are often decidedly increased through the " squeeze." 
 When the official makes purchases for the Government, often he also 
 expects to take his squeeze. As has been said, when he collects taxes 
 he collects enough so that the squeeze can be retained after the taxes 
 are paid into the central treasury, aijd so on. 
 
 It has been thought by many that the chief objection of the officials 
 to the introduction of a uniform monetary system came from the fear 
 lest the squeeze system would thereby be seriously interfered with. 
 One source of income has been the exchange, money being paid out, 
 for example, in one kind of tael and charged up to the Government in 
 another Ifind, somewhat heavier, the official making the difference. 
 For example, the K'up'ing tael is heavier than the T'saoping by 2 per 
 cent. The Siangping tael is 2 per cent lighter than the T'saoping, 
 and of course any of these taels are considerably heavier than a Mexi- 
 can dollar. It is a common saying in Nanking among students who 
 receive prizes that " the prizes are awarded in K'up'ing, the examin- 
 ing official pays them in T'saoping, the minor officials distribute them 
 in Siangping, and by the time it reaches the student the tael has be- 
 
64 GOL0 STANDARD IN INTEBNATIONAL TRADE. 
 
 come a Mexican dollar, which, on being exchanged, is found to be 
 bad." 
 
 It has been thought also that whereas now the taxes are levied in 
 taels, of which the rates of exchange in cash can be made to vary 
 almost at the will of the local official, this source of profit would be 
 taken away if the Government were to make one uniform coin, either 
 tael or dollar, for the whole Empire, and were to make minor coins as 
 decimal parts of this, of which the value would be maintained uni- 
 formerly everywhere in the Empire. It is believed that on acocunt of 
 this lessening of the opportunity for squeeze on the part of the officials 
 many of them will be opposed to any reform. 
 
 This objection is not necessarily valid. In the first place there are 
 doubtless many individual officials, particularly those of the higher 
 ranks, who make, relatively speaking, little, if any use of the oppor- 
 tunity for profit which maj^ come from the fluctuating rates of 
 exchange. It is these higher officials whose opinion will, in the long 
 run, be decisive. 
 
 In the second place, there seems to be no especial need for connect- 
 ing the two subjects, provided the Central Government takes practical 
 note of the conditions and attempts to meet the issue fairly. As a 
 matter of fact at the present time, where this form of the squeeze is 
 employed, the taxes are actually paid by the people in copper cash, 
 although they may be levied in taels or in fractions of a tael. If the 
 Government were to take the position, therefore, that the customary 
 taxes as paid heretofore in cash should, for the time being, remain 
 unchanged, in cash ; that the local official should return to the central 
 treasurer the same amount that he had returned heretofore, and that 
 he should simply account for the balance as an addition to his own 
 salary, there would be practically no change from present conditions 
 beyond a new item in the matter of bookkeeping. It would, of 
 course, be desirable, if not essential, that the percentage retained for 
 added salary should be made practically uniform for officials of the 
 same rank in the same sections of the country. That might result 
 in comparatively slight changes in the rates of squeeze in different 
 localities, but not enough materially to affect the situation. If the 
 Government were to take up the question openlj' and fairly, with an 
 attempt to dispose of it in the way indicated, there can be little doubt 
 that many of the officials would be glad to join with their superiors 
 in the reform. The system of squeeze is now, generally speaking, not 
 recognized as a form of dishonesty. On the other hand, it is recog- 
 nized as a source of many abuses, and the more intelligent, more ener- 
 getic, and more patriotic officials would prefer to have the matter 
 regulated and made uniform. 
 
 So far as the officials are concerned, then, the matter may be summed 
 up by saying that the most intelligent ones, and particularly those 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 65 
 
 most conversant with the relations of the Government with other 
 countries and with international trade, believe that there should be a 
 monetary reform which should give a uniformity to the coins through- 
 out China, and which preferably should give to the new coins a fixed 
 value in terms of gold. 
 
 A very few, while believing that the system should be uniform, 
 think it would be better to leave it on the silver basis, on the ground 
 that the export trade would be encouraged thereby, and that it would 
 be equally as well, if not better, for Chinese interests. It should be 
 noted, however, that many of this class have changed their opinion on 
 further study of the question ; and there can be little doubt that the 
 trend of discussion is in the direction of the gold standard. 
 
 A goodly number of them, from their natural desire to move slowly 
 and to change existing conditions as little as possible, would favor 
 the adoption of a uniform silver standard first with the hope that it 
 might ultimately go to the gold standard. Many of this class also 
 seem to have been converted to the idea that it would be better to 
 begin with the gold standard. 
 
 A comparatively large class of the lower officials probably would 
 look askance at a reform which they feared would deprive them of 
 their squeeze. This class, however, is not made up of the most intel- 
 ligent and most influential officials, and the objection could probably 
 be fairly met. Of greater importance, however, is the fear of some 
 of the higher officials that if the Central Government took complete 
 charge of a uniform monetary system it would deprive the viceroys 
 and governors in the different provinces of the profits which they now 
 derive from their separate mints, and that the Central Government 
 would not make proper compensation for this profit which it had 
 taken. The solution to this difficulty, which is a real one, is, of course, 
 that the Central Government deal fairly, not to say liberally, with 
 the viceroj's when it takes control of their mints. 
 
 CHINESE BUSINESS MEN^ 
 
 For Americans who are not accustomed to conditions in oriental 
 countries, where the form of government is somewhat despotic, it is 
 important to keep in mind that the Government officials and the busi- 
 ness men have practically no personal association one with the other. 
 The official stands socially in a separate class from the business man, 
 and has nothing whatever to do with him excepting in connection 
 with tax collecting, with work in the courts, or in some other official 
 waJ^ He looks down upon the business man as one distinctively 
 lower in the social scale than himself, and it is to be feared, in too 
 many instances, as one that may perhaps be used as a source of profit. 
 
 The business man, on the other hand, who in his business dealings, 
 S. Doc. 128, 58-3 5 
 
66 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 as we have seen in connection with the discussion of banliing, is, as a 
 rule, honorable, scrupulously careful with reference to living up to 
 his contracts, and inclined to do business in accordance with the 
 customs of his trade, stands in awe and often in well-founded fear of 
 the official. He knows that if he opposes the official too openly he is 
 likely to be made to suffer for it. In consequence, there is no sympa- 
 thy between the classes. The officials are not inclined to consult the 
 business men with reference to a matter so important to trade as is 
 the reform of the monetary system, while the business men, on the 
 other hand, are quite of the opinion that if the officials attempt to 
 carry out any reform of the monetary system themselves they will 
 do it with an eye single to their own interests, and not to the interests 
 of business. It is important, therefore, to note the attitude of the 
 business men toward the reform itself, and then to consider their 
 opinions as to its practicability. 
 
 The business men have little confidence in the good faith of the 
 Government, or in the ability of the Government officials. They 
 do not hesitate to cite instances where the Government has practically 
 repudiated its bonds, when those bonds were taken by the Chinese 
 business men, although the Government has regularly paid its obliga- 
 tions due to foreigners. Even the Chinese officials themselves, at 
 times, make this distinction between treatment of the natives and 
 treatment of the foreigners, being much more careful not to offend 
 the foreigners. 
 
 (a) Of the numerous Chinese business men who were consulted 
 concerning the monetary reform, a few, and only a few, were of the 
 opinion that it would be wiser for China to remain on the silver 
 standard. Those thought that the silver standard, especially if silver 
 were depreciating in value, would tend to stimulate the export trade, 
 arid in that way to further Chinese interests. They were, however, 
 entirely ready to listen to argument on the question, and many of 
 them certainly it would not be difficult to convince that the fixed 
 rate of exchange would be preferable. Their arguments are answered 
 in Appendixes A, I, II, and III, 1. 
 
 (i) A few wished to retain the silver standard for speculative 
 purposes. They say that they like the risks of business; that busi- 
 ness is more exciting when exchange is fluctuating; that they like 
 to take the chances of making high profits from exchange ; and that 
 they are willing to take the losses that come when they make mistakes. 
 
 Some of those, hoAvever, while saying this as regards their indi- 
 vidual preference, were willing to add that it was much better for 
 business as a whole to have the rate of exchange stable; that they 
 thought the interests of the country would be furthered by the 
 stable rate, and that the Government ought to consider the interests 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 67 
 
 of the whole rather than the interests of the few who would gain by 
 speculation. 
 
 (c) A large majority, however, of the business men who were 
 consulted, and particularly the most important business men, such as, 
 for example, the President of the Bankers' Guild in Shanghai, the 
 President of the Chinese Chamber of Commerce in Hongkong, and 
 other important bankers and merchants, were decidedly of the opin- 
 ion that a stable rate of exchange was best, and that it would be best 
 for the Government, in the reform of its monetary system, to give 
 to the new coins from the beginning a fixed value in terms of gold. 
 
 These business men were very intelligent and seemed to have little 
 difficulty in grasping clearly the points of the plans of the American 
 Commission when they were explained to them. Most of them, of 
 course, having been trained in the present Chinese system, and not 
 having studied thoroughly monetary principles, did not know about 
 the plan beforehand. They, however, grasped it very readily when 
 it was explained, and with rare if any exceptions, when they under- 
 stood the system, they said that they would favor it, and that the 
 Government would do well to adopt it. 
 
 With reference to the banking interests their opinions were particu- 
 larly interesting and valuable. As regards the exchange bankers, 
 whose chief profits consisted in transferring money and credits within 
 the Empire itself, it was said that the reform would affect their inter- 
 ests comparatively little either way. They took their pay regularly 
 in the form of a commission on the exchange, and they could get their 
 pay as readily under one system as under another. 
 
 Some of the large, loan bankers said that they would decidedly pre- 
 fer the fixed rate of exchange, because there would be fewer bank- 
 ruptcies, and, in consequence, they would lose less under that system 
 than they do now. The regular rates of interest need not be changed. 
 
 They thought the small cash shops, whose profits now come practi- 
 cally entirely from exchanging from one form of money to another, 
 would be opposed. Both they and the higher officials said, however, 
 that the cash shops were small affairs, dependent largely upon the 
 more important bankers ; and that, if the bankers were in favor of the 
 reform, the object of the cash shop keepers would be of slight con- 
 sequence. 
 
 A .prominent member of the great guild of the Shan-si bankers 
 expressed himself as very strongly in favor of the reform and decidedly 
 in favor of the plan of the American Commission. When he was 
 asked whether he thought the guild as a whole could be persuaded to 
 cast its influence in favor of the reform and to aid the Government in 
 carrying it out, he said that he saw no reason why the guild should 
 not be willing to aid in the matter. It was his opinion that if the 
 Government would undertake the reform, and if the Controller or 
 
68 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 other persons who understood the subject thoroughly and some of the 
 higher officials who were in general charge of the system should visit 
 the heads of the guild and explain the matter to them thoroughly, 
 arrangements could in all probability be made with them for giving 
 their hearty support and assistance in carrying the system into effect. 
 
 RELATIONS OF OFFICIALS AND BUSINESS MEN. 
 
 The difficulties coming from the lack of sympathy and community 
 of interests between the different classes can be best exi^lained, per- 
 haps, by giving the opinions of some business men regarding the 
 establishment of a national bank for China, and their readiness to 
 subscribe for its stock. This question was discussed with representa- 
 tives of more than sixty guilds, including representatives of impor- 
 tant banks and bankers' guilds in Canton, Shanghai, Peking, and 
 elsewhere. The opinion was generally expressed that in the carrying 
 out of such a reform a national bank for China would be of great 
 assistance. The business men said also that they had considerable 
 money which they would be willing to invest in such a bank under 
 proper conditions. With substantial unanimity, however, they 
 agreed that the bank would fail if its management were left in the 
 hands of the officials, and that in consequence they would be entirely 
 unwilling to make any subscription unless the management should 
 be confided exclusively to business men with one or more foreigners 
 as managers. 
 
 When asked whether they would object to the Government laying 
 down the general lines of policy for the bank, in order that it might 
 be sure that the Government's interests would be subserved, they re- 
 plied that they had not the slightest objection to living up to proper, 
 well-understood regulations which should be made beforehand by the 
 Government, such as are common in other countries; that, further- 
 more, they would not object to the Government appointing inspectors 
 who might follow every action of the bank, in order to see that the 
 regulations were fully carried out. On the other hand, they would 
 not subscribe money or take any part in the management of the bank 
 if a high Government official were to be a member of the board of 
 directors, so that he could hear the discussions and take an active part 
 in determining the policy of the bank. They asserted that their rea- 
 son for taking this position was that they could not act freely and in 
 accordance with their best judgment if any high Government official 
 was present. 
 
 As one man expressed it, if one director who was a Government 
 official should say " go east," and say six other members of the board, 
 who are not officials, should want to go west, the whole board would 
 go east. The one vote of the official would determine the action of the 
 
GoLi) STANDAltD Ilj iNTEllNAtlONAt tUADE. 69 
 
 bank against the unanimous opinion of the other members of the 
 board. They would ultimately vote with him. The reason for this, 
 he said, is that the Government official, if his policy were not fol- 
 lowed, might very readily make complaints to the Government 
 authorities against the other members, have them arrested, their 
 property confiscated, and themselves perhaps imprisoned without any 
 fault of their own. They could not, they said, take such risks ; they 
 were entirely willing to live up to the law, and for the Government to 
 take pains to see that they did live up to the law ; but they could not 
 and would not attempt to join in an important business with a high 
 Government official. 
 
 One reason also why they insist upon having a foreign manager 
 equal in power to a native manager is for similar reasons. If a 
 high Chinese official were to demand a loan from the bank, a native 
 manager would not dare refuse him alone. If, however, it required 
 also the consent of the foreign manager to carry out the transaction, 
 they could count upon the foreigner being independent, inasmuch 
 * as he and his property would not be subject to seizure and confiscation 
 on the complaint of the Government official. The loans, therefore, 
 to the officials from a national bank with a foreign manager could be 
 made on a strictly business basis, as was proper. Without a foreign 
 manager this would not be the case. 
 
 When these opinions were reported to the high Government offi- 
 cials, most of them stated that it was unfortunate that the business 
 men were not better acquainted with the higher Government officials 
 and did not understand them better. They would then trust them 
 more fully. They recognized the fact, however, that this lack of 
 confidence did exist, and said that the Government must get the con- 
 fidence of the btisiness men before the system could be a suc- 
 cess. The business men say that this confidence can be secured only 
 by a proper law which shall give sufficient power to business men 
 and foreign experts, and which the Government will itself live up to 
 carefully; that the Government can secure this confidence in no 
 other way. Some of the high officials, when talking alone and pri- 
 vately with the American commissioner, said that the business men 
 were entirely right ; that it would not be safe for them to risk their" 
 money except under the conditions which they had themselves laid 
 down, and that any person who knew thoroughly the conditions in 
 China must agree with the Chinese business men. 
 
 Not only do the higher important business men refuse to unite with 
 the Government officials in business, as intimated above, but, speaking 
 generally, the common people are also afraid of the magistrates, and 
 distrust them in their dealings. The statement was made frequently, 
 in fact almost or quite universally, by not only business men, but 
 also by the higher officials themselves, that it would be much better, 
 
70 GOLD STANDARD IN INTERNATIONAL TRADB. 
 
 if it could be so arranged, to introduce a new coin for use among the 
 people through the banks and business men instead of through the 
 officials. The people, it was said, mistrust the officials and would 
 hesitate to accept a new kind of money from them, whereas they 
 would not hesitate to deal with the native bankers and business men 
 and would accept a new kind of money from them without hesitation, 
 if they were sure regarding its value. 
 
 THE COMMON PEOPLE. 
 
 It has been intimated elsewhere that the common people in China 
 are so accustomed to trading in different kinds of currency — taels of 
 various weights, cash of various kinds, and notes of different values — 
 that they would probably adopt a new good system as intelligently 
 and use it from the beginning with as few mistakes as would any other 
 people. It should not be thought, as in the case sometimes, that 
 people in general need to understand a monetary system in order to 
 use it properly. Probably no people understand fully their own sys- 
 tem. That is not necessary. The average man needs to be able to 
 recognize his country's money, and the relative value of one piece to 
 another, nothing more from the business point of view. A few men, 
 those managing the system, need to understand the principles of 
 money, to know the amount on hand in the treasury, the approximate 
 circulation, the relations with the banks, etc., but there is no reason 
 why the masses should understand all these things in order to do busi- 
 ness. The Chinese will understand as readily as Americans or 
 Europeans, probably more readily. Nothing better is needed. 
 
 THBJ DEALINGS WITH THE GOVERNMENTl 
 
 As has been explained in the Commissioner's report, page 16, when 
 the special commissioner for China reached Peking, he was informed 
 that a special monetary commission had been appointed to deal with 
 the whole subject of monetary reform. The members of the commis- 
 sion are the following: The Prince of Ch'ing, Chii Hung Chi, 
 Natung, Wang Wen Shao, Jung Ching, Lu Chuan Lin, Ching Feng, 
 Chen Pau Jui, Tseng Chung, Tai Hung Tzu. Besides these mem- 
 bers, partly ex officio, a special committee consisting of the following 
 executive and consulting officers had been selected to take up the sub- 
 ject for detailed discussion : Ch'en Pi, Hsii Shih Ch'ang, Chang Yiin- 
 yen, Jui Feng, Lei Pu T'ung, Wang Ching Mu, Shao Yen. The 
 president of the whole commission, who is also the actual head of the 
 Government under the Elmperor, was the Prince of Ch'ing. It is he 
 who would, of necessity, present in behalf of the grand council any 
 memorial to the Emperor or any decree for promulgation as law. He 
 stated that this special committee would consider fully the sugges- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 71 
 
 tions of the American Commission, and would then talk them over 
 with the higher officials, more particularly with the two presidents 
 of the Board of Revenue, and with His Excellency Natung, who had 
 been sent the preceding year as special commissioner to Japan to 
 study its monetary system, and who, in consequence, besides being a 
 man of great ability, had presumably more special knowledge of the 
 subject than the presidents of the Board of Revenue. The special 
 committee had no authority beyond that of discussion and report, 
 although, of course, its members were at liberty to express their 
 individual opinions and often aided the discussion very much by so 
 doing. The opinion of the presidents of the Board of Revenue and 
 Natung, so the Prince said, would be practically decisive, in all prob- 
 ability, as he would expect to accept their advice. 
 
 Discussions with this special committee and occasional meetings 
 with the three higher officials mentioned above were carried on several 
 times a week from June 25 until August 26, when the American com- 
 missioner was compelled to leave for home. As has been explained 
 in the report, the commissioner was treated with the greatest courtesy 
 by all these officials throughout. At first it was evident that both 
 some of these officials and the officials elsewhere throughout the coun- 
 try, who were visited by the commissioner, had some suspicions as to 
 the worthiness of the motives of the American Government in pre- 
 senting their plan, although those best informed, who knew that the 
 American commissioner was there as the result of the invitation issued 
 by the Chinese Government, naturally had fewer suspicions. As the 
 meetings went on and the plans were more and more developed, and 
 as it became evident that the Government of the United States was 
 asking for no special advantages, and that the benefits to it were 
 expected to come only through the improvement of conditions in 
 China, these suspicions seemed to vanish entirely, and the later meet- 
 ings were characterized by the greatest cordiality and personal sym- 
 pathy throughout. The new Chinese President of the Board of 
 Revenue, His Excellency Chao, as explained before, took the greatest 
 interest in the subject, and apparently still continues his interest in 
 the matter. It is believed that a considerable number of the special 
 commission, if not indeed all of them, believe that the plans of the 
 American Commission are wise and practicable, and that they can be 
 carried into effect as soon as a sufficient number of the viceroys and 
 other influential people shall have studied the matter enough to see its 
 significance. Of course, as the members had no right to express any 
 official opinion, and as they could not take any vote on the matter, 
 their opinions can be gauged only from the tone of the discussions. 
 There is no reason, however, to believe that in this way their opinions 
 were not gauged with a reasonable degree of accuracy. 
 
72 SOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Appendix A II contains, in outline, the substance of most of the dis- 
 cussions which were held with this Commission, although naturally 
 the discussions were much fuller than would be indicated by the out- 
 line, and it is not possible, of course, here to present the arguments 
 and questions of the Chinese members of the Commission. 
 
 As has already been explained in the report, the results are, on the 
 whole, fairly satisfactory. Many of the higher officials and the 
 Prince of Ch'ing express opinions strongly in favor of the American 
 plans. 
 
 On the whole, the American Commissioner feels, as the result of 
 many assurances from both foreigners and Chinese officials, that the 
 work in China has been productive of very good results, and that, 
 even if the Chinese Government does not immediately take up the sys- 
 tem proposed by the American Commission (a result indeed that is 
 hardly to be expected), it has, nevertheless, been saved from a good 
 many mistakes which it was clearly about to make beforehand, and 
 that a system quite similar to that proposed by the American Com- 
 mission will in due course of time be adopted. Indeed, since parts 
 of this report have been in the printers' hands word has been received 
 bj' the American Commissioner direct from officials who are among 
 the most influential in China that, in spite of discouraging delays and 
 even some discouraging indications, the persons favoring the reform 
 may be confident that the proper plans will be carried through ulti- 
 mately, and that they need simply to cultivate the patience which is 
 often required in dealing with conditions in China where, owing to 
 the looser form of government organization, any great changes must 
 be made with great deliberation. 
 
APPEIsTDIXES. 
 
 76 
 
Appendix A. 
 
 « 
 
 CHINA. 
 
 I. MEMORANDA ON A NEW MONETARY SYSTEM FOR CHINA. 
 
 By Jeremiah W. Jenks, Commissioner in CJiima. 
 
 I. NOTE FROM THE CHINESE CHARGE D'AFFAIRES TO THE SEC- 
 RETARY OF STATE OF THE UNITED STATES OF AMERICA. 
 
 3£r. Shen to Mr. Hay. 
 
 No. 277.] Chinese Legation, 
 
 Washington., January 22, 1903. 
 
 Sir : Referring to my note No. 276, of the 19th instant, in which I 
 informed you that I had received instructions from the Imperial Gov- 
 ernment relative to a proposed plan looking toward an international 
 concert of action bearing upon the monetary question, I have the 
 honor to submit to you the accompanying memorandum containing 
 the views of my Government relating to the above-mentioned subject. 
 
 It is the confident hope of the Imperial Government that the sub- 
 ject-matter of its memorandum may receive the careful consideration 
 of the Government of the United States, and that such steps may be 
 taken as it may deem proper toward bringing about the desired end, 
 to the mutual benefit- of all concerned. 
 
 Accept, sir, etc., Shen Tung. 
 
 [Inclosure.] 
 MEMORANDTJM. 
 
 The serious results which are threatened by the recent fluctuations 
 in the value of silver bullion to the commerce, both of gold and silver 
 standard countries, have induced the Chinese Imperial Government, 
 acting in concert with the Mexican Government, to ask the cooper- 
 ation of the United States in seeking a remedy for these conditions 
 for the mutual benefit of all concerned. Safe and profitable trade 
 between any two countries is dependent to a considerable degree 
 upon relative stability in the value of their currencies. This stability 
 is destroyed in the trade between a gold-standard country, like the 
 United States, and a silver country, like China, when the variations 
 
 75 
 
76 GOLD STANDARB llf INTEKNAtIONAL TKABE. 
 
 in the gold value of silver, as was the case during the year 1902, 
 reached nearly '10 cents an ounce in gold in a single year, or nearly 
 20 per cent upon the price of silver bullion. 
 
 The problem of securing relative stability of exchange bei^ween the" 
 gold and silver countries is one whose importance is not limited to 
 silver countries, but comes home with force to all those gold-standard 
 countries which are seeking markets for their products in silver coun- 
 tries and are seeking the extension of their trade in the Orient. The 
 importance of this trade is indicated in some measure by the following 
 table of the imports into certain 'silver-using countries for the latest 
 year for which data is obtainable, based in some cases upon official 
 figures, and in others upon those presented in the Statesman's Year- 
 book for the year 1902, reduced to round figures in American gold 
 coin : 
 
 Imports of certain silver-using countries. 
 
 China $190, 934, 342 
 
 Mexico 65,083,451 
 
 Philippine Islands 32, 141, 842 
 
 The Straits Settlements 150,000,000 
 
 Federated Malay States 18,000,000 
 
 Indo-China 35, 750, 000 
 
 Cochin China 24, 000, 000 
 
 Tonking 12, 300, 000 
 
 Siam 12, 600, 000 
 
 Korea 5, 500, 000 
 
 Bolivia 3, 300, 000 
 
 Colombia 11, 083, 028 
 
 Guatemala 1, 521, 900 
 
 Honduras 1,074, O.TO 
 
 Nicaragua 3, 500, 000 
 
 Paraguay 1, 838, 710 
 
 Total 574, 627, 323 
 
 This large volume of imports into the silver countries, exceeding the 
 entire annual import trade of the United States, as recently as 1879, 
 comes almost exclusively from the gold-standard countries which are 
 engaged in the manufacture of finished goods for the world's markets 
 and are profoundly interested in the extension of those markets. The 
 table given does not include British India and several silver countries 
 in South America which might become parties to an engagement for 
 giving stability to the relative value of the monejr of gold and silver 
 countries. 
 
 It will be noted that the largest amount of imports in the table 
 given above is credited to the Chinese Empire. This large volume of 
 trade is threatened in the present state of the Chinese fiscal and cur- 
 ]-ency systems with a decline, the limit of which no one could foresee. 
 The heavy indemnity imposed by certain of the powers upon the 
 Chinese Government has led to large offerings of silver on the Chi- 
 nese market and has diminished the power of that country to purchase 
 foreign goods to a point which threatens to materially reduce the 
 existing export trade to China from the United States, Great Britain, 
 France, Germany, and other countries. 
 
 The foreign trade of China, while standing at the head of the above 
 table in the order of magnitude, is small at present in proportion to 
 the population and resources of the Chinese Empire. The exports 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 77 
 
 from the United States to China have multiplied many fold within 
 twelve years, and now exceed 24 million dollars. The present volume 
 of imports of merchandise into China, however, amounts to only 
 about 50 cents per capita in gold, and affords but a slight measui-e of 
 what the trade of China might become if expanded in the future as 
 rapidly as even that of Japan, which has advanced in ten years from 
 about $1.25 to nearly $3 per capita. An import trade of $3 per cap- 
 ita for the Empire of China, with its nearly 4:00 million people, would 
 represent the enormous sum of $1,200,000,000, or one-third more than 
 the largest amount ever attained by the import trade of the United 
 States. The encouragement of a commerce so important as this seems 
 to the Chinese Imperial Government to be worthy of the most serious 
 ccftisideration of the Western powers. It would afford an outlet for 
 the produce of the labor of many thousands of workers of Europe 
 and America, and employment for many millions of the capital of 
 those nations, and would dot the Pacific and Indian oceans with the 
 flags of a carrying trade as large as that now required in the entire 
 commerce between Europe and the United States. 
 
 While a readjustment of the currency of China upon a stable rela- 
 tionship with that of the gold-standard countries would not in itself, 
 perhaps, accomplish so tremendous a revolution as would be involved 
 in the creation of a trade of more than a thousand millions, yet it 
 would be one of several steps in that direction which would con- 
 tribute greatly to accelerate an event of such paramount importance 
 to the capitalists and the producing masses of the Old and New 
 Worlds. The necessity is becoming more and more keenly felt by 
 American and European manufacturers for the opening of new and 
 the extension of already existing markets in every direction for the 
 absorption of their goods, in order that means may be found for 
 relieving overproduction and affording profitable returns to the in- 
 vestment of capital. China, with her immense population and conse- 
 quently large potential capacity for absorbing foreign products, 
 offers a most important field for American and European manufac- 
 tures, the ready absorption of which would tend to relieve overpro- 
 duction and contribute materially to the prosperity of the manufac- 
 turing nations. 
 
 If results such as these are within the range of the influence of a 
 reorganization of the monetary system of China, in harmony with 
 the system of other powers where silver is the principal money in use, 
 it is evident that the Chinese Imperial Government acts from no 
 narrow and selfish motive in asking the United States and the Eepub- 
 lic of Mexico to join her in seeking an international arrangement for 
 securing greater fixity of relationship between the moneys of the 
 gold and silver countries. 
 
 Questions of finance and economics should be considered in all 
 their bearings, with due'attention to their far-reaching effects, and not 
 merely upon results which bring immediate benefit. Important as 
 are the indemnity payments to the several powers, and ready as China 
 is to meet them to the best of her ability, they represent but a trifling 
 proportion of the benefits which may be derived by the Western pow- 
 ers from a policy which would give to China a permanent uniform 
 monetary system, and make her a wide market for the products of 
 American and European factories and workshops. 
 
78 GOLD 8TAWDAED IN INTERNATIONAL TRADE. 
 
 It is with a view to finding a remedy for the monetary causes which 
 threaten to retard this development, and to preserye the export and 
 carrying trade of the. leading manufacturing nations to the silver 
 countries, so that trade may not lose its healthy activity, and confi- 
 dence may be restored to investors and manufacturers, that the cooper- 
 ation of the United States is asked in representations to other lead- 
 ing powers in favor of international concert of action on this subject. 
 The Government of 'China does not seek the restoration of the free 
 coinage of silver by either the gold or silver using nations. It is 
 recognized by this Government that bimetallism in the sense of the 
 free coinage of both metals is a policy which has been definitely dis- 
 carded by leading powers of Europe and by the United States, and 
 that it would be futile to propose its restoration. 
 
 It is, therefore, not the expectation nor the wish of this Govern- 
 ment that the gold-standard countries should take any action tending 
 to impair their monetary standard or to make material changes in 
 their monetary systems. It is desired that the governments of gold 
 countries having dependencies where silver is used and the govern- 
 ments of silver countries shall cooperate in formulating some plan for 
 establishing a definite relationship between their gold and silver 
 moneys, and shall take proper measures to maintain such relation- 
 ship. One such plan, it is reported, has already been proposed in 
 both Houses of the Congress of the tlnited States with reference to 
 the Philippine Islands. It is this and other plans designed to accom- 
 plish the same end which the Government of China would be glad to 
 have considered by the United States and other governments, with the 
 view to the adoption of the best attainable monetary arrangement by 
 those countries which are not prepared under existing conditions to 
 adopt a currency system involving the general use of gold coins. 
 
 The cooperation of the United States with the Chinese Imperial 
 Government and with the Republic of Mexico in presenting this 
 subject to other governments would, in the opinion of this Govern- 
 ment, aid greatly in securing a prompt and satisfactory solution of 
 an economic problem which threatens the ruin of the silver-using 
 countries on the one hand, in the vain effort to meet increasing 
 gold obligations abroad, and which threatens also the commercial 
 prosperity of the gold-using countries by destroying the purchasing 
 power of their customers. It would, we believe, contribute materially 
 to the permanent satisfactory settlement of this problem if Great 
 Britain and France, with their important colonial possessions in 
 Asia, and if Germany and Russia and other countries having large 
 commercial and territorial interests there, would unite with the 
 IJnited States and China in the adoption of a common standard for 
 a new coinage system in the silver countries; in recommendations 
 for the readjustment of the fiscal and monetarj' relations of China 
 with the other powers which would permit that country to continue 
 to be a user of silver and a purchaser of the products of the manu- 
 facturing nations; and in such provision for their own subsidiary 
 currencies as would tend to promote stability of relationship between 
 their gold and silver money. The Chinese Imperial Government 
 will welcome the cooperation of the United States in this matter in 
 any form which may be acceptable to that power, and earnestly pravs 
 that the subject may receive the prompt and serious consideration 
 which, in the opinion of this Government, it merits. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 79. 
 
 II. MESSAGE FROM THE PRESIDENT OF THE UNITED STATES, 
 
 TRANSMITTING 
 
 A EEPORT FROM THE SECRETARY OP STATE, WITH ACCOMPANYING NOTES 
 FROM THE MEXICAN AMBASSADOR AND THE CHINESE CHARGE D'AF- 
 FAIRES AD INTERIM, WHICH SEEK THE COOPERATION OF THE GOVERN- 
 MENT OF THE UNITED STATES IN SUCH MEASURES AS WILL TEND TO 
 RESTORE AND MAINTAIN A FIXED RELATIONSHIP BETWEEN THE MONEYS 
 OF THE GOLD-STANDARD COUNTRIES AND THE SILVER-USING COUNTRIES, 
 ETC. 
 
 To the Senate and House of Representatives: 
 
 I transmit herewith a report from the Secretary of State, with 
 accompanying notes from the Mexican ambassador and the Chinese 
 charge d'affaires ad interim, which seek the cooperation of the Govern- 
 ment of the United States in such measures as will tend to restore and 
 maintain a fixed relationship between the moneys of the gold- 
 standard countries and the silver-using countries. 
 
 I recommend that the Executive be given sufficient iiowers to lend 
 the support of the United States, in such manner and to such degree 
 as he may deem expedient, to the purposes of the two Governments. 
 
 Theodore Roosevelt. 
 
 White House, January £9, 1903. 
 
 The President : 
 
 I have the honor to submit herewith a translation of a note from 
 the ambassador of the Republic of Mexico and a copy of a note from 
 the charge d'affaires of the Imperial Chinese Government. Both notes 
 ask the cooperation of the Government of the United States in such 
 measures as will tend to restore and maintain a fixed relationship 
 between the moneys of the gold-standard countries and the silver- 
 using countries. It is not asked that the United States modify its 
 monetary system, and it is distinctly disavowed that any movement is 
 contemplated for the restoration of international bimetallism. The 
 opinion is expressed, however, by representatives of both Govern- 
 ments, that consultation between the United States and European 
 powers having dependencies in the Orient, and the independent coun- 
 tries where silver money is in general use, may result in the adoption 
 of a monetary system which will prev-ent the great fluctuations in 
 exchange which now occur in trade with tl^ silver-using countries. 
 If such a result can be achieved — and it is pointed out that at least a 
 partial solution has been proposed in the United States in a bill now 
 pending in the Senate in regard to the Philippine Islands— great 
 benefits will follow to the trade of the world by making easier the 
 access of the products of the manufacturing nations to the markets of 
 China and the other silver-using countries. 
 
 The consideration of this subject may have an important bearing 
 also on the payment of the indemnity due by China to certain 
 European powers and to the United States by enabling the Chinese 
 Empire to put her monetary system upon a basis which will make it 
 possible for her to meet these payments in a manner satisfactory to 
 
80 GOLD STANDARD IW INTERNATIONAL TRADE. 
 
 all the powers. This result, if it could be accomplished, would be of 
 the first importance not only to the United States and to the other 
 powers having a share in the indemnity payments, but to China her- 
 self and her future development. 
 
 ' I respectfully submit for your consideration that these communica- 
 tions be transmitted to Congress with the recommendation that the 
 Executive be given sufficient powers to lend the support of the United 
 States, in such manner and to such degree as you may deem expedient, 
 to the purposes of the two Governments whose notes are herewith 
 submitted. 
 Respectfully submitted. 
 
 John Hay. 
 Department of State, 
 
 Washinffton, January ^8, 1903. 
 
 List of papers. 
 
 From Mexican ambassador, January 15, 1903, with inclosed memorandum. 
 
 Prom Cliinese charge, January 19, 1903. 
 
 Prom Chinese chargg, January 22, 1903, with inclosed memorandum. 
 
 III. SUGGESTIONS REGARDING A NEW MONETARY SYSTEM FOR 
 
 CHINA. 
 
 1. The Chinese Imperial Government promptly to take effective 
 steps, satisfactory to a majority of the indemnity treaty powers, to 
 establish a general monetary sj'stem consisting chiefly of silver coins 
 with a fixed gold value. 
 
 2. In the establishment and management of this system China to 
 invite and employ acceptable foreign assistance. 
 
 3. In pursuance of this plan, the Chinese Government to appoint 
 a foreign controller of the currency, who shall have general charge 
 of the system for China; he to have acceptable associates in charge 
 of the mint or of such work as he may prescribe. 
 
 4. The controller to make monthly reports in detail of the condi- 
 tion of the currency, including amounts in circulation, loans, drafts 
 on foreign credits, etc. His accounts (but not those of the general 
 Government) to be open at reasonable times to- inspection by accred- 
 ited representatives of the powers interested in the indemnity, 
 provided the Chinese Government judges that such a provision 
 would be wise in order to secure confidence in the system. Such 
 representatives, as also ^he associate controllers, to have the right of 
 suggestion and recommendation. 
 
 5. The Chinese Government to adopt a standard unit of value. 
 The unit to consist of grains of gold, and to be worth presum- 
 ably, approximately, the gold value of a tael, or somewhat more than 
 a Mexican dollar. Provision to be made for the free coinage of 
 suitable pieces, multiples of this unit, 5, 10, and 20, on demand, for 
 a reasonable coinage charge. Eventually some to be coined on Gov- 
 ernment account. 
 
 6. China to coin as rapidly as possible silver coins, with an 
 
 appropriate device, about the size of a Mexican dollar, for circulation 
 in the country. These to be maintained at par with the standard gold 
 
GOLD STANBARD IN INTEBNATIONAL TRADE. 81 
 
 unit at a ratio of about 32 to 1. More to be coined thereafter, accord- 
 ing to needs, as indicated by provisions following. Subsidiary and 
 minor coins, silver, nickel, and copper, of suitable weight and value 
 to be provided. 
 
 7. Both the gold and silver coins to be receivable at par in payment 
 of all obligations due to the Chinese Imperial Government in any of 
 the provinces. When such obligations have been made in silver, the 
 new coins may be tendered instead at their coin value. 
 
 8. The Government at its discretion, in conjunction with the vice- 
 roys, from time to time to declare, by proclamation, in the various 
 provinces the new coins legal tender for debts incurred after a date 
 fixed in the proclamation. Previous debts to be paid as contracted. 
 
 9. For the maintenance of the parity of the silver coins, the Chinese 
 Government to open credit accounts in London and other leading 
 commercial centers against which it may draw gold bills at a fixed 
 rate, somewhat above the usual banking rates. For example, if the 
 usual banking rate on London, under the system, were about 1 of the 
 new coins for 2s., the Government might sell if the rate rose to 1.02 
 for 2s. Such drafts to be made only under the direction of the con- 
 troller of the currency, but to be made on demand for all depositors of 
 the new silver coins in sums of not less than, say, 10,000 taels. 
 
 10. Should it be necessary to make a loan for the establishment of a 
 general monetary system with adequate exchange funds, it to be se- 
 cured by sources of revenue sufficient to yield an amount which will 
 provide for the needed interest and sinking fund, such revenues to be 
 managed in a way satisfactory to the parties interested. 
 
 11. The seigniorage profit from coinage to be kept as a separate 
 fund. Whenever 500,000 taels worth shall have been accumulated, it 
 to be placed as a gold deposit with the several foreign depositaries in 
 proportion to drafts made upon them. This process to be continued 
 till at least taels worth shall be in the gold fund on deposit. 
 
 12. For replenishing the gold fund after its reduction bj^ drafts, the 
 controller to honor silver drafts drawn by the foreign agents of th: 
 treasury in exchange for gold, at rates fixed by the controller. 
 
 13. Provision to be made for a banking law under which bank note ; 
 kept at par with the legal-tender currency may be issued by an impe- 
 rial bank or by other responsible banks under the supervision of the 
 controller. 
 
 14. As rapidly as is practicable the new currency to be introduced 
 into the various provinces, the controller making use of the local gov- 
 ernments, banks, business houses, and such other agencies as are best 
 suited to the purpose. 
 
 15. Within five years the new system to be introduced into all the 
 treaty ports, and as far as possible, elsewhere, and all customs duties 
 to be collected in terms of the new currency. Local taxes to be col- 
 lected in new currency as fast as it is adopted in provinces, and pro- 
 vision also to be made for the keeping of the tax accounts under the 
 new system. 
 
 16. The new system to be put into effect when of the new 
 
 coins are ready for circulation. 
 
 17. The controller and the representatives of the powers to be 
 authorized to recommend economic reforms to the Jmperial Govern- 
 ment. 
 
 S. Doc. 138, 58-3 6 
 
82 GOXD STANDARD IN INTERNATIONAL TRADE. 
 
 V. CONSIDERATIONS REGARDING A NEW MONETARY SYSTEM 
 
 FOR CHINA. 
 
 1. ADVANTAGES OP A GOOD SYSTEM. 
 
 When the Imperial Government of China, on January 22, 1903, 
 addressed its memorandum to the United States concernmg the estab- 
 lishment of a new monetary system which should fix the rate ot ex- 
 change between China and gold-standard countries, the Government 
 of China doubtless fully recognized the great advantages which would 
 accrue to it should such a reform be carried out. It doubtless also 
 realized that such a reform would be beneficial to the nations with 
 which it had commercial relations. It is, however, perhaps well to 
 mention here what may be some of the advantages both to China and 
 to the foreign countries concerned, and to note also how this move- 
 ment appeared to others. 
 
 It was natural that the Government of the United States should 
 welcome the proposition to put China upon a gold basis and should 
 look for the cordial cooperation of the leading manufacturing and 
 exporting nations of Europe, because such a measure promises so 
 much for the extension of their future trade and their opportunities 
 for safe investments. The present uncertainties, due to fluctuations 
 in exchange, in regard to the profits upon commercial operations be- 
 tween the gold countries and the silver countries would be brought to 
 an end if these fluctuations were brought within the usual limits 
 between two gold countries. Under present conditions the importer 
 in a silver country is compelled to live from hand to mouth and to 
 greatly restrict his orders for goods given to European and American 
 exporters. Investments of capital are even more hazardous, since 
 a fall in the price of silver equal to that which occurred within a few 
 months in 1902 would wipe out profits of 15 or 20 per cent and reduce 
 by that amount the value of an investment made in a silver country 
 if it were sought to Avithdraw it in gold. 
 
 The adoption of a stable exchange, by remedying these conditions, 
 would unquestionably stimulate the importation into China of the 
 products of European and American mills and factories. Many of 
 these imf)ortations would be in the form of advances of capital for 
 the development of the rich natural resources of China. These 
 investments would be made in the form of rails and rolling stock for 
 new railways, equipment for factories, and supplies for the laborers 
 engaged in extending railways and modern industrial methods 
 throughout China. The fact that such exportations from the manu- 
 facturing countries would not depend primarily upon the increased 
 consuming power of the Chinese people, but upon the surplus of 
 capital of the rich countries seeking investment, would greatly stimu- 
 late this movement in the earlier years. This was the experience of 
 Russia and Japan when they adopted the gold standard. In the case 
 of Eussia, imports of foreign goods rose from 416,000,000 roubles 
 ($210,000,000 gold) in 1890 to 626,000,000 roubles ($315,000,000 
 gold) in 1900 — an increase of 50 per cent in ten years. In the case of 
 Japan, the imports of foreign goods rose from 81,000,000 yen 
 ($40,000,000) in. 1890 to over 300,000,000 yen ($150,000,000)" in 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 83 
 
 1900 — an increase of about 200 per cent, even when allowance is made 
 for the reduced value of the yen by the fall of silver. 
 
 If a ratio of increase corresponding to that of Japan were to occur 
 in the imports of foreign goods into China, such imports would rise 
 within ten years from 50 cents to $1.50 per capita and a market would 
 be opened for $400,000,000 worth in American gold of the products of 
 Europe and America, in addition to the present volume of their trade 
 with China. While it is probable that the development of the com- 
 merce of China would not be so rapid as that of Japan, there can be 
 no doubt that the opportunity for large trade and safe investments 
 offered by the adoption of a uniform currency in China based upon 
 the gold standard would afford benefits to the manufacturing and 
 exporting nations which abundantly justify earnest efforts on their 
 part to secure such an important economic result. 
 
 Already, at about the date of the appointment of the Commission, 
 the importance of stable exchange in China had become a subject of 
 discussion in the Orient and of action by several commercial bodies. 
 Typical of these expressions is the resolution adopted on April 18 
 last by the Shanghai General Chamber of Commerce : 
 
 " Plaving in view the fact that silver is subject to violent fluctua- 
 tions, and that China's financial obligations, national and commercial, 
 are now mainly, and in future will probably be entirely, with 
 gold-using countries, this chamber is of opinion that the treaty ]>ow- 
 ers should urge the Chinese Government to take the necessary steps 
 without delay to provide for a uniform national coinage as a first step 
 toward establishing the currency of this country on a gold basis at as 
 early a date as practicable." 
 
 The high authority of Sir Robert Hart, inspector-general of the 
 imperial maritime customs, may also be invoked in favor of securing 
 for China the great commercial and fiscal benefits of a gold standard. 
 In a paper presented to the board of foreign affairs and printed in the 
 North China Herald of July 3, 1903, Sir Robert Hart declares : 
 
 " It would be much wiser for China to maintain a gold standard 
 instead of a silver one as at present, since silver has dropped down to 
 such a degree, and moreover possesses no certain or uniform exchange, 
 even within the limits of a single day. The hundreds of trades are all 
 disastrously affected by the present state of the currency, whiU>, the 
 Government having to pay its foreign debts in gold, both country 
 and people are being plunged intc^ the depths of financial distress. 
 The conditions pictured in the foregoing therefore compel one to 
 seek some plan whereby they may be ameliorated, and so make it that 
 China, while still using a silver currency, shall so fix a uniform 
 exchange between silver and gold that there may be no danger of 
 uncertain fluctuations." 
 
 Such reform, however, needs to be very carefully considered from 
 all possible points of view. Closely related to the project of estab- 
 lishing a definite monetary system for China on the gold basis are 
 several subjects relating to the monetary systems of other countries 
 of the Orient, most of which are dependencies of the leading Euro- 
 pean powers. These countries include the Philippines, under the 
 authority of the United States; the Straits Settlements, under the 
 authority of Great Britain; Indo-China, under the authority of 
 France, and the dependencies and colonies of Germany in East 
 
84 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Africa and Asia. In support of the general objects sought, the 
 Commission presented, therefore, to the European powers: 
 
 1. Suggestions for a monetary system for China. i,- u 
 
 2. The subject ef approximate uniformity in the relationship be- 
 tween the gold unit and the silver coinage in China and m such 
 other countries as may hereafter establish new monetary systems 
 based on the gold standard. 
 
 3. The subject of establishing a certain regularity in such pur- 
 chases of silver bullion as are actually required for coinage purposes, 
 with a view to aiding the gold price of silver and eliminating, as 
 far as practicable, the extreme fluctuations in price incident to specu- 
 lation, thus rendering the adoption of the gold-exchange system 
 much more easily attainable in countries whose credit needs 
 strengthening. 
 
 2. DIFFICULTIES OF A CHANGE IN CHINA. 
 
 The question of a monetary system for the Empire of China is 
 distinctly a practical one. While the establishment of a new mone- 
 tary system m a country so differently situated as regards its busi- 
 ness, governmental organization, and civilization from those of the 
 western world would be one of great interest to all students of mone- 
 tary science, nevertheless the question as treated by the American 
 Commission on Internation Exchange is one which has to do with 
 governmental action and with the action of business men in the near 
 future; and, in consequence, it is to be considered chiefly from the 
 point of view of practice. Under these circumstances it is advisable 
 at once to realize as clearly as possible the difficulties which stand in 
 the way of the establishment of any satisfactory monetary system in 
 the Chinese Empire. The chief difficulties may perhaps be enumer- 
 ated as follows : 
 
 1. At the present time China has no national monetary system. 
 Indeed, it would not be too much to say that she has no monetary sys- 
 tem at all of the type common in Europe and America. In several of 
 the treaty ports silver coins circulate largely ; in Shanghai and Tient- 
 sin, the Mexican dollars; in certain parts of Manchuria, the Russian 
 rouble; in Canton and Hankow and in various provinces, dollars 
 coined by the mints of the respective viceroys; and other coins are 
 also used in different places. Injnany of these ports, even, as gener- 
 ally in the interior, instead of coins, silver shoes — sycees — or other 
 forms of silver bars are used, which pass in accordance with their 
 weight and fineness. In the country districts in the interior even sil- 
 ver is comparatively seldom employed by the Chinese, the, copper cash 
 being practically the sole medium of exchange. Even the so-called 
 silver unit of the tael has no general validity. In Shanghai the tael 
 means one weight of silver, in Tientsin another, in Peking another — 
 a popular book on coinage enumerating fourteen different taels of 
 different weights; and the tael thus varies in weight and in conse- 
 quence in value in the different parts of China. Under these circum- 
 stances, of course, the question of a national monetary system for the 
 Chinese Empire involves not merely the learning of the value of some 
 new coin on the part of the people, as would be the case in. any of the 
 European countries, but it involves also the problem of having'the peo- 
 ple become accustomed to the use of coins which may be counted, in- 
 
GOLD STAKDARD TN INTERNATIONAL TRABE. 85 
 
 stead of silver which must be weighed. Moreover, the Chinese people 
 are proverbially conservative and indisposed to change from the cus- 
 toms of their fathers. Experience both in China and elsewhere, how- 
 ever, shows that a people soon learn a new money system if it is for 
 their advantage. Moreover, China has in one way a decided advan- 
 tage in having no established uniform system. Her Government is 
 under no obligation to redeem the old coins, except those issued by the 
 provincial governments. 
 
 2. The central Government of China has not been accustomed to 
 enter into the details of administration of local government in the 
 different parts of China. Those details have been entrusted to the 
 viceroys and other local officials. For the establishment of a national 
 monetarjr system in any country it is ordinarily imderstood that the 
 central government must be strong, and that it must exercise its 
 authority directly over individuals throughout the country. It will 
 be recalled that when the United States was first organized under the 
 confederation, the Government practically broke down because the 
 central Government could act upon individuals only through the sep- 
 arate States. Possibly the most essential improvement in the new 
 Constitution was the establishment of authority in the central Gov- 
 ernment to deal on certain matters directly with individual citizens 
 throughout the entire territory included in the United States with- 
 out the intervention of local authorities. The fact that the central 
 Government in China has not been accustomed to deal thus directly 
 with the individual citizen in many matters will make it necessary 
 for the success of the new system to extend somewhat this custom, 
 and also to secure the co-operation of the viceroys and of other local 
 authorities in order to make the system effective with as little friction 
 as possible. There is no doubt that, by the organization of a central 
 national bank or some similar centralized organization this difficulty 
 can be largely overcome. 
 
 3. Of course wherever a change in the present monetary system 
 would lessen materially the revenues of the viceroys, governors, and 
 other officials, it would be only just that care be taken so to adjust the 
 local revenues or the revenues of the new system that reasonable com- 
 pensation would be made to the officials for the losses sustained. 
 While the new system would tend toward needed centralization of 
 administration, such administrative change ought not to be made 
 unjustly without due consideration for present conditions. 
 
 It has also been suggested that a general monetary system, espe- 
 cially if it were founded on a gold basis, would be contrary to the 
 personal interests of many of the local officials and of the individual 
 Chinese bankers, that, in consequence, it would meet their opposition 
 ■and would, therefore, be likely to fail. It is said that it has been the 
 custom for the local officials in receiving the taxes and other obliga- 
 tions due the Government, to make profit, at times large, from the 
 exchange of the local silver, copper, or other material employed in 
 payment into the form in which payments were made to the higher 
 authorities. If a monetary system were to become general and the 
 laxes were levied directly in terms of the new coin, this profit from 
 exchange, etc., might possibly be largely taken away. 
 
 The local bankers have also, it is said, made large profits often from 
 themselves acting as exchange agents in making payment between 
 individuals and between the individuals and the Government. 
 
86 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Some persons have even been of the opinion that opposition would 
 be made to a new system even by the European bankers, because their 
 business has for a long time been largely an exchange business, and a 
 very large percentage of their profits have come from their profits m 
 exchange. If the monetary system of China were placed on a gold 
 basis, it is thought, these profits naturally would be very much less- 
 ened. In most cases these difficulties are not important and will make 
 no trouble. The way in which the new system will benefit instead of 
 injure both these classes is explained later. 
 
 3. The Government of China is under so great financial obligations 
 on account of its foreign debt and the indemnity due the powers that 
 any monetary plan to succeed ought to have the good will and moral 
 support of all the great powers ; or, at any rate, it must be one which 
 will not interfere in any adverse wav with the settlement of the obli- 
 gations which are due to them, ft is on this account, of course, 
 that it has been thought desirable for China and those assisting her 
 in the attempt to inaugurate a new monetary system to secure before- 
 hand the sympathy and moral support of all the great powers inter- 
 ested in the indemnity. Such sympathetic consideration has already 
 been secured by the visit of the Commission on International Ex- 
 change to Europe and Japan. The obligation of the indemnity has, 
 of course, weakened the power of China financially for a time, but 
 it is hoped this may be overcome. 
 
 4. Inasmuch as the stability of exchange in the settlement of pay- 
 ments in foreign trade is a matter of prime importance in connection 
 with the proposed monetary system, being in fact the point on which 
 the chief emphasis was laid by the Chinese Government in its memo- 
 randum addressed to the United States Government January 22, 
 1903, the plan and the method of administration in order to be suc- 
 cessful must commend themselves to foreign business men who are 
 engaged in trade with China. The Chinese indemnity, in accordance 
 with the interpretation given to the protocol by several of the powers, ' 
 is payable in gold and is payable through the medium of a committee 
 of business men and bankers. 
 
 Foreigners who have money to invest are deterred from such 
 investment in China by the danger of loss coming from the fluctu- 
 ations in the rates of exchange. Persons who have goods to sell in 
 China, not knowing \^'hat their return will be when sales are made 
 in terms of the silver unit in China on account of the fluctuations 
 in the value of that unit, may at times meet with losses, when on the 
 day of the sale the terms agreed upon would secure a profit. Other- 
 wise they must pay bankers liberal commissions for forward rates of 
 exchange. In consequence, business men naturally hesitate about 
 exporting to China. Between 1882 and 1902 it has been estimated 
 in a letter by Sir Charles Dudgeon to the China Association, th:it 
 silver declined in value as compared with gold 49.7 per cent; as com- 
 pared with copper cash, 26.5 per cent. As compared with gold, cop- 
 per cash has fallen about 32.5 per cent. 
 
 Under these circumstances any plan which is to be successful must 
 be not merely good in itself, but, if it is to overcome these evils, it 
 must be one which will have the confidence of both Chinese and for- 
 eign business men. The plan here proposed is in accordance with the 
 views of the majority of the ablest bankers and business men con- 
 sulted. 
 
GOLD 8TANDAED IN INTERNATIONAL TRADE. 87 
 
 5. The American commissioners, in presenting a plan for a mone- 
 tary system for China, represent China, inasmuch as they were 
 appointed for this purpose on the invitation of the Chinese Govern- 
 ment. The plan m hich they present is the one which they believe to 
 be the best for China herself, the one that will probably help China 
 the most in both her internal and her external trade, in the settlement 
 of her foreign indemnity obligations and in other regards. The plan 
 must, of course, be one that will in no way be detrimental to the sover- 
 eign rights of China. It should be one that will as rapidly as possi- 
 ble fit mto the customs of the people. Inasnnlch as the Chinese are 
 not accustomed to a general monetary system of the occidental type, it 
 has been felt that the way to accomplish this purpose most easily is 
 to formulate a plan Avhich will appeal directly to the motive of self- 
 interest of the individual. As compared with other oriental jjeoples, 
 for example, the inhabitants of India, or of Java, or of the Philip- 
 pines, the Chinese are noteworthy for their thrift and their quick 
 intelligence in everything that touches their self-interest. They are 
 notoriously shrewd in matters of bargain and are ready to take 
 advantage of any opportunity for even a slight profit. In conse- 
 quence, it is thought that any plan which provides a money that,- in 
 retail trade, in the settlement of obligations, in the payment of taxes 
 due the Government, and otherwise, will either free the individual 
 from the liability of losses which he has suffered heretofore, or will 
 give him an opportunity for making a gain, however small, will be 
 one that will attract the Chinese peojjle; and in this way it may be 
 said to fit into the habits and customs of the inhabitants, even of those 
 who are uneducated and untrained in business methods. 
 
 As has been said one must not underestimate the difficulties which 
 stand in the way of the introduction of any new system ; but, on the 
 other hand, in spite of these difficulties and adverse conditions, it 
 is thought it is worth while, both for China and for the people who 
 are doing business in China and with China, that at least a beginning 
 be made toward the introduction of a rational national monetary sys- 
 tem.' AVithin the last two or three years many suggestions have been 
 made in this direction. The Chinese Government has issued a decree 
 commanding its board of finance to organize and put into effect such a 
 system. It has instructed its delegate to the Osaka Exposition in 
 Japan to make a study of the Japanese monetary system with refer- 
 ence to obtaining information which might aid the Government in 
 formulating its own plan. The Tientsin and Shanghai chambers of 
 commerce have adopted resolutions looking toward the establishment 
 of a new system. The Hongkong Chamber of Commerce has likewise 
 acted in a somewhat similar direction. Sir Robert Hart has outlined 
 a plan which has been submitted to the Chinese Government. The 
 Chinese Government, in its commercial treaties with England, Japan, 
 and the United States, has agreed to establish a national monetarj' 
 system. With so much agitation on that subject and with so evident 
 readiness on the part of the Chinese Government to act, it is practically- 
 certain that some attempt toward reform will be made. It is in conse- 
 quence extremely desirable that when a beginning is made it be made 
 in the right direction. It is not to be expected that all the difficulties 
 enumerated can be overcome promptly, nor that a national system 
 which shall be generally employed throughout China can be put into, 
 full effect within a short space of time. If a beginning is made in 
 
»» GOLD STANDAED IN INTERNATIONAL TRADE. 
 
 the right dircetion there will be nothing to retrace, and the systein can 
 be put into effect along right lines with the practical certainty that 
 eventually the end desired will be attained. 
 
 3. THE INTRODUCTION OF THE NEW SYSTEM. 
 
 It has been thought by a minority of the persons who have dis- 
 cussed with the American Commission their monetary plans that, on 
 account of the fact that the Chinese people are not accustomed to a 
 national monetary system, it would be wiser to begin by introducing 
 a general .monetary silver unit, in order that the people might thus 
 become accustomed to the use of a national coin of a recognized 
 weight and fineness, and that the establishment of this coin upon a 
 parity with gold be made a matter for later action after this first step 
 had been taken. It has been the opinion, on the other hand, of the 
 American Commission, and, it may be said, also of the large major- 
 ity of those with whom the question has been officially discussed, 
 that it would be a wiser plan, because in the end an easier plan, in 
 starting the new system, to establish the new coins, silver and copper, 
 on a gold basis, and from the beginning to maintain them at a parity 
 with gold. 
 
 There are various reasons for beginning on the gold parity : 
 
 1. The benefit of the system will be more evident from the begin- 
 ning. While a national silver currency not on a parity with gold 
 would be of great benefit to the internal trade of the country, the 
 export and import trade would be helped directly in no way by such 
 a system. It would receive only indirect benefits, such as the encour- 
 agement of internal trade would give to trade with foreign countries. 
 On the other hand, it is extremely desirable that the export and 
 import trade be encouraged as soon as possible, because through that 
 trade will perhaps come one of the chief benefits to China in enabling 
 her to pay off more easily her foreign debts. 
 
 It can not properly be urged that the chief or even the first benefit 
 of the new system would go to the foreigners, though, of course, they 
 also will be benefited. The Chinese as the producers of the goods to 
 be exported, and as the consumers of the imports, will gain most. 
 The fluctuations in exchange have checked the foreign demand for 
 Chinese goods. With the increase in that demand prices will natu- 
 rally rise and a new source of wealth for the Chinese will thus be 
 opened. Again as the risks of a fluctuating exchange have led ex- 
 porters to pay the lowest possible prices for goods to export, these 
 same risks have led importers to ask the highest possible prices for 
 their imports. The removal of the risk would lead to an increase in 
 the number of importers, to greater competition, and in consequence 
 to lower prices for imports. Though the money may largely pass 
 first through the hands of the foreign trader, the chief and first real 
 benefit will come to the Chinese producer and consumer. 
 
 If, for a short time, the new system were adopted only in the sea- 
 board provinces and not yet in the interior, of course there would be 
 a greater rate of exchange between interior and port than now exists 
 for goods not to be exported. As so great a part of the shipments to 
 the ports, however, is for foreign trade, so that the gold rate must 
 now be considered, the real fluctuations in exchange in actual busi- 
 ness would probably be less than now. At any rate, the difficulty 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 89 
 
 would be merely temporary and Avould be OA^ercome as soon as the 
 system could be extended into the interior, and is slight compared 
 with the great benefit to follow when the system is complete. 
 
 2. The establishment of the system on a gold basis would encourage 
 also from the beginning the investment ot foreign capital in China, 
 and this again will be a source of profit to the Chinese people and to 
 the Chinese Government, which will enable them to meet their obli- 
 gations. 
 
 The benefit of a new factory or a new railway or other business 
 undertaking is very great to any country. In America it is usual for 
 the people to give not merely land free for such enterprises, but they 
 often give freedom from taxes for a period of years, and at times a 
 large bonus in cash. The new investment gives the employment at 
 higher wages to more workmen, encourages the building of houses, 
 makes a greater demand for food supplies and goods of all kinds, and 
 tends thus to make the whole .people more prosperous. 
 
 3. The beginning on a silver basis with the expectation that the 
 coins were afterwards to be raised to a parity Mdth gold would tend 
 to encourage speculation to a greater degree than if the new system 
 were established at once on a gold basis. It would tend still further 
 to the unsettling of business, through a fall in the prices of goods 
 when the value of the silver coins was increased ; and while it might 
 prove a source of considerable profit to the bankers or to others who 
 might have large stocks of the new silver on hand, it could not but 
 prove detrimental to the individuals who had large obligations to 
 meet, inasmuch as they must be met in a coin of greater value. 
 
 4. The Government would derive directly from the gold basis a 
 benefit from an increase in its revenues, inasmuch as it would be ex- 
 pected that comparatively soon, at any rate, all the obligations due 
 the Government would be collected in terms of the new coin, and even 
 though the readjustment were so made that there would be no addi- 
 tional burden laid at first upon the taxpayer, the Government would 
 at any rate be saved from the loss in the value of its revenue which 
 might come from the further depreciation in the price of silver such 
 as it has suffered during the last few years, a loss, as we have seen, of 
 nearly 50 per cent since 1882. 
 
 Even though the Chinese Government might need to make a new 
 loan at first to start the new system, the added power to pay taxes, 
 which would soon come, as has been shown, would be so great as to 
 make the real tax burden less than it now is. 
 
 5. A somewhat indirect benefit, but one which, beyond question, 
 would be felt in the long run, would be that which would come from 
 improvement in business methods under the influence of the example 
 set by foreign investors as their capital and business increased in the 
 country. 
 
 It is believed to be not merely thus more beneficial to China to start 
 on a gold basis, but if the gold basis is the end to be attained, it is 
 easier than to start with silver which must afterwards be placed on a 
 gold basis, because, as soon as the Chinese people perceive that the 
 new coin is practically equal in value to gold and is, in consequence, 
 not subject to the depreciation which they have experienced of late in 
 silver, they will be much more ready to accept it and hold it for regu- 
 lar investment than if it were merely a silver coin still subject to the 
 fluctuations of the j^etal. Indeed, there is a possibility, although one 
 
90 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 that would in no way prove an evil, that the coin might for a consider- 
 able time be hoarded by many Chinese as they would hoard gold. If 
 a silver coin were generally circulated throughout China before^ it 
 were placed on a gold basis, it would not give this confidence. Be- 
 sides, there would be a considerable danger of the issue being so large 
 that when an effort was made to place it on a gold basis there would 
 result the necessity, as was the case in India, of a relative contraction 
 in the currency as compared with the business demand which would 
 produce the ill effects of falling prices already mentioned. If the 
 coinage were also free, there would be a likelihood of the melting of 
 the coins, of the subsequent recoinage of the metal, and so on, which 
 at present exists and which would render it practically impossible for 
 the Government to have any accurate knowledge as to the amount of 
 coins in circulation ; and in consequence the difficulties of regulating 
 and maintaining the system would be vastly increased. 
 
 The fact must be recognized also that in any case the new monetarj 
 system must work its way slowly throughout China. The mere physi- 
 cal difficulties of coining enough silver to supply the needs of 400,000,- 
 000 people or more will make it certain that several years will elapse* 
 before there can be a national system of any kind which shall be gen- 
 erally employed throughout China. If, therefore, it is proposed to 
 have a national system thoroughly introduced before it is placed on a 
 gold parity, there must be a delay of many years before even the treaty 
 ports and foreign countries could get the benefit of stable exchange. 
 On the other hand, if the system is introduced on the gold parity, it 
 may, and must in fact, be introduced first in these treaty ports and in 
 other places where exchange with foreign countries is common. These 
 benefits will be secured from the beginning, and then, as the new coins 
 increase in number, they will, gradually make their way with the aid 
 of the viceroys through the different provinces into the interior, and 
 the system can doubtless be completed in its final form in substan- 
 tially the same length of time that it would take to introduce the silver 
 currency throughout the country, even though it were not on the gold 
 basis. The difficulties of the maintenance of the coins at par through- 
 out the country will be discussed later. 
 
 The difficulty, then, of the Chinese people becoming accustomed to 
 the use of the new coins would be met as readily under the one plan as 
 under the other by the mere physical impossibility of coining the 
 silver rapidly enough, unless special efforts were made to hire foreign 
 mints to do the work,, and the people would become the more readuy 
 accustomed to the new S3'stem if it were on the gold basis, inasmuch as 
 the benefits to them would be greater. 
 
 The opposition of individual banlrers and the hostility of local offi- 
 cials, if such were found, can also probably be met by the method 
 employed in the introduction of the systein. It would probably be 
 best to begin first in perhaps only part of the treaty ports and larger 
 cities, say in Peking, Tientsin, Shanghai, Hankow, and Canton, and 
 the country adjoining. Owing to the form of government in China, 
 these cities, with the country immediately adjoining, can be consid- 
 ered practically as territorial units, and the system might be started 
 in them as if they were independent territories. Possibly it would be 
 best to begin for a few inonths in the province of Chili alone, to get 
 the right method worked out there. As soon as a sufficient number 
 of corns were ready to meet a noteworthy part of the monetary needs 
 
GOLD STANDAKD IN INTERNATIONAL TRADE. 91 
 
 of the community, say 25 per cent, they might be introduced, the 
 Government making them receivable at their par vakie in payment of 
 all public obligations, and even, if it seemed desirable, making the 
 payment of these obligations in the new coins compulsory. Under 
 those circumstances the Government should also provide in those 
 cities a sufficient number of exchange agents of tried probity, so that 
 the native Chinese who had taxes to pav could bring their copper 
 cash or their silver sycees or Mexican dollars to these agents, secure 
 the new coins at fair rates, and then immediately use them in the pay- 
 ment of their obligations due. In this way they would see at once 
 the superior value of the new money in the payment of obligations; 
 they would know that they could always be employed for this pur- 
 pose, and they would in consequence not hesitate to receive them. 
 
 Furthermore, it would doubtless be wise for the Government to 
 employ as exchange agents the European bankers and the native 
 bankers who might be in this way properly compensated for work 
 done for the Government and thus a source of profit might be created 
 which would tend to remove the opposition which they might other- 
 wise make. Indeed, if the Government Avere itself making a profit 
 from the seigniorage of 10 to 20 per cent, it could well afford, if, for 
 political reasons, it seemed desirable, to pay a rather high commission 
 for this work. Even if they should wish to do so, as has been some- 
 times said, it would not be possible for the local officials to talte an 
 unfair advantage of the exchange of the old money into the new coins, 
 provided the Government started the reform in small territories like 
 the cities indicated and established directly its exchange agents whom 
 it could trust. The terms of the exchange ought to be made so public 
 that it would be comparatively difficult for extortions of the kind 
 indicated to be practiced. 
 
 From these cities the system should, of course, be extended as rap- 
 idly as possible, considering the necessity of meeting the needs for 
 coins and of. securing the proper governmental control, into the ad- 
 joining provinces where the people are already accustomed to coin, 
 and where the viceroys and other local officials would be most in favor 
 of the new plan; and then, gradually, it should be extended from 
 province to province into the interior. The people in the coast prov- 
 inces now accustomed to the use of the Mexican or British dollar, as the 
 experience of Russia in Boukhara, of the English in Hongkong, of the 
 Philippines, of Japan, and of British India shows, would very rapidly 
 learn the use of the new coin whose par value was above its metal 
 value. The people in the interior not accustomed to the use of coin 
 at all would gradually gain that new custom through the possibility 
 of paying their governmental obligations in them at once, and that in 
 such a way that they would be freed from the oppressive charges of 
 the money changers, and would thus be led to see promptly the advan- 
 tages of the new coins. 
 
 While, speaking generally, the European bankers have expressed 
 sympathy with the plan for the adoption of a new monetary system 
 for China, it is recognized that the adoption of a system on the gold 
 standard would, of course, soon lessen their profit from an exchange 
 business. AVhile far-sighted bankers are not likely to place obstacles 
 in the way of such a reform, since, in the long run, the plan would 
 probably prove profitable to them, as well as from the fact that they 
 would at any rate hardly openly oppose such a great economic benefit 
 
92 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 to the country as a whole, even though it were somewha,t detrimental 
 to their individual interests, it may be worth while to indicate what 
 the effect of such a system would probably be on the business of the 
 foreign bankers. There is every reason to believe that, although 
 there would be loss from a fixed exchange, there would be enough 
 increased business in the nature of loans and discounts to offset this 
 loss.' In India it is stated that, although the profits from exchange 
 business have fallen off since the stability of exchange has been prac- 
 tically secured, the bankers have increased quite decidedly their loans. 
 In Japan it is stated by one of the great bankers that since the intro- 
 duction of the gold standard there their profits have, on the whole, 
 doubled in that country. It is scarcely to be expected that so great 
 a benefit could come to bankers in China on account of the different 
 methods of doing business. Still it is probable that within a few 
 years a considerable increase of gains over losses would be secured, 
 in Mexico some of the largest exchange bankers, whose profits for the 
 last few years from exchange have been very large, are ready to take 
 the risk of their loss because of the certainty of new foreign invest- 
 ments for which they might readily become the agents. Moreover, 
 in the case of foreign investments the banks would naturally become 
 the agents and organizers of business enterprises, etc., to a degree 
 which would bring them large profits. From all these sources, and 
 from others which will readily occur to the banker, the far-sighted 
 banker would be certain that in the long run not only the country as 
 a whole, but also his bank, would gain. 
 
 4. NEED OF EXPERT ASSISTANCE. 
 
 Inasmuch as China has few, if any, men who have been thoroughly 
 trained in the organization and management of monetary systems on 
 the European or American plan, in order to secure the sound manage- 
 ment of any new system, it would seem best that foreign experts ha 
 placed in charge of the mints, and be given a general supervision of the 
 monetary system as a whole. Of course, by far the largest part of 
 the work would be done by Chinese, and the foreigners would hold 
 their positions as appointees of the Chinese, Government; but it 
 would be absolutely necessary, in order to secure the requsite skill 
 and confidence in success, that they be given a large measure of dis- 
 cretion in management, at least for the first few years. 
 
 In order to avoid as far as possible international- jealousy, it 
 would doubtless be wise for the few foreigners who would be needed 
 to organize and manage the system at first to be selected from differ- 
 ent nationalities; but it would also doubtless be best for China, as 
 well as for the success of the system, that they be not in any way 
 representatives of their governments. Foreigners appointed should 
 be experts of such standing that they would have the confidence of 
 business men, both Chinese and foreign, and of all the governments. 
 As Chinese appointees they should see to it that the interests of China 
 are fully cared for and protected, and to this end, of course, they 
 should give every degree of publicity to the way in which their work 
 is carried on. 
 
 It has even been suggested as a wise plan that the controller of the 
 currency should not merely make monthly reports in detail of the con- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 93 
 
 dition of the currency, including amounts in circulation, loans, drafts 
 on foreign credits, and other matters such as are usually published by 
 European governments, but, further, that the Chinese Government 
 should voluntarily open the controller's accounts at reasonable times 
 to inspection by accredited representatives of the powers interested in 
 the indemnity. These accounts would be only those usually published 
 and would not be those of the fiscal system in general, but only those 
 connected with the monetary system. Of course no power would have 
 any right to make such a demand, but inasmuch as the success of the 
 system depends upon public confidence, the Chinese Government could 
 perhaps in no other way so easily and so wisely secure confidence as by 
 voluntarily giving this right of inspection to the powers. China 
 might well also be willing that they should make any suggestions and 
 recommendations regarding the management of the system which they 
 saw fit, although, of course, the foreign experts in charge of the 
 system and the Chinese Government itself should not be placed under 
 the slightest obligation to follow such suggestions. 
 
 It is clear, of course, that the monetary system as such should be 
 kept entirely separate from the fiscal system. The income of the State 
 from taxes of various kinds should be kept entirely separate from the 
 income in connection with the seigniorage of the monetary system, and 
 the expenses of the State in ever}' way excepting those in connection 
 with the monetary system would also be kept apart, so that, while the 
 details of the monetary system should be made public, these would in 
 no way give any person information regarding the fiscal system of the 
 country beyond that which would normally be secured in other ways. 
 
 It is believed that while a reasonable degree of foreign assistance 
 must be secured by China in order to make the success of the new 
 monetary system secure, it would be very unwise for the foreign gov- 
 ernments as such to take any part in the matter or to take any super- 
 vision over the system beyond the inspection which might be offered 
 by the Chinese Government itself. The governments would, beyond 
 any question, find it extremely difficult, if not even absolutely impos- 
 sible, to worli in harmony in connection with a matter so important 
 and so complicated as that of a monetary system. 
 
 5. OUTLINE OF SYSTEM. 
 
 While the details of the management of a monetary system must 
 be determined in part as the system itself develops, the fundamental 
 principles of such a system must, of course, be laid down in advance. 
 Whether the monetary system of China should be begun at once with 
 all the coins on a fixed parity with gold, or whether, as has been rec- 
 ommended by a minority of the commissioners who have discussed 
 the plan of a system, silver coins to circulate at their bullion value, 
 should first be introduced and afterwards be placed on a parity with 
 gold, the opinion is unanimous that when the system is completed all 
 the coins should be maintained at a parity with gold. In such a 
 system there must be adopted by the Chinese Government a standard 
 unit of value. This should consist of a fixed -number of grains of 
 gold of a fixed degree of fineness, so that its nature can not be ques- 
 tioned. How large this standard unit should be, is a matter to be 
 determined in the interests of China herself. The chief purpose of 
 
94 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 establishing a gold unit as a standard is to facilitate trade, and that 
 largely with foreign countries. In consequence the unit should be 
 of such a nature that it will render the keeping of accounts in trade 
 matters as simple as possible. If the different nations with which 
 China trades had the same unit, it would probably be wise for China 
 to adopt that unit. Inasmuch, however, as the monetary units of 
 Great Britain, France, the United States, Russia, Japan, and Ger- 
 many are all different, there is no one which would give absolute 
 harmony. The next point of union with these monetary systems 
 seems to be for China to adopt as a unit one that is somewhat closely 
 related in value to the American 50 cents, the English 2 shillings, the 
 Japanese ven, the Russian rouble, the French 2^ francs, and the Ger- 
 man 2 marks. If China is to adopt any one of these, it would seem 
 natural that she should choose one of a country with which her rela- 
 tions are close and with Which her trade is large and increasing. 
 
 Many nations, however, in order to emphasize their own separate 
 sovereignty, in part, and, in part, in order to check the circulation of 
 foreign coins of equal weight in their own country, have thought it 
 desirable to establish their monetary unit at a weight slightly differ- 
 ent from that of other countries. The countries of the Latin Union 
 of course form an exception to this rule. If China were to adopt a 
 similar plan, she might, while adopting a. unit not exactly the same as 
 any of those suggested, still select one that is nearly allied to the 
 values already suggested, so that in ordinary .retail dealings there 
 Avould be convenience of reckoning. In the larger transactions, 
 owing to exchange conditions, there must alwa^^s be slight fluctua- 
 tions in rates of exchange with gold, a circumstance which make^i 
 somewhat complex bookkeeping, so that a slight variation of the unit 
 from any of the standards mentioned would be of relatively slight 
 importance. 
 
 It is not at all necessary that this standard gold unit of value be 
 coined at all. It might be uncoined, like the Japanese one-yen piece 
 or there might be no coinage whatever of either this unit or any of 
 its multiples, as is the case, for example, in the Philippines with their 
 standard gold peso. So long as the unit is legally fixed and so long 
 as the Government will maintain the minor coins at a parity with this 
 quantity of gold, it is not essential that the coins be provided. 
 
 It is probably desirable, however, that, while primarily China 
 should maintain as its chief circulating medium silver and copper 
 coins at parity with gold, there should be also some coinage of gold. 
 It is possible that in the course of time the price of silver might rise 
 so that there would be the possibility of the silver coins becoming 
 more valuable than the gold. Under those circumstances a check 
 would be given to this tendency if provision were made for the free 
 coinage of suitable pieces of gold, presumably multiples of the stand- 
 ard unit, five, ten, and twenty, such coins to be furnished on demand 
 either with or without a reasonable coinage charge. Under ordinary 
 circumstances, of course, there would be no demand whatever for 
 these coins, inasmuch as silver would be more acceptable to the people, 
 more in accordance with the conditions of the country, and more prof- 
 itable to the Government. It might be well, however, eventually, in 
 order to secure the effect on the feelings of the people which an occa- 
 sional use of gold coins might give, for the Government to coin some 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 95 
 
 gold on governmental account, and from time to time and as suitable 
 occassion offers to pay out some of these coins in the meeting of Gov- 
 ernment obligations. 
 
 Owing to the economic condition of China, it is of course desirable 
 that the chief money of circulation be composed of silver and copper. 
 In a country where, wages are often not more than seven or eight 
 dollars a month in American money, and where they are gometimes 
 not more than from two to five dollars a month, and where, naturally, 
 the standard of living must be on the same scale, it is evident that 
 there would be very little use for gold coins among the Chinese people. 
 The one kind of coin that is really current pretty generally through- 
 out China is the copper cash. This may be said to be the coin that 
 has been developed to meet the needs of the people in their daily 
 intercourse. In larger transactions they may use silver by weight, 
 or, in some places, in coins. "When one reflects that these copi^er 
 coins, which have been developed to meet business conditions, are 
 worth each in the neighborhood of one-twentieth of an American cent, 
 one realizes how minute the transactions may be. The current coins, 
 then, must be silver or copper. The coin which shall represent the 
 unit of value of course will be silver, although it will have a fixed 
 gold value. These silver coins which should be maintained at par 
 with the gold unit, should be given, of course, an appropriate device 
 suitable to China, and should, presumably, for convenience, be about 
 the size of the Mexican dollar. 
 
 It has been urged by some that a better coin would contain about 
 the quantity of silver contained in the Haikwan tael, which is nearly 
 one-half larger than the Mexican dollar. Inasmuch as the Chinese 
 are accustomed to reckoning in taels in most sections of the country, 
 it would doubtless be a convenient unit so far as the customs of the 
 people are concerned. The chief objection, naturally, is that the 
 coin is too large for convenient use. It would be generally agreed 
 that the Mexican dollar is about as large a coin as caa be most con- 
 veniently handled in ordinary business dealings. There is no 
 special reason why one name should be given to this coin rather than 
 another, and it might equally well be called tael as dollar. Of 
 course whatever name were given to the imit, its relative value to 
 the Haikwan tael and to the Mexican dollar would be fixed by law. 
 The value would be determined somewhat arbitrarily by the gold 
 unit which was adopted, but it is desirable that the bullion value of 
 the coin be somewhat, perhaps 10 or 15 per cent, less than the parity 
 value. Besides this silver coin, which shall have the name of the 
 standard gold unit and which shall be the chief monetary unit in 
 circulation, there should be coined, of course, subsidiary and minor 
 coins of suitable weight and value, presumably halves, quarters, 
 fifths, tenths, twentieths, fiftieths, and hundredths of the monetary 
 unit, at least, and in all probability coins of still less value, perhaps 
 even as small as a thousandth part of the unit. Probably it would 
 be well to have the larger minor silver coins proportional in weight 
 to the standard, although as they are less in value the danger of 
 counterfeiting or of melting would not be so great provided they 
 were made even a little lighter. The minor coins of the lower denom- 
 inations, made of nickel and copper, might be made of such a value 
 as metal as to yield a large profit as seigniorage to the Government, 
 
96 GOLD STANDARD IN INTKRNATIONAL TRADE. 
 
 G. MAINTENANCE OF PARITY WITH GOLD. 
 
 Perhaps the most diflicult, as well as the most important, question 
 in connection with the new monetary system is that of maintaining 
 the parity of these silver, nickel, and copper coins with gold. Accord- 
 ing to the best reports that can be secured, during the last twenty 
 years the.silver coins have fallen in their relations to gold some 50 per 
 cent. The copper coins have likewise depreciated, although to a 
 much less degree, the estimate being about 32 or 33 per cent. 
 
 In practically all civilized countries the fractional coins of copper 
 and nickel are maintained at a parity with the monetary unit only 
 by the limitation of their coinage and their acceptance by the Govern- 
 ment. They are usually of a very light weight as compared with 
 their value, so that there is no temptation to melt them down. Their 
 value being small, it would ordinarily not pay anyone to counterfeit 
 them, as the profit would be very small unless expensive machinery 
 were employed, and this would be likely to lead to detection. It is 
 comparatively easy for the Government, by noting business condi- 
 tions and meeting requests from business men and bankers, to supply 
 the needs of the country for these coins reasonably well without spe- 
 cial danger of overissue so that the coins would depreciate in value. 
 
 The conditions, however, are quite difPerent regarding the silver 
 coins, especially those of the larger denominations. These naturally, 
 in a country like China, become the means of making payments in all 
 larger transactions, and are used not merely as a medium of exchange, 
 as are fractional coins, but to a very much greater extent than the 
 small coins that are used, especially in countries like India and China, 
 as a means of storing values for a considerable length of time when 
 exchanges are not demanded. Inasmuch also as these silver coins 
 represent the unit, and should probably be made legal tender for un- 
 limited amounts, while fractional coins are made legal tender for only 
 very small an»ounts, they will come to represent in the minds of the 
 people the standard by which values are measured more than will 
 any of the other coins. The methods to be adopted are, of course, in 
 part the same, but further steps may also need to be taken. 
 
 The principal measures to be recommended are the following : 
 
 1. The amount of coinage should be strictly limited and kept en- 
 tirely within governmental control. In the case of the fractional 
 coins, it has been said that this measure alone is sufficient to maintain 
 the parity. It is probable, likewise, that in the case of the larger silver 
 coins a strict limitation of the quantity issued to the proper demands 
 of business would be, on the whole, the most efficient and the most im- 
 portant of the means for maintaining the parity. There is in every 
 country a certain amount of money work to be done by each class of 
 money. There are a certain number of payments to be made in 
 effecting exchanges. Some payments are for small amounts, which 
 demand a supply of copper cash. All the larger transactions will de- 
 mand either the unit com or multiples of the unit for their payment, 
 although, of course, a great saving of the metal coins is made by the 
 use of bank notes, checks, bills of exchange, book accounts, and other 
 common devices. If the amount of coins issued should be at all 
 beyond the business needs of the country, so that there is not a con- 
 stant and steady demand for practically every coin in circulation 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 97 
 
 there will be a tendency for the value to depreciate, until eventually, 
 if the supply increases, the value will fall until it reaches the value of 
 the bullion contained in the coin. A strict limitation, then, of the 
 supply by the Government to the needs of business is to be considered 
 the first and most important method of maintaining the parity. 
 
 2. As the value of the coin is to be determined by the relations of 
 the demand to the supply, it is of almost equal consequence that the 
 Government itself establish a normal steady demand, and by its own 
 readiness to receive the coins for payments due to the Government 
 manifest openly and indisputably its confidence in the value of the coin. 
 The second measure to be employed, then, is that the Government 
 agree to accept the coins at their full parity value in payment of all 
 obligations due to it. How large a demand this may create as com- 
 pared with the demands of private business will vary, of course, 
 largeljr in each separate country. It is probably true that in many 
 countries the demand of the government in the course of the year 
 equals 25 per cent of the entire amount required to satisfy the needs 
 of business. In some countries even, where business is comparatively 
 slack and where the system of barter is somewhat extensive, the pro- 
 portion might be much larger, whereas in other countries it might 
 well be less. Even this demand, however, is seen to be so large that 
 this method, in connection with the first, would, in most countries 
 where the people had confidence in the integrity of the government, 
 be suiRcient to maintain the parity of the coins with gold without any 
 further steps. 
 
 3. It is usual, however, to make the silver coins, especially in coun- 
 tries where silver coins are the ones most common in circulation, legal 
 tender in the payment of private as well as of public debts. The 
 small subsidiary coins would naturally be legal tender for only a 
 small amount, say $10 ; the silver unit, however, would be legal tender 
 for any amount. This still more, of course, strengthens the sources 
 of demand which tend to maintain the value. 
 
 4. The further means which is usually advocated, and by many 
 believed to be the only sure means of maintaining the parity, is that 
 the Government agree to redeem the silver coins by the payment of 
 gold, practically on demand. With certain important qualifications 
 this general statement may be accepted. It is not, however, neces- 
 sary that the redemption always be made on the spot and in gold 
 coins. The method of redemption will, of necessity, depend upon the 
 business customs of the country in question. 
 
 In a country like China, where the ordinary medium of circulation 
 is silver, there is no business need whatever for gold money, to b"e 
 used within the country itself. If gold is required for purposes of 
 manufacturing jewelry or other similar needs, this is not a question 
 which concerns the monetary system or, generally, the needs of busi- 
 ness. Jewelers needing gold for any such purpose should supply 
 their own wants as much as the manufacturers of steel tools shonld 
 provide their raw materials without depending on the Government. 
 The legitimate business demand in connection with the currency 
 which calls for gold is a demand only for the purpose of making pay- 
 ments abroad in a gold-standard cour^try. For this purpose not gold 
 within the country itself is needed, but rather a gold credit in the 
 country or countries in which the payment must be made. If a 
 S. Doc. 128, 58-3 7 
 
98 GOLD STAWDAEBIN INTERNATIONAL TRADE. 
 
 merchant in Shanghai, with a gold obligation to be met in London, 
 comes to a bank for the means of paying his debt, he does not wish 
 gold to ship ; he wishes, rather, an order for the payment of gold in 
 London. For the satisfaction of all proper business needs, therefore, 
 in connection with the monetary system, it would be sufficient on all 
 occasions if the Chinese Government were to keep a gold credit in 
 Europe against which it could sell bills of exchange whenever a 
 legitimate demand came from business men for this purpose. This 
 is practically the plan that has been followed by Holland for the past 
 thirty years, and it is the plan which, at length, British India, after 
 several years of eifort iii that direction, has adopted. In Holland, 
 for example, the national bank, which acts as the Government agent 
 in the regulation of the currency, does not agree to pay out gold on 
 demand to all who present silver or bank notes. The silver gulden 
 in Holland is not redeemable in gold. On the other hand, the Gov- 
 ernment has for many years declared itself ready to give gold in 
 exchange for silver gulden or other money of the country, provided 
 that gold were needed for the purpose of paying obligations due 
 abroad. This qualified redemption alone, a redemption which is 
 comparatively seldom called for, taken together with the Government 
 control of coinage and the high credit of the Dutch Government, has 
 been sufficient to maintain the parity of the silver coins during a long 
 period of years, even in times of commercial pressure. 
 
 In order to maintain the parity, however, it is not necessary that the 
 Government hold itself ready to meet all demands for gold for export 
 purposes or for the payment of foreign obligations. Without endan- 
 gering the parity of the coins in all internal transactions and without 
 in any way injuring the business of the country, it would be sufficient 
 if the Chinese Government were to put its gold reserve at the service 
 of business men, not in the first instance at any time that the demand 
 is made (why should the Government enter into competition with the 
 banks?), but only after the banks and other financiers had been unable 
 to meet the ordinary demands for gold payments abroad, as would be 
 shown by the increase in the rates charged, in the local money, for for- 
 eign bills of exchange. 
 
 Whenever it becomes necessary for a country to meet the obligations 
 which it owes abroad, it is usual for those obligations in the last resort 
 to be met by the goods that on the whole can be shipped the cheapest. 
 If there is a large supply of money in a country whose credit is 
 unquestioned, it may well be that the gold supply in that country will 
 be so large that it will be cheaper to ship gold abroad to settle balances 
 due than to force down the prices of some other product in order to 
 make that the most available commodity for shipment. Whether the 
 money metal in a country is the one commodity that can most readily 
 be spared to meet the balance of payments due will depend to a con- 
 siderable extent upon the quantity "of money in circulation as com- 
 pared with the needs of business. If money is really- scarce in the 
 country and is a metal money, it is probablethat its value will be so 
 great in terms of goods ; that is, in -other words, the price of goods in 
 terms of money will be so low that the goods will be shipped abroad 
 rather than the money itself. If, on the other hand, either through 
 the slackness of trade or through an excessive coinage, the supply of 
 gold money becomes large in comparison with the demand for its use 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 99 
 
 within the country, prices of goods rise, the rate of interest falls, peo- 
 ple Ciin more readily get gold than goods, the rates of exchange in 
 terms of the local money rise, and money is more readily shipped for 
 the payment of obligations or for investment. If a money which is 
 not gold, but silver or paper, is used, and becomes excessive, prices of 
 gold bills of exchange in terms of the silver or paper money will rise 
 as do the prices of other goods, and gold will be exported. 
 
 In a country like China, therefore, it would be sufficient if the Gov- 
 ernment were to announce that it would, under ordinary circum- 
 stances, expect the bankers and other business men to supply the 
 needs of those who require gold or silver for the payment of obliga- 
 tions abroad, and that it would meet such demands only when, owing 
 to the strong demand, the rates for gold had risen considerably 
 above the normal. If the Government would agree that whenever 
 the rates of exchange on Europe reached a high price above the- 
 parity it would sell bills of exchange against its gold reserve in 
 Europe for silver coins or other equivalent paid in, it would find its 
 reserve called upon only when the silver currency had become for 
 the time being redundant, either on account of the slackened demands 
 brought about by lessened trade or on account of excessive coinage. 
 If, for example, the usual banking rate on London were about one of 
 the new coins for 2 shillings, the Government might sell exchange if 
 the rate rose to 1.02 for 2 shillings. If, when money were paid in, in 
 exchange for the foreign bills of exchange, that money were not 
 reissued, but were held in the treasury, a scarcity of currency would 
 thus be brought about which would soon make it more profitable to 
 ship other goods to meet obligations rather than to take from the 
 channels of trade the money which had thus acquired an added value. 
 
 When, on the other hand, owing to a stoppage in the coinage or to 
 an increase in the demands for the coins from an increase in business, 
 they became relatively scarce, it might well be that business men 
 would find it advisable to pay gold either into the treasury of the 
 Chinese Government at home, or more likely to the agents of the 
 Chinese Government in Europe or America, and to receive in return 
 those silver coins in China to meet their obligations there, or to use 
 them for the purchase of goods in the interior. By this means we 
 should obtain in China a currency which would be elastic so as to 
 meet the fluctuating demands of trade, and at the same time the 
 Government would find itself free from all obligations except those 
 imposed upon it by unusual circumstances which rarely come. (Cf. 
 p. 37.) 
 
 If the gold reserve were maintained, especially for the purpose of 
 maintaining the parity, as indicated above, and if, under ordinary 
 circumstances, the banlcs were to meet the usual commercial needs, 
 it would seem that the reserve fund need not be especially burdensome 
 in quantity. In India, with its circulation in round numbers of per- 
 haps '1,800,000,000 rupees, or £120,000,000, it has been found that a 
 gold reserve of considerably less than £10,000,000, or 8 J per cent of 
 the monetary circulation, is ample to meet all the needs of business 
 for gold export purposes. Even if, for a considerable period of time, 
 imports of goods were considerably larger than exports, so that the 
 tendency would be toward a strong demand for gold for export, it is 
 scarcely conceivable that a contraction of the currency of, say, 18 or 
 
100 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 20 per cent would not be sufficient to overcome this tendency and force 
 the prices of some other goods so low that they would be substituted 
 instead of gold as a means for meeting foreign obligations. 
 
 Owing likewise to the unlikelihood of a gold reserve held abroad 
 for such purposes being frequently called upon, it would doubtless 
 be comparatively easy for any country desiring to maintain such a 
 reserve to secure on relatively easy terms gold credits against which 
 it could draw to large amounts if necessary. Such obligations, of 
 course, could not be unlimited as regards quantity, but they might 
 be ample ; they could not be unlimited perhaps as regar4s time, but 
 could be renewable ; and as soon as a comparatively short experience 
 of a few years had shown the wisdom of the management of the sys- 
 tem in China, both the need of such a reserve and the' difficulty of 
 securing it would be very much lessened. 
 
 There seems no reason to doubt that by the means indicated the 
 parity of silver coins in China can be maintained absolutely, so far as 
 all local transactions are concerned. The fact that a rate of exchange 
 should be charged for bills sold on a gold reserve placed in foreign 
 countries would not affect the local conditions, even though at times 
 that rate should be quite high. 
 
 If, however, for the sake of argument, we should grant that under 
 the pressure of abnormal conditions the parity might temporarily fall 
 by a small amount, 1 or 2 per cent, even then conditions would be 
 vastly better than they have been for the last few years, or than they 
 could be eVen with a uniform silver coin whose value fluctuated with 
 the value of the metal. This is another reason to be kept in mind why 
 under any circumstances a determined effort should be made to place 
 the new silver coins on a parity with gold from the beginning and 
 maintain them there. 
 
 7. THE ESTABLISHMENT OF A GOLD RESERVE. 
 
 It is extremely desirable, in order to maintain the confidence of busi- 
 ness men in the new monetary system, that practically at the begin- 
 ning of the work provision be made for the accumulation of a gold 
 reserve which will be sufficient at all times to maintain the parity of 
 the new coins beyond question. How may this gold reserve be 
 accumulated ? 
 
 1. If the price of silver were to remain about where it is at present, 
 and the gold unit were made substantially equal in value to the one 
 recommended, that is, to the American 50 cents, the English 2 shil- 
 lings, the Japanese yen, the Eiissian rouble, etc., there would be a 
 profit from seigniorage of some eight to twelve per cent on silver 
 coins. As regards the minor coins, especially those of copper and 
 nickel, the seigniorage profit would be very much larger. Beyond 
 question practically all of this seigniorage should be used from the 
 beginning for the purchase of gold to be used as a reserve. 
 
 2. It has already been suggested that the nations interested in the 
 war indemnity might well' afford to make some concessions to China 
 provided she were to establish a new monetary system which would 
 give a fixed par to exchange in business dealings. If they were to 
 make the concession which has been proposed, i. e., the acceptance 
 from China for a period of years of their shares in the indemnity on 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 101 
 
 a silver basis, reserving the right to call for a difference between that 
 and paymente on a gold basis at a later period, a considerable saving 
 would be made for China so long as the price of silver does not go 
 materially above its present rate. It would seem entirely proper for 
 the governments, if such a concession were made, to insist upon it that 
 this saving be used directly for the establishment of a neAV monetary 
 system, in good part at least for the establishment of a gold reserve. 
 
 3. In all probability, however, if the plan is carried through 
 promptly for the most important parts of China, it will be desirable 
 for China to make a loan of considerable size. To that end it will 
 be necessary, of course, for the Government to pledge specific reve- 
 nues. Either new sources must be found which can be devoted to 
 this end, or some of the present revenues must become more produc- 
 tive. Persons most familiar with the financial situation of China 
 are of the opinion that a more rigid, businesslike management of 
 present sources of revenue would result in a considerable increase, 
 and are also of the opinion that it is by no means impossible to find 
 new sources of revenue which will prove sufficiently productive. It 
 is thought that the people are not taxed to any very burdensome 
 extent, and there is reason to believe that a loan raised for this pur- 
 pose would soon result in so great an increase in the prosperity of the 
 country that its burden would not be felt at all, as was the case with 
 the loan of Egypt a few years ago which so improved the irrigation 
 system. 
 
 It should be borne in mind also that a gold reserve secured thus by 
 a loan would be kept on deposit in Europe and America, and would 
 doubtless be seldom drawn against. The interest that would thus be 
 paid to China on current balances would very materially reduce the 
 expense of the loan. 
 
 Furthermore, inasmuch as the loan is not to be employed for ordi- 
 nary uses, but is only to be drawn against on uncommon occasions, it 
 would suffice, if, instead of a very large gold loan, part of the sum 
 necessary should be simply in the form of a gold credit which might 
 be drawn upon. This gold credit, which would be merely a right to 
 draw for a specific maximum sum, a right which would seldom, if 
 ever, be used, could probably be secured at a comparatively slight 
 expense, provided there were reasonable confidence in the manage- 
 ment of the monetary system. 
 
 4. After the reserve had once been established in Europe and 
 America, provisions should be made for its replenishment in case of 
 drafts being made upon it, by an agreement of the controller of the 
 currency in China to honor silver drafts drawn against the Chinese 
 Government by its agents abroad in exchange for gold deposited in 
 the fund. The rates should, of course, be fixed by the conditions at 
 the tiihe, and to the controller should be given discretion, within 
 certain limits, at least, in fixing the rate. In this way a crisis of even 
 a considerable length could beyond doubt be safely tided over, pro- 
 vided the system itself in China were managed intelligently and 
 firmly. 
 
 The Government might also, following the example of Japan, buy 
 in China gold bills of exchange on Europe and later collect the gold 
 there for its reserve. 
 
102 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 6. If the Chinese Government could open and work some of the 
 gold mines which the country is said to contain, it is quite possible 
 that within a few years a good supply could be secured from this 
 source. 
 
 8. BANK NOTES. 
 
 As soon as practicable, if not even from the very beginning, some 
 provision should be made for the issue of bank-notes payable in the 
 new currency, to be issued and managed in accordance with conserva- 
 tive banking principles. A proper bank-note system, whether issued 
 by a single bank or a system of banks, under proper organization and 
 control, would give the needed elasticity to the system, by which the 
 amount of currency would practically automatically increase and 
 decrease in accordance with the needs of business. 
 
 Such a system would do very much to protect the gold reserve. At 
 a time of an increase in the demand for money, either for moving the 
 crops or other temporary purposes, unless there were some bank-note 
 system established there would be naturally a large issue of the new 
 silver coins. When this extraordinary demand fell off the silver 
 coins might easily be to a considerable extent excessive, and thus the 
 rate of exchange would naturally rise and the coins would be paid in 
 for bills of exchange drawn against the gold reserve. If, on the other 
 hand, a proper bank-note system were established, the increased 
 demands for monejr would be met by the increased issue of notes, and 
 a shrinkage in the demand would result in the paying in of these 
 notes, and in the consequent reduction of the monetary circulation 
 without danger of a corresponding demand upon the gold reserve. 
 
 In the next place the bank-note system would take its part in the 
 supply of the monetaiy needs of the country at a less cost than would 
 the otherwise larger coinage of silver; always provided, of course, 
 that the bank-note system is established on sound principles. 
 
 Of a nature somewhat different is another advantage which, never- 
 theless, ought not to be overlooked — that is, the advantage which 
 woidd come from interesting bankers in the monetary system of the 
 Government, and getting their counsel and support in the proper 
 management of the system. 
 
 It is the opinion of many of the best authorities that a proper bank- 
 note system could be best secured through the establishment of one 
 imperial bank, which should have the monopoly of bank-note issue, 
 as is the case in Japan, France, and elsewhere. Such a bank, if estab- 
 lished, would naturally become the chief fiscal agent of the Govern- 
 ment in connection with its loans and its general financial administra- 
 tion. 
 
 Of course the minor points in the establishment of a monetary sys- 
 tem for any country, such as the amount of coin that is to be issued 
 before the system is put into effect, the exact time for the introduc- 
 tion of the system, the rapidity of its extension, the places in which 
 the gold reser\'e or gold credit shall be kept, the size of the loan neces- 
 sary, etc., must be settled on the spot by persons who are intrusted 
 with the onerous duties of putting the system into effect and of its 
 administration. It is possible and proper in this place only to indi- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 103 
 
 cate in a few lines the nattire of the system and the general principles 
 on which it can be and ought to be established. 
 
 9. WORK AI;READY DONE. 
 
 It was felt by the Commission on International Exchange that the 
 first essential step in giving to the Chinese Empire a sound currency 
 was to present the subject to the leading powers having commercial 
 and financial interests in the Orient, with the object of bringing into 
 a clear light the advantages of the proposed measure, demonstrating 
 to those powers the impartial motives of the United States, and 
 securing their approval of the general project and of the initiative 
 of the American Government. 
 
 While many other steps will be required before the gold standard 
 can be in actual operation throughout the length and breadth of the 
 Chinese Empire, it was felt that the one step absolutely vital to the 
 inauguration of the system was that approval of the principle should 
 be first secured. In this fundamental matter the American Commis- 
 sion has been completely successful. Approval of the principle of a 
 national gold-currency system for China has been given by Great 
 Britain, France, the Netherlands, Germany, Japan, and Russia, with 
 a completeness which has removed the first great obstacle to bringing 
 the monetary system of the Chinese Empire into harmony with that 
 . of other commercial States. 
 
 The representatives of all of the powers consulted, as has already 
 been stated, accepted in a general Avay as desirable and practicable the 
 suggestions made by the Commission of the United States. The char- 
 acter of these approvals warrants the statement that the work of the 
 Commission up to this time has been entirely successful. Differences 
 of opinion in regard to details were naturally encountered at different 
 capitals, but they were overcome in many cases by mutual discussion 
 and comparison of views. The form in which the ultimate opinions 
 of the commissions were expressed also differed. In Great Britain 
 and Germany there was an agreement upon certain principles, which 
 was signed mutually by the representatives of the countries engaged 
 in the conference. The views of the delegates of the Netherlands and 
 of France were expressed in reports discussing at considerable length 
 the points submitted by the American and Mexican commissions and 
 expressing judgment upon them. In Russia a formal statement of 
 views was prepared by the Russian commissioners, which was not 
 mutually signed, but was transmitted by the Russian commission to the 
 Mexican and American commissions as a formal expression of the 
 views of the Russian Government. In Japan likewise the represent- 
 atives of Japan expressed their unanimous conclusions in a series of 
 statements which were in practical accord with the American position. 
 
 Upon the soundness of the general proposition laid down by the 
 Mexican and American commissions, that the adoption of a gold- 
 exchange standard in the present silver-using countries would greatly 
 contribute to their economic progress, there was universal agreement 
 at every European capital where the subject was presented. There 
 was agreement upon the principle that such a system must involve the 
 continued large use of silver coins, in order to conform to long-estab- 
 
104 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 lished customs and existing scales of value, but that free coinage of 
 silver should be suspended and the determination of the quantity of 
 the coins taken under the control of the State, in order that measures 
 might be promptly taken to give them a fixed relation with gold. 
 
 Upon the subject of the introduction of a uniform gold-standard 
 system into China there was unanimous agreement that such a system 
 would be desirable and advantageous, both to China and to the gold- 
 standard countries which have large commercial dealings with her. 
 Upon the question, however, whether the gold standard should be 
 established at the beginning or should come after the introduction 
 of a uniform national currency upon the silver basis, there was some 
 difference of opinion. The British resolutions declared that the 
 national currency of China should consist of silver coins made full 
 legal tender throughout the Empire and that " as soon as practica- 
 ble steps should be taken for the establishment in China of a fixed 
 relation between the silver unit and gold." It was explained that if 
 it were possible as a practicable matter to start with the silver coins 
 on a gold basis that plan would be best. It was, however, not thought 
 practicable. The Russian resolutions recited some of the difficulties 
 of beginning upon a gold basis and declared that the American plan 
 " would have our approval if it were so amended as to mean a national 
 silver currency issued on Government account, which should be given 
 as soon as practicable a fixed parity with gold." This is practically 
 the same as the English expression, except that it favors coinage 
 only on Government account. The report of the Netherlands Com- 
 mission strongly favored a gold parity from the beginning and 
 declared this to be the only practicable method of obtaining the bene- 
 fits of a fixed exchange; but it was pointed out that care and intel- 
 ligence would be required in the administration of .such a system. 
 The German resolutions declared against free coinage of the silver 
 coins and asserted that the Chinese Government should " take at the 
 beginning of the reform all those steps which would allow her an 
 influence on the rate of foreign exchange." The French report also 
 favored the system suggested by the commissions of Mexico and the 
 United States. The Japanese report looks forward to a gold sys- 
 tem in the future, after the model of that of Japan, but declares 
 that •' in view of the present condition of China, it is too much to 
 expect that the currency reform can be started at once on a perfect 
 system; and as it is considered highly disadvantageous to delay the 
 said reform on that account, it is advisable to adopt the suggestions 
 of the American Commission as a matter of expediency." They add 
 that " the utmost skill and care are needed to overcome the great diffi- 
 culties which necessarily accompany the operation of the system." 
 
 Thus, upon the part of six powers — Germany, France, the iSTether- 
 lands, Mexico, Japan, and the United States — there was agreement 
 that the best method was to begin the issue of the new currency at a 
 fixed parity with gold, while upon the part of Great Britain and 
 Russia there was a disposition to favor beginning on a silver basis 
 with the view of first supplying the coimtry with a uniform currency 
 and then giving it within a short interval a fixed gold value. 
 
 Upon the subject of adopting the relatively imiform ratio of about 
 32 to 1 in the currency systems to be estabished in the Orient by those 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 105 
 
 countries and dependencies which are considering a change in their 
 existing systems, there was agreement in all countries except Russia. 
 In Russia the wisdom of a ratio which would prevent the exportation 
 of the coins by the rise in the price of silver was admitted, but it was 
 deemed best to make the reservation that each country should deter- 
 mine its own ratio according to its monetary needs and economic con- 
 ditions. Even in Russia, however, indorsement was given to the 
 ratio of 32 to 1 for China as corresponding to actual economic 
 conditions. 
 
 Upon the proposal that there would be advantages in making the 
 purchases of silver actually required by each government for its coin- 
 age purposes with as much regularity as possible, there was agree- 
 ment at each capital where the subject was considered, except in 
 France, where objection was made to the adoption of any definite 
 official policy on the subject. Doubt was expressed in some cases as 
 "to whether actual requirements could always be determined with 
 regularity, but the principle was declared to be sound, that regularity 
 of purchases would be beneficial alike to the silver market and the 
 stability of international exchange. 
 
 Still another subject was dealt with by the French and German 
 commissions without solicitation by the Commission of the United 
 States. This was the internal tax levied upon manufactured articles 
 of silver. The French tax upon such articles is high, amounting to 
 about 30 per cent of the value of the silver at its present price, and 
 imposes serious restrictions upon the use of such articles in France. 
 It was suggested by the French delegates themselves, therefore, that 
 the abolition or reduction of this tax would be advantageous and that 
 they would recommend it to their Government. A similar declara- 
 tion was made by the German commission. Th« text of the resolu- 
 tions and reports adopted in each country will be found in an appen- 
 dix to the complete report of the Commission. 
 
 The German resolutions recited the fundamental principle, embod- 
 ied in the original notes of China and Mexico addressed to the United 
 States, that it was not sought to affect a change in the monetary sys- 
 tem of the gold-standard countries, and that the establishment of 
 international bimetallism was " neither intended nor considered prac- 
 ticable." This declaration, it is needless to say, had the cordial 
 approval of the Mexican and American commissions. 
 
 10. THE CONTINUANCE OF THE WORK. 
 
 The securing of the formal approval of the representatives of the 
 leading European powers and of Japan to the principle of the prompt 
 establishment of a uniform monetary system for China, placed on a 
 ■ gold basis, either at once or at the earliest practicable moment, 
 marks the first necessary step, though only one step, toward the 
 accomplishment of the work of the Commission, as indicated in the 
 notes of Mexico and China in presenting the subject to the Govern- 
 ment of the United States. 
 
 A project of law is already in course of preparation in Mexico 
 which contemplates the adoption of the gold-exchange standard, and 
 which will probably be enacted at the present session of the Mexican 
 Congress. 
 
106 GOLD STANBAKD IK INTERNATIONAL TRADE. 
 
 Owing to the conditions in China, which have already been dis- 
 cussed, the adoption of a sound monetary system in that country is a 
 much more difficult matter. At the suggestion of representatives ot 
 the Chinese Government one member of the American Commission is 
 in China to present formally to the Imperial Government the results 
 of the work accomplished in Europe by the Mexican and American 
 commissions. The United States is already in a position to state that 
 no obstacle will be placed in China's way by any of the Europea,n 
 powers, or by Japan, and that in many ways she may count on then- 
 hearty cooperation. 
 
 The commissioner will be glad to cooperate with the Chinese Gov- 
 ernment in formulating the details of a suitable gold-exchange sys- 
 tem and in presenting the matter to native and foreign business men 
 and officials and in urging it Avherever such work can be of assistance. 
 
 The notes of the governments of Mexico and China contemplated 
 also the extension of the fixed exchange system in some practicable ' 
 form to the other silver-using countries of the world. Peru has 
 already taken action of her own volition, and the Straits Settlements 
 with the Federated Malay States and French Indo-China have taken 
 first steps toward securing this fixed parity of exchange. When China 
 succeeds in carrying out her plans the English colony of Hongkong 
 and the German colony of Kiao Chau will doubtless employ either 
 the system adopted by China or one closely related to it. With the 
 new system successfully inaugurated in the near future in Mexico 
 and in preparation by China, the path will be opened for the presen- 
 tation of the project by the American Commission to the friendly 
 republics of Latin America, and for widening the opportunities there 
 for the extension of American trade. 
 
 The work has been begun successfully, even beyond the anticipa- 
 tions formed by the Commission at the outset. The study of the sub- 
 ject has brought into clear light the great difficulties of the task, but 
 it has made still more evident the great benefits that are to come, both 
 to the silver countries and to Europe and the United States, from the 
 success of the movement when it is finally assured. 
 
 The friendly petition of China to the United States has been a 
 natural result of the cordial relations between the two powers growing 
 out of the enlightened attitude of our Government, and has afforded 
 the means of demonstrating anew the desire of the United States to 
 promote the true economic interests of China, in the belief that those 
 interests are identical with those of America and of all other powers 
 seeking legitimate commercial opportunities in the Orient. 
 
 V. THE BALANCE OF TRADE AS A FACTOR IN THE ESTABLISH- 
 MENT OF A GOLD EXCHANGE STANDARD. 
 
 1. In their discussions on the establishment of a gold-exchange 
 standard in the Straits Settlements, China, Siam, and elsewhere, a 
 number of bankers and other business men have expressed the opinion 
 that the balance of trade of those colonies is a most important factor 
 in the question. It has even been stated that it would probably be 
 impossible for China to establish such a monetary system on account 
 of the asserted — not fully established — fact that the balance of trade is 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 107 
 
 heavily against her. It seems, therefore, of consequence that this 
 question be examined with some care before active steps are talten for 
 the establishment of a new system in any silver-standard country. 
 
 2. From the days when the mercantilist doctrine in political 
 economy was dominant, business men have spoken of a favorable and 
 of an unfavorable balance of trade. The balance is considered fav- 
 orable when the exports of commodities for a time apparently exceed 
 in value the imports of commodities, and the balance of trade is con- 
 sidered unfavorable when the conditions are the opposite. The rea- 
 son for these expressions primarily was the fact that silver and gold 
 were considered commodities of peculiar importance to the prosperity 
 of a country. The importation of the precious metals was looked 
 upon under all circumstances as a decided benefit and their export 
 as a more or less severe misfortune. Of course, the truth of the 
 matter is that in some way in the long run the value of the exports all 
 told of a country must balance the imports; or, at least, generally 
 speaking, they must pay interest on foreign capital invested in the 
 form of imports; otherwise, people would be either importing goods 
 for which they were not compelled to pay, or they would be exporting 
 goods for which they were to receive no pay. This state of afiairs, it 
 IS needless to say, does not exist. It may be that some of the exports 
 or of the imports will be either gold or silver, or for a time credit may 
 take the place of goods; but in international trade gold or silver bars 
 are ordinarily used ; or, if coins are used, they too are employed simply 
 as commodities. Whether gold or silver shall be exported depends in 
 fact ultimately upon the question whether it is cheaper for the country 
 concerned to^sell silver or gold rather than to sell commodities of 
 some other class. No one, of course, would deny the fact that, under 
 certain conditions of trade, gold and silver as the commodities on 
 which our monetary and banking systems are based are commodities 
 of very exceptional importance in the business of a country, as pow- 
 der and lead or possibly horses are in time of war ; and under special 
 circumstances a country frequently does pay unusual rates for the sake 
 of securing these commodities at those times. These extraordinary 
 demands for money are usually due either to conditions which dimin- 
 ish credit, or to special need of cash for special purposes. The last 
 need is ordinarily easily met by a good banking system ; the first often 
 in part by a sound money system in which people have confidence. 
 
 3. The statistics of expoi^ts and imports of commodities are ordi- 
 narily used in discussions as an indication of the real balance of trade. 
 This will, of course, give an apparent balance, though often not the 
 real one. For many years, for example, England's imports of com- 
 modities have been far greater than her exports, so that apparently 
 the balance of trade has been decidedly against her. One reason for 
 this apparent discrepancy has been that England, as a creditor conn- 
 try, with money invested in enormous sums abroad, has had due to her 
 people the interest or profit on these investments, so that this interest 
 has been used abroad to pay for many of the goods imported. Like- 
 wise English ships have been to a great extent the freight carriers of 
 the world, and the freights paid by foreigners to shipowners have 
 been used to pay for the goods imported. These two prominent 
 factors have, of course, been supplemented by some others, so that a 
 condition which has been spoken of as an unfavorable balance of trade 
 
108 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 has, in itself, under ordinary circumstances, made no extraordinary 
 demand for export of gold from England. 
 
 In practically every new country in process of development invest- 
 ments are made by citizens of the wealthier countries. During the 
 period of this investment, machinery, equipments for railroads, build- 
 ing materials, and supplies of various kinds are sent into the new 
 country to be used in production there. The foreigners who thus 
 place this capital in the new country do not expect that capital to be 
 returned, at any rate for a long period of years. In many countries 
 such investments become permanent. The only return that is then 
 demanded is the interest or the profits on these investments, and even 
 they in many cases are re-invested, so that there is no demand for 
 exports to ofi'set the imports thus made. 
 
 Here, again, an apparent balance of trade against the country may 
 mean simply that capital is being invested in that country, and that 
 the investments are making little, if any, demand for the export of 
 gold or silver, or even for the export of other commodities. It should 
 then be kept in mind that the ordinary statistics regarding exports 
 and imports may be very deceptive, and that, at any rate in the long 
 run, a country can not continue buying goods unless she is in some 
 way or other making provision for payment for those goods or for the 
 use of the capital which they represent. These payments may at 
 times be made in gold or silver ; but the precious metals, and especi- 
 ally coined moneys, will not be so used unless under all the circum- 
 stances of the case it is cheaper to send them than to send other com- 
 modities. Should money become scarce in the country, the result, of 
 course, is that it becomes dear, or to express the same thing diiferently, 
 that the rates of interest or discount rise. This tends, if other things 
 remain equal, to diminish the value of commodities in relation to 
 money ; prices of commodities fall, and thus it pays better to export 
 other commodities, and if the process continues, to import gold. 
 
 Of course the fact is recognized that the demand for gold may for 
 a time be very strong and the rates high. In consequence, if a govern- 
 ment attempts to supply gold or gold exchange, it must be prepared 
 to supply large sums on short notice; but such demand can not last 
 long with high rates and a contracting currency. (See also pp. 35 
 et seq. for means of securing gold.) 
 
 4. These general principles may now be briefly applied to the ques- 
 tion of the establishment of a gold-exchange standard. If silver coins 
 in a country are to be raised above the value of the bullion contained 
 in them, in order that they may pass at par with gold, in some way 
 they must be made equally available with gold so far as their service- 
 ableness for doing the money work of the country under consideration 
 is concerned. There are various ways in which these silver coins may 
 be given a value above that of the bullion contained in them : 
 
 (a) There is a certain amount of money work to be done in a coun- 
 try. If, by limitation of coinage, the coins are kept relatively scarce 
 as compared with the work to be done, they will acquire the added 
 value that is ordinarily given to any commodity when the demand for 
 it is great and the supply relatively limited. 
 
 (b) The Government under consideration may also agree to receive 
 these silver coins in payment of obligations due to the Government at 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 109 
 
 the same rate at which it will receive gold coins which legally repre- 
 sent the same value, thus creating a strong and constant demand. 
 
 (c) The silver coins may likewise be made legal tender for private 
 debts, which will tend to increase the demand for them. 
 
 Neither of the above methods would be affected by the balance of 
 trade. They do not call for gold. 
 
 (d) The Government may agree under certain circumstances to 
 redeem the silver coins with gold. This redemption may be carried 
 out in various ways. Gold coins might be given directly for silver 
 coins on demand either at par or at a certain fixed charge. In this 
 case the Government might need to keep gold, and a temporary 
 adverse balance 6f trade would cause high rates to be paid for gold if 
 it were needed. A government can, of course, arrange to buy gold, if 
 necessary, as Japan and Russia in fact did in many cases when they 
 were establishing their new systems. But in such a country as China, 
 for example, where silver is the current coin, gold would be demanded 
 in actual life for only two purposes : First, for use in the arts. In that 
 case gold might be bought by the goldsmiths as bullion wherever they 
 wished, and they should pay for it accordingly. There is no reason 
 why the Government should attempt to supply coins or bullion for 
 any such purpose. Second, those persons who have debts payable in 
 gold standard countries might wish to buy foreign bills of exchange 
 in order to pay those debts. 
 
 The Government might then, for all purposes of business, keep a 
 gold reserve in Europe and America against which it could sell bills 
 of exchange in return for the new silver coins paid into the treasury. 
 It has long been the custom of Holland, through its national bank, 
 in this way to protect the parity of its silver coins while still main- 
 taining its gold reserve. Ever since the establishment of its present 
 system Holland has consistently refused to pay out gold on demand 
 in exchange for its silver coins. Whenever gold is demanded the 
 inquiry is specifically made and examined, whether the gold is needed 
 for export. If so, it is regularly granted; if not, it is regularly 
 refused. Of course the Bank of Holland has it in its power to con- 
 trol to a considerable extent the rate which will be charged for 
 exchange on foreign countries, although in the main, naturally, that 
 is controlled by the commercial situation ; and the Bank of Holland, 
 it is understood, will give gold in exchange for. silver for export 
 purposes without itself demanding the right of selling a foreign bill. 
 
 The Chinese Government, if it wished to enter into the banking 
 business, either through a national bank or directly, might in this 
 way enter into competition with the banks in China by selling bills 
 of exchange against a gold reserve in Europe and America at the cur- 
 Tent rates of exchange of the day. It is not, however, necessary, in 
 order to protect the parity of its silver coins, that the Chinese Govern- 
 ment should directly enter the banking business, and it probably 
 would not be wise for it to do so. On all ordinary occasions it might 
 be well to permit this business to be done by the banks already estab- 
 lished. If, however, for any reason there came a tendency toward 
 the depreciation of the silver coins, so that the exchange rates became 
 abnormally unfavorable, the Government might then sell in large 
 sums to either the banks or to private individuals bills of exchange 
 
110 GOLD STANDARD IN INTERNATIONAL TKADE. 
 
 against its foreign gold reserve. It will be seen that if it adopts this 
 policy, the silver coins would be paid in only when there was a 
 tendency for them to depreciate, either because mey had become 
 redundant through an overissue or through a decided slackening of 
 the demands for local business. Such coins would regularly be worth 
 much more in their own country than in any other country and they 
 would never be shipped out. If, as soon as they were paid in for 
 bills of exchange, they were locked up in the treasury, the scarcity 
 thus caused would comparatively soon make them more valuable for 
 the local trade than for the purchase of bills of exchange, and then 
 demands on the foreign gold reserve would cease. The balance 
 abroad would be met by the shipping of other less-needed commodi- 
 ties and the currency would be protected. An adverse balance of 
 trade, it is thus seen, would not affect the monetary system in the long 
 run so long as its coins were not over-issued or did not for some reason 
 become redundant, and would then ail'ect it only so long as the surplus 
 was being automatically retired. 
 
 5. According to the best available statistics the following appears 
 regarding China's balance of trade : 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Ill 
 
 a 
 
 
 t 
 
 H f' 9 S 
 
 ^ (^ ^ d 
 
 
 04 iH ^rH « CO "* 
 
 ITS-*-* CO TO CO CO 
 
 ojocicoo 
 
 
 l^sl 
 
 jC-**coto'"'«* 
 
 
 °sa 
 
 
 5S"*i-H 
 
 -wt-o*-* 
 
 5t-oot- 
 
 :< gt-coco-Jic-«Dr-iint-«5 
 
 jS "** rH CO t-'t-"©*® CO QD"t^t^ 
 
 =5 Q 
 
 ^•M S— / U*J "JW ^-*i U'J ^ *1J "^^ "^^ ^^ "^1 
 
 J? _T u<J W*kl uw »— 1 1^ "^^ WJ u^ tiJ 1,^ ^^.z "T 
 
 ■§ -S 8 S E5 S 3 s ssVs s s 
 
 s sssi 
 
 C3 . 
 
 §885 S?5 
 
 SrHlfSCOU 
 
 i? 
 
 • t-cocDi-HOS'tCOincpcsiOi-i 
 
 ^lOOt-C^lSlMtOOlTfOSOOCO 
 
 iiD'oTsfoir-'lr-^-^eo'iftt; 
 i-iNcowtr-t-oomccco 
 
 
 
 5S 
 
 «t-l ^ 
 
 cocccococooococqoococ 
 
112 GOLD STANDAKD IW INTERNATIONAL TKADE. 
 
 Speaking generally, for the past decade or more there has been a 
 considerable exportation of gold from China, since gold has not been 
 needed in the countrj', the monetary demands being supplied entirely 
 bv silver and copper. Silver, on the other hand, as the money metal 
 in steady demand with no sulEcient production, has usually been im- 
 ported. But the figures given show a steady, and on the whole a 
 steadily increasing, excess of aggregate imports, including gold and 
 silver. This must, of course, have been covered in some way. Possi- 
 bly there have been exports of considerable moment overland, so that 
 they have not been noted in the customs. .Probably large investments 
 have been made of foreign capital for which no exports in return have 
 been demanded. In fact, for several years the imports of machinery, 
 manufactures of iron^ etc., which are probably largely of this nature, 
 amount to some five or six million taels annually. The years 1900- 
 1901 show how exceptional conditions make themselves at once felt, 
 but nowhere is there anything to show that any principles different 
 from those indicated have been at work. 
 
 To sum the matter up : 
 
 6. If a silver-standard country, China, for example, should estab- 
 lish a silver currency which it attempts to maintain at a parity with 
 gold, giving to its coins a value above their bullion rate, it is not 
 probable that there would be any serious difficulty in maintaining 
 that parity in the long run, on account of exchange conditions. In 
 China there is at the present time a large amount of silver in various 
 forms which, even in China itself, passes substantially as bullion. 
 Should this prove to be a cheap commodity to send abroad, there 
 would surely be no objection. If a new system were established, with 
 silver coins above their bullion value, and there should be a very large 
 coinage, so that there was a tendency for the silver coins to fall below 
 the gold parity, the standard rates would at once rise in terms of the 
 local currency ; i. e., one would be compelled to pay more of the Chi- 
 nese currency for a pound sterling than before. Those people who 
 had gold debts to pay abroad would find that they must pay higher 
 rates in these silver coins, because they had really become cheaper 
 than their nominal value. If the Grovernment would sell gold 
 exchange to meet all demands at some fixed rate more unfavorable 
 thanj:he usual banking rate, it would receive these coins when that 
 point was reached and sell the exchange, and the bank rate could, in 
 consequence, not rise above the governmental rate. For example, 
 if the usual banking rate in the ncAv coins were about one standard 
 coin for 2 shillings, and if the Government agreed to sell exchange 
 on London to any amount whenever the rate reached 1.02 for 2 shil- 
 lings, exchange could never rise above that point. If, as they were 
 paid in, the coins were retained in the vaults by the Government or 
 by banks acting as agents for the Government, and were not reissued, 
 a relative scarcity of them would soon be created, so that they would 
 return to their legal gold value, and then this special demand on the 
 gold reserve would at once cease. There would, under circumstances 
 of this kind, be no danger of their going out of the country to so 
 great an extent as seriously to hamper business. In fact, as China 
 would be tlie ouly country in which they would be worth more than 
 their bullion value, they would not 'be exported at all, unless they fell 
 to their bullion value. 
 
GOLD STANDARD IN INTEENATIONAL TRADE. 113 
 
 It is not expected, of course, that there would be retained in China 
 for business purposes any gold worth consideration. The banlts 
 would under ordinary circumstances find themselves able to meet 
 demands for gold exchange at ordinary business rates, the same as is 
 done at the present time. If, for any reason, there came an undue 
 pressure so that their rates became very unfavorable, the Government 
 might then properly, in order to prevent any depreciation of its 
 standard, itself offer to sell gold exchange at rates considered worse 
 than those ordinarily charged by the banks. This would under all 
 circumstances prevent any depreciation below such charge. For this 
 purpose the Government would of necessity keep a gold credit 
 abroad. Inasmuch, however, as gold deposited in Europe or America 
 would draw interest, or a gold credit which was not likely to be drawn 
 upon could be obtained at a very low rate, the expense need not be 
 great; and, inasmuch as the gold reserve would thus be called upon 
 only under extraordinary circumstances, the country on its gold- 
 exchange system would find its business handled in substantially the 
 same way as is the case in any countrj'^ on the gold standard. 
 
 Incidentally, too, it will be seen, such a method of procedure would 
 make but a small demand upon the gold supply of Europe, so that no 
 serious apprehension on that score need be felt. 
 
 If the above considerations hold, a so-called adverse balance of 
 trade, like that of China, need prove of slight importance as a hin- 
 drance to the introduction of a gold-exchange system if proper meas- 
 ures be adopted. 
 
 II. CONSIDEEATIONS ON A NEW MONETARY SYSTEM FOE CHINA." 
 
 By Jeremiah W. Jenks, Commissioner in China. 
 
 I. INTRODUCTION. 
 
 1. PURPOSE OF THE PAMPHLET. 
 
 Several months ago the Commission on International Exchange 
 published at Shanghai a pamphlet. Memoranda on a New Monetary 
 System for China, prepared by Mr. Jenks. In that pamphlet'were 
 given the reasons Avhy the United States Government had appointed 
 the Commission on International Exchange, a very brief outline of 
 the plan which was suggested for the consideration of the Chinese 
 Government, together with some arguments regarding the plan, and a 
 brief statement of the work which the Commission had done in Eu- 
 rope and elsewhere. It has been found that owing to the brevity of 
 the pamphlet several parts of it were misunderstood, especially by 
 
 "A translation into Chinese of tlie first pamplilet, made by Mr. Sao-lce Alfred 
 Sze, one of the secretaries of the Commission on International Exchange, was 
 published at the same time. This pamphlet will also be published in Chinese 
 through the courtesy of their Excellencies Lii Hai-Hwan and Sheng Hsiian- 
 Huai, treaty commissioners of China. The translations into Chinese have been: 
 made for the most part by Mr. Sze. Chapters X, XII, XIII, XVI, were trans- 
 lated by Mr. E. T. Williams, Chinese secretary of the American legation at 
 Peking. 
 
 S. Doc. 128, 58-3 8 
 
114 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Chinese officials and business men, and very manj' inquiries have been 
 made for a more detailed discussion of many of the points therein 
 raised. 
 
 As a representative of the American Commission on International 
 Exchange the writer of that pamphlet has spent several months in 
 investigating the currency question in China with the aid of very 
 manjr officials and business men in the different parts of the Empire, 
 and in discussing the outlines of some practicable plan for a new 
 monetary system especially with the members of the Monetary Com- 
 mission appointed by the Imperial Government. It is the purpose 
 of this pamphlet to elucidate many of the points touched upon in the 
 first pamphlet by printing, with here and there slight corrections and 
 elaborations, a series of papers handed to the Chinese monetary com- 
 mission to form the basis of discussions with them. It is thought that 
 by so doing a much more definite view than was presented in the 
 earlier pamphlet may be obtained of the plan which it had seemed to 
 the Commission on International Exchange wise to submit to the 
 Chinese Government for its consideration. This method will, of 
 course, involve considerable repetition and will destroy the unity of 
 the discussion. On the other hand, it will emphasize the points which 
 have been made most prominent in the discussions. 
 
 2. TWO PLANS SUGGESTED. 
 
 It will be noticed in the following memoranda that a rather sharp 
 contrast is drawn between two possible plans of procedure on the part 
 of the Chinese Government — (a) the establishment of a new uniform 
 monetary system, consisting of silver and copper and possibly nickel 
 coins, on the silver basis, the question of the establishment of these 
 coins at a fixed value with gold being a matter left for future consid- 
 eration, with the definite idea, nevertheless, that the ultimate aim of 
 the Government is the establishment of the system on a gold basis; 
 (b) the establishment of a monetary system consisting of silver, 
 nickel, and copper coins which would be issued by the Chinese Gov- 
 ernment at a fixed value in terms of gold and maintained at that value 
 thereafter. 
 
 Very many of the persons who had earlier been giving advice to 
 the Chinese Government and who had been Avriting on the subject of 
 monetary reform in China had recoinraended the first system, be- 
 lieving that the establishment of a uniform silver currency was a 
 useful, if not even a necessary, preliminary first step toward the 
 establishment of a monetary system on the gold basis, arid the ex- 
 ample of India was cited as a case in point. It was the belief of the 
 American Commission, after making a detailed study of the ques- 
 tion, even before its representative went to China, that it would be 
 much easier for China to follow the second plan and to establish 
 its coins at a fixed value with gold from the beginning, as the United 
 States has done so successfully within the last year in the Philippine 
 Islands. The American representative found, on taking the matter 
 up for discussion with the Chinese Government, that this Govern- 
 ment, very naturally, not having had, as yet, opportunity of study- 
 ing the subject thoroughly, and very properly desiring to proceed 
 gradually on so important a matter, had practically adopted the 
 views of those who thought it was best first to establish a uniform 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 115 
 
 silver currency without reference to its gold value. In consequence 
 a considerable part of the energies of the commissioner were devoted 
 to the discussion of this question. It is a pleasure to record that the 
 views of the American Commission seem finally to have met the ap- 
 proval of a goodly number of the Chinese officials as well as of sev- 
 eral of the English writers and business men who, naturally looking 
 first at the example of India, had advocated, some of them in print, 
 beginning on the silver basis. Several of these men have now said 
 that a further study of the question has convinced them that the 
 plan suggested by the American Commission will be the easier for 
 China and the wiser plan for her to follow. There is good reason to 
 believe that further consideration of the subject in detail in the 
 light of the experience of the Philippines and of the changed con- 
 ditions of the silver market during the last few years would lead 
 substantially all to this conclusion. 
 
 It is difficult to follow the course of reasoning of some who say 
 that it is impossible to put a monetary system on a gold basis until 
 you have a system complete. The gold value attaches to each of the 
 coins. It is immaterial logically whether that value is given to them 
 when they are issued or later. Practically, as will appear in the fol- 
 lowing pages, it is much simpler and more profitable to give them 
 the gold value one at a time as they are issued than to give it to them 
 all at once when millions are already in circulation with a well- 
 known silver value. 
 
 3. PROCESS OF ESTABLISHING A MONETARY SYSTEM. 
 
 So much has been said regarding the " gradual " establishment of 
 a monetary system in China and of taking one step at a time that it 
 seems worth while in this introduction to consider briefly the nature 
 of the process of the establishment of a monetary system, in order to 
 show how misleading the figure of speech of '" going forward step by 
 step " has been. The subject will be made clearer, of course, in the 
 detailed discussions which follow. 
 
 A monetary system made up of copper, subsidiary silver, standard 
 silver and gold coins — to omit representative money, like bank 
 notes — is a single, complete, organized whole which must be built up 
 gradually. The building of this structure is not like going on a 
 journey, in which one can take one step forward, then another step 
 forward, and another until the journey's end is reached. If it were 
 so, one should begin first by taking the step which will lead to the 
 copper coinage, and one should completely establish the new copper 
 coinage throughout the country until the people became used to that. 
 The next step should then be taken leading to the subsidiary silver 
 coinage, which is of less pure silver than the standard coins. 'One 
 should then pause until the copper coins have been given a fixed 
 value in terms of the subsidiary silver. One should then take the 
 next step forward to the introduction of the standard siJver coins, and 
 should then wait until the subsidiary silver and copper coins have 
 been given a fixed value in terms of the standard silver coins. 
 Finally, one should proceed to the fourth step of introducing gold 
 either in the form of coins or in the form of a gold reserve which can 
 be used as a standard. The country must then wait until the stand- 
 ard silver, the subsidiary silver, and the copper coins are given a fixed 
 
116 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 value in terms of gold. The journey would then be complete. When 
 one analyzes this process, including the silver and copper, it is seen 
 that the idea is absurd. Nevertheless, it is equally absurd to begin 
 with silver and afterwards go to gold as it would be to begin with 
 copper alone, proceed to subsidiary silver, and then to standard silver. 
 The process in both cases is identical. 
 
 The establishment of a complete monetary system is rather like 
 building a house with four sides, one wall of which is represented 
 by the copper coinage, a second wall by the subsidiary silver coins, 
 a third wall by the standard silver coins, and the fourth by the gold. 
 The structure must be built up gradually, but it is wise to build the 
 four sides up together, so that the relations between them will be the 
 same from the beginning, and that, as the building rises, there will 
 be no disturbance in their relations one to the other. In the plan 
 which has been proposed twenty years is allowed for this period of 
 building the structure. The cost has been estimated in detail for 
 the first five years. The cost in succeeding years would be relatively 
 less and would need no special provision. The system would pay 
 for itself after the first five years. But the completion of the mone- 
 tary system is planned to take tAventy years, surely a long enough 
 time, and the process is a gradual one. 
 
 The plan of beginning on a silver basis to change to a gold basis 
 later is like building up three walls of the house together, omitting 
 the fourth wall. It will talre practically as many years to build the 
 three walls as it would to build the four. After the twenty years 
 are completed, unless some specific provision has been made for the 
 accumulation of a gold reserve, it may take many years longer 
 before that is accumulated. When the Government begins to estab- 
 lish the gold standard — that is, to build the fourth wall of the build- 
 ing which has been left out — all of the arrangements of the house, 
 which have been made heretofore with reference to having one side 
 open to the air, must be altered to suit the new conditions, with the 
 result that — .to drop the figure — there will be a complete upsetting 
 and disarrangement of the business relations of the country. In 
 other words, the whole system of prices, which has been adjusted to 
 the silver standard, must be upset and readjusted to the gold 
 standard. That process of readjustment will continue seA'erul years 
 at best. In consequence, if the Government adopts the silver plan, 
 it is simply postponing indefinitely giving to China a good mone- 
 tary system, and it is increasing vastly the difficulties, as is explained 
 in detail later. 
 
 In the plan which the American Commission has proposed, in five 
 or six years there will be enough of the new money in circulation so 
 that prices in all the treaty ports and in all international traffic will 
 be adjusted to the new gold standard, so far as the people have any 
 desire so to adjust them. The gradual extension of the system into 
 the interior as the new coins increase in number will involve no new 
 disturbances. The change from a standard of prices fixed on bul- 
 lion silver to those fixed on a standard dollar with a gold value is 
 not appreciably more difficidt than the change from prices on the 
 bullion standard to those on a dollar standard on the silvm- basis. 
 There must be at least one disturbance of prices ; it will be much less 
 ®n the whole if it is taken directly from the beginning, and it will 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 117 
 
 save completely the trouble and expense of a second readjustment 
 from the standard silver dollars to gold after the one from bullion 
 to standard silver dollars has been made. To begin with the silver 
 plan with a gold standard oidy for the indefinite future is like set- 
 ting up an engine to run imperfectly for years without the governor, 
 Avith the idea that this can be attached later. The engine should 
 have all its essential parts when it begins to run. 
 
 4. OUTLINE OF THE AMERICAN PLAN. 
 
 It is perhaps wise to indicate in outline at the beginning the main 
 points of the plan which has been advocated by the American^ Com- 
 mission" in order that the papers that follow may take their places 
 as a more detailed explanation of a system already outlined. The 
 following is therefore submitted : 
 
 {a) The Chinese Government to assume supervision or control of 
 the various provincial mints, so that the entire coinage system of the 
 Empire will be managed in harmony. 
 
 (5) The establishment of one uniform system of imperial coins, 
 consisting of silver coins, nickel coins, and copper coins, which shall 
 be uniform throughout the Empire, and in due time a legal tender 
 for all obligations, public and private ; the minting of all other coins 
 to be stopped.. 
 
 (e) These silver, nickel, and copper coins to be established on a 
 decimal system and to be maintained at proportionate values one to 
 the other. 
 
 (d) A gold unit consisting of a fixed number of grams or deci- 
 grams of gold to be established as the basis of the currency. The 
 silver and copper coins to be issued at fixed values proportional to 
 this unit, and to be maintained thereafter at this fixed gold value. 
 It is understood that gold will not be used in general circulation 
 within the country itself, although a small amount may be coined, 
 but that the currency shall be the silver and copper coins above men- 
 tioned and bank notes based upon them. 
 
 (e) The establishment of a gold reserve sufficient to maintain 
 these coins at the fixed gold value, but not necessarily to furnish a 
 gold circulation for .the country itself. c 
 
 (/) The Chinese Government to manage this system in accordance 
 with the principles established elsewhere by successful experience; 
 and, therefore, in order to secure the necessary confidence of Chinese 
 and foreign business men, to employ to assist in the establishment of 
 the system foreign expert advisers of the highest standing whose 
 reputation and work will secure confidence. 
 
 (ff) The establishment of a national bank, of subordinate treasury 
 agencies, and of other means that may be reconunended by the experts 
 and that may prove essential for the successful carrying out of the 
 system. 
 
 II. UNIFORMITY OF COINAGE. 
 
 Action will need to be taken by the Government covering the fol- 
 lowing points : 
 
 1. Declaring that there is to be established a uniform system of 
 coinage, arranged on the decimal plan, and that the coins will in due 
 
118 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 time be made legal tender throughout the Empire for the payment 
 of public and private debts. 
 
 2. The central Government assumes charge of all mints ; this action 
 to take effect as soon as compensation is determined. 
 
 3. The provinces, on agreement with the viceroys and governors 
 concerned, are to receive due compensation for all the mints surren- 
 dered to the central Government; this compensation presumably to 
 be in the form of a certain amount paid each year for a fixed number 
 of years, or a remission of taxes of a fixed amount for the same 
 period. 
 
 4. All coinage of present coins by the different mints to be stopped 
 immediately, unless it should be decided to adopt into the system the 
 10 cash pieces and to continue their coinage temporarily. That would 
 probably not be wise. 
 
 5. Expert appraisers, presumably three, two from the mints now 
 in existence in China, and the third to be hired presumably from 
 abroad, to be appointed to appraise the value of the mints on the 
 basis of their normal output as a basis for agreement with the vice- 
 roys. This output to be gauged in part by what they have been doing 
 in the past, but especially by the fair normal capacity of the mints 
 themselves. 
 
 6. These same appraisers to make detailed recommendations as to 
 the mints that can be used most profitably in the future, as to those 
 which should be closed absolutely, and as to the transfers of mint 
 machinery or the purchases of new machinery that should be made. 
 
 7. Detailed reports of all coins of all denominations heretofore 
 issued by each one of the mints to be secured from the various vice- 
 roys and governors concerned. 
 
 8. The best estimate possible to be secured of the money now in use — 
 (a) coins of silver, (6) silver bullion, sycee, (c) gold of whatever 
 form, (d) cash of whatever form, cents, etc. 
 
 9. Regulations to be made regarding the denominations of the 
 A'arious new coins, with their exact weights in silver, nickel, and cop- 
 per, the amount and quality of the alloy, etc. 
 
 III. METfJODS OF FIXING VALUES OF SUBSIDIARY AND MINOR 
 J COINS. 
 
 1. BUSINESS FIXES VALUE. 
 
 The business men will ultimately fix the values at which the people 
 will take the coins, since the people use the coins in buying and sell- 
 ing with the merchants, bankers, etc., who in such matters are more 
 influential and powerful than the common people ; but 
 
 2. GOVERNMENT MAY DETERMINE BUSINESS ACTS. 
 
 The Government can make such arrangements regarding coinage 
 and the receipt and issue of coins that the business men and people 
 will find it to their advantage to accept and use the Government val- 
 uations : 
 
 (o) Make Subsidiary and Minob Coins Less Valuable as Bullion. 
 
 Let subsidiary and minor coins, both silver and copper, never be 
 proportionately more valuable as bullion than are the large coins; 
 usually they may be much less valuable. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 119 
 
 (6) Limit Quantity. 
 
 So far as is practicable suit the quantity of coins issued to business 
 needs. At first this can not be measured accurately ; later, experience 
 will show the right amounts. 
 
 (c) Always Receive Coins at Face Value, 
 
 Lat the Government always receive coins at their face value in 
 the payment of taxes. For this purpose the quantities of subsid- 
 iary silver to be received at any one payment might be limited to 
 sums of not over, say, $20 for 50-cent pieces, and to, say, $10 for 20- 
 cent and 10-cent pieces. Quantities of copper to be received at one 
 payment may be limited to, say, $5 for 20 and 10 cash pieces ; to $1 for 
 smaller pieces. 
 
 (d) Interchange Small Coins fob Large and vice versa. 
 
 Let the Government at its established agencies keep a good supply 
 of all kinds of coins, and exchange them free of charge one for the 
 other for all applicants in reasonable amounts (say as above in re- 
 ceiving taxes), dollars for subsidiary silver, nickel, or copper coins, 
 and vice versa. 
 
 (e) Make Coins Legal Tender. 
 
 Ultimately, when the value is firmly established at the Government 
 rate, let decrees be issued making it legal for every debtor to pay his 
 debts in whichever coins he chooses within the limits set in (c). 
 
 3. IF ABOVE PLAN FOLLOWED ESPECIALLY 
 
 (d) Value Will be Maintained. 
 
 If there are plenty of places where these exchanges can be made, 
 no one will give eleven 10-cent pieces for a dollar when at the Gov- 
 ernment office he can always get a dollar for ten of them. 
 
 IV. ADVANTAGES OF A FIXED GOLD VALUE FOR THE CHINESE 
 
 CURRENCY. 
 
 In the imperial edicts of xYpril 22, September 7, 26, and 29, 1903, 
 the encouragement of commerce and industry was emphatically an- 
 nounced as the present policy of the Government, and the board of 
 commerce was established in order to carry out that policy. Per- 
 haps in no other single way can this purpose be accomplished so 
 promptly and surely as by the establishment of a monetary system 
 which has a fixed value with gold. It iu worth while to note the 
 following benefits which would come therefrom : 
 
 1. A FIXED RATE OF EXCHANGE. 
 
 It removes the fluctations in exchange. This makes business much 
 more secure, and takes away from it the gambling element. During 
 the year 1903 the Shanghai tael varied in average monthly value from 
 2s. Ifd. in March to 2s. 7d. in October, a variation of 5|d. Often there 
 are strong fluctuations in one day with no cause that can be foreseen. 
 
120 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 In Japan there used to be similar fluctuations, but they have prac- 
 tically entirely ceased. For example, some two years and a half after 
 the fixing of the rate of exchange the fluctuations of the yen were 
 only between 2s. 0.1250d. and 2s""..0.8125d. ; that is to say, less than 
 seven-tenths of a penny in two and a half years. This practically 
 eliminates all business risk from this source. 
 
 (o) Effect on Peices in Foeeign , Trade. 
 
 It should be noted also that this removal of risk from business 
 will have a tendency, on the one hand, toward increasing the prices 
 paid by foreigners for Chinese goods for export, and, on the other 
 hand, toward lessening the prices for goods imported into China 
 from foreign countries for the use of the Chinese people. With the 
 risk eliminated, the competition of merchants, both importers and 
 exporters, will lead them to take less average profits than now. 
 
 (6) Effect on Internal Trade. 
 
 These advantages of stability in foreign trade will be reflected 
 also to a greater or less extent in domestic trade, while the favorable 
 efl^ects upon prices will be felt in all parts of the country to a note- 
 worthy extent in the internal trade. The chief curse to internal 
 trade now is the variety of taels and fluctuations in internal exchange. 
 "V\1iile a uniform silver currency would to a great extent cure this 
 evil, it can never be permanently cured until the silver currency is 
 given a gold basis. A change from a uniform silver to a gold basis 
 after a few years would produce a business upheaval worse than a 
 present change from a variety of taels to a uniform silver currency 
 which has a fixed gold value. No especial difficulty will be felt now 
 in introducing a new currency on either a gold or a silver basis. It 
 will seem but one more added to many existing standards. When 
 there is once uniformity, a change of basis with a complete upsetting 
 of established prices means a crisis. 
 
 (c) Effect on Quantity of Exports and Imports. 
 
 This removal of risk from business will tend also to increase de- 
 cidedly both the import and export trade of China. After Russia 
 had established her system on a gold basis her foreign trade increased 
 very decidedly, and a similar result was shown m Japan. Count 
 Matsukata, the Japanese finance minister under whom the change 
 was made, says that on account of the freedom from fluctuations m 
 the value of coinage and also in prices, commercial and industrial 
 enterprises came to make a healthy and orderly development, while 
 trade with the gold-standard countries, which comprises the largest 
 part of Japan's foreign trade, for the same reason, was also making 
 a very healthy growth. Even as regards the trade with the silver 
 countries, where people had feared that, on account of the change, the 
 country might be at a disadvantage, there was a considerable increase 
 in the foreign trade. It was his opinion that trade would, on the 
 whole, be benefited. 
 
 The statistics of Japan seem to show that the change to the gold 
 standard does not itself increase imports, on the whole, more than it 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 121 
 
 increases exports, as some people argue. On account of the large 
 speculative business in Japan at the time of the payment of the 
 Chinese indemnity, during the year preceding the establishment of 
 the gold system and for two years thereafter there was a very decided 
 increase in the imports as compared with the exports, but since that 
 time there has been a decided decrease, so that in 1899 and 1901, for 
 example, the imports exceeded exports by only a very slight amount, 
 in 1900 there being again an increase. The jBgures seem to show that 
 the relative quantity of the imports as compared with the exports are 
 due mainly to other factors and practically not at all to the quality 
 of the currency. The figures regarding the excess of imports and 
 exports relatively from 1894 to 1901, inclusive, are as follows : 
 
 Table I.o 
 
 Yen. 
 
 Excess of imports, 1894 4, 235, 809 
 
 Excess of exports, 189.5 6,851,600 
 
 Excess of Imports ; 
 
 ]S96 53, 881, 714 
 
 1897 56, 165, 694 
 
 1898 111, 748, 404 
 
 1899 5,472,032 
 
 1900 82, 831, 852 
 
 1901 3, 467, 102 
 
 The law establishing the new gold system was passed in March, 
 1897. It went into operation September 30, 1897, but it was not 
 fully in effect until July, 1898. The great excess of imports, there- 
 fore, is as much during the period of silver coinage as of gold, and 
 there was a great fall the j'^ear after the establishment of the new 
 system, the excess of imports almost disappearing. 
 
 2. COINAGE PROFIT. 
 
 Giving to the Chinese coins a fixed value in gold would give to China 
 a very large profit from the coinage. At the present prices of silver 
 and copper the profit on each dollar coined, on the average, may be 
 conservatively estimated at 20 per cent. During the last year the prof- 
 its in the Philippines have been over 19 per cent, and the touch of the 
 subsidiary silver coins there has been higher than would be necessary 
 for China. Probably, also, the amount of copper coins, on which the 
 profit is much greater than on the silver, would be larger in China 
 than in the Philippines. The vice-minister of finance in Japan, Mr. 
 Sakatani, has estimated that China might count on an average profit 
 of 30 per cent. Estimating the profit at only 20 per" cent on a prob- 
 able output of 250 million dollars of her new coins within the first 
 four or five years, China's gain would be 50 million dollars. This 
 should be made to form a very large proportion of a gold reserve. 
 
 Moreover, if every effort were made to keep all of the coins at a 
 fixed value one with the other, it would be possible to issue the sub- 
 sidiary coins at a lower touch than if they were to have their value 
 fixed by ordinary custom among the merchants. Whether the coins 
 are given a fixed gold value or not, effort should be made (and the 
 methods are not at all difficult) to keep up the value of the subsidiary 
 coins to their face value, but if the coins were given a fixed gold 
 value this would be absolutely essential and would certainly be done. 
 
 a The Fourth Financial and Economical Annual of Japan, 1904, p. 67. 
 
122 GOLD STANDARD IN INTERNATIONAL TRADE. 
 3. INCREASE OP INVESTMENTS. 
 
 Fixing the value of the coins in terms of gold would, beyond 
 question, increase such investments of a conservative nature, both 
 foreign and native, as the Chinese Government would wish. Count 
 Matsukata, in referring to the result of the reform of the currency 
 in Japan, said that the tendency had already promptly set in to in- 
 vest in that country, at low rates of interest, capital from gold- 
 standard foreign countries, thus supplying the lack of capital in the 
 country and giving a powerful stimulus to the development of indus- 
 try. This was seen within two years after the establishment of the 
 system. 
 
 Statements were likewise made to the representatives of the Mex- 
 ican Government by leading financiers in New York that they had 
 money ready to the amount of at least 50 million dollars gold, in spe- 
 cific cases which they mentioned, to invest immediately in Mexico as 
 soon as the fixed value for the Mexican coins should have been estab- 
 lished. Doubtless this sum would have been very largely increased. 
 China might well expect much greater results, owing to the much 
 greater opportunities for investment here and to the larger extent of 
 her undeveloped resources. 
 
 Unless there are political considerations which lead to investments, 
 money will be oii'ered much more freely for building railroads, open- 
 ing mines, and maliing public improvements of all kinds if China 
 has a sound monetary system on a gold basis. The conservative 
 business men of the industrial nations will gladly invest when they 
 can make certain calculations. . Before then we may expect invest- 
 ments rather from speculators or from those who have some political 
 schemes to further. After railroads are built and trade on a large 
 scale in the interior is established, a sound coined money on a stable 
 basis will be a necessity. Trade can not grow satisfactorily under 
 present currency conditions. 
 
 4. STRENGTHENED CREDIT. 
 
 Probably no other action on the part of the Chinese Government 
 would strengthen its credit among foreign nations so much as the 
 establishment of a sound monetary system which would fix the value 
 of its money in terms of gold. This would enable her to borrow 
 money much more cheaply than at present, and quite possibly to 
 refund some of her foreign debts at lower rates of interest. 
 
 The experience of Japan, as stated by Count Matsukata, was this: 
 Within three years after the system was established, he says, " It may 
 be regarded as a happy omen that the Government was able to raise 
 recently a foreign loan of '£10,000,000 in London at 4 per cent inter- 
 est." He ascribed this result to the improved credit of the country, 
 due to the establishment of the new system. If China could refund 
 her debts which now bear interest above 4 per cent at that rate, it 
 would effect a saving, if we assume the tael to be worth only 2s. 6d., 
 of 3,136,400 taels a year. That alone would more than pay the 
 interest on all the loan she would probably need to make to establish 
 the new system with an ample gold reserve, if she desired to adopt a 
 system with a loan. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 123 
 
 5., CERTAINTY REGARDING TAXES. 
 
 Beside the possibility of refunding her debts, if the price of silver 
 should continue to decline, China could pay off her present debts 
 much more easily with her currency given a fixed gold value. Dur- 
 ing the past fifteen years the decline in the value of silver has les- 
 sened the income of China, as compared with what it would have been 
 on a gold basis, by nearly one-half, the average value of the tael in 
 1890 being 5s. 2^d., and during the year 1903 2s. Tfd., while it has 
 been at times even considerably lower. As soon as the new mone- 
 tary system is established, there will be no further decline in the 
 value of the taxes collected; and even if silver should not decline 
 further, there would be a decided advantage to the Government in 
 being able to reckon accurately on the vahie of the taxes collected 
 for the purpose of paying foreign obligations. 
 
 The chief danger to China in her relations with foreign countries 
 comes from considerations of a financial nature. If she at any time 
 fails to pay her obligations, the danger of aggression will be very 
 great indeed. On the other hand, in no other way can she so 
 strengthen her military force or her resources in other directions 
 which would be available for defense against aggression as by im- 
 proving her financial situation. In no other way can her financial 
 situation be improved so rapidly as by establishing a monetary 
 system which will have the full confidence of Chinese business men 
 as well as of foreigners, and such a system can never be satisfactory 
 to either Chinese or foreigners until the coins have a fixed value in 
 terms of gold. It is clearly within the power of China to establish 
 such a system in the immediate future by taking energetic measures. 
 
 V. REASONS FOR ADOPTING A GOLD VALUE FOR THE SILVER 
 COINS AT THE BEGINNING OF THE SYSTEM. 
 
 1. GOVERNMENT PROFIT. 
 
 The Government will gain a profit from coinage of some 15 per 
 cent more than would be possible if the system were introduced on the 
 silver basis. On the gold basis the average profit should be at least 
 20 per cent; on the silver basis, possibly 5 per cent. Unless this 
 profit is made when the coins are first introduced, it can never be 
 made afterwards. This additional gain should amount to a yearly 
 profit of $6,000,000 or thereabouts throughout the introduction of 
 the system, say ten to twenty years. It would be increased or les- 
 sened in proportion to the rapidity of coinage and in part to the price 
 of silver. It would last as long as the new coinage continued to be 
 introduced. Can the Chinese Government in its present financial 
 situation afford to neglect this source of profit? 
 
 2. NO DISTURBANCE OF BUSINESS. 
 
 If the coins are introduced at their gold value while business is 
 being done with so many other kinds of coins and with bullion, 
 there will be no appreciable disturbance of business. "Prices are now 
 fixed in so many different kinds of moneys that an addition of one 
 kind more would not be noticeably detrimental. It would be only 
 like introducing a new kind of tael. 
 
124 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 3. IF INTRODUCED AT SILVER VALUE DISTURBANCE WILL FOLLOW. 
 
 If the coins are first introduced at their silver value and an attempt 
 is later made to give them a gold value, the result is almost sure to 
 be a great disturbance of business over a period of several years. 
 
 (o) Result op Fail in Price of Silver — Case op India. 
 
 If it were certain that the value of silver bullion would continue to 
 fall, so that the Government could simply fix the gold value of the 
 new coins at the silver value of the day when the Government starts 
 on the gold value, and that the silver bullion value of the coins would 
 then continue to decline, there would be no serious disturbance of bus- 
 iness. Both Japan and India were extremely fortunate in fixing their 
 gold values under such circumstances. At that time, however, not 
 only was silver bullion steadily falling in the world market, but it 
 was known that the stoppage of the free coinage of silver in India 
 would certainly cause a fall in silver bullion, so that India might 
 safely count on that result, inasmuch as its action would lessen for 
 the time being the demand for silver by some ten or twelve million 
 ounces yearly. 
 
 At present, however, in China the situation is entirely different. 
 No act of China's is likely to have any effect toward lowering the 
 price of silver, and even if its action were to have that effect, this 
 would take place immediately upon the introduction of the new sys- 
 tem, so that the gold value should be fixed then rather than later. In 
 the second place, the condition of the silver market for the last two or 
 three years has been such that one may anticipate a rise in silver as 
 fully as probable as a fall. There is practically no increase of out- 
 put ; there is a large increase in demand ; there is a large increase in 
 the output of gold. There are certain to be fluctuations. 
 
 (6) Result op Rise in Price op Silver. 
 
 If the price of silver does not fall, the Government must ultimately 
 fix the gold value of its silver coins at considerably above their bul- 
 lion value — say 15 per cent, at least. If it should fix the rate at, say, 
 only 5 per cent above, any slight rise in the market value of silver, 
 would be sufficient to lead to the melting or exportation of the silver 
 coins. A slight fall would again lead to their coinage, and so on, 
 making the system very unstable. We must not forget that in 1903, 
 which was by no means a bad year, the average monthly rate of ex- 
 change in Shanghai varied as much as 20 per cent. 
 
 China might and should make arrangements so that a permanent 
 rise of any extent in the value of silver bullion, which should lead to 
 the melting-of the silver coins, would bring about the introduction of 
 gold coins ; but, on the other hand, it is doubtless better, considering 
 business conditions in China, that silver coins be the chief medium of 
 exchange rather than gold, although the value should be fixed in gold. 
 A large bulk of the business of China is on so small a scale that gold 
 coins, which would not be convenient in sizes worth less than $5, are 
 not adapted to the needs of the people. On this account, Mexico for 
 its own use, the United States for the Philippines, England for India 
 and the Straits Settlements, and France for French Indo-China, are 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 125 
 
 providing systems with silver coins to which they have given or ex- 
 pect to give a gold value, rather than real gold systems with gold in 
 circulation. 
 
 The country needs small change, at any rate, even though it should 
 have gold coins. The Government, therefore, if it takes any risk of 
 having its silver dollars melted down, should keep the half dollars, 
 20-cent pieces, and 10-cent pieces more nearly free from that danger 
 by making them eight-tenths fine, while the dollar pieces are nine- 
 tenths fine. 
 
 (c) Result of Raising Value of Coins after Circulation Established. 
 
 If the Government fixes the gold value at, say, 15 per cent above the 
 bullion value after the silver coins are once in general circulation, 
 there must be a great disturbance of business. The only way (short 
 of an artificial scarcity, which will seriously injure business and 
 which it would be extremely difficult to enforce in China) to give the 
 coins that higher gold value is for the Government, after they are in 
 circulation and after it has been receiving them at a certain fixed rate, 
 to say that it will receive them at a higher rate and for it to be pre- 
 pared to sell gold exchange at this higher rate. For example, if 
 to-day a silver dollar is worth 48 cents gold (American) the Govern- 
 ment must say that it will receive it for, say, the next two months at 
 50 cents gold, for the two months thereafter at 52 cents, and so on, 
 until it has reached the required value. If, now, it should increase 
 the rate at all rapidly, the result would be that the banks and wealthy 
 people would hoard great sums of money in order to secure these 
 higher rates. There would be a great scarcity of coins and business 
 would be seriously hampered. Wealthy people who could thus hoard 
 would make large profits at the expense of prosperity in trade. 
 
 If the Government, to prevent this speculation, should raise the 
 rate gradually, at, say, not -over 5 per cent a year, bringing it up 
 slowly month by month, it would extend the period of unsettled busi- 
 ness, of changing and gradually lowering prices, etc., over several 
 years, which might well produce a serious commercial crisis. 
 
 A failure on the part of the Chinese Government to begin on the 
 gold system now means, therefore, that it is taking, first, an abso- 
 lutely certain loss of many millions of dollars to begin with, and, sec- 
 ond, a very serious danger of a future hampering of business for sev- 
 eral years, and, at any rate, it must take a much more complicated 
 process in the future in reaching a gold system than it need take if it 
 starts now on a fixed gold basis. 
 
 VI. METHODS OF MAINTAINING THE SILVER AND COPPER COINS 
 AT A FIXED VALUE WITH GOLD. 
 
 1. GOVERNMENTAL CONTROL OP COINAGE. 
 
 The Government must absolutely control the coinage and must 
 limit the quantity of coins to the actual needs of business. 
 
 It is impossible to keep the value of silver coins above their bullion 
 value unless the Government itself keeps rigid control of the mints. 
 Private individuals must neither be allowed to coin by themselves, 
 nor must they be allowed to determine in any way the quantity which 
 
126 GOLD STANDARD IN INTEKNATIONAI, TRADK. 
 
 the Government shall coin or to determine individually the amount 
 of money in use. In consequence, besides the Government control of 
 the mints, it is desirable, and will ultimately be necessary, that the 
 Government be able to stop the importation of foreign coins and bul- 
 lion, except on Government account, or that by other measures, such 
 as taxation, it make it more disadvantageous to use them than to use 
 the new Government coins. 
 
 This limitation and control is absolutely necessary for the follow- 
 ing reasons : 
 
 (a) Value Depends upon Quantity. 
 
 The value of coins, as well as of goods of all kinds, depends, to 
 a considerable extent, upon the quantity of them which are available 
 for use in proportion to the demand for them, just as flour or cloth 
 becomes more expensive when the quantity is scarce and decreases in 
 value when there is a surplus on hand. So the coins, by being fewer 
 in number than the merchants might readily make use of, will 
 acquire an added value, while, if the merchants were allowed to coin 
 them freely, there might easily come to be an oversupply, so their 
 value would fall to the value of the silver bullion which they contain. 
 
 In establishing a fixed gold value for the silver coins in India, 
 the government depended for some years upon scarcity alone. Before 
 1893 the mints had been open to the free coinage of silver. On the 
 26th of June of that year the mints were closed, and for some years 
 no more were coined. At first the value of the coins declined, there 
 being a large supply in circulation; but after a time, inasmuch 
 as the quantity was limited and no further coins were supplied, 
 there came a strong demand for more to supply the growing needs of 
 business. Then the value of those in circulation began gradually 
 to increase until it reached the price which had been fixed by the 
 Government — 1 shilling and 4 pence to the rupee. When this 
 point was reached, and there came a further demand from the mer- 
 chants, they were ready to pay gold to the Government in order to 
 have the Government, for their convenience, coin more rupees at that 
 price — 1 shilling and 4 pence. It must not be forgotten, how- 
 ever, that the scarcity hampered business for a time by raising the rate 
 of interest. In a similar way it would be wise for China to declare 
 that she would furnish her new silver coins to any amount on the 
 demand of merchants, provided they would pay a corresponding 
 amount of gold into the treasury at the fixed value determined. 
 On no other condition, however, should the merchants be permitted 
 to demand of the Government an increase in the number of silver 
 and copper coins. 
 
 The merchants should be permitted to have gold coins furnished 
 them at any time either with or without payment of a reasonable 
 mintage charge, as seems best when the system is established, in 
 exchange for gold bullion which they themselves pay in. 
 
 (6) Value Depends upon Confidence. 
 
 In order to maintain the value of the new coins, it is also necessary 
 that the Government secure and keep the confidence of the public 
 in connection with its management of the new system. This can be 
 
GOLD STANDARD IN INTEENATIONAL TRADE. 127 
 
 done best by maintaining absolute faith as regards the quality of the 
 coins, by the employment of the ablest experts of the highest reputa- 
 tion, and by publicity in connection with the management. 
 
 Heretofore the mints have, at times, used a larger amount of alloy 
 than was provided in the law, and there has been no proper check 
 over the asseys. In consequence the public has lost confidence in the 
 coins of some of the mints. ' This must never be permitted to happen 
 in connection with the new coins. Each melting for coinage must be 
 carefully assayed, and under no circumstances should any coins be 
 minted that.are not of the right quality. Tn order to secure the confi- 
 dence of the public, coins taken at random from the different mints 
 from time to time should be tested by assayers not connected with 
 • the mints and their reports published. It would be well also, for a 
 time, to have coins selected at random by persons not connected with 
 the Government or with the mint management and sent to foreign 
 mints to be assayed and reported on. The confidence of the public, 
 both Chinese and foreign, must be secured and kept. 
 
 Publicity regarding the quantities coined and put into circulation 
 will likewise tend to give confidence in the wisdom of the Government 
 management, and such publicity should be encouraged. 
 
 The confidence of the public, in the first place, is necessary in order 
 to maintain the value of the silver coins; and, in the second place, 
 this confidence would be profitable to the Government inasmuch as, 
 when the people trust the Government, the gold reserve, which it will 
 need to carry, may be much smaller than will be the case if they dis- 
 trust the Government. 
 
 2. UNIVERSAL ACCEPTANCE OF COINS BY GOVERNMENT. 
 
 The Government must receive its new coins at all times without 
 hesitation anywhere in the Empire in the payment of any obligations 
 due it. 
 
 (a) The acceptance of the coins without question by all Govern- 
 ment officials will give the public confidence in the good faith of the 
 Government. 
 
 (6) This acceptance by the Government makes also a demand for 
 the new coins which will tend to keep up their value. While the 
 supply of coins is still limited to an amount less than the ordinary 
 demands of business require, this Government demand, of itself, 
 might possibly be sufficient to maintain the value at the gold rate. 
 
 In some coiuitries the annual revenue receipts of the government 
 amount probably to 25 per cent or more of all the money in circula- 
 tion. Even though the annual revenue of China should be consider- 
 ably less than that, the Government demand would still be very great. 
 
 (c) It would be well, in the first place, probably, not to compel the 
 officials, even in the provinces where the coins are introduced, to pay 
 to the board of revenue more than, say, one-quarter and afterwards 
 one-half of their revenue in the new coins, the amounts in every case 
 being adaj)ted to local conditions and to the local supply of the new 
 coins ; but finally, of course, they and all taxpayers should be. com- 
 pelled to pay all of their money taxes in the new coins. There should 
 be, of course, no interference in this connection with the payment of 
 certain taxes in kind. From the beginning, however, all of the offi- 
 cials should be compelled to receive from, the people at their full gold 
 
128 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 value all of the new coins offered to pay obligations due to the Gov- 
 ernment. Otherwise confidence in the Government would be lost and 
 its credit would be seriously injured. 
 
 If the introduction of the new coins is made locally, province by 
 province, it might very likely be possible almost from the beginning 
 to compel the people in the localities where they are introduced to 
 pay all of their money taxes in the new coins. Of course if a tax- 
 payer does not have enough of the new coins in hand to pay his taxes, 
 the Government will provide means through exchange shops with 
 fixed rates to supply his needs, as will be explained in connection with 
 administrative organization. 
 
 3. MAKE COINS LEGAL TENDER. 
 
 In due time the coins must, by law, be made legal tender (the legal 
 money in which private debtors may pay their debts). A law of this 
 kind is usual in all countries where a developed monetary system 
 exists. It tends, of course, to add to the demand for the new coins 
 and thus to keep up their value. 
 
 Such a law should not apply to debts made before the new coins 
 are put in circulation. The people should also be permitted to make 
 specific contracts payable in anything they like, but all contracts 
 made payable simply in the money of the country, such as dollars 
 or taels, the debtor should be permitted to pay in these new coins. 
 If the creditor objects, the debtor should still have the privilege of 
 paying the new coins into the court for the creditor and of having 
 the debt discharged. This law should not be passed at first, but 
 after the people have become accustomed to the new coins and know 
 their real value. 
 
 4. GOVERNMENTAL SALE OF GOLD EXCHANGE. 
 
 The Government should be ready at all times after the coins are 
 put into circulation to sell in exchange for these coins at their gold 
 value, on demand, in amounts of not less than $5,000, orders (bills 
 of exchange) payable in gold in London, New York, or Yokohama, 
 at rates slightly more advantageous than the usual banking rates. 
 If, for example, the usual average charge of the banks throughout 
 the year is, exclusive of fluctuations in the value of silver bullion, 
 say, three-quarters or seven-eighths of 1 per cent, the Government 
 might offer to sell at, say, 1 per cent or 1^ per cent. 
 
 (a) Gold Needed fob Payment of Foreign Debts Only. 
 
 Inasmuch as business conditions in China (the low rates of wages, 
 the low scale of prices, the great number of very small transactions, 
 etc.) do not require the use of gold in ordinary trade, there is no 
 reason why the Government should offer to redeem the new coins in 
 China itself in gold. 
 
 For the payment of obligations to creditors in foreign countries, 
 however, gold is needed; and in no other way can the Government 
 so easily secure the confidence of the great merchants and the foreio-n 
 bankers as by supplying gold at a reasonable charge for the settfe- 
 ment of these foreign debts. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 129 
 
 For the last thirty years Holland -has found it possible to main- 
 tain for her silver coins a fixed value in gold without redeeming 
 those coins in gold for use within the country. She has stood ready, 
 however, to furnish gold at any time for the payment of debts abroad. 
 
 India, for a considerable time, maintained the value of her silver 
 coins by scarcity alone. This, however, was always at a considerable 
 risk that the coins might temporarily at any time, owing to a slack- 
 ening demand, fall somewhat below their face value, and of late, 
 since she has a large gold reserve, India has also been ready to fur- 
 nish gold for the payment of foreign obligations. 
 
 In the Philippines the Government relies chiefly upon this fur- 
 nishing of gold by means of bills of exchange for the payment of 
 foreign obligations to maintain the value of its silver coins, although, 
 inasmuch as it had a considerable quantity of gold and United 
 States currency, which is at a par with gold, on hand in Manila, it 
 offered temporarily to exchange this United States money free of 
 charge for the new currency, and to exchange gold for the new cur- 
 rency at a charge equivalent to the cost of importation. 
 
 Instead of furnishing gold itself for the payment of foreign obli- 
 gations, it will be equally useful to the people and much cheaper 
 for the Chinese Government to sell bills of exchange, as indicated. 
 
 (6) Bankers Will Use Coins if They Can Buy Exchange. 
 
 In order to secure public confidence in the new monetary system, 
 the bankers, especially the foreign bankers, and the great merchants 
 must be willing to receive the new coins at their gold value. If 'the 
 bankers and the merchants can always be sure of buying bills of 
 exchange at a fair charge in exchange for the new coins, they will 
 always be ready to receive and make use of them in their general 
 business. There would never be any possibility of their falling in 
 value more than enough to cover the difference between the charge 
 for a bill of exchange which the bank would make and the charge 
 which the Government would make, say one-half of 1 per cent. This 
 amount is so slight that it would never be felt at all in local transac- 
 tions ; and, as a matter of fact, when the confidence of the public was 
 secured, the difference would never be made by any of the banks. 
 Other uses of the coins would be more than sufficient to cover any 
 slight difference. 
 
 (0) GOVEKNMENT RATES TOR EXCHANGE. 
 
 The Government should probably charge rates somewhat above 
 those charged by the banks. In the first place, the Government will 
 probably not wish to compete with the banks in their ordinary busi- 
 ness. In consequence, it places its rates somewhat higher than the 
 banks, in order that the banks may ordinarily sell the usual bills of 
 exchange. The Government will sell them only for the purpose of 
 maintaining the value of the silver coins when there comes an 
 unusually strong demand for gold, so that withouc action on the 
 part of the Government the value of its silver coins might fall. 
 
 Should the Government establish a national bank it would be 
 possible to arrange, of course, for it to sell bills of exchange against 
 S. Doc. 128, 58-3 9 
 
130 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 the Government's gold reserve at the usual banking rates, thus com- 
 peting with the other banlis. It would probably, however, be better 
 for the Government to have its rate fixed in the law, and for the 
 national bank to use only its own funds and not the Government 
 funds in competition with other banks. 
 
 (d) Pbofits from Exchange. 
 
 This business of selling bills of exchange, under the circumstances 
 indicated, will also yield to the Government a small profit, which 
 should be placed in the gold reserve. 
 
 5. COINS FURNISHED IN EXCHANGE FOR GOLD AT HOME OR ABROAD. , 
 
 The measure recommended in section 4 will prevent the deprecia- 
 tion of the silver coins. In order to prevent an increase of the value 
 of the silver coins above their gold value fixed in the law, the Gov- 
 ernment should agree always to furnish these silver and copper coins 
 to any amount at their face value in exchange for gold paid in to the 
 Government. 
 
 This gold might be paid in either to the treasury in China or to 
 its agencies or to the branches or agents of its national bank abroad. 
 In the latter case the gold paid in abroad would be used to purchase 
 orders (bills of exchange) payable in China in the new coins at the 
 treasury or at the national bank. When these drafts on the home 
 Government are purchased abroad there should also be a charge 
 made, as in the case of gold bills of exchange sold in China for pay- 
 ment abroad, although the rate of exchange may not be the same. 
 This would likewise bring a small profit to the Government, and, 
 what is of greater importance, as will appear later, will serve to 
 prevent the exhaustion of the gold reserve. 
 
 VI, A. HOW CAN A 48-CENT DOLLAR BE MADE BY THE GOVERN- 
 MENT TO PASS FOR 55 CENTS GOLD? 
 
 [The following sums up in concrete form several of the points just made 
 
 in VL] 
 
 A silver dollar which weighs seventy-two hundredths of a tael is 
 worth in China at this date in American gold about 4-8 cents. If that 
 same dollar or an equal weight of silver could be given by action of 
 the Government a value of 55 cents American gold, it would be worth 
 about eighty-two hundredths of a tael. The Government can not, by 
 mere decree, make seveniy-two hundredths of a tael worth eighty-two 
 hundredths of a tael, but it can take other measures so that all mer- 
 chants will readily accept it at that value. Exactly that kind of 
 result is secured by all the civilized countries except China. 
 
 The following shows the way : 
 
 If the Chinese Government takes seventy -two hundredths of a" tael 
 of silver bullion, coins it, and calls the coin the " imperial coinage 
 dollar," it will be different in looks from any dollar now in circula- 
 tion. Let it pay this new coin to an ofl&cial for 82 tael cents; that 
 is, if it owes him 8.20 taels, let the Government pay him 10 of the 
 new dollars instead of $11.38 of the present dollars as the equiva- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 131 
 
 lent of 8.20 taels. The official will readily take the new dollars at the 
 rate of 82 tael cents under the following conditions : 
 
 1. The Government agrees always to take the new dollar anywhere 
 in the Empire — Peking, Shanghai, in Szechuan, Honan, or elsewhere, 
 instead of 82 tael cents due in taxes or contributions or in any other 
 debt due the Government. If the official can pay it to the Govern- 
 ment for 82 tael cents and the Government will surely receive it at 
 that rate, he will not object to taking it. 
 
 2. The Government should pass a decree in due time, after the peo- 
 ple understand the plans of the Government, saying that anyone who 
 has a debt to pay to any other person may pay it in the new dollars 
 at the rate of |l for 82 tael cents. If the people know that the Gov- 
 ernment will always back them in paying their debts with the dollar 
 at 82 tael cents, they will not object to taking it at that rate. 
 
 3. If the Government says, further, that it will take these new dol- 
 lars and give in exchange for them an order to pay in London or New 
 York or Yokohama 82 tael cents' worth of gold for each new dollar 
 paid into its bank, all the foreign banks will receive them at that 
 value, for they are buying orders on those places every day. If the 
 foreign banks take them at that rate, all native banks and merchants 
 will take them at the same rate, for they can be sure of paying them 
 out at that. If the merchants take them at 82 tael cents, all the peo- 
 ple will do so, for they will know that they may pay them out at the 
 same rate. 
 
 4. The Government, too, having full control of the mints will not 
 coin, more of these coins than the needs of business demand, so that 
 the people will always be using all that are in circulation, and this 
 also will keep up the value. 
 
 By following these methods the Government could without cost to 
 itself gain a profit of 10 tael cents on each new dollar coined. It 
 would be practically as easy by the same methods to make a profit 
 of 12 or 15 cents, and it would probably be best to make the gain 
 about 20 per cent. It should be noted that this profit can be made on 
 each piece only once, and that is when it is first coined and put into 
 circulation. After that the dollar must be taken in by the Govern- 
 ment at the same value at which it is paid out, so that there is no 
 profit. 
 
 As 18 cents gold equals about 72 tael cents and 55 cents gold 
 equals about 82 tael cents, it is shown above how a 48-cent dollar can 
 be made to pass for 55 cents. 
 
 It is important to note that, if the new dollars are introduced into 
 circulation in the way indicated above, very little gold will be- 
 required at first, and the gold reserve can be built up very gradually 
 as the new coins go into circulation. If at first there should be 
 distrust on the part of the people, so that they would wish to bring 
 the coins paid out to them back to the Government in large quanti- 
 ties to buy gold with, it would be well to have on hand for the first 
 few months a very large proportion of the coins issued. For ex- 
 ample, for the first million dollars issued it might be well to let the 
 people know that the Government had $750,000 gold in reserve; for 
 the second million issued, say $500,000— that is, $1,250,000 for the 
 two millions issued. This large reserve at first is to guard against 
 any possibility of panic. The actual demands probably would be 
 trifling from the first, and after two or three years the reserve could 
 
132 GOLD STANDABB IN INTERNATIONAL TRADE. 
 
 probably safely be cut to 25 per cent, or even considerably less, pro- 
 vided the Government had made arrangements to borrow promptly 
 on short notice. 
 
 If the Government pays out the new coins for salaries and sup- 
 plies, deposits them in the banks, gives fair rates in the new coins 
 for silver sycee and cash purchased, receives them everywhere for 
 their full gold value in taxes, the people will very soon gain confi- 
 dence and all persons having money to receive either for goods or 
 for services will soon prefer to take the new dollar as the better dol- 
 lar and the one steadier in value rather than the fluctuating Peiyang 
 dollar or the inconvenient tael which has to be weighed. 
 
 VII. GOLD RESERVE. 
 
 1. A GOLD RESERVE NECESSARY. 
 
 As has been stated before, in order to secure public confidence and 
 to insure from the beginning the maintenance of the value of the sil- 
 ver coins in gold, by methods which we have already discussed, espe- 
 cially by selling bills of exchange on a gold fund held mostly abroad, 
 it is necessary to have a sufficient gold reserve. 
 
 It should be kept in mind, however, that the quantity of the gold 
 reserve required on the system proposed would be very much less than 
 if the redemption of the coins in gold on demand were made in the 
 country itself. While, beyond question, when the system is being 
 introduced there would be a certain speculative demand for bills of 
 exchange from the interior on the part of bankers who could forward 
 their new silver coins to Shanghai, Tientsin, and other places where 
 the banks could use them in the purchase of gold exchange, this 
 speculative demand would probably not last very long. It would 
 depend upon the fact that at first a good many of the more ignorant 
 people might be willing to sell the new coins, which would seem to 
 them of light weight, at rates something below their face value. This 
 danger could be largely obviated by having the Government give 
 full information as to its means of conducting the business, and by 
 the Government itself always receiving them promptly at their full 
 gold value for money taxes of all kinds. This purely speculative 
 demand on the gold reserve would of course stop as soon as the com- 
 mon people knew experimentally that the Government was maintain- 
 ing the value of the silver coins. 
 
 2. AMOUNT OF RESERVE. 
 
 The amount of the total reserve required is extremely difficult to 
 determine on account of the deficiency of statistics in China. In 
 actual practice it must be determined more or less experimentally, 
 depending upon the demand for coins. It will be necessary, on ac- 
 count of the lack of accurate information, to make ample provision 
 so as to cover all risks, and to see to it that there is enough at each 
 stage of progress. 
 
 According to estimates made by the best experts in America and 
 Europe, this reserve should be, for a considerable time at least, from 
 25 to 30 per cent of the value of the new silver coins in circulation. 
 
 At the beginning, while the change from the old system to the new 
 is going on, it will be necessary to have this gold reserve considerablv 
 
GOLD STANDABD IN INTERNATIONAL TRADE. 133 
 
 larger than 25 or 30 per cent of the coins at that time in circulation, 
 inasmuch as there is likely to be a lack of confidence at first which may 
 create a run on the reserve. Besides this fact, there will also be other 
 coins and bullion in circulation for a considerable time. If there 
 should be a slackening of business or a very strong demand for gold 
 bills of exchange, the withdrawal of, say, even 50 per cent of the new 
 coins in circulation might not contract the entire currency so much 
 as would later, when the system is completely established, the with- 
 drawal of, say, 10 per cent. After the system is thoroughly estab- 
 lished, it IS probable that a resrve equa). to 10 or 15 per cent of the 
 circulation will be sufficient for actual use, although 25 or 30 per cent 
 should always be available on short notice. 
 
 In consequence of the fact that the reserve fund may be put to only 
 special uses— i.e., to the redemption of the new silver in bills of ex- 
 change, etc. — it will doubtless be possible to keep part of it in good 
 foreign bonds on which cash could be promptly realized. Again, so 
 far as a part is concerned, it may be sufficient possibly, instead of 
 keeping cash or bonds on hand, for arrangements to be made by the 
 Chinese Government for a mere right to draw bills of exchange up to 
 a certain amount on, say, two days^notice, the regular rates of interest 
 to be paid only on the amounts drawn. This privilege could doubtless 
 be obtained at a very small charge if the management had the confi- 
 dence of the great banking houses. 
 
 According to the estimates of the Director of the Mint of the 
 United States, the stock of silver in China at the present time is 
 probably in value 750 million dollars Mexican, in round numbers, 
 say, 482 million taels, or, say, $337,400,000 American gold. If we 
 assume a population for China of 400 million (an outside figure; 
 the Director estimates 330,100,000), this would give a per capita cir- 
 culation of 1.205 taels, or substantially 84.35 cents gold. If the new 
 dollar were issued at, in round numbers, 2 shillings, 1 yen, or 50 
 cents gold, or a little more, it would doubtless be sufficient for the 
 time being to allow two of the new coins per capita, or 800 million 
 for the entire country when the system is completed. In order, how- 
 ever, to be sure to cover all possible expense in our first estimate, we 
 take a figure more nearly like that of India and assume a profitable 
 circulation of some 8 shillings, or $2 American gold, or, say, four of 
 the new silver coins per capita, making 1,600 million. 
 
 At the present time, according to the same authority, the per capita 
 circulation of China and of several countries which may be com- 
 pared with it is, in gold, as follows : 
 
 Tabm II. 
 
 China <J$1. 02 
 
 Turkey 3. 75 
 
 Japan ^ 3. 24 
 
 Cuba » 2. 19 
 
 Bulgaria 1. 32 
 
 India 2. 07 
 
 Egypt 3. 71 
 
 o The figures are $2.27 Mexican, whicli would amount to about $1.02 American, 
 according to the price of silver when this Is written. No other country in the 
 list has so low an estimate. One of the best-informed Chinese bankers esti- 
 mates the present silver circulation at 100 million taels, of which 10 per cent is 
 paper and the rest bullion or dollar coins. He estimates the copper circulation 
 
134 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Of course countries with more highly developed business have a 
 
 higher ratio. For example: 
 
 The straits Settlements fu'2? 
 
 Great Britain }°- «*1 
 
 Germany 20. 48 
 
 United States 29. 79 
 
 France ''^^- 22 
 
 It is evident that four new dollars per capita would be a sufficient 
 outside amount to take into consideration at the beginning of the new 
 system. I^t would take several years at any rate to have the system 
 established throughout the country, and experience would eventually 
 show the amount required. While the conditions in China resemble 
 those in India more than in any other prominent country mentioned, 
 the probability is that conditions are even less developed, so far as 
 the use of money is concerned, in many parts of the interior of China 
 than in India, where a system of coins has been in use many years. 
 It should be noted also that the per capita circulation in India, as 
 given in the table, includes 11 cents per capita for paper money 
 uncovered. 
 
 It would be advisable, of course, for China to introduce the system 
 first in the treaty ports or in some of the most populous provinces 
 and then gradually to extend the system throughout the country. 
 The population in the treaty ports probably does not exceed 8 mil- 
 lion, while the population of the four provinces which contain 
 Shanghai, Canton, Tientsin, and Hankow is about 100 million. If 
 we assume that China, within the first five years (after) she began the 
 coinage, could supply 400 million of the new coins, that would cover 
 practically all parts of the country which have any direct dealings 
 with foreign countries or which can be considered commercial to any 
 noteworthy extent. A system that is made thoroughly successful 
 in these sections of the country and with this class of the population 
 for a series of years will, without especial difficulty, make its way 
 through the rest of the country. An actual reserve, therefore, of, 
 say, 33^ per cent of this sum of 400 million of new reserve coins, with 
 the privilege of increasing it to 50 per cent or even to double the 
 original amount in case of need, would certainly be ample provision 
 to make for the introduction of the system. It would not be neces- 
 sary, of courae, for the entire final reserve to be raised within the 
 first four or five years after the system is started. If the amount 
 mentioned above were sufficient to carry it through the first five or 
 six years with safety, experience would show how to take care of the 
 system from that time on; but according to all reasonable calcula- 
 tions, if the price of silver were to remain where it is now or not to 
 increase considerably, the profits from the coinage alone would prob- 
 ably prove ample thereafter to continue the reserve at a sufficient 
 figure until the completion of the system. 
 
 The figures given above are the highest that the writer has ever 
 heard estimated, and are given as outside figures which would be safe 
 under the most adverse circumstances. On the basis of most esti- 
 
 at 50 million taels, of which 50 per cent is paper. He thinks the country needs 
 more money, but gives that as the present amount. That estimate allows only 
 .S7.G tael cents per capita, or 50 cents at a population of 300 million, the least 
 assumed. Unless this estimate is ridiculously wrong, an allowance of two new 
 dollars per capita is ample for the present. 
 
GOLD 8TANBABD IN INTERNATIONAL TRADE. 135 
 
 mates, and those largely of Europeans long resident in China as 
 bankers and merchants, one-half of the sums mentioned would prob- 
 ably suffice, and those are the figures recommended as best to assume. 
 It would doubtless do to begin the system on one-half the estimates 
 given all around, provided arrangements were made to increase in 
 case of necessity to the higher figures, and provided also that the 
 management were watchful and skillful and had the confidence of 
 the public, native and foreign. The figures are tabulated by years 
 of work in the next Chapter, VIII. 
 
 3. USES OF THE RESERVE. 
 
 This has been explained sufficiently for present purposes in earlier 
 discussions. 
 
 4. MEANS OF OBTAINING A RESERVE, 
 (o) Profits on Coinage. 
 
 The profits of the coinage of the silver, nickel, and copper coins, 
 if the prices of silver and copper do not increase materially, ought 
 to amount to as much as 20 per cent. The experiences of the Philip- 
 pines and of Japan seem to justify this estimate as reasonably con- 
 servative. Of course all would depend upon the value which the 
 government determines to give to the coins, and it can, within reason- 
 able limits, fix its profits. According to the best experts it is desira- 
 ble that the face value of the silver coins be at least 15 per cent above 
 the usual bullion value in order to prevent the danger of the melting 
 down of the coins if there should be an increase in the price of silver 
 bullion, which would make the coins more valuable as bullion than 
 as coins. On the other hand, it is not desirable that the profits be 
 too high on account of the danger of counterfeiting. It is probable 
 that so far as the unit coin (the dollar) is concerned, a reasonably 
 safe profit of about 15 per cent is about right. From the present 
 outlook regarding the future price of silver the margin had better be 
 somewhat above 15 per cent rather than below it. On the subsidiary 
 silver coins, on account of the less danger of counterfeiting, and also 
 because the principle of scarcity can be applied somewhat more 
 rigidly to maintain their value, a somewhat higher profit may be 
 made. If the dollar coins are nine-tenths fine, it is entirely possible 
 that the subsidiary silver coins might be made eight-tenths fine. The 
 disadvantage of the larger amount of alloy in the subsidiary coins 
 is that people might at first hesitate somewhat about receiving them ; 
 but that danger would soon be overcome if the government adopted 
 the right measures of interchanging them for dollar coins on demand. 
 The second danger of greater importance is that of counterfeiting. 
 
 On the nickel and copper coins, of course, a much greater profit can 
 readily be realized. On such coins a profit from 50 to 100 per cent is 
 not unusual. As in China the quantity of copper and subsidiary sil- 
 ver coins would be unusually large, a profit of 20 per cent on the en- 
 tire coinage for five years is probably safe to assume. Mr. Sakatani, 
 vice-minister of finance of Japan, assumes a profit of 30 per cent. 
 
 It should be kept in mind also that if an increase in the value of sil- 
 ver bullion lessened materially the profit of the Government, it would 
 also lessen the Government's risk at the same time. A decided rise 
 
136 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 in silver in the London market would rather have a tendency, other 
 things equal, to lessen the demand on the gold reserve, both by en- 
 couraging the payment of foreign obligations through the export of 
 silver and by giving confidence in the Government as the risk from 
 depreciation of its coins lessened. Moreover, if, owing to a threat- 
 ened exhaustion of its gold reserve, it were eventually forced to sell 
 some of its silver coins to meet a temporary emergency, it would real- 
 ize a higher price for them. In no event would it lose more than the 
 cost of coinage and freight, unless the bullion value of silver fell be- 
 tween the time of its purchase of bullion and sale of coin. 
 
 The profit on coinage should all be devoted, for a considerable time 
 at least, to the purchase of gold for the gold reserve. If it should be 
 necessary to get any considerable extra sum in hand at any one time, 
 it would be possible to use this reserve and the silver on hand as a 
 basis for a temporary loan of a few months, provided the Government 
 authorities had the full confidence of business men. It probably 
 would not be wise, however, to count on this as a basis for any but a 
 temporary loan. 
 
 (6) COWTEIBTJTIONS. 
 
 The Government has already made provision for the accumulation 
 of a gold reserve by permitting contributions from certain classes of 
 officials to be paid part in gold or in silver at the ratio of 32 to 1. It 
 might be well to encourage as far as possible the income from this 
 source. Possibly other similar sources can be discovered which will 
 add considerable sums to the gold reserve. 
 
 (n) IjOAN. 
 
 The Chinese Government might very profitably, considering the 
 importance of the change of the nionetary system and the profits of 
 coinage, make a loan, of which a large part of the proceeds should be 
 placed in the gold reserve. The direct gain from profits of coinage 
 alone ought to make this loan very profitable, even if the extra capi- 
 tal needed had to be borrowed. In private life to borrow at 6 or 7 
 per cent and to make 20 per cent is considered very good business. 
 China ought to be able to make better rates than those. 
 
 If the foregoing estimates regarding the profits from coinage are 
 not excessive, it will be noticed that these profits will amount regu- 
 larly, at the rate of coinage suggested as sufficient for beginning, to 
 $8,000,000 a year for a period of twenty years if the smaller estimates 
 are taken; to double that if the larger are assumed. If the rate of 
 coinage were increased, the income would be proportionately in- 
 creased, although the time of its duration might be correspondingly 
 lessened. 
 
 However, even if this profit of 8 or 16 million dollars a year is 
 made for the Government so that it becomes Government property, 
 it could probably not be used for anything else than a gold reserve; 
 that is to say, it could not become one of the regular revenues of the 
 Government to be applied to other purposes, at any rate for a consid- 
 erable time. Later, part of it might possibly be used in such a way. 
 On the other hand, unless the statements made heretofore regardino- 
 the benefits to China of a monetary system established on this basis 
 are grossly mistaken, the indirect benefits to China from the system 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 137 
 
 would amount to much more than the cash profits from the coinage 
 thus placed in the gold reserve. Before the system were entirely com- 
 pleted it is probable that as a result of its establishment the added 
 revenue to the country from other sources would be enough to much 
 more than pay the expenses of any loan required. Every increase in 
 imports or exports increases both customs and likin receipts, while in- 
 vestments and confidence lead to increased revenue from other sources. 
 
 In estimating the expenses of a loan, also, it should be kept in mind 
 that, so far as the loan is required for the gold reserve, a considerable 
 part of it could be kept as a current balance in the banks either at 
 home or abroad, and thus be made to realize a considerable return in 
 interest, doubtless 2 per cent, and in some cases more. The govern- 
 ment of the Philippine Islands has realized 3^ per cent. If experi- 
 ence showed that the demand on the gold reserve was comparatively 
 small, a considerable portion might also be kept invested in securities, 
 Chinese or foreign, which would pay part of the expenses of the loan, 
 probably 3 to 4 per cent. At least half of the reserve, on the average, 
 might thus draw interest; probably a much larger proportion than 
 one-half might secure some income. 
 
 As a basis for a loan, if any is needed, the following sources are 
 suggested : 
 
 (1) Increased returns from customs. — The annual increase of the 
 returns from the imperial customs. The annual income at the time 
 of the establishment of the indemnity, it is understood, was prac- 
 tically all required for the payment of that indemnity. The trade of 
 China, however, is rapidly increasing, and there is, in consequence, a 
 large annual increase in the returns from the customs. If the Gov- 
 ernment can secure its support on the basis of the income of three 
 years ago and assign this increase in the customs to the establishment 
 of a monetary sjj-stem, this might be used as the basis of a considerable 
 loan. 
 
 (2) Opium, spirits, etc. — From investigations made throughout 
 the provinces, it is evident that the Chinese Government is not receiv- 
 ing, either through the central government or through tne provincial 
 governments, nearly so large an income from opium, spirits, tobacco, 
 and other similar products as is usual in other civilized countries. 
 In the United States, for example, the central Government alone de- 
 rives from the manufacture and first sale of such products, mostly 
 spirits and tobacco, ordinarily nearly half of the entire national rev- 
 enue. Besides this, the municipalities derive a large additional in- 
 come from licenses issued to shops where these products are sold. In 
 India, in 1902, the Government derived from opium alone a revenue 
 of 72,781,000 rupees, or, in round numbers, about 36,400,000 taels. 
 B'rom salt it received only about 89 million rupees, say 44,500,000 
 taels. 
 
 It would seem probable that by a proper organization of the serv- 
 ice and an increase in the tax, the Chinese Government might realize 
 from opium a much larger revenue in the near future without any 
 tendency toward increasing the quantity of opium used. The Gov- 
 ernment Avould also derive a very great advantage in securing a much 
 greater control over its production and use, which would enable it 
 more easily later to adopt whatever measures might seem advisable. 
 Probably similar provisions might be made, although they would be 
 
138 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 of less importance, with regard to spirits, wines, tobacco, and similar 
 luxuries. 
 
 The succeeding note offers some suggestions regarding an opium 
 farm for certain cities. 
 
 (3) Land tax. — Sir Kobert Hart has suggested an increased rev- 
 enue from the land tax, the provisions of which are familiar. 
 
 (4) Mines.— It seems to be the general opinion throughout the 
 provinces, particularly among business men and those who have 
 looked somewhat carefully into the subject, that a considerable 
 increase in income might be derived from the development of those 
 mines of China, the revenues from which have not already been as- 
 signed, and that, if it were desired, a loan might be made on this 
 security. 
 
 In order to secure such an increase in revenue and to manage it to 
 _ the best advantage, it is necessary that the Government have a some- 
 what accurate and detailed knowledge regarding the mineral re- 
 sources of China. This could probably be most readily secured if 
 the Government, through the board of commerce, were to organize a 
 central mining bureau. This bureau should undertake at once a 
 careful survey or prospecting of the chief mining resources of the 
 Empire under the direction of experts who would have the full con- 
 fidence not merely of the Government itself, but also of investors 
 everywhere. In the case of all mines which seem important very 
 careful estimates should be made by these experts of the probable 
 income which might be received from each mine under proper 
 royalties. When this estimate was in hand the Government could 
 judge reasonably well regarding the amount of money which could 
 probably be borrowed on this basis. Of course no investors, either 
 Chinese or foreign, would be willing to make a loan so large that its 
 interest and amortization fund would exhaust the estimated royalty. 
 Capitalists might readily be found, however, who would be willing 
 to make a loan the average support of which might amount to, say, a 
 half of the royalty. This would, on the average, give an ample 
 security. The other half then, in case it were actually realized, 
 would go into the general treasury of the Empire. 
 
 When the mining bureau once had full knowledge of the mines 
 at its disposal it would be in a position to grant privileges on these 
 mines on reasonable terms on the basis of the experts' reports. In- 
 vestors would, of course, send their own experts, at first at any rate, 
 to investigate the mines which they were proposing to develop or 
 on which it was their intention to make a loan; but if the Chinese 
 had employed experts of equal skill every such investigation would 
 serve not only to confirm the judgment of the Government experts 
 but likewise to add to the credit of the Government itself. When the 
 permit for the working of the mines was given, until a sufficient 
 sum had been secured for the monetary system, it might well be 
 made on the basis of a loan of reasonable size. It is the opinion 
 of a goodT many experts who have thought out the matter somewhat 
 fully that from the mineral resources of the country there might be 
 realized in this way a considerable sum within a comparatively short 
 period— enough probably to supply the needs of the monetary system. 
 
 (5) Railroads. — It is probable that there are also some railroad 
 concessions which might be used in the same way under the direction 
 of the board of commerce. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 139 
 
 (6) Other sources. — Probably the board of revenue can suggest 
 other sources of revenue ; for example, a house tax, such as has been 
 employed in Canton; a business tax, such as is common throughout 
 Europe and in the Philippines; or others. Of course, any such 
 taxes should be levied with discretion and with care not to interfere 
 with business. There can be little doubt, however, not merely that 
 it would be extremely profitable to the Chinese Government, but 
 also very beneficial to the Chinese people, to make the sacrifice of 
 slightly additional taxes or of the use of some of the new sources of 
 revenue suggested, amounting, say, to from two to five million taels 
 a year, in order to establish a new monetary system, which would 
 probably bring an annual profit for a good many years of from 
 six million taels a year upward, besides the still greater indirect 
 benefits already mentioned. 
 
 6. MEANS OF MAINTAINING THE RESERVE. 
 
 Most of the means of maintaining the reserve at a sufficient amount 
 after it has once been established have already been indicated in con- 
 nection with the maintenance of the gold value of the silver and cop- 
 per coins, so that this subject may be treated quite summarily. The 
 following methods may be noted : 
 
 (a) Gold Paid In. 
 
 In case individuals wished to have silver and copper coins issued 
 to them individually, in addition to those which the Government has 
 put into circulation by the ordinary channels, the Government should 
 coin and issue such silver and copper coins on demand in reasonable 
 quantities for gold deposited. Such gold should be placed in the 
 reserve fund. 
 
 This has been the chief source, practically the only source, of rais- 
 ing the gold reserve in India. It could doubtless be made eventually 
 to become a considerable source of gold revenue for China. It is not 
 well to depend upon it too much, as, in order to have it work most 
 efficiently, it would be necessary so to limit the quantity of coins that 
 business might be considerably hampered. Moreover, it should be 
 kept in mind that full confidence in the administration and high 
 credit is needed to make this source effective. 
 
 (6) Sale of Silveb Bills on China; 
 
 In connection with the above is the sale of bills of exchange for 
 gold by the Chinese agencies abroad, these bills of exchangeto be 
 drawn on the treasury in China or on the national banlc acting as 
 the agent of the treasury, and to be payable in China in the new 
 silver coins. It is not necessary that the rates charged by the agents 
 of China abroad for bills of exchange payable in the new coins in 
 China be the same as those charged by the Chinese Government for 
 bills of exclxange payable abroad in gold from the gold reserve. In 
 fact, if it seemed that there were danger of the exhaustion of the 
 gold reserve, the Government might make the rates favorable enough, 
 so that it would become an active competitor of the foreign banks in 
 selling these bills of exchange. Of course the persons in charge of 
 
140 GOLD STANDAED IN INTERNATIONAL TRADE. 
 
 the system would need to exercise very careful discretion in deter- 
 mining what those rates may be, in order, on the one hand, to main- 
 tain the system in its integrity, and, on the other, not to interfere 
 unduly with private business. 
 
 (c) But Gold Exoh.*nge. 
 
 In case of very heavy drafts on the gold fund, so that there seemed 
 danger of its exhaustion, the Chinese Government, either through 
 the national bank or through other special agencies, following the 
 example which Japan set in more than one instance, might enter the 
 market and buy in competition with others in Shanghai, Tientsin, 
 and elsewhere, for silver, foreign bills of exchange payable iri gold in 
 London, New York, Yokohama, or elsewhere; the products of these 
 bills of exchange M'hen collected in gold to be placed in the gold 
 reserve. 
 
 (d) Profits on Exchange. 
 
 From the sale of bills of exchange on the gold reserve held abroad, 
 as well as from the sale of bills of exchange on the Chinese treasury 
 payable in the new silver coins of the country, small profits would, of 
 course, be realized. These would naturally be placed in the gold re- 
 serve. While they would in all probability amount to a consider- 
 able sum each year, they would naturally form but a small part of 
 the gold reserve as a whole. They are therefore to be looked upon 
 as a subordinate means of maintaining the gold reserve. 
 
 (e) Sale of Silver on Hand. 
 
 Another resource is also left in case of an emergency, a means 
 which was advocated by Mr. Lindsay, of the Bank of Bengal, when it 
 was proposed to establish earlier a gold reserve for India. 
 
 In case very large quantities of the new silver coins are paid into 
 the Government treasury in exchange for bills of exchange on the 
 gold reserve, these coins are to be held in the treasury until there 
 comes a strong demand on the part of business men for them to be 
 paid out, a demand which would be manifested ordinarily by the de- 
 posit of gold, either at home or abroad, for this purpose. It is evi- 
 dent that such deposits of gold would not be made as long as gold 
 exchange is demanded. The Government Avould therefore have in 
 its vaults large quantities of silver coins. If the gold were not forth- 
 coming elsewhere, it could either borrow temporarily on the security 
 of these coins or could finally sell them on the market as bullion, 
 either for local use or for shipment abroad. Such a sale would in- 
 volve a loss to the Government of the cost of coinage, and possibly 
 also some shipment charges. Beyond that, however, there would be 
 no loss suflered, provided the price of bullion remained the same, 
 inasmuch as the Government would itself have bought the bullion 
 originally for coining these pieces at market bullion rates. There 
 would be a loss of coinage and recoinage, but this would be a very 
 small per cent, possibly 2, or even 4 per cent, with freight charges, 
 and might well be suffered rather than to take any serious risk of 
 the exhaustion of the gold reserve and the depreciation of the coins 
 already in circulation. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 141 
 
 Note. — An opium farm for some of the cities of China. 
 
 In the article on a gold reserve, under (c) (2), it is suggested that 
 the Chinese Government does not receive so large an income from 
 opium, spirits, etc., as is usual in other countries or as is desirable. In 
 order to secure a sufficient basis for a loan of the new monetary system 
 and in order to get this return within a year, which would be soon 
 enough for the inauguration of that system, it has been suggested that 
 the selling of opium in the larger cities like Canton, Shanghai, Han- 
 kow, Foochow, etc., might be made into an opium farm; that is, that 
 the monopoly of this sale, including the selling through the opium 
 shops where opium is consumed, be made a monopoly and be sold to 
 an individual or syndicate who would pay the largest amount for it, 
 and would conduct it in accordance with the law. 
 
 The Government would then lay down whatever regulations it saw 
 fit for its introduction into the city, and its sale, fixing, if it thought 
 best, the quality, prices, restrictions regarding persons to whom it 
 should be sold, the number of shops where it should be sold, with 
 their location, and any other regulations that seemed desirable. The 
 money for the farm should be paid quarterly in advance, so that the 
 Government could count absolutely upon the amount of revenue and 
 upon the date when it would be received. 
 
 This system should be applied to enough cities to furnish the reve- 
 nue required for the loan. This law would form a good basis for the 
 proper taxing of opium, and might later be extended to include a 
 general opium monopoly by the state, or it might take whatever other 
 form seemed advisable. It was suggested that a commission of 
 three men, to consist of two Chinese and one foreigner, the foreigner 
 presumably a man from the imperial customs who knew something 
 regarding the conditions of opium importation, etc., and who could 
 speak Chinese, should be sent at once to Singapore, the Federated 
 Malay States, possibly to Java, Sumatra, Manila, and Formosa, to 
 see how the farms are run in those different places, where they have 
 them. They should then go to Canton and these other Chinese 
 cities, and after informing themselves about conditions there, have 
 charge of the selling of the opium farm. The farm should presuma- 
 bly be sold for a year at a time, with the expectation that if the 
 farmer did his work well he should have a certain priority in the 
 succeeding year. 
 
 An opium farm of this, type would presumably bring in a certain 
 revenue more promptly than almost any other tax that could be 
 devised. As soon as the farm was sold it would make an absolute 
 basis for a loan, so good that a loan could doubtless be floated at a 
 low rate. 
 
 The chief advantages of the system are (1) the prompt and cer- 
 tain income; (2) the ease of enforcing the law, inasmuch as the 
 opium farmer, in order to keep his monopoly, would himself see to 
 the enforcement of th^ law against all other persons besides himself. 
 He himself has so much money invested that it would not pa^^ him to 
 take the risks of violating the law under penalty of forfeiture of his 
 farm; (3) the ease of changing the system for another at almost 
 any time whenever the change might seem desirable. 
 
142 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 Of course the dangers of a farming system like this are not over- 
 looked. There is danger of evasion of the law, of a poor quality 
 of opium, etc. In many respects a Government monopoly is pref- 
 erable. On the other hand, considering present conditions in China — 
 the difficulty of handling honestly Government monopoly, the need 
 of immediate and certain returns, etc. — it is probable that the opium 
 farm would secure the needed revenue more certainly and promptly 
 than the other forms of tax suggested. 
 
 VIII. COST OF ESTABLISHING THE NEW MONETARY SYSTEM- 
 ESTIMATES. 
 
 It is assumed in suggesting these figures, in order to make the 
 estimates at the highest possible cost, that the population of China is, 
 in round numbers, 400 million ; that the new monetary standard coin 
 shall be a dollar about equal to the present Peiyang or Canton dollar 
 in size and weight, and that it is given a gold value slightly above 
 that of the Japanese yen, enough to insure the requisite profit. It is 
 within the power of the Government to fix the rate of profit at the 
 beginning. 
 
 There are two bases of estimates, the first assuming that China will 
 need eventually, when the system is completed, four of these new dol- 
 lars per capita. This is an outside estimate, larger than is usually 
 given, and larger probably than is needed. The second assumes a 
 circulation of two of the new dollars per capita, is the one more 
 generally given, and is the one recommended. It is ample for start- 
 ing the system, though the rate of coinage might be increased if the 
 coins went into circulation readily. 
 
 FIRST ESTIMATE— $4 PER CAPITA. 
 
 The circulation for the entire Empire when the system is completed 
 will be 1,600 million dollars. 
 
 In the four chief provinces of China which are especially con- 
 nected with foreign trade — Chili, Kiang-sii, Hupeh, and Kwang 
 Tung — and which contain all of the leading commercial cities — Tien- 
 tsin, Shanghai, Nanking, Hankow, and Canton — there is a popula- 
 tion, in round numbers, of presumably some 100 million. 
 
 If the new monetary system is once well established in these prov- 
 inces and the fixed value of the coins maintained in terms of gold, 
 there will be no difficulty whatever in extending it on that basis 
 through the rest of China. In consequence the estimates here given 
 are on the basis of supplying these four provinces completely with 
 the new coins. In actual practice it is probable that a good many of 
 the more remote districts of these provinces might not be well sup- 
 plied at that time, Mobile some of the cities of the other provinces, 
 such as Shantung and Fukien, would be supplied, but the quantity 
 mentioned would be ample work for the first five years. The figures 
 given are high enough in every case so that they are believed to be 
 entirely safe. The following table, in millions of dollars, gives for 
 each of the first five years the amount to be coined, the profit on the 
 coinage at 20 per cent, the amount in circulation, the percentage of 
 the circulation to be held as a gold reserve, the amount of that re- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 143 
 
 serve, and the amount to be supplied to the gold-reserve fund, by loan • 
 or otherwise, outside of the coinage profit : 
 
 
 Table III. 
 
 
 
 
 
 Year. 
 
 Amount 
 coined. 
 
 Coinage 
 profit. 
 
 Amount 
 in circu- 
 lation. 
 
 Circula- 
 tion in 
 
 reserve 
 fund. 
 
 Beserve. 
 
 Amount 
 to be sup- 
 plied 
 from 
 loan or 
 tax. 
 
 First 
 
 $80 
 80 
 80 
 80 
 80 
 
 $16 
 16 
 16 
 16 
 16 
 
 180 
 240 
 320 
 400 
 
 Per cent. 
 75 
 60 
 
 $60 
 80 
 103 
 119 
 135 
 
 $44 
 
 
 Third. 
 
 7 
 
 Fourth 
 
 
 Fifth... 
 
 
 
 
 Total .. . 
 
 100 
 
 80 
 
 400 
 
 
 135 
 
 55 
 
 
 
 
 It will be noted that the larger part of the loan or special tax is 
 called for during the first year. There are two reasons for this. In 
 the first place, the special runs on the new system are likely to occur 
 during the first year rather than later. On that account it might-be 
 thought advisable, for a time at least, to be ready to supply gold if 
 necessary to a certain extent in exchange for the new silver coins 
 within the country itself at a charge equiA^alent to the cost of ship- 
 ment of gold from Europe. This should not be adopted as a general 
 policy, and it is questionable whether it should be done at all, but 
 provision for a verj' large reserve to guard against possible runs 
 should be made. 
 
 Ill the second place, while the bulk of the circulation is still in 
 other coins or in bullion, especially before their importation is 
 stopped, it is possible that in order to test the system a very large 
 percentage of the new coins would be presented to buy gold exchange 
 with, even at the rather high rates charged for bills of exchange. 
 After the system is finally established, the withdrawal of the coins 
 from circulation on their presentation to buy bills would so contract 
 the currency that the rates charged for bills of exchange would cer- 
 tainly fall, i. e., a fixed amount in sterling — say, £1,000 — would cost 
 less in the new dollars, or a fixed amount of the new dollars would 
 buv a larger sterling draft as the dollars became scarcer. But while 
 there remained a large circulation of other coins, and particularly 
 while importation of other coins might continue, it is possible that 
 this might not be the case; hence the necessity during the first year 
 or two of a verj^ large reserve which could be used if necessary. It 
 is absolutely essential to the success of the system that sufficient pro- 
 vision be made so that the absolute confidence of the business world, 
 both Chinese and foreign, be assured beyond question. 
 
 SECOND ESTIMATE— $2 PER CAPITA. 
 
 This estimate is much more reasonable on the whole and is ample 
 for a safe starting of the system, though if experience shows that 
 the coins are readily used and the system rapidly wins success, provi- 
 sion should be made to increase the rate of coinage and the amount 
 
144 
 
 GOLD STANDARD IN INTERNATIONAL TKADE. 
 
 coined. The following table in millions of dollars shows the figures 
 for each of the first five years and the totals : 
 
 Table IV. 
 
 Year. 
 
 Amount 
 coined. 
 
 Coinage 
 profit. 
 
 Amount 
 in circu- 
 lation. 
 
 Circula- 
 tion in 
 reserve 
 fund. 
 
 Eeserve. 
 
 Amount 
 to he 
 
 supplied 
 from 
 loan. 
 
 First - 
 
 $40 
 40 
 40 
 40 
 40 
 
 1 
 8 
 8 
 8 
 
 $40 
 80 
 120 
 160 
 200 
 
 Per cent. 
 75 
 50 
 42i 
 
 m 
 
 m 
 
 $30 
 40 
 51 
 69 
 67 
 
 $22 
 
 
 a 
 
 Third 
 
 3 
 
 Fourth 
 
 
 Fifth 
 
 
 
 
 Total 
 
 200 
 
 40 
 
 200 
 
 
 67 
 
 27 
 
 
 
 
 In either case it would be desirable to make contracts in the cities 
 where the gold reserve is kept for making further temporary drafts 
 in case of an emergency — that is, an option to draw to an amount 
 named would be bought. As long as it is likely that this privilege 
 would not be needed, it is probable that the charge for the mere 
 privilege would be slight. In case use should be made of it the 
 Government would, of course, pay the usual rate of interest for the 
 length of time it kept the money, say from one to four months. It 
 would be easily possible, doubtless, to give to an institution from 
 which this option of drawing was obtained a warning of a day or two 
 at least. Probably a -warning of even a month could be given. 
 
 In addition to the monetary circulation itself, it is necessary that 
 there be some working capital. It is probable that from the present 
 sources of income of the Chinese Government something could be 
 furnished ; but in order that the entire expenses may be estimated, 
 it is thought best to add a sum for working capital. Under the first 
 estimate, in order that the principle of giving the highest charges to 
 everything be maintained, this sum may be placed at, say, $25,000,000. 
 This would be sufficient to provide a liberal amount of bullion for the 
 mints, to incur some expense in organizing the mints anew if neces- 
 sary, and to make some provision for the initial establishment of 
 exchanges and agencies for the introduction of the new system. It is 
 possible that this sum would also pny the provinces, in part at least, 
 for the mints taken over. This would make, then, to be raised from 
 outside sources, i. e., from a loan or special tax, $80,000,000. 
 
 Under the second estimate we may place the figure for expenses at, 
 say, $13,000,000. Doubtless a smaller sum would serve to run the 
 mints, but not to the best advantage, provided many other expenses 
 arise, inasmuch as it is desirable always to be sure of keeping an 
 ample supply of material on hand. The payment for present mints 
 is not included. This would make a total from outside sources, a loan 
 or tax, under this estimate, of $40,000,000. 
 
 Inasmuch as the present accounts of the Chinese Government are 
 kept in K'up'ing taels, it might be convenient for purposes of compu- 
 tation if these sums were put into taels. It is assumed that the new 
 dollar will be slightly more valuable than the Japanese yen. The 
 K'up'ing tael is somewhat heavier than the Shanghai tael. According 
 
GOLD STAND ABD IN INTERNATIONAL TBADE. 145 
 
 to late qxiotations, exchange on Yokohama was 80 Shanghai tael cents 
 per yen. "We may perhaps safely assume for the present purpose that 
 the added value of the K'up'ing tael as compared with the Shanghai 
 tael corresponds to the added value of the new dollar as compared 
 Avith the yen, and reckon the new dollar as worth 0.80 of a K'up'ing 
 tael. In that case the amounts to be raised would be, on the different 
 estimates, respectively, 64 million taels and 32 million taels. 
 
 If an estimate of 7 per cent interest is assumed in order to get the 
 annual charge, we shall surely be taking an outside limit. It is 
 probable that the loan could be made at considerably less than that. 
 At the rate of 7 per cent, under the first estimate, the annual charge 
 would be 4,480,000 taels; under the second estimate, 2,240,000 taels. 
 If we may judge from the practically universal experience with such 
 funds, however, a considerable portion of the gold reserve could be 
 kept on deposit at call in the great business centers, whether in Eu- 
 rope, America, or China, so that it would bear interest. It is clearly 
 a conservative estimate to assume that a half of the reserve is drawing 
 2 per cent interest. It is probable that it would be considerably more 
 than that. 
 
 The first year we should have a reserve of 60 million dollars; the 
 fifth year, 135 million dollars. It will perhaps be fair to take an 
 average of these sums for the average reserve during the first five 
 years, $97,500,000, the interest at 2 per cent on half of which amounts 
 to $975,000. Reducing this to taels at the same rate we get 3,700,000 
 taels, to be deducted from 4,480,000 taels, leaving 3,700,000 taels as the 
 net expenditure. In the second table, reckoning in the same way, the 
 annual net revenue at 2 per cent for the first five years would be 
 388,000 taels, to be deducted from 2,240,000 taels, leaving an average 
 annual expenditure of 1,852,000 taels. 
 
 If to these sums, respectivelv, be added, say, 1 per cent of the aver- 
 age reserve for the privilege of drawing an added amount equal to the 
 reserve for any few days at a time when that might be needed, 
 although in all probability it never would be needed, this will restore 
 the annual charge to the figures given originally; that is, 4,480,000 
 taels and 2,240,000 taels. 
 
 When one considers the enormous benefits to China, as they have 
 been stated before, which would accrue from these expenditures, the 
 latter seem very slight indeed. These estimated charges themselves 
 per annum would probably, in actual practice, suffice to pay off the 
 debt incurred by the time the monetary system was made complete, 
 provided the rate of coinage, the profits of coinage, and the amount 
 to be coined remained as indicated in the estimates, and estimating 
 that it will require twenty years for the complete establishment of the 
 system. The following considerations indicate that result : The gold 
 reserve could be made proportionally less before that time; the in- 
 terest on current balances would increase decidedly ; the reserve has 
 been reckoned against the entire circulation, whereas it would not 
 need to be kept for redemption of copper coins, etc. It is best, how- 
 ever, to make provisions against all possible risks, so that the above 
 outside figures are given. It would be desirable to introduce the sys- 
 tem more rapidly than indicated here. In that event the cost to the 
 country would be less, since the benefits to the country would be cor- 
 g. Doc. 128, 58-3 10 
 
146 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 respondingly greater, inasmuch as the benefits would take effect 
 sooner. 
 
 If for an expenditure of 4,480,000 taels a year a cash income of 
 12,800,000 taels can be secured, and for an expenditure of 2,240,000 
 taels one of 6,400,000 can be secured, aside from all the other vastly 
 greater benefits of established credit, of increased trade, of increased 
 revenues, etc., it would seem that the most strenuous efforts ought to 
 be made to secure the sum needed from year to year in order to keep 
 up these benefits. 
 
 It must not be forgotten that if the system, instead of being estab- 
 lished with the coins on a fixed parity with gold, is placed on the 
 silver parity, the profits of coinage will be reduced by three-fourths, 
 at any rate, whereas the cost of minting and other incidental expenses 
 of introducing the system would not be reduced at all. Moreover, 
 there would be lost a verj^ large proportion of the advantages that 
 would come from an established credit, an increased investment of 
 capital, etc. Beginning on a silver basis and afterwards transferring 
 to gold would lose absolutely at least three-fourths of the profits on 
 all the coinage issued before the system was established and would, 
 beyond much of any question, postpone the completion of the sys- 
 tem to a period at least double that which will be required if the 
 system is started on the gold basis. It becomes a matter of the 
 gravest importance, therefore, that the whole plan be thoroughly 
 thought out before any positive action is taken. 
 
 If it is rightly managed, the system not merely costs nothing in 
 the long run ; it is a source of large actual cash profits from the first 
 year. It is a very profitable financial investment. If the sovereign 
 power of the State which enables it to make these profits could be 
 loaned to a private company, such a company would willingly pay 
 the Chinese Government several millions of taels a year for the 
 privilege of starting and running the system without any expense to 
 the Chinese Government. It would, of course, be inadvisable to give 
 such power to a private compan}' ; but the fact shows the opportunity 
 which is presented to the Chinese Government by the present condi- 
 tions. All other civilized countries on the gold basis are using this 
 source of profit to advantage ; but as the chief profits come from the 
 new coinage they make much less than China can make, which has to 
 coin anew its entire circulation. 
 
 If the Chinese Government finds it difficult for two or three years 
 to secure additional revenue to pay the interest on the loan, it will 
 probably be practicable to pay the interest for three years at least out 
 of the seigniorage, so that the Chinese Government would thus estab- 
 lish its monetary system on a gold basis without any expense to its 
 revenues for the first three years, provided the price of silver 
 remained substantially the same. It is probable, of course, that this 
 period might be extended a year or two ; it is possible that it might 
 be shortened a little. From careful discussion of the subject, how- 
 ever, with business men accustomed to floating foreign loans and 
 dealing with financial matters of that type it is practically certain 
 that a loan could be made on the security of the gold reserve, with the 
 interest to be paid for three years at least out of the profits of the 
 coinage. This would be sufficient time for the Government to start 
 almost any new system of revenue which was necessary in order to 
 meet expenses thereafter. 
 
GOLD STANDARD IN INTEENATIONAL TRADE. 147 
 
 IX. ADMINISTRATIVE ORGANIZATION. 
 1. CONDITIONS OF SUCCESS, 
 (o) The Confidence of the People — Chinese and Fokeign. 
 
 (1) That they may readily take the new coins at their face value. 
 
 (2) That they may subscribe money for a loan or the establishment 
 of a national bank. 
 
 (3) That the banks, especially the native banks, may accept the 
 coins in connection with foreign exchange and the gold reserve. 
 
 (6) Sufficient Capital. 
 
 (c) Skill in Management of the System. 
 
 These three are all needed for the success of the system, whether the 
 coins be given a fixed value in gold or not, though especially needed 
 in the latter case. 
 
 2. HOW TO SECURE THESE CONDITIONS. 
 
 (o) Means of Securing Confidence. 
 
 (1) Publicity. — If everybody knows well what is being done and 
 how the system is managed and if the work is well done, confidence is 
 assured. This will require' a careful system of accounting and the 
 regular publication of accounts, as is the case in most of the advanced 
 countries. 
 
 (2) Absolute good faith and uprightness in the management, and 
 -public belief in this good faith. — At present the public has not always 
 sufficient trust in the good faith of the Government to give it its full 
 confidence. The management must be such as to secure that confi- 
 dence. 
 
 (3) Management in the public interest, and public belief in that. — 
 At present there is sometimes, unfortunately, a belief that some of the 
 business of the Government is managed in the interest of the oificials. 
 The new system must be managed by business methods, and it will be 
 easier to secure public confidence if it is managed, as far as is practi- 
 cable, through the banks and other business men. 
 
 (4) ShUl ard knowledge in management and management through 
 such agents that the people will trust their skill. — It is not sufficient 
 that the men have sufficient knowledge unless they are those whom the 
 public, on account of their general reputation and of their connec- 
 tions, will trust. 
 
 , (&) Capital. 
 
 In order to secure capital the public confidence must first be se- 
 cured, and the plans adopted must meet the approval of the leading 
 capitalists. After that the methods of raising capital by loans or 
 subscriptions have already been sufficiently discussed under the ques- 
 tion of a gold reserve. 
 
148 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 (c) Skill in Management or the System. 
 
 Men for the different positions of responsibility must be chosen 
 who from their training and experience will be known to have the 
 requisite skill. It will not be sufficient to select merely men of prom- 
 ise. The men in the most important positions must have been already 
 tested. 
 
 3. THE OFFICIALS NEEDED. 
 (o) The Monetaey Commission oe Board or Revenue. 
 
 Either the monetary commission or the board of revenue will pre- 
 sumably have the general supervision of the system as a whole, and 
 the officials appointed will be subordinate to them. 
 
 Presumably it would be well for some one person in this commis- 
 sion to be designated as an active official to give his full time to the 
 work and to represent the commission as a whole. 
 
 (6) An Expert (Controller) in General Charge op the System. 
 
 He should be held responsible for the general management of the 
 system as a whole under the commission, and, generally speaking, of 
 course, his recommendations should be followed. He should take no 
 important step without the full knowledge of the special manager of 
 the monetary commission, already mentioned, and matters of chief 
 importance should receive the sanction of the full board. 
 
 He should be ex officio a director of the national bank, and should 
 have immediate direction of the gold reserve, acting through the 
 bank, where practicable, and also under the oversight of the commis- 
 sion. He ought not to have any control over the revenues except in 
 the monetary system. 
 
 Presumably he should live at Peking. He should nominate to the 
 board for appointment the other chief monetary officials. 
 
 (c) Deputy Controller. 
 
 Inasmuch as Shanghai is the most important business place in 
 China, and inasmuch as questions of exchange, as well as other im- 
 portant matters in connection with the system might presumably come 
 up there first, it would be advisable that, when the system is started 
 at Shanghai, there be a deputy controller resident there who would 
 have the confidence of the commission, and who, agreeing in o-eneral 
 policy with the controller and the board, would represent the con- 
 troller in Shanghai. 
 
 (d) General Accountant. 
 
 The necessity of accurate accounting and publicity has already 
 been mentioned. This can not be secured to advantage unless the 
 accounts of the different mints and of the different branches of the 
 work be kept in accordance with an harmonious system. The gen- 
 eral accountant should, therefore, determine the methods of account- 
 ing throughout the system ; should receive in detail, from the mints 
 
GOLD STANDABD IN INTERNATIONAL TBADE. 149 
 
 and other branches of the work, including the national bank so far 
 as its work is connected with the monetary system, uniform reports, 
 and should be held responsible for the regular publication of 
 accounts so far as matters are to be made public. He should collect 
 statistics for the commission, be the agent to send out notices of rates 
 of exchange, etc. 
 
 (e) General Suteeintendent of Mints. 
 
 Besides the sub-superintendents in charge of each one of the mints 
 that is running, there should be a general superintendent in charge 
 of them all. It should be his duty to see to the buying of bullion, to 
 the general principles on which the mints should be managed so as 
 to secure absolute accuracy in the minting of the coins, as regards 
 the touch of the coins, excellence of workmanship, care of the ma- 
 terials, etc. He should also deliver the coins to the national bank, 
 the treasury, or other agencies of the monetary commission, in accord- 
 ance with the directions received from the monetary commission 
 through the controller. 
 
 He should nominate the sub-superintendents of the mints to the 
 controller for appointment by the monetary commission Pre- 
 sumably the present local managers and working force would be 
 retained as far as practicable. 
 
 4. THE NATIONAL BANK. 
 
 The national bank, while doing presumably a large private banking 
 business which would come to the profit of the stockholders, would 
 also be an agent of the Government in connection with the monetary 
 pystem and with other Governmental work. As its profits would be 
 in part dependent upon the Government, and as it would do much 
 Government work, it should divide profits with the Government 
 and the Government should have a voice in the management. 
 
 (o) Powers. 
 
 Private. — (1) Discount or purchase of commercial bills of exchange. 
 (2) Purchase and sale of gold and silver bullion and bonds. (3) 
 Loaning money on the security of gold and silver coins, bonds, govern- 
 ment bills, or other collateral. (4) Opening and conducting deposit 
 accounts, including safety deposits. 
 
 Partly private. — (5) Issuing of bank notes convertible on demand 
 into the new coins under Government law determining the new coin- 
 age. A special law should be passed determining the amount and 
 character of the coin reserve for the bank notes, the regulations 
 regarding their redemption, and other ordinary provisions of a law 
 regulating bank-note issue ; the right of issuing bank notes to be made 
 a monoply of the bank as soon as practicable. 
 
 Public. — (6) Act as the chief agent of the Government in exchang- 
 ing the new coins and notes for the old coins and moneys now in cir- 
 culation under regulations made by the commission. For this work, 
 of course, it would establish branches and numerous agencies. It 
 would advise regarding the quantity and denominations of. coins to 
 be minted. (7) Act as agent for the Government in the administra- 
 
150 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 tion of the gold-reserve fund in connection with the controller under 
 regulations made by the monetary commission. The gold reserve to 
 be held as government property on deposit with the bank and to be 
 administered by the bank, not as its own funds, but under general 
 regulations, as indicated. Exchange to be sold against this gold 
 reserve only under the general regulations and with the cooperation 
 of the controller, the bank selling its own exchange, of course, freely, 
 without reference to the monetary commission. (8) Act as agent of 
 the treasury in receiving and disbursing government moneys under 
 regulation of the treasury, presumably receiving in its different 
 branches Government moneys for deposit; acting as agent for the 
 Government in i^aying Government salaries, etc. This work to in- 
 clude the administration of the debt obligations so far as it may be 
 made practicable. This work done under the board of revenue, not 
 the monetary commission, except regarding its own funds. 
 
 (6) Organization. 
 
 The bank should be organized as a stock company for twenty- 
 five or thirty years, with the liability of stockholders limited to the 
 amount of their capital stock. The stockholders presumably private 
 individuals. The capital presumably some forty or fifty million dol- 
 lars of the new coins, one-quarter to be paid in before the bank begins 
 business. 
 
 (c) Officers. 
 
 (1) Five to seven directors, elected by the shareholders. The 
 president and the vice-president to be chosen from among them. (2) 
 One manager, Chinese, and one manager, foreign, to be elected by the 
 directors with the approval of the Government, and to be given full 
 power under the law laid down by the Government. (3) One au- 
 ditor, to be appointed by the Government ; one or two auditors to be 
 elected by the shareholders. (4) Compradores, managers of branch 
 banks, minor officers and assistants, to be appointed by the board of 
 directors. (5) The controller of the currency, who is a Government 
 official, to be a director of the bank ex officio. 
 
 The directors to be chosen for a period of five years, and to be so 
 classified that one at least will retire each year. 
 
 The private business of the bank to be managed solely by the board 
 of directors at their discretion. The -public business to be managed 
 by them under regulations laid down by the Government and under 
 its careful inspection .through the controller and auditor, ajid, if the 
 Government wishes, also through an inspector to be appointed by the 
 Government. 
 
 Id) Branches and Agencies. 
 
 The bank to establish branches in the leading commercial cities and 
 to establish agencies throughout the country as rapidly as it is pos- 
 sible to extend the new monetary system, or wherever the banls: finds 
 it profitable for its own business. 
 
 The bank also in due time to establish its branches and agencies 
 abroad. It may possibly be advisable at least for a time to make 
 leading foreign banks its agents in connection with the reserve funds. 
 
GOLD STANDARD IN INTKRNATIONAL TRADE. 151 
 
 (e) The Managemeht. 
 
 The management to be, in the main, in accordance with the customs 
 of the leading foreign national banks. Reports of the exact condi- 
 tion of the bank to be published quarterly; reports to be made on 
 demand at any time to the monetary commission. So far as the Gov- 
 ernment business in connection with the monetary system is concerned, 
 the books to be kept in accordance with the rules laid down by the 
 monetary commission on advice of the general accountant, and 
 reports to be furnished him when asked for. Every effort to be made 
 to secure public confidence by engaging well-known competent man- 
 agers and by as great a degree of publicity of management as is 
 practicable. 
 
 if) Peofits. 
 
 From the profits, dividends to the amount of 6 per cent to be 
 divided among the stockholders. If there is a surplus beyond, 10 
 per cent of this surplus to be placed in a reserve fund until that fund 
 amounts to 10 million dollars. Surplus beyond this to be divided into 
 two parts between the stockholders and the state until the share of the 
 stockholders amounts to 8 per cent of the capital. The remainder 
 beyond that to be divided into three parts, one to the stockholders and 
 two to the state. 
 
 X. REVISION OF TREATIES. 
 
 1. REGARDING THE IMPORTATION OF FOREIGN COINS AND OF 
 
 BULLION. 
 
 In order to carry out successfully its monetary reform, it seems 
 probable that China will need to arrange with the various treaty 
 powers a revision of the conditions regarding the importation of for- 
 eign coins and of bullion, so that she may either levy a duty upon 
 their importation or forbid their importation altogether excepting 
 under Government instruction. 
 
 (o) Reasons foe Checking Impoetation. 
 
 The reasons for the checking of importation are as follows : 
 (1) To secure and keep one uniform system of coinage. — So long 
 as foreign coins are admitted free of duty, it is likely that the Mexi- 
 can dollars, and especially the British dollars, will circulate freely in 
 many parts of China, particularly in the coast cities. If the new 
 coins remain on the silver basis and are substantially of the same 
 weight as these other coins, there is no reason why the people should 
 make any special discrimination between them, and it is not likely 
 that they will take the trouble to do so. Indeed the reputation of 
 the Mexican dollar, and especially. that of the British dollar, are so 
 well established that for a long time to come many would take them 
 in preference to the new dollar. 
 
 If the new coins should be placed on the gold basis, very many of 
 the Chinese would gradually come to prefer the new coins as more 
 satisfactory for use, especially in the import trade and in all other 
 cases where a fluctuation in exchange with foreign countries is detri- 
 mental. On the other hand, for the use of exporters who wish to buy 
 material in the interior of the country, for those who have wages to 
 
152 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 pay to the more ignorant classes among the people, and for many 
 others, the cheaper coin would be considered more advantageous, and 
 on that account the foreign coins would hold their own against these 
 new coins for a long time unless special discrimination were made 
 against them. 
 
 Of course the Government might discriminate against them by 
 refusing to receive them for obligations due the Government and 
 might deprive them of their legal-tender qualities, but even this dis- 
 crimination would not prove sufficient to expel them from the coun- 
 try, and resort would probably be had ultimately, if that were pos- 
 sible, to discriminating taxation on contracts, as explained below. 
 
 Without stopping importation, therefore, it would seem practically 
 impossible to carry out the provisions of the treaties which require 
 the establishment of a uniform coinage. 
 
 (2) To keep up the value of the silver coins hy maJeing them, rela- 
 tively speaking, scarce as compared with the demand for them. — 
 One important influence toward maintaining the value of the silver 
 coins, particularly if they are placed on the gold basis, is to see that 
 the quantity of money in circulation is limited to the needs of busi- 
 ness. If the Government is able to exclude foreign coins and" bul- 
 lion, it will be able, in case of a threatened depreciation of its new 
 coins, to withdraw some of them from circulation by receiving them 
 in exchange for drafts on its gold reserve, and then by retaining 
 them in the treasury to create a relative scarcity of the money in cir- 
 culation. If there is no checking of importation, any such with- 
 - drawal of coins from circulation would have little or no effect, since 
 their place would be filled by coins from Hongkong, by bullion, etc. 
 To insure the maintenance of the gold parity without too great a 
 strain on the gold reserve, a checking of importation is necessary. 
 
 (6) When Regulate Importation. 
 
 The regulation of importation of these coins and of bullion should 
 be placed in the hands of the Chinese Government. It is possible, 
 however, that foreign nations now having the right to demand the 
 free importation of these articles would not be willing to leave the 
 regulation of their importation entirely in the hands of the Chinese 
 Government. They would fear that such use might be made of the 
 power that it would hamper business. In order to prevent such a 
 result they will possibly insist that no restrictions be placed upon 
 importation until a sufficient number of new coins are in circulation 
 to prevent any undue scarcity of money. The determination of this 
 point is somewhat difficult. Two methods have been suggested. 
 
 (1) When fixed number coined. — That treaties be negotiated de- 
 claring that as soon as China has a certain fixed number of the 
 new coins in circulation the Chinese Government shall thereafter 
 impose such restrictions as seem to it wise. So little is known, how- 
 ever, regarding the money actually in circulation in China and the 
 amount actually needed for doing business that it is probable that 
 great difficulty would arise in securing agreement upon the quantity 
 needed. Many business men would think it preferable to leave the 
 matter to be settled by some joint commission made up of representa 
 tives of the Chinese Government, Chinese business men, and of for- 
 eign governments and business men. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 153 
 
 (2) When special hoard agrees. — It has been suggested, for exam- 
 ple, that the poA\er of restricting importation shall be exercised by 
 the Chinese Government whenever the president of the board of reve- 
 nue, the controller, and the managers of the national bank repre- 
 senting the Chinese Government, and authorized representatives of 
 the Shanghai and Tientsin, English, American, and Chinese cham- 
 bers of commerce shall agree by a majority vote that the proper time 
 has come. It is possible that it would be wise to add to this commit- 
 tee the ministers of the foreign powers resident in Peking or a cer- 
 tain number of consuls, but it is probable that this would simply 
 increase the difficulties and be of no advantage whatever. A com- 
 mittee representing the business men would probably be more satis- 
 factory to other nations as well as to China. 
 
 2. METHOD OF NEGOTIATION. 
 
 In the case of the revision of the treaties one should consider 
 where and how such treaties should be negotiated. 
 
 (a) In China. 
 
 If they were negotiated at Peking with the ministers of the for- 
 eign powers, owing to the desire of each minister to make as strong 
 a record as possible for accomplishing much for his government, 
 and to his natural desire to gratify his nationals and to secure more 
 than do other members of the diplomatic corps, jealousies are likely 
 to arise which make it difficult to secure satisfactory results. 
 
 Moreover, the authorities in the home governments, owing to their 
 lack of knowledge of actual conditions in China, are likely to hamper 
 very seriously the actions of their ministers resident in Peking and 
 thus lead again to delay and difficulty. 
 
 (6) In Foreign Countries. 
 
 For the reasons given above it is usually better for the Chinese 
 Government to negotiate general treaties, requiring the agreement 
 of several nations, in foreign countries, provided she can have the 
 services there of men who are thoroughly well acquainted with the 
 subject in hand. It is asked, therefore, whether it would not be 
 better for China to send to the foreign countries to assist the Chinese 
 ministers in making these treaties and in keeping them uniform, 
 some representative Chinese who is fully in the confidence of the 
 Government, together with some expert who knows fully the mone- 
 tary situation in China and can explain with the greatest clearness 
 to the foreign offices the exact needs of China and the benefit to those 
 countries from acceding to her request. By such a method probably 
 the best results would be reached most quickly. 
 
 XI. COMPARISON OF THE TWO PLANS OF STARTING THE NEW 
 MONETARY SYSTEM. 
 
 Before undertaking any matter of so great importance as the 
 reform of a country's monetary system, it is advisable to make very 
 careful estimates of the cost and of the results. Unless this is done, 
 mistakes are likely to be made which will prove very expensive 
 financially and which may easily cause failure. 
 
154 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 In the following comparison of the costs and results of the two 
 plans, (1) that which starts with the silver coins given a fixed value 
 in gold and (2) that which starts with the silver coins at their bul- 
 lion value and later, after the accumulation of a gold reserve, raises 
 them to a fixed value in terms of gold, it is assumed, for convenience 
 of comparison and because the calculating tables make it more con- 
 venient, that the interest both paid and received is at 5 per cent, 
 and that £1 sterling equals 10 of the new dollars. (At present £1 
 sterling equals about $10.11 Mexican.) 
 
 In actual practice the Government might probably have to pay 
 from 5-J to 6 per cent on a loan, but if so it might possibly be able 
 to invest also at somewhat above 5 per cent. Whether the figures 
 in themselves are exactly accurate or not, the comparison of the two 
 plans will be fair. 
 
 Table V.« 
 
 Beginning with a gold reserve: 
 
 Borrow at 5 per cent interest $40,000,000 
 
 Annual interest charge 2,000,000 
 
 Result at the end of five years : 
 
 Amount of coins in circulation 200,000,000 
 
 Gold reserve on hand sufficient for the needs 67,000,000 
 
 To pay debt in five years requires in sinking fund annually 7, 240, 000 
 
 Annual interest charge 2,000,000 
 
 Total annual payment 9,240,000 
 
 Result at the end of ten years : 
 
 Amount of coin in circulation 400,000,000 
 
 Gold reserve 107,000,000 
 
 To pay debt in ten years requires in sinking fund annually 3, 180, 000 
 
 Annual interest charge 2,000,000 
 
 Total annual payment 5,180,000 
 
 [Loan for thirty years; payment to 'begin after ten years.] 
 
 Result at the end of twenty years : 
 
 Amount of coins in circulation 800,000,000 
 
 Gold reserve 1 187,000,000 
 
 Annual expenses, first ten years 2,000,000 
 
 Annual expenses, second ten years 3,208,000 
 
 Annual expenses, third ten years 3,208,000 
 
 Total expense for thirty years 84,160,000 
 
 Total expense for first twenty years 52,080,000 
 
 Beginning with silver to acetimulate gold: 
 Result at the end of five years — 
 
 Amount of coins in circulation 200,000,000 
 
 Gold reserve, as before 67, OOo! 000 
 
 To raise $67,000,000 in five years, with money invested at 
 5 per cent and used for no other purpose, the annual 
 payment is 12,127,000 
 
 a In these tables there have been used as the basis for the calculations the 
 interest and bond tables of the Mutual Life Insurance Company, of New York. 
 If other tables were used with more or fewer decimals, the results would be 
 slightly different * 
 
GOLD STAND AED IN INTEBNATIONAL TRADE. 155 
 
 Beginning with silver to accumulate gold — Continued. 
 Result at the end of ten years — 
 
 Amount of coins in circulation $400,000,000 
 
 Gold reserve, as before 107,000,000 
 
 To raise $107,000,000 in ten years requires an annual pay- 
 ment of 8,500,500 
 
 To raise even ,$67,000,000 in ten years requires an annual 
 
 payment of 5,326,500 
 
 Result at the end of twenty years — 
 
 Amount of coins in circulation 800,000,000 
 
 Gold reserve, as before 187,000,000 
 
 Annual expense ^ 5,647,400 
 
 Total expense for twenty years 112,948,000 
 
 To close the whole transaction in five years on the first plan there 
 
 would be a yearly saving of 2,887,000 
 
 To close the whole transaction in ten years on the first plan there 
 
 would be a yearly saving of ' , 3,326,500 
 
 To close the whole transaction in thirty years as recommended, 
 making payments on the principal of the debt the last twenty 
 years, there would be a total saving, over merely raising a gold 
 reserve, in twenty years of 28,788,000 
 
 Advantages of the first plan. — (1) The gold parity from the begin- 
 ning, preventing the fluctuations from exchange and all losses to the 
 Chinese Government in taxes, etc., from any fall in the price of silver. 
 C2) The cost, on a ten-year basis, including the payment of the debt, 
 less each year by $3,326,500. 
 
 It would probably be more convenient for China to borrow the 
 money, to pay in thirty years, with the privilege of paying at any 
 time after ten years, then for the first ten years to pay only the inter- 
 est ; that is, $2,000,000 annually. Afterwards the accumulations will 
 probably enable the debt to be paid very promptly, or at any rate 
 to be refunded at a lower rate of interest. If, however, it should be 
 decided to carry the debt for the full thirty years, at the end of ten 
 years the Government could begin accumulating money in a sinking 
 fund. This would require an additional payment for twenty years 
 of $1,208,005 each year. The result would therefore be that for ten 
 years the Government would pay each year $2,000,000 ; for the suc- 
 ceeding twenty years it would pay each year $3,208,000. There can 
 be little doubt, however, that as a result of the great benefits to the 
 country of the new system the burden of these last figures could be 
 very much lightened. 
 
 It should be borne in mind, too, that under the second system there 
 would be all the fluctuations in exchange for at least ten years ; that 
 these fluctuations would probably continue for five years more, while 
 the gold value of the coins is being established, and that during that 
 five years there would need to be a complete readjustment of prices 
 throughout the country, which would disturb business very decidedly. 
 Under the first plan the only disturbance to business would be at 
 the beginning for four or five years, and this would not be more ap- 
 preciable than it must be anyway during these same five years m 
 starting on the silver basis. 
 
156 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 XII. TO BEGIN THE MONETARY SYSTEM ON A GOLD BASIS 
 WITHOUT A LOAN. 
 
 1. AT SAME RATE AS WITH LOAN. 
 
 It has been suggested that if the new system were to begin on the 
 silver basis, it might not be necessary to wait ten years before putting 
 the silver coins on a gold basis. It might, perhaps, be done, it is 
 thought, in three years or five years. It is not worth while to esti- 
 mate carefully the relative costs of this procedure. If the system 
 begins by issuing the coins at a fixed gold value, the gold reserve may 
 begin very small and increase gradually in proportion to the number 
 of new coins in circulation. If gold enough can be raised by the 
 Government to change from the silver basis to the gold basis in five 
 years, the system can be started on a gold basis without making any 
 loan by raising the same amount of money in the same way ; and at 
 the end of five years, on account of the greater profits of the gold 
 system, there will be on hand $33,000,000 more in a gold reserve than 
 if the start is made on the silver basis. The fig-ures to show this 
 follow : 
 
 There must be raised each year $12,127,000 to accumulate in five 
 years by a sinking fund $67,000,000, the smallest amount planned to 
 change the new system to a gold basis at that time with 200,000,000 
 new silver coins in circulation. If there can be raised only $12,000,- 
 000 each year, it would be easy to start on the gold basis at once 
 without making any loan. 
 
 Table VI. 
 First year : 
 
 Coin $40, 000, 000 
 
 Of tliis in small silver and copper coins 10,000,000 
 
 Silver which can be used to draw on gold reserve 30, 000, 000 
 
 Raise by taxation and place in gold reserve 12, 000, 000 
 
 Profits from coinage, at 20 per cent ._ 8, 000, 000 
 
 Total reserve at end of first year 20, 000, 000 
 
 This is 66f per cent of the amount available to draw on and will probably 
 be ample. 
 
 Second year : 
 
 Coin $40, 000, 000 
 
 Total in circulation 80,000,000 
 
 Available for draft on gold fund, not over 70, 000, 000 
 
 Reserve already on hand 20,000,000 
 
 Raised by taxation during second year 12,000,000 
 
 Profits of coinage, at 20 per cent 8, 000, 000 
 
 Total reserve end of second year 40,000,000 
 
 This is 57| per cent and ample for the second year. 
 
 Third year : 
 
 Total circulation would be '- 120,000,000 
 
 Reserve 6o] OOo! 000 
 
 Fourth year : 
 
 Total circulation 160, 000, 000 
 
 Reserve 80,000,000 
 
 Fifth year : 
 
 Total circulation 200,000,000 
 
 Reserve lOO, 000, 000 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 157 
 
 The reserve is, then, at the end of the fifth year $33,000,000 more 
 than under the other plan at the end of an equal period, and is 
 large enough so that by adding merely the annual profits of the coin- 
 age to the reserve, stopping after five years all further taxation for 
 this purpose, it will be sufficient to protect the coinage for twenty 
 years from the beginning, if the mints work at the same rate. 
 
 Besides this benefit there has been no disturbance of business as 
 under the other system, which involves a change from silver prices to 
 gold prices, and the same rate of taxation need be maintained a much 
 shorter time. 
 
 It is probable that during the later years a less reserve might be 
 needed than is indicated; but that fact would be still more to the 
 advantage of the system which starts on the gold basis. Confidence 
 is gained some years sooner and more gold is readily available to be 
 put to other uses. 
 
 The advantage in this case, as in all the others, comes, of course, 
 from the added coinage profit when silver coins are issued at a gold 
 value. 
 
 2. AT SLOWER RATE THAN WITH LOAN. 
 
 It being considered by some inadvisable for China to make any 
 loan in connection with the new monetary system, the following new 
 estimates are given to show the probable cost of establishing the 
 monetary system without a loan, in a cheaper, though not quite so 
 rapid a way as with a loan. 
 
 It has been suggested by the monetary commission that China could 
 probably raise 7,000,000 taels to start the new monetary system. In 
 the following estimates it is suggested that 7,000,000 taels each year 
 be raised for the first two years ; thereafter 3,500,000 taels annually. 
 
 It is probable that after the sixth year the percentage of reserve 
 could be reduced somewhat, so that quite possibly no further sums 
 would need to be contributed by the Government for the further de- 
 velopment of the system. 
 
 It is assumed for the purpose of maintaining whole numbers in the 
 computations and for the pu^rpose of keeping the estimates in dollars, 
 so as to admit of more ready comparison with previous papers, that 
 $1 equals 70 tael cents. Seven million taels then would equal 
 $10,000,000. 
 
 For the first year it is assumed that half of this sum is set aside as 
 a reserve and that half is used as working capital. For the second 
 year and thereafter $10,000,000 is kept as working capital. By 
 " working capital " is meant particularly the money used for the 
 purchase of bullion and mint supplies. 
 
 No account is taken of the interest on the reserve. This could be 
 used either to reduce the annual contribution from taxation or to in- 
 crease the rate of coinage, thus insuring the more rapid success of the 
 system. The main difficulty, of course, will be during the first two 
 years, but it is not thought that these difficulties are by any means 
 insuperable. 
 
 This plan would secure for China the fixed value in gold of the 
 new coins from the beginning, it would save the high profit from 
 seigniorage, and it would avoid any loan. The uprightness and skill 
 required for the management would be substantially the same as in 
 previous plans. 
 
158 QOLB STANDARD TJST INTERNATIONAL TRADE. 
 
 Table VII. ^ 
 
 First year : 
 
 Working capital $5, 000, 000 
 
 Reserve 5,000,000 
 
 Coin 20, 000, 000 
 
 Profit to add to reserve 4, 000, 000 
 
 Total circulation 20, 000, 000 
 
 Total reserve 9, 000, 000 
 
 Second year : 
 
 Working capital 10, 000, 000 
 
 Coin 40,000,000 
 
 Profit to add to reserve 8,000,000 
 
 In circulation 60,000,000 
 
 Former reserve 9, 000, 000 
 
 Add reserve from taxation 5,000,000 
 
 Total reserve 22, 000, 000 
 
 Third year : 
 
 Working capital 10, 000, 000 
 
 Coin 40, 000, 000 
 
 Profit to add to reserve 8,000,000 
 
 In circulation 100, 000, 000 
 
 Former reserve 22, 000, 000 
 
 Add reserve from taxation 5,000,000 
 
 Total reserve 35, 000, 000 
 
 Fourth year : 
 
 Working capital 10, 000, 000 
 
 Coin 40, 000, 000 
 
 Profit to add to reserve 8,000,000 
 
 In circulation 140, 000, 000 
 
 Add reserve from taxation 5,000,000 
 
 Former reserve 35,000,000 
 
 Total reserve 48, 000, 000 
 
 Fifth year : 
 
 Working capital 10, 000, 000 
 
 Coin 40,000,000 
 
 Profit to add to reserve 8,000,000 
 
 In circulation 180, 000, 000 
 
 Former reserve 48, 000, 000 
 
 Add reserve from taxation 5,000,000 
 
 Total reserve 61, 000, 000 
 
 Sixth year: 
 
 Working capital 10,000,000 
 
 Coin 40, 000, 000 
 
 Profit to add to reserve 8,000,000 
 
 In circulation 220, 000, 000 
 
 Former reserve 1 61, 000, 000 
 
 Add reserve from taxation 5,000,000 
 
 Total reserve 74, OOO, 000 
 
 While the reserve seems small for the first two years, it should be 
 kept in mind that the new copper and nickel coins, which might make 
 a considerable part of the coins in circulation, would make little, if 
 any, demand upon the reserve. Furthermore, the rate of coinage 
 might be checked somewhat, if more time seemed advisable to secure 
 confidence, and thus lessen the demand on the reserve. 
 
 XIII. COINAGE SPECIFICATIONS. 
 
 The following specifications regarding coinage are suggested as 
 perhaps reasonable if it is decided to establish the new monetary sys- 
 tem on the silver basis and to make the new dollar seventy-two oiie- 
 hundredths of a K'up'ing tael, as the committee has proposed. It is 
 quite possible that the specifications would be equally satisfactory if it 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 159 
 
 were decided to give the coins a fixed value in terms of gold, but in 
 that case the matter should be discussed again fully before the coinage 
 is begun. These weights are in decigrams, so as to make, generally 
 speaking, whole numbers. 
 
 Inasmuch as the coins are ultimately to be given a value independ- 
 ent of their weight, it is inadvisable to refer to their tael weight, 
 either on the coin or in the law. Moreover, the tael weight is not ex- 
 actly known and uniform, so that it will be necessary for the Govern- 
 ment to fix weights in grains or decigrams before the confidence of 
 business men, native or foreign, can be secured and held. The metric 
 system is followed here as the system most generally approved. 
 
 According to the treaty with Japan regarding the settlement of the 
 war indemnity in gold, it M^as decided for that special purpose that 
 the K'up'ing tael was 575.82 grains. This gives the weight of sev- 
 enty-two one-hundredths of a K'up'ing tael as 268.65 decigrams. The 
 silver standard, therefore, in the nearest divisible round numbers 
 would be 268 decigrams. We had therefore suggested the following 
 table : 
 
 Table VIH. 
 
 
 Gross 
 weight 
 in deci- 
 grams. 
 
 Kind of 
 alloy. 
 
 Amount 
 of alloy. 
 
 One dollar 
 
 268.0 
 134.0 
 53.6 
 26.8 
 
 Copper. 
 
 ""do": 
 ....do... 
 
 1 
 
 Fifty cents 
 
 2 
 
 Twenty cents 
 
 2 
 
 Ten cents 
 
 2 
 
 
 
 If it were thought not unwise to make the new dollar a trifle 
 heavier than the present one (and there would be no objection to 
 this if it were given a gold value) , there would be an easier division 
 if the dollar were to weigh 270 decigrams. In that case the dollar 
 should be given a gold value presumably of some 55 cents American 
 or 2s. 3d. English. Should silver rise much, it might be well to make 
 the coin 60 or 62.5 cents American; or it might be thought best to 
 give the new dollar a value of e.Kactly 50 cents American (gold) or 
 2s. English and make the coin slightly lighter than the Mexican 
 dollar, so that there would remain a coinage profit of 15 or 20 per 
 cent, a sufficient margin, perhaps, for any probable rise in the price 
 of silver bullion ; but the question of exact -gold value is not under 
 consideration here. 
 
 Table IX. 
 
 
 Gross 
 weight 
 in deci- 
 grams. 
 
 Percentage composition. 
 
 
 Copper. 
 
 Nickel. 
 
 Tin. 
 
 Zinc. 
 
 Five cents - 
 
 50.0 
 70.0 
 35.0 
 25.0 
 12.5 
 
 75 
 95 
 95 
 50 
 50 
 
 25 
 
 
 
 
 1 
 
 1 
 
 i 
 
 
 4 
 
 
 50 
 
 One mill ' 
 
 
 
 50 
 
 
 
 
 
 The legal limit of variation from these weights and degrees of 
 fineness should be made to conform substantially to those of the 
 leading countries. 
 
160 GOLD STANDARD IN INTEKNATIONAL TRADE. 
 
 XIV. FOREIGN EXPERTS FOR THE CHINESE MONETARY SYSTEM. 
 1. DIFFICULTIES OF TASK; REASONS FOR FOREIGNERS. 
 
 The successful organization and direction of a monetary system is 
 one of the most complicated and difficult problems which any state 
 has to undertake. The experience of nearly every state of Europe 
 and of America shows that mistakes in such systems bring enormous 
 losses in commerce and industry to the countries concerned, and that 
 frequently such mistakes lead to commercial crises from the effects 
 of which a country does not recover for several years. Moreover, 
 they often leave a system permanently faulty. 
 
 The starting of a new monetary system in a country like China, 
 with its enormous population, its great extent of territory, its incom- 
 plete methods of communication, and its mingling of foreign and 
 Chinese business methods, is a task of especial difficulty, and this 
 makes it of particular importance that no mistakes be made at the 
 beginning. China should have the advice of some of the best experts 
 in the world. 
 
 A few of these experts must at first probably be foreigners for the 
 following reasons : 
 
 (a) Few Chinese Experts. 
 
 It seems to be the general opinion, Chinese and foreign, that, 
 owing to her previous methods of doing business without a well- 
 organized monetary system, there are at present no Chinese who 
 have the requisite training and experience to undertake the task 
 without foreign assistance. 
 
 (&) Need op Ooneidence. 
 
 Even if there were such Chinese at present, it is generally said that 
 neither Chinese business men nor foreigners have the confidence in 
 Chinese experts that is absolutely essential to the success of the new 
 system, while they do have confidence in trained foreigners of repu- 
 tation. As the system can not succeed unless the people give it their 
 confidence, it is apparent that some foreigners of special ability and 
 reputation should be engaged at first. The refusal on the part of 
 the Chinese Government" to engage such experts would certainly be 
 mterpreted to its discredit by some of the leading Chinese business 
 men themselves, as well as by foreign business men and by foreign 
 Governments. From what is often said by Chinese business men 
 thcT?- might readily interpret such action as evidence of a lack of sin- 
 cerity and of good faith on the part of the Chinese Government. 
 They might even interpret it to mean that the Chinese officials 
 undertaking the work had their own special profit in view rather 
 than the benefit of the Chinese people. 
 
 2. RELATIVE NEED FOR EXPERTS UNDER THE TWO SYSTEMS. 
 
 Under which method of beginning the new monetary system are 
 experts most needed? 
 
GOLD STANDARD IN INTERNATIONAL TRAt)E. 161 
 
 («) Unpeb Silver System. 
 
 The system which starts with the introduction of the silver coins 
 issued at their bullion value, with the intention of raising those coins 
 within a few years to a fixed value in terms of gold, is, in the long 
 run, the more difficult, and certainly requires as able experts as the 
 other. Moreover, these experts are as much needed at the beginning 
 of the system. 
 
 (1) Care must be taken that nothing is done, either in determin- 
 ing the form of the coins, their relative weights and relations to one 
 another and to the coins already in existence or in their methods of 
 introduction which will hamper the change to a gold system when 
 the proper time shall have arrived. 
 
 (2) The problem arising from melting and exportation of many of 
 the new coins, together with the old, will make it far more difficult to 
 secure and keep accurate information regarding the conditions of 
 the currency, so as to know when and how to undertake the change. 
 There will be no melting of the coins under the gold system. 
 
 (3) A gold reserve must be gradually accumulated. The provid- 
 ing and managing of sources of revenue for this gold reserve and the 
 due investment of it until a sufficient amount of it has been accumu- 
 lated, requires much skill and discretion, else there will be a great 
 waste. 
 
 (4) 'V\Tien business has once become adjusted to the new system 
 of coins, and the present coins and sycee are largely out of the way, 
 business men will shrink from the disturbance of business which 
 another change is sure to create, and it will require great confidence 
 
 . in the controller of the currency on the part of the people and great 
 skill on his part to select the right time to begin the change and to 
 find the right methods to carry it through without arousing severe 
 criticism and causing the greatest confusion in business. 
 
 (&) Under Gold System. 
 
 Under the system of starting with gold the main tasks at first will 
 
 be the following : , , ,, j- ., j- 
 
 (1) There will be the same care to be taken regardmg the forms 
 of the coins, the purity of the minting, etc. _ 
 
 (2) The problems of introducing the coms among the people, mas- 
 rauch as their value will not depend upon their weight, seems some- 
 what different from that in the other case and somewhat more 
 difficult. In reality it is about the same. In both cases the Govern- 
 ment must fix and must regulate from time to time, for tax purposes 
 and for all Government business, the varymg rates of exchange of the 
 new coins for bullion silver, copper cash, the present dollars, etc. 
 This must be done for all Government busmess. Private banks and 
 merchants will make their own rates, but in practice they will accept 
 mostlv the Government rates. This difficult task must be met m 
 ether ""case, whether the coins be given a gold value or not. It makes 
 little difference to the people whether the rate for 1 tael is $1.31, say, 
 under the silver plan or, say, $1.10 under the gold parity. 
 
 (3) Unless the Government can raise considerable revenue tor the 
 first four or five years it will be necessary to raise a small loan; in 
 
 S. Doc. 128, 58-3 11 
 
162 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 fact, it will probably be much easier to raise the loan than to secure, 
 under the first plan, the requisite revenue for the accumulation of a 
 gold reserve by a sinking fimd. 
 
 (4) Treaties with foreign powers regarding prohibition of irnpor- 
 tation of foreign coins, bullion, etc., must be negotiated in either 
 case, but they would probably take effect first under the plan of 
 starting on the gold basis. It is probable that they would be more 
 readily secured from foreign governments under that plan. 
 
 3. EXPERTS NEEDED ESPECIALLY AT BEGINNING OF SYSTEM. 
 
 The experts are needed especially at the beginning of the system. 
 
 (a) Making Plans is Difmcui-t. 
 
 The making out of the detailed plans regarding coinage, the intro- 
 duction of the system, organization of the bank, rules for minting, 
 etc., and the organization of the whole of the working force is by far 
 the most difficult part of the problem. After the system has been 
 thoroughly organized and has been running well for a few years 
 much less expert knowledge will be required. 
 
 (6) Making Plans Most Important Paet of Work. 
 
 The first work, as may be judged, is not only the most difficult 
 part, but it is by far the most important part of the work, inasmuch 
 as it involves the making of far-reaching plans which are to affect 
 the welfare of every person in the Empire for many decades to come. 
 
 When a battle ship is to be built or a great manufacturing estab- 
 lishment to be organized the experts are called in at the very begin- 
 ning to make the detailed plans. 
 
 (c) Mistakes at Beginning Often Irreparable. 
 
 Mistakes in making the plans at the beginning are usually irrep- 
 arable, and even if not absolutely irreparable it will prove exceed- 
 ingly expensive to change to a better plan. Few countries in the 
 world to-day have monetary systems that they consider perfect on 
 account of mistakes that have been made in the beginning which it 
 has been impossible thereafter to rectify. 
 
 Consider again the difficulty of remodeling a battle ship half built 
 on wrong plans made by a poorly trained naval architect, or of a 
 great factory building poorly planned for the machinery which is to 
 be used and for the work to be accomplished. 
 
 4. SELECTION OF EXPERTS. 
 
 The Chinese Government will do well to be cautious in employing 
 foreigners, but it should be remembered that the Chinese Govern- 
 ment selects the foreign experts not as its masters but as its trained 
 workmen. 
 
GOLD STANDARD IN INTERNATIOHAI, TRADE. 163 
 
 (o) Fob Ability and Fitness Only. 
 
 Klxperts should be selected only for their ability and for their fit- 
 ness of their positions. The Chinese Government shoud not give 
 any person a position to please a foreign government, or because he 
 has paid for that position, or merely because he is a friend of 
 China's. While he must be friendly to China and devoted to her 
 interests in his business, he must first of all be an expert who knows 
 his business thorough^. He should also, of course, understand as 
 fully as possible Chinese conditions, but it is far easier in China for 
 a thorough expert to become posted regarding Chinese conditions 
 than for a person knowing Chinese well, but not an expert, to become 
 an expert. 
 
 (6) CoNTBACTS Definite. 
 
 Contracts should be made with the experts which are perfectly 
 definite. 
 
 (1) As regards time. — It is probable that it would be well to 
 engage these experts for a fixed period of not over five years, with 
 chance of renewal of contract, with the right to discharge them at 
 any time in case they prove inefficient or in case they exceed their 
 powers. 
 
 (2) As regards powers. — The contract should be perfectly explicit 
 regarding the field of work which the expert occupies. AVhile he 
 should be given much discretion in his special field, an attempt to 
 control matters outside of his field without a new contract in which 
 the Chinese Government joins should be sufficient cause for his 
 prompt discharge. 
 
 (c) Associate Chinese with Experts. 
 
 Associate with the three or four leading experts Chinese of ability 
 appointed to prominent positions, who may know all of the details 
 of the work of the expert and themselves become expert. They 
 should not be given power to hamper the work of the expert, as he 
 must take the responsibility under the monetary commission; but 
 they should have the right to know everything that he does in his 
 work, to make suggestions, to give him information regarding 
 Chinese conditions, and to aid in directing the Chinese employees. 
 
 (d) Establish Tbaining School Under Experts. 
 
 There should be established under these experts schools in which 
 should be trained in this special field of work Chinese to take posi- 
 tions in the department as the work develops. 
 
 The way to get rid finally of the foreign experts is by training men 
 who, from their training, experience, high character, and the confi- 
 dence of the business community, are fitted to take their places. A 
 failure or serious mistake in the establishment of the system in the 
 first place, through neglect to secure in time competent expert assist- 
 ants, would seriously discredit the Chinese Government, and would 
 have the normal result later on of forcing into the Chinese service 
 more experts, and that, too, for a longer time than would come from 
 a selection of a few of the very highest grade at the beginning. 
 
164 GOLD STAND ABD IN INTERNATIONAL TEADE. 
 
 XV. SUMMARY OF POINTS IN CONNECTION WITH THE CHINESE 
 MONETARY SYSTEM. 
 
 1. COMPARISON OF TWO SYSTEMS. 
 
 It has been proposed by the Government to start the monetary sys- 
 tem on the silver and afterwards to change to the gold basis. It has 
 been proposed by tlie American commissioner to start the system 
 Avith silver coins which have been given a fixed value in gold from 
 the beginning. 
 
 The difficulties of the introduction of the system are substantially 
 the same in degree in either case, although the difficulties are in some 
 respects slightly different in kind. In either case the same amount 
 and character of foreign expert help would be needed. 
 
 (a) The same care must be taken regarding minting of the coins. 
 
 (h) The same skill is required in the establishment and manage- 
 ment of the national bank, although its work would be slightly dif- 
 ferent'in kind in the two cases. 
 
 (c) The same skill and care is requisite in keeping the accounts 
 and collecting statistics, which are absolutely essential for intelligent 
 management under the two systems. Inasmuch, however, as under 
 the silver system coins are much more likely to be melted down than 
 under the system of gold parity, it would be absolutely impossible to 
 have the same accuracy and knowledge under the silver system that 
 could be secured under the gold. 
 
 (d) The difficulties of securing the coins among the people are 
 practically the same in the two cases, although it is usually thought 
 that the difficulties are much less under the silver system. That 
 would be the case if China had a fully developed coinage system now, 
 so that the only problem was that of exchanging one new coin for 
 another old coin, as in the Straits Settlements. If those two coins 
 could be exchanged at par it would be "easier than to exchange the 
 old silver coins for one given a gold value 15 or 20 per cent higher, 
 so that, say, only 80 cents of the new coin would exchange for a dollar 
 of the old. The present problem in China, however, is not at all of 
 that nature. This is a point which has been often overlooked, and 
 this mistake has led to mistaken advice which, if followed, will cost 
 the Chinese Government and the Chinese people many millions of 
 dollars and serious disturbances in business. 
 
 The great bulk of the business in China is done with silver bullion 
 and copper cash. In consequence the Government is compelled, even 
 if it introduces the new silver coins on the silver basis, to give to them 
 an official rate of exchange in terms of the various taels in circula- 
 tion. For instance, if the new coin is made to weigh seventy-two 
 hundredths of a K'up'ingtael, when the coin is introduced into Peking 
 the Government would fix the rate of exchange with the Kungfa tael. 
 The Government in posting the official rate would probably say, 
 therefore, that it would receive in payment of taxes instead of a tael 
 $1.30 or $1.31 of the new coin. In case the dollar had been given a 
 
 fold value, the notice would be that for each tael it would receive 
 1.10 or $1.12 of the new coins, depending upon the rate established. 
 In the interior where the people are entirely unfamiliar with coins 
 of any kind, they would take the new coins on the gold basis at, say, 
 $1.10 or $1.12 for the tael about as readily as they would if the coins 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 165 
 
 were on the silver basis at, say, $1.30 or $1.32. In the treaty ports, 
 where the people are accustomed to the Peiyang or Hupeh dollars, it 
 may be that a new dollar which should pass exactly at par with them 
 would have temporarily a slight advantage. Taking China as a 
 whole, however,' the difficulties of introduction are substantially the 
 same on the gold as on the silver basis, provided it is clearly ex- 
 plained that the Government always receives the new coins at their 
 published gold value and that the people have the chance to see that 
 this is done when they pay their taxes. 
 
 (e) The difficulties after the first introduction, at any rate, are 
 much greater, immeasurably greater, if the start is made on the silver 
 system. With the start made on the gold system, when the coins are 
 once introduced the difficulties are over. With the start on the silver 
 system, when the coins are introduced they are given a silver value. 
 When, some years later, it is proposed to change to the gold basis, the 
 people are told that the dollar, which they had supposed was the 
 standard, is no longer the standard ; that it is not as good as it ought 
 to be, and that the Government, therefore, proposes to give it a higher 
 value. Whereas before it was received at 72 tael cents, the Govern- 
 ment now will receive it at 74 cents, then at 76 cents, then at 78 cents, 
 and so on, until it has reached the value decided upon, say, 92 tael 
 cents. This process of gradually raising the value, by the Govern- 
 ment changing its rates for receiving it and selling gold in exchange 
 for it at these rates, must cover a period of several years, otherwise 
 it will lead to the greatest speculation and to the hoarding of the 
 coins to make the profit when the sudden change is made of adding 
 15 to 20 per cent to the value of the coins; and this would probably 
 cause a commercial crisis. 
 
 On the whole, then, the difficulties of establishing a gold exchange 
 system from the beginning are very much less than if the system, 
 established on the silver basis, is afterwards to be changed to gold. 
 
 2. EXPENSES COMPARED. 
 
 The expenses of establishing and carrying out the system are very 
 much less if one starts with gold than if one starts with silver and 
 afterwards changes to gold. Other papers of these memoranda, giv- 
 ing the comparative cost of the two methods, make this clear beyond 
 all possibility of dispute. 
 
 3. METHOD OF STARTING SYSTEM. 
 
 Either system should begin in a small way, especially perhaps the 
 system with a gold parity. One province, preferably Chili, should 
 be selected first. As soon as there is a suitable amount of coins on 
 hand the Government should decide that it would start the system in 
 Peking, say, and a sufficient quantity of the new coins of the various 
 denominations for use in that city should be provided. The people 
 would be notified that the Government would exchange these coins 
 free of charge at certain published rates for their provincial coins — 
 sycee and copper coins — and a suitable number of agencies where these 
 exchanges could be made would be provided. It would then be de- 
 clared further that at a certain date in the future, which would be 
 named, all local obligations due the Government in cash must be paid 
 
166 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 in the new coins. This would include the octroi and small fees of all 
 kinds, and the Government would establish exchange shops near the 
 stations where the chief payments are made, so that the people could, 
 without trouble, exchange their sycee and copper cash for the new 
 coins at fixed legal rates. Of course for a time taxes' payable in kind 
 would remain as before. 
 
 As soon as the number of coins minted had increased, the same plan 
 would be followed in Tientsin, then, say, in Pao Ting Fu, etc., as rap- 
 idly as the new coins could be supplied and organization could be 
 made throughout the province of Chili. The Government would, of 
 course, agree from the beginning to receive these coins at their fixed 
 gold value anywhere in the Empire for obligations due to it, provided 
 the people wanted to present them. It would compel payment of ob- 
 ligations in these new coins only gradually as it had a sufficient sup- 
 ply for the local market on hand and had provided exchange shops 
 in reasonable numbers for the people. Of course when these arrange- 
 ments were made in the larger places, the merchants would soon take 
 the coins at the regular value in the villages and elsewhere, so that in 
 a comparatively short time the change would be made from one money 
 to the other without any special intervention on the part of the Gov- 
 ernment. 
 
 As soon as the Government began insisting upon the receipt of these 
 coins in obligations due itself, it would also begin paying out these 
 new coins in the payment of salaries, for supplies, etc., paying them 
 out at the same rate at which it received them. Following the prov- 
 ince of Chili would come, of course, the province of Kiangsii, for the 
 sake of Shanghai, Kwang-tung, Hupeh, etc. No pressure, anywhere, 
 would be brought upon the people to take these coins excepting to pay 
 their obligations due the Government, and that would be done simply 
 to accustom the people to their use, and such complete exchange ar- 
 rangements would be made that there would be no hardship. 
 
 4. LOAN AND SECURITY. 
 
 A small loan, say of about 40,000,000 of the new dollars, or a lit- 
 tle more than £4,000,000, would doubtless be the most convenient 
 way of securing money for the new system, though a loan is not 
 necessary if the annual revenue can be increased somewhat for a few 
 years. From careful discussion of this matter with people who are 
 accustomed to making loans there seems little doubt that China could 
 make a loan at a reasonable rate of interest, possibly on the security 
 merely of the gold reserve and the stock of coins on hand in the 
 management of the department, with the added guaranty of the 
 loan by the Chinese Government. It would doubtless be better, 
 however, in many ways for the Government to supply another basis 
 for the loan, such as, say, the receipts of an opium farm in Shanghai, 
 Canton, and one or two other cities, and to keep the gold reserve to 
 be used as a special security in case an emergency should arise. 
 However, the ability of China to make the loan on reasonable terms 
 is clear. The advisability of making a loan is a suitable subject for 
 discussion, and, as has appeared, China is probably able to start the 
 system without a loan if it is thought best to do so. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 167 
 
 5. ENGAGEMENT OF EXPERTS. 
 
 It will be necessary, in order to secure the proper skill in manage- 
 ment, and especially to secure confidence on the part of business 
 men, both Chinese and foreign, that a few of the very best foreign 
 experts be secured, especially for a few years at the beginning of the 
 system. These experts would, of course, be under the Chinese Gov- 
 ernment. Their fields of labor would be rigidly defined in their 
 appointments, so that the Chinese Government would take no risk 
 of their usurping power unduly; but within the field of work as- 
 signed them they would need to have much discretion left them, 
 inasmuch as the work is very difficult and almost from day to day 
 must be adapted to the changing needs. Foreign governments con- 
 sider the establishment of their monetary system one of their most 
 difficult problems. 
 
 The experts chiefly needed at first would be a controller in general 
 charge of the whole system, whose business it should be to plan out 
 the details of the work and the new laws needed, the putting of those 
 laws into force, the direction of the general organization of the 
 systeni, and its gradual introduction throughout the country, and the 
 direction of its management. He should nominate to the Govern- 
 ment for its appointment (a) a general superintendent of all of the 
 mints. This man should be thoroughly acquainted with all foreign 
 methods of mint management and be well known, so that his name 
 would be a guaranty to everyone of the absolute honesty of both 
 weight and touch of the new coins, and should also be a guaranty 
 to the Government that the work was being done at the lowest 
 possible cost. 
 
 (&) An accountant or statistician. — It is necessary that all the 
 mints and different agencies for the introduction of the system 
 should keep their books in harmony, so that from month to month — 
 almost from day to day — the controller can learn the exact con- 
 dition of the mints as regards supply, the rate of exchange, the 
 amount of money, silver, etc., on hand in each of the agencies for 
 the introduction of the money throughout the country, the condition 
 of the national bank, and its reserve, etc. The accountant, there- 
 fore, must have authority to collect this information from the 
 various sources, and to compel them to keep their books in the ways 
 which he prescribes. He should be the medium through whom the 
 information needed by the controller should be gathered, and he 
 should publish reports regularly. 
 
 (c) The national bank should be organized under a special law 
 prescribing strictly its powers and duties, so that the Government 
 would be protected absolutely as long as the law was observed. 
 Still further, the controller, a government official, would be ex officio 
 a director of the bank, so that he should know the conditions and 
 details of the management of the bank. The Government should 
 also appoint auditors and inspectors to see that the bank kept within 
 the law. The chief foreign manager of the bank should probably be 
 selected by the board of directors elected by the stockholders, but his 
 election should be approved by the Government on the recommenda- 
 tion of the controller. Inasmuch as the bank has so much Govern- 
 ment work to do, and inasmuch as it must be run in harmony with the 
 new monetary system, it is necessary that its manager and the con- 
 
168 GOLD STANDABD IN IWTEBWATIONAL TRADE. 
 
 troUer work in the closest harmonj^. Possibly it would be best to 
 have the manager of the bank appointed by the Government on the 
 nomination of the controller; but probably the way first suggested 
 would be best. 
 
 6. CONTRACTS WITH EXPERTS. 
 
 With these foreign experts the Government should make rigid con- 
 tracts, so that there could be no dispute as to their field of work, and 
 the Government should in those fields give them practically full 
 power. They should not be allowed to exercise authority outside 
 their special fields of work. 
 
 It would be well for the Government to place with these foreign 
 experts, who, it should be kept in mind, are skilled workmen and 
 advisers employed by the Chinese Government and not in any sense its 
 dictators, Chinese who are willing to make this kind of work their 
 business, and who, as understudies, will know all the work of the 
 foreign experts and will assist them in every way possible. To a 
 considerable extent, in connection with the foreign experts, they will 
 take charge of the Chinese subordinates who are employed ; but care 
 must be taken, especially during the first years, that they do not 
 hamper the work of the experts. 
 
 The controller should also start a training school to run for some 
 years until he gets a good many well-trained young Chinese to take 
 positions in the monetary system in the provinces'. 
 
 7. RELATION OF FOREIGN GOVERNMENTS. 
 
 In securing these experts the Government should not in any waj' 
 accept the dictation of any foreign government. Men should be 
 selected for their knowledge and ability to do their work, and for 
 this only. The banker should doubtless be one of the most experi- 
 enced and ablest foreign bankers who have done business in the East 
 for the last few years and one who has the confidence of every one. 
 The controller should be a man who knows monetary science and 
 monetary systems thoroughly, who has had experience in establish- 
 ing and adminisfering foreign systems, and whose reputation will 
 give confidence to business men, Chinese and foreign. The same 
 thing should be said in their respective fields with reference to the 
 superintendent of the mints and of the accountant. The accountant 
 should be, if possible, one who knows the Chinese language thor- 
 oughly and Chinese ways of doing business. Presumably the cham- 
 bers of commerce might be consulted to advantage by the controller 
 in securing the names of two or three of the leading men from whom 
 the accountant should be selected by the monetary commission. Pre- 
 sumably some one of experience in the Imperial customs service 
 would be the right man, although possibly some one of experience in 
 private business might be better equipped. 
 
 After the first few men are selected there will be little difficulty 
 in getting their subordinates. For branch banks, etc., the board of 
 directors, with their manager, would, of course, control ; for the more 
 directly subordinate Government positions the controller would, of 
 course, name (nominate, not appoint) the men; in the mints, prac- 
 tically in accordance with the wishes of the superintendent of the 
 
GOLD STANDARD IN INTERN ATIONAL TRADE. 169 
 
 mints; in the accounting department, at the suggestion of the chief 
 accountant, and so on. In the establishment of the new monetary 
 system in various places the inspectors necessary would, of course, be 
 more directlj' the personal subordinates of the controller. The main 
 difficulty is m getting the right start with the right men ; thereafter 
 the system will develop easily. 
 
 XVI. GOVERNMENT PROCEDURE. 
 
 In the establishment of the new monetary system it is important 
 that the Chinese Government arrange soon a plan for its general 
 lines of work, so that the whole system may be developed in an 
 orderly manner without mistakes. So long as the new coins are not 
 put into actual circulation there will be relatively little harm done 
 by a delay of a few weeks, or even.of a few months, after the first 
 steps ate taken, so as to permit the definite formulation of plans. If 
 the new coins are put into circulation before the plans are practically 
 all worked out, it may do great harm, since there will be great diffi- 
 culty in making any changes thereafter. 
 
 The following indicates the chief lines of activity which the Gov- 
 ernment must follow in the comparatively near future. So far as 
 possible the order in which action should be taken is indicated. 
 
 1. THE APPOINTMENT OP EXPERTS, 
 (o) The Contboller of the Cubbency. 
 
 Inasmuch as the controller of the currency will be held responsible 
 hj the Chinese Government for the success of the system, and 
 inasmuch as it will expect to rely to a considerable extent ujDon his 
 judgment in making plans for the organization of the system, his 
 appointment should be made as soon as the Government can find a 
 satisfactory man. This is equally necessary whether the system 
 starts on a gold or on a silver basis. It is merely good business policy 
 to put the responsibility upon some one individual to whom the 
 Government can apply at any time for suggestions, from whom it can 
 demand reports, and with whom it will expect to counsel regularly 
 regarding the development of the system. No other plan would be 
 in accordance with good practical business methods. 
 
 Inasmuch as he is to be held responsible for the successful and 
 harmonious working of the system, the other chief officials to -be 
 appointed by the Government should have their names suggested to 
 the Government by the controller. In that way only can it be cer- 
 tain that friction, which might be dangerous to the success of the 
 system, will be avoided. The Government should, of course, indicate 
 to the controller certain general matters in connection with these 
 appointments if it wishes to do so, such as the nationality of the 
 appointee which would be preferable, if it has any preference, the 
 general type of man desired, etc. The two appointments (aside 
 from a secretary or an assistant) that should probably be made first 
 are: 
 
 (6) Geneeal Superintendent or Mints. 
 
 This appointment should be made comparatively soon, inasmuch 
 as under the general management of the superintendent, in accord- 
 
170 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 ance with directions issued to him by the Government through the 
 controller, should be made the inspection of all the existing provin- 
 cial mints, the inventory of their machinery, so as to bring out their 
 capacity, the profits which they can make, etc. 
 
 There should be ascertained also, either by the general superintend- 
 ent or by officials acting for the controller, the profits which have 
 been made by the mints of late years. The superintendent should 
 inquire likewise carefully into the skill and trustworthiness of the 
 present managers and also regarding the most responsible worlanen. 
 The information indicated above is necessary in order that just and 
 satisfactory arrangements can be made with the viceroys for the 
 transference of their mints in due time, and for the satisfactory 
 working under the new system of the mints when they are once taken 
 over. As the general superintendent of mints will be held responsible 
 for every ounce of silver or gold placed in his hands, he must have 
 a voice in selecting his subordinates — so far as is possible from those 
 now working. He should be consulted also regarding the edicts that 
 will need to be passed in connection with the work of the mints. 
 
 (e) General Accountant. 
 
 It is not necessary that this appointment should be made immedi- 
 ately, and still there should not be too long a delay, inasmuch as the 
 accountant should prepare beforehand, on consultation with thf. 
 controller, so as to be sure that the whole system is understood alike 
 by them both, his plans for uniform accounting in all of the mints, 
 his forms for the reports on public business of the national bank, 
 as well as for the various offices for the distribution of the coins, etc., 
 throughout the Empire. He will need also to have furnished him, 
 as the basis of the accounts of the entire system, the inventory of the 
 material in the existing mints, the values of the machinery, mint 
 buildings, etc. Such preparation before the actual work of the sys- 
 tem begins will require considerable time. 
 
 2. CONTROLLER TO PREPARE AND SUBMIT DRAFTS OF EDICTS. 
 
 The Government should instruct the controller to study carefully 
 with the superintendent of mints, the general accountant, and others, 
 then to prepare and submit for its consideration and action, as soon 
 as it can be satisfactorily done, drafts of edicts on the following 
 subjects : 
 
 (a) Geneeal Cueeenct Law. 
 
 A general currency law, which shall prescribe in outline the organi- 
 zation of the system. 
 
 (6) Minting Law. 
 
 A minting law giving (1) a description of the coins to be issued; 
 (2) the limit of variation in weight and fineness of the coins to be 
 issued; (3) regulations regarding inspection of coins, purchase of 
 bullion, the issue of coins, etc. 
 
 (c) Gold-Reserve Law. 
 
 An edict creating a gold-reserve fund and establishing general 
 regulations for its management. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. I7l 
 
 (d) Banking Laws. 
 
 (1) A law for the establishment of a national bank. (2) A law 
 regulating the issue of bank notes. 
 
 These edicts should be drawn with the greatest care. A varia- 
 tion of one decigram in the weight assigned to the gold standard 
 coin would make a difference of more than $20,000,000 probably in 
 five or six years. 
 
 It is not necessary that all of these edicts be passed immediately, 
 but they should be prepared by the controller as rapidly as they are 
 needed, for submission to the monetary commission in ample time for 
 full discussion of them by the commission with the controller before 
 they need to be issued. 
 
 3. REGULATIONS REGARDING LOANS. 
 
 If it is decided to make a loan in order that the new coins may be 
 issued with a fixed value in terms of gold, it is desirable that steps 
 be taken soon in connection with that matter, (a) The question of 
 proper security for the loan and provision for the payment of the 
 interest and in due time of the principal should be considered. (&) 
 Negotiations should be entered into to secure the loan on the best 
 terms by securing offers from various parties to see who will offer the 
 best terms. 
 
 4. REGULATIONS REGARDING REVENUE. 
 
 If it should be found that a loan is. not necessary, provisions will 
 still need to be made very soon to secure the revenue requisite from the 
 beginning either for the proper development of the system with the 
 coins on a gold value or for the rapid accumulation of a gold reserve. 
 
 . 5. MODIFICATION OF TREATIES. 
 
 Steps should be taken in the near future for negotiating amend- 
 ments to the treaties with foreign powers so far as they are neces- 
 sary for limiting the importation of foreign silver coins and bullion. 
 
 These measures will perhaps not be needed for a considerable time, 
 but there is likely to be much delay in securing the consent of all of 
 the treaty powers, and when it does become necessary to limit the 
 importation of silver coins and bullion, it would be a great misfor- 
 tune if that step could not be taken promptly. 
 
 With certain powers it might also be desirable to discuss informally 
 the question of their attitude in the future toward taxation on busi- 
 ness conducted in any currency excepting the new currency. For 
 these measures a monetary expert will be needed with the Chinese 
 treaty commissioners. 
 
 6. ORGANIZATION OF NATIONAL BANK. 
 
 The Government should also instruct the controller to suggest steps 
 in due time for the organization of a national bank and for beginning 
 business with it. It is not absolutely necessary that the bank be 
 started at any fixed time, but it would probably save some money to 
 the Government, and it would certainly be desirable, if it is practica- 
 ble, for the bank to be organized so as to begin business by the time 
 
172 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 that the new coins are issued. It would, of course, be an advantage 
 if the bank could be started almost immediately, so as to have its 
 buildings ready, its corps of assistants engaged and somewhat accus- 
 tomed to their work, and some patronage already secured for the 
 private business before it became necessary for it to take up its public 
 business. 
 
 In suggesting to the monetary commission the draft of the law for 
 the establishment of a national bank, the controller would, of course, 
 suggest methods of securing capital, organizing the bank, etc., and he 
 should be ex officio a director of the bank. The manager, elected pre- 
 sumably by the directors, should be subject to approval by the Gov- 
 ernment on his name being referred to it by the controller. 
 
 It will be noted in the outline above that the entire power and con- 
 trol rests with the Government, but that an organization is indi- 
 cated so that it can receive continually from the controller, and 
 through him from each one of the subordinate officials, suggestions 
 regarding the details of organization, of management, of appointment 
 of suitable men, etc. The Government will, of course, view these sug- 
 gestions carefully, and, finally, after full and careful discussion with 
 the experts appointed, so that there will be no misunderstanding, the 
 Government will take action. So far as possible its control will be 
 largely in the form of these general edicts and a careful inspection 
 to see that these laws are rigidly observed. The contracts made with 
 the experts would, of course, prescribe strictly their powers and du- 
 ties, and they must confine their activities to those fields. Within 
 those fields they should be alloAved much discretion. 
 
 It is only through this method of centralizing responsibility in the 
 controller and of dealing with the details of the system through the 
 heads of the different departments and eventually through the subor- 
 dinates, each of whom is to be held strictly responsible by his imme- 
 diate superior, that the Government can secure absolute certainty of 
 results and absolute confidence on the part of the public, both Chinese 
 and foreign. 
 
 It would be understood, of course, from the beginning that the 
 whole system is to be managed on the strictest business principles and 
 solely in the interests of China. 
 
 XVII. SECOND SUMMARY; ANSWERS TO OBJECTIONS, AND FINAL 
 
 SUGGESTIONS. 
 
 1. SUMMARY OF WORK OF EXPERT ORGANIZER. 
 
 The Chinese Government needs foreign expert help of the nature 
 suggested in our previous discussions, substantially as much if it 
 should decide to issue merely a silver coinage without giving that 
 coinage a gold value as if it attempted to establish a gold system. 
 The difficulty connected with foreign experts, therefore, can not be 
 avoided by rejection of the American plan, and in addition to this 
 consideration its rejection means also, of course, the loss of the 20 
 per cent profit, the disadvantage of not securing a stable rate of 
 exchange with gold, and the many other disadvantages of the silver 
 system mentioned. The expert will \)e needed on the silver basis for 
 the following reasons : 
 
 (a) To fix the ratio to the tael at which the Government will ac- 
 cept the new coins in various parts of China when it is introduced. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 173 
 
 (&) To see that the mints turn out coins of standard weight and 
 quality, and to give the people confidence in them. At present this 
 is not universally the case with any mint in China. Objections from 
 business men have been heard against them all. 
 
 (c) To organize and manage the distribution of the new coins and 
 the purchase of the old coins and of bullion. Unless this is skillfully 
 done the old coins will remain in circulation indefinitely and the new 
 coins will have great difficulty in making their way. 
 
 (d) He should advise regarding laws to be passed discouraging 
 the circulation of old coins and of bullion. 
 
 (e) He will be needed in the arrangement of treaties permitting 
 the prohibition of importation of the old coins and of bullion. 
 
 (/) His care will be needed in the detailed arrangements to keep 
 up the value of the smaller silver and copper coins. 
 
 (g) The coinage of the present copper ten cash pieces should be 
 stopped very soon. He should be consulted regarding that. 
 
 (A) He should make estimates regarding the taking over by the 
 board of revenue of the provincial mints. 
 
 There are other points which might be mentioned, but this is 
 enough to show that an expert of the first rank is needed even if 
 the gold system is not attempted. 
 
 2. DELAY INADVISABLE. 
 
 With the new mint approaching completion, part of the machinery 
 already being on hand, there can not be any long delay in reaching 
 a decision without considerable loss to the Government. Neverthe- 
 less it would be far better to delay the issue of the new coins for a 
 3'ear or more, losing the interest on the capital in the mint, than to 
 make a wrong start from the ill effect of which it might be almost 
 impossible ever to recover. 
 
 3. OBJECTIONS TO SYSTEM ANSWERED. 
 
 No objections have been raised to the gold exchange system which 
 have not been satisfactorily answered, to some people at least who 
 have taken the time for full consideration. In a few words are 
 summed up below some of the most important objections and the line 
 of answer. There is no doubt that all objections can be satisfactorily 
 answered. 
 
 (o) People too Ignoeant. 
 
 It is said that the Chinese people are too ignorant; not ready; 
 can not understand the new system. 
 
 No people in any civilized country understand the details or trie 
 monetary system; it is not necessary that they should. Most people 
 send telegrams without understanding the process ; they ride on the 
 railroads without knowing how to run an engine; they take bank 
 notes knowing nothing of the reserve. In one week they can be 
 taught that the Government will take the new coins at a fixed valua- 
 tion- that they can always get a thousand of the new cash for the 
 new 'dollar, or a new dollar for a thousand of the new cash, and that 
 they need no longer be dependent upon the cash shops to learn the 
 
174 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 value of their money. This alone will secure the hearty support 
 of the common people, and it is not really necessary that they under- 
 stand more. 
 
 The merchants and business men with whom I have had an oppor- 
 tunity of discussing the matter thoroughljr have practically all sup- 
 ported it heartilv. The one or two exceptions were simply in doubt 
 as to whether it were not better to keep a silver system with its 
 fluctuations. I am convinced that those who favor the gamblmg 
 risks in business coming from the fluctuating rate of exchange of a 
 silver system are relatively few. 
 
 To urge that China must wait until her people are educated would 
 seem to argue simply a wish to avoid responsibility. 
 
 It might be well for the new controller to visit some of the leading 
 cities before the system is introduced and explain it in some detail 
 to leadiiag business men. 
 
 (h) Chijsta Has No Gold. 
 
 It is said that China has no gold. China can buy gold as easily 
 as she can buy machinery. Moreover, it is as cheap for her to buy 
 gold with her present products as it is to get it by mining or in any 
 other way. 
 
 (C) FOBEIGNEKS WiLL NOT RECEIVE NEW COINS AT GOLD VALUE. 
 
 It is said that foreigners will not take the new coins in the settle- 
 ment of debt obligations. The new coins can not be sent abroad at 
 their gold value, it is true, but the new coins can buy at their gold 
 value bills of exchange with which to settle the foreign debts, and 
 that is far better than to send the coins themselves abroad ; in fact, 
 coins are not sent abroad now. 
 
 (d) System Will Benefit Foreign Nations. 
 
 It is said that it will benefit the foreign nations at the expense of 
 China. 
 
 Foreign nations are benefited only in .their foreign trade with 
 China. China will herself benefit from the new system as much as 
 all the foreign nations put together, for her trade with all of them is 
 equal to their trade with her, and she benefits from the foreign trade 
 as well as they do. The Chinese are too shrewd to do business in 
 which they do not make a profit. 
 
 Besides China's enormous added gain from a good system in her 
 foreign trade, her domestic trade would also be very greatly im- 
 proved if there were one system of uniform coins of fixed value 
 throughout the empire. Moreover, a stimulus to foreign trade in 
 itself gives a great stimulus to the internal trade. Most export goods 
 change hands more than once in the interior. Railroads are build- 
 ing in many parts of China. These can work to advantage only with 
 a fixed money. It would be practically impossible to use taels with 
 a large traffic, and there will be grave disadvantages to the Chinese 
 people until there are fixed gold values. Railroads will always take 
 advantage of the fluctuations in exchange at the expense of their 
 patrons. 
 
GOLD 8TANDAKD IN INTERNATIONAL TRADE. 176 
 
 (e) China Can Not Maintain Value of Coins. 
 
 It is said that China can not maintain the gold value of her coins. 
 It has been made clear repeatedly that this can be done without 
 dmiculty. 
 
 (f) Will Drive Cash Shops Out of Business. 
 
 It is urged that it will drive the cash shops and others out of busi- 
 ness. It IS doubtless true that some few people, especially keepers 
 of cash shops, will be injured in their business by the new system. 
 That will be equally as true with a good uniform silver system as 
 with gold. It is inevitable that a few suffer from any industrial 
 change. Where one suffers a hundred will benefit. 
 
 (ff) ExpoBTEBS Will not Gain Fbom Rise in Gold. 
 
 It is said that the exporters will not gain if there comes a rise in 
 gold. True. Neither will they lose if gold falls. It takes away 
 the gambling element from business — a most desirable thing. 
 
 (h) POBEISN EXPEET NEEDED. 
 
 It would require foreign expert help, and some object to that. So 
 will the new silver system, and in any case it has been made clear that 
 the foreigners would be here as skilled workmen of the Government 
 and its advisers, but not in any sense as its masters. 
 
 Most of these and other objections are due either to a misunder- 
 standing of the system or to the fact that the Chinese edition of 
 the earlier pamphlet did not make clear the plans. The more 
 detailed explanations here will doubtless clear up many difficulties, 
 and further details can easily be supplied. 
 
 4. AN EXPERT CAN MODIFY HIS PLANS TO SUIT SPECIAL NEEDS. 
 
 It should be kept in mind, also, that an expert who knows his busi- 
 ness fully can probably modify, more or less, some features of a plan 
 to meet special objections while retaining the chief points. 
 
 It will be recalled, for example, that several modifications of the 
 original plan were suggested so that China could start a system 
 without a loan by raising considerably more money for the first few 
 years. Other modifications could be made with reference to certain 
 details regarding foreign experts, or with 'reference to the rapidity 
 of introduction, etc., if it should be necessary, although the substan- 
 tial features of the plan suggested would remain. 
 
 5. SUCCESS SURE IF PLANS ARE WELL MANAGED AND SUPPORTED. 
 
 On the Chinese Government, of course, rests the responsibilty of 
 the rejection of plans which, if they were successful, would mean a 
 saving of very many millions of dollars to the people, besides an 
 added prosperity which would count for far more than the millions 
 of dollars saved. 
 
 To that Government, on the other hand, would come also chiefly the 
 .satisfaction of a great service rendered and the gratitude of the peo- 
 
176 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 pie for many generations to come if there is introduced and made 
 successful a system which would be of so great benefit. 
 
 From long study of this subject, from helping establish other sys- 
 tems, and from its experience in seeing similar systems at work in 
 other places, the American Commission counts upon the full success 
 of the system recommended, if it is well managed and if it is prop- 
 erly supported by the Chinese Government. 
 
 III. COMMENTS AND SUGGESTIONS ON THE CHINESE MONETARY 
 
 REFORM. 
 
 I. MEMORANDUM ON THE ESTABLISHMENT OF A GOLD-STAND- 
 ARD CURRENCY IN CHINA. 
 
 By Alfred E. Hippisley, Commissioner of the Imperial maritime Customs, adviser 
 to Chinese Treaty Commissioners. 
 
 Note. — The roUowing memorandum was drawn up in compliance 
 with a request from the imperial commissioners for treaty revision. 
 Their excellencies Lii Hai-hwan and Sheng Kung-pao, for an ex- 
 pression of the writer's views with reference to the suggestions con- 
 tained in a pamphlet, " Memoranda on a New Monetary System for 
 China," presented by Prof. J. W. Jenks, the commissioner appointed 
 by the United States Government in response to an appeal made to 
 it in January, 1903, by China and Mexico, for assistance in establish- 
 ing a monetary system which should determine the relations between 
 silver and gold. As the views of a layman on the technical points 
 involved in such a proposition would be of little worth, the writer 
 confines himself to an expression of opinion as to the manner in which 
 the Government and the people of China are likely to be affected by 
 the establishment of a gold-standard monetary system. 
 
 On January 22, 1903, the Chinese charge d'affaires at Washington 
 addressed an official request to the United States Government to use 
 its influence in establishing an equilibrium between gold and silver. 
 He said : 
 
 " The serious results which are threatened by the recent fluctua- 
 tions in the value of silver bullion to the commerce both of gold and 
 silver-standard countries have induced the Chinese Imperial Gov- 
 ernment, acting in consent with the Mexican Government, to ask the 
 cooperation of the United States in seeking a remedy for these con- 
 ditions for the mutual benefit of all concerned. Safe and profitable 
 trade between any two countries is dependent to a considerable degree 
 upon relative stability in the value of their currencies. This stability 
 is destroyed in the trade between a gold-standard country like the 
 United States and a silver country like China, when the variations in 
 the gold value of silver, as was the case in the year 1902, reached 
 nearly 10 cents an ounce in gold in a single year, or nearly 20 per cent 
 upon the price of silver bullion. * * * 
 
 " It is not the expectation nor the wish of the Chinese Government 
 that the gold standard countries should take any action tending to 
 impair their own monetary standards or to make material changes in 
 their monetary systems. It is desired that the governments of gold 
 
GOLD STANDARD IN INTEBNATIONAt TEADE. 177 
 
 countries having dependencies where silver is used and the govern- 
 ments of silver-using countries shall cooperate in formulating some 
 plan for establishing a definite relationship between their gold and 
 silver moneys, and shall take proper measures to maintain such rela- 
 tionship. One such plan, it is reported, has already been proposed in 
 both Houses of the Congress of the United States with reference to 
 the Philippine Islands. It is this, and other plans designed to accom- 
 plish the same end, which the Government of China would be glad to 
 have considered by the United States and other governments, with a 
 view to the adoption of the best attainable monetary arrangement by 
 those countries which are not prepared under existing conditions to 
 adopt a currency system involving the general use of gold coins. 
 The cooperation of the United States Avith the Chinese Imperial 
 Government and with the Republic of Mexico in presenting this sub- 
 ject to other governments would, in the opinion of this Government, 
 aid greatly in securing a prompt and satisfactory solution of an 
 enormous problem which threatens the ruin of the silver-using coun- 
 tries on the one hand in the vain effort to meet increasing gold obliga- 
 tions abroad, and which threatens also the commercial prosperity of 
 the gold-using countries by destroying the purchasing powers of 
 their customers." 
 
 MEANING OF china's REQUEST TO THE TTNITED STATES. 
 
 This was practically a request from the Government of China to 
 the United States to devise a new monetary system which would estab- 
 lish a fixed rate of exchange between China and gold-standard coun- 
 tries; because if China made no change in her system the existing 
 evils resulting from constant fluctuations in exchange between gold 
 and silver detailed by the Chinese charge d'affaires would continue, 
 even if they were not accentuated by action taken by other countries 
 with a view to fix the rate of exchange between their coins and the 
 gold standards of the West. It thus involved two things — first, the 
 adoption of a uniform national currency, a step which it had already 
 been promised should be taken in the new treaty with England ; and, 
 second, the establishment of a definite relationship between that cur- 
 rency and gold, but in such a manner as would not involve the general 
 use of gold coins, which, indeed, are unsuited to the conditions exist- 
 ing in China. 
 
 CAN NEW COINAGE HAVE A FIXED GOLD VALUE? 
 
 In consequence of this request the United States Government 
 appointed a commission of three experts to consult the financial 
 authorities of the different countries of Europe and then to frame 
 suggestions with a view to the establishment of a gold-standard cur- 
 rency in China. One of these experts was Mr. Jenks, who had 
 already been deputed to visit India and the Dutch colonies in Asia, 
 where a gold-standard currency had already been established, with 
 a view to the introduction of a similar monetary system in the 
 Philippines; and as he was proceeding to those islands again to 
 superintend the carrying out of this policy he was deputed to pro- 
 ceed to China in order to submit to the Government of that country 
 S. Doc. 128, 58-3 12 
 
178 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 such proposals as seemed best calculated to attain the object in view. 
 The financial experts of Europe were unanimously of opinion that a 
 national currency should be at once established in China, and that the 
 coin used should, so soon as possible, be given a fixed gold value : but 
 they differed as to the meaning of the words " so soon as possible." 
 
 Six out of the eight countries consulted, including the United 
 States, Germanj'^, Japan, and Mexico, considered that the two steps 
 should be taken simultaneously and that the silver coin adopted by 
 China should from the outset be given and be maintained at a fixed 
 gold value. England and Eussia, on the other hand, believed that 
 China is too conservative to introduce a uniform currency and at the 
 same time to take the steps necessary to maintain a fixed gold value 
 for the coin adopted; they therefore considered it would be best to 
 start with the introduction of a national silver currency, and then, 
 later on, but so soon as possible, to give the silver coin adof»ted a 
 fixed gold value. But the member of the original Commission who 
 was deputed to continue the investigations in Asia and to submit 
 proposals to the Chinese Government, Mr. Jenks, has been satisfied 
 by his investigations into what has been done in India, and by his 
 experience in assisting to introduce into the Philippines a silver 
 currency on a gold basis, that it is possible even in China to take the 
 two steps simultaneously, if China decided to do so — to from the 
 outset fix a gold value to the silver coin adopted, and by this means 
 to put a stop to the increasing fall in China of the gold value of 
 silver. If such action be possible, there can be no question that from 
 a financial point of view it would be to China's advantage to take it. 
 
 UNIT or NEW COINAGE. 
 
 In introducing the new national silver coinage the first step for 
 China to take is to decide upon the unit of the coinage, whether it 
 shall be a dollar or a tael. It is suggested that a silver dollar is 
 already a sufficiently large coin, and that a tael, no matter what 
 denomination of tael might be selected, would be too hea^'y and cum- 
 bersome. Moreover, mints have been established in several of the 
 provinces, and these have turned out dollars and fractions of dollars 
 that, in the aggregate, amount to several tens of millions of dollars. 
 To retain the dollar as the unit would have several distinct advantages. 
 First, in so large a country as China it will be necessary to continue 
 to employ several mints, and those already established can continue 
 to be utilized for coinage purposes with only a slight modification of 
 the device on the coin, and thus considerable expense, which would be 
 entailed by the purchase of the heavier machinery required to mint a 
 tael coin, will be avoided. Second, the people being already accus- 
 tomed to the use of dollars, a large step has already been taken toward 
 the establishment of a uniform currency. Third, if the value of the 
 unit be 6xed in cash, it is believed that the many kinds of taels used 
 in different localities, not being coins but merely a weight of silver of 
 varying fineness, would gradually disappear before the new coin. 
 
 If that coin were made a tael, money changers would unduly depre- 
 ciate the value of the dollars already in use, to the serious loss of the 
 people. If, on the other hand, the coin were made a dollar, those 
 already issued should be accepted during a limited period by the 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 179 
 
 Government— -and this should be published everywhere by proclama- 
 tion — at a price somewhat above the market value, and thus holders 
 of the old coin would suffer no loss ; the latter being, of course, with- 
 drawn from circulation and melted down. If, then, it be decided to 
 adopt the dollar as the new unit, it is proposed that $1 shall be equal 
 to 1,000 cash ; $0.50 shall be equal to 500 cash ; $0.20 shall be equal to 
 200 cash; $0.10 shall be equal to 100 cash; $0.05 shall be equal to 50 
 cash ; that the 10-cash piece now being coined be continued and bear 
 the words now borne by those minted at Canton, namely : " One hun- 
 dred equal one dollar," and that a new 1-cash coin be struck. Then 1 
 treasury tael might be held equal to 1,400 cash; 1 Haikwan tael might 
 be held equal to 1,500 cash, and other taels might be converted into 
 the new currency at corresponding rates. 
 
 This system, if adopted, would I)e a great boon to the people gener- 
 ally, merchants and agriculturists alike : because, as one of the princi- 
 ples of a national coinage is that the Government must always accept 
 their own coins at the value it affixes to them, the people would always 
 know exactly what silver coins or what copper coins they had to ten- 
 der in payment of taxes due. There would no longer be any room for 
 discussion as to how many cash represent a tael. 
 
 If China takes the second step and bases the new cui-rency on a gold 
 standard, it remains to decide how many grains of gold should repre- 
 sent a gold dollar — and that is a matter for experts. Supposing they 
 decide that the silver dollar shall represent a gold value equivalent 
 to 2 English shillings, then the Haikwan tael would represent 3 
 shillings. 
 
 IS CHINA IN FACT A SILVEE-STANDAED COUNTRY? 
 
 But it may be asked, " If this proposal were adopted, would not 
 China lose the commercial advantages she appears now to possess as a 
 silver-standard country ; and would not the effect of such action be, on 
 the one hand, to cheapen the laying-down cost of foreign goods in 
 China and so promote their consumption to the. detriment of native 
 manufacturers ; and, on the other hand, by increasing the laying-down 
 cost of native goods in foreign countries, to restrict the consumption 
 abroad of such goods? " Before proceeding to consider what effect 
 the adoption of a gold-standard currency by China is likely to exercise 
 upon her foreign trade, it may be well to pause and examine whether 
 China can with propriety be described as a silver-standard country. 
 It is submitted that this is a misnomer. It is true that the Govern- 
 ment statements of revenue are usually expressed in taels — that is, in 
 silver — and in large commercial transactions the consideration for 
 which the goods are passed is also expressed in taels. But as a matter 
 of fact the vast majority of the population seldom see silver. In the 
 interior the bulk of the revenue, especially the land tax and salt taxes, 
 are collected in copper cash, and it is in copper cash that prices are 
 expressed and purchases are made. The real standard of value in 
 China is the coin known as cash ; i. e., copper, and not silver. And 
 this fact has a very important bearing upon the development of 
 China's export trade. 
 
 As a rule one large mercantile transaction entered into by a Chinese 
 merchant with a foreign merchant is the result of a number of minor 
 transactions entered into bv the former with cultivators or traders 
 
180 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 in the interior. The tea which is sold as one crop to the foreign mer- 
 chant has been collected from several gardens belonging to different 
 owners, and the thousand piculs of hides sold to the foreign merchant 
 represent many purchases from a large number of dealers. The 
 Chinese middleman pays the cultivator or the dealer for his pur- 
 chases in cash, and the important matter to both is not how many 
 taels the former realizes from the transaction, but how many tiao, i. e., 
 thousands of copper cash; because that is the factor which will deter- 
 mine how many cash he can afford to pay next season for his tea or 
 hides. Now, during the last thirty years silver has depreciated, not 
 only in terms of gold, but also in terms of copper cash. The number 
 of the latter for which a tael or a dollar will exchange has been 
 steadily falling. In 1874, 1 tael of Shanghai currency exchanged for 
 1,630 cash; to-day it exchanges for only 1,100. In the interior the 
 depreciation of silver in terms of copper is even more marked, but 
 to avoid exaggeratiom we will adopt Shanghai quotations. Then the 
 Haikwan taefexchanged in 1892 for 1,560 cash, and in 1903 for 1,280 
 cash. 
 
 The value of the foreign export trade of China, which was 
 102,580,000 taels in 1892, rose to 214,350,000 taels in<1903. Expressed 
 in copper cash, it rose from 160,890,000 tiao to 274,360,000 tiao. In 
 other words, while the increase in value, if expressed in silver, 
 amounted to 108 per cent, it amounted to only 70 per cent when 
 expressed in copper; and as the depreciation of silver in terms of 
 copper began some years later, so now it is proceeding more rapidly 
 than that in terms of gold, having during the last two years shown a 
 percentage of decline more than twice as large as that shown by the 
 latter. How much further it is likely to proceed can not be definitely 
 stated, but the depreciation of silver in terms of copper which has 
 already taken place and the rate at which it is still progressing show 
 that it would be unwise to attach any great importance to the idea 
 that China is a silver-standard country or to gauge the profit she 
 derives from her foreign export trade bj^ the increase of its value in 
 terms of silver. 
 
 It is necessary to bear this point in mind while we proceed to con- 
 sider whether the adoption of a gold standard would adversely affect 
 China's foreign trade. 
 
 would giving new coins a fixed gold value adversely affect 
 china's foreign trade? 
 
 First, as regards imports of foreign goods into China. A table 
 has been compiled (Appendix No. 1) showing the net value, both in 
 silver and in gold, of the imports received annually from abroad 
 during the last thirteen years, 1891-1903, and the average gold value 
 of the Haikwan tael in each of those years. 
 
 Examination of this table shows : 
 
 1. That the silver value of this trade has steadily increased year by 
 year — with the exception of the year 1900 — and has risen from IM 
 million taels in 1891 to 326,740,000 taels in 1903, or slightly over 140 
 per cent. 
 
 2. That the gold value of the Haikwan tael, though there have 
 been ups and downs in the course of the thirteen years, shows at first 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 181 
 
 a rapid and then a fairly steady decline, the A^aliie having been 4s. lid, 
 in 1891, and only 2s. 7fd. in 1903, a fall of 46^ per cent. 
 
 3. That, as a consequence of this fall in the gold value of the tael, 
 the gold value of this trade has increased from £32,930,000 to only 
 £39,630,000, or 20 per cent ; and 
 
 4. That it is not exchange that determines what quantity of for- 
 eign goods China will purchase. In other words, the table shows 
 that China does not take a larger quantity of foreign goods when 
 exchange rises and a smaller quantity when exchange falls. Thus it 
 will be seen that she took goods of practically the same gold value in 
 the years 1891 (£32,930,000) and 1900 (£32,760,000) , though exchange 
 was 4s. lid. in the former and only 3s. IJd. in the latter year. So, 
 too, she took goods of practically the same gold value in the years 
 1899 (£39,880,000) and 1903 (£39,630,000), though exchange was 
 3s. O^d. in the former and only 2s. 7f d. in the later year, and in 1902, 
 when exchange touched its lowest point and averaged for the year 
 only 2s. 7|d., she took foreign goods representing a gold value of 
 £41,000,000 — the highest value in the thirteen years — or nearly 25 per 
 cent more in gold than she took in 1891 (£32,930,000) , when exchange 
 was at its highest point during the thirteen years--4s. lid. 
 
 This seems to show conclusively that there is no reason to appre- 
 hend that an increased consumption of foreign goods to the detri- 
 ment of native manufactures will result from giving to the new 
 currency a fixed gold value. The figures in Addendum No. 1 would 
 seem to suggest that China has a certain sum, averaging roughly 
 £33,000,000 per annum — though where exactly she derives that sum 
 we are unable to state — for investment in foreign goods, and that she 
 so invests it year after year without regard to the rate of exchange 
 ruling. If that be so, the Chinese people will still continue to 
 expend about the same amount in gold annually, but they will 
 receive a larger quantity of yarn, kerosene, and sugar, the articles 
 which show the largest increases during the period in question, or of 
 rice in periods of famine — an advantage, not a loss, to the country. 
 
 Next, as regards native exports to foreign countries. Addendum 
 No. 2 shows the value, both in silver and in gold, of the native goods 
 exported abroad annually during the last thirteen years, 1891-1903, 
 and the average gold value of the Haikwan tael in each of those 
 years. Examination of this table discloses practically the same 
 results as does examination of Addendum No. 1. It shows — 
 
 1. That while the silver value of the trade has been subject to 
 many fluctuations, it has increased from 100,950,000 taels in 1891, 
 to 2i4,350,000 taels in 1903, or over 114 per cent. 
 
 2. That the gold value has only increased 14 per cent, from £24,- 
 820,000 to £28,280,000. 
 
 3. That it is not exchange that determines what amount in gold 
 foreign countries invest in Chinese produce, for the gold value of 
 exports abroad was practically on a level in the years 1891, 1897, and 
 1900— £24,820,000, £24,350,000, and £24,680,000, respectively— 
 though the rates of exchange in those years were 4s. lid.., 2s. llfd., 
 and 3s. l|d., respectively, the average value for the entire period 
 being £24,510,000. 
 
 It is, however, a generally accepted axiom that it is wise policy to 
 promote the cheapening of the laying-down cost in foreign countries 
 
182 GOLD STANDAJID IN INTERNATIONAL TRADE. 
 
 of native products, because the cheaper they can be placed on the 
 market the more effectively can they compete with similar products 
 from other countries. 
 
 Hence all nations do their utmost to develop the means of internal 
 transport, few levy export duties, and some even go so far as to 
 encourage export by means of bounties. From this point of view 
 the proposal to establish the new currency in China upon a gold 
 basis would at first sight aj)pear to be an economical mistake, 
 because if silver continues to fall the effect of the proposal to estab- 
 lish the dollar on a parity of 2 shillings would be to raise the laying- 
 down cost in foreign countries of Chinese products somewhat above 
 what that cost would be but for the adoption of this proposal. And 
 it was for this very reason that when the government of India ini- 
 tiated the policy of placing the currency of that country on a gold 
 basis that policy was strenuously opposed by some of the greatest 
 financial authorities in England, who prophesied that it would ruin 
 the export trade of the country and bring distress to its people. The 
 course of trade subsequent to the date at which this legislation took 
 effect would, however, appear to show that the apprehensions of 
 these distinguished critics were ill-founded, and that instead of fall- 
 ing off the export trade of British India has been marked by healthy 
 expansion. 
 
 The Indian government took the first step toward placing its cur- 
 rency on a gold basis (at the rate of 15 rupees = £1) in 1893 by clos- 
 ing the mints to the free coinage of silver. It was not, however, till 
 1896 that the effect of this measure began to laake itself felt, and in 
 the following year the parity of exchange aimed at had been practi- 
 cally attained. In Addendum No. 3 are given statistics of the foreign 
 trade of India from the year 1888-89 to the year 1902-3. From them 
 it will be seen that while the average annual value of the export trade 
 of India during the five years prior to 1896-97 (when the rupee 
 passed at its market value) was 1,079 millions of rupees, the average 
 annual value of that trade during the five years following 1897-98 
 (the period of gold standard) has amounted to 1,189 millions of 
 rupees. 
 
 The effect of the adoption of a gold standard in Japan has been 
 precisely the same. Japan adopted a gold standard in 1897, and the 
 average annual value of the export trade during the six years prior 
 to that year amounted to 105 millions of yen, while the average 
 annual value during the six years following 1897 amounted to no less 
 than 231 millions of yen (vide Addendum No. i) . 
 
 IP IT DOES NOT, HOW EECONCILE THIS FACT WITH THEORY THAT IT IS 
 WISE POLICY TO REDUCE PRICE OF SHIPMENT OF NATIVE PRODUCTS? 
 
 The question naturally arises : " Seeing that the effect of placing a 
 silver currency on a gold basis is, in a falling silver market, to give the 
 silver coin a value higher than that of the metal it contains, and conse- 
 quently to raise the price abroad of the ijroduct of the country con- 
 cerned, how is it possible to reconcile expansion of the export trade 
 following on the adoption of a gold standard currency with the 
 theory that it is economically advantageous to cheapen the laying- 
 down cost of a country's exports?" 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 183 
 
 The explanation appears to be tliat though a silver currency has 
 the advantage of enabling exports to be laid down in gold-standard 
 countries at a lower cost when silver is falling in price than similar 
 products from gold-standard countries can be laid down at, that ad- 
 vantage is, as a fact, far more than counterbalanced by the instability 
 which is incidental to a silver currency. The sudden and violent 
 fluctuations of value which have characterized the silver market dur- 
 ing recent years have tended to convert legitimate trade into little 
 else than a gamble. The most careful calculations of a merchant are 
 upset without warning by a cause over which he has no control ; and 
 the prudent man, rather than run the risk of a disastrous loss, deems it 
 Aviser to sit still and wait until the causes which are so violently dis- 
 turbing the silver market have passed, with the result that the devel- 
 opment of trade is seriously retarded or brought entirely to a 
 standstill. 
 
 If he does continue his business, then he must raise the price asked 
 for foreign imports and lower the price to be given for native exports 
 in order to cover the risk of a fall in exchange, and in consequence 
 trade must be restricted. Take, for instance, the present year. The 
 value of the Haikwan tael was 3s. fd. in February and 2s. 7fd. in 
 April. Suppose a merchant invested £10,000 in tea costing 15 taels per 
 picul<*in February. His £10,000 would realize 65,850 taels, which 
 would purchase 4,390 piculs of tea. Before this tea can reach Europe 
 Merchant B, taking advantage in the fall in exchange, also invests 
 £10,000 in April in similar tea. His £10,000 realizes 75,590 taels, 
 with which he purchases 5,039 piculs. The latter purchase having been 
 telegraphed to Europe, the price of this tea will at once fall there and 
 Merchant A will not be able to dispose of his tea except at a serious 
 loss. Again, in February, exchange then ruling at 3s. fd., a foreign 
 merchant calculates that he can sell gray shirtings on the Shanghai 
 market with a small profit, at 3 taels per piece, and he enters into a 
 contract to deliver 21,950 pieces at that price. He delivers the goods 
 in April and receives his 65,850 taels. This sum represented £10,000 
 at the time he made the contract, but when paid to him it will only 
 realize £8,711, so that instead of the profit he had calculated upon he 
 has to face a loss of £1,289, or close on 13 per cent. 
 
 The serious character of the impediments placed in the way of 
 legitimate trade by the constant fluctuations in exchange which occur 
 is exemplified by the following statement of the value of the Haikwan 
 tael, month by month, from January, 1903, to April, 1904 : 
 1903. s. a. 
 
 January 2 5 
 
 February 2 ii 
 
 March 2 4J 
 
 April 2 6J 
 
 May 2 8 
 
 June^ 2 7 
 
 July 2 8J 
 
 August 2 lOJ 
 
 September 2 11 
 
 October 
 
 
 s. 
 - - 2 
 
 d. 
 lOi 
 
 November 
 
 
 2 
 
 8i 
 8 
 
 December 
 
 
 ■> 
 
 January 
 
 1904. 
 
 . 2 
 
 i 
 
 71 
 
 E'ebruary 
 
 
 3 
 
 March 
 
 
 2 
 
 April 
 
 
 2 
 
 ADVANTAGES TO COUNTKY OP GIVING FIXED GOLD VALUE TO COINS. 
 
 The only means of avoiding these fluctuations is by establishing the 
 new currency on a gold basis. Until that is done the new coins, just 
 as ingots of silver have done in the past, will pass at the market value 
 
 a Picul=183i pounds. 
 
184 aOLi) STAiTDABD IN iNTEBifATiOlfAL IEADK. 
 
 of the metal they contain and therefore will rise and fall in response 
 to the manipulations of the silver market by speculators. That, but 
 for these fluctuations, trade would during recent years have shown a 
 much larger expansion than it has done, there can be no question. By 
 the establishment of the new currency on a gold basis the cause of these 
 can be removed and stability of exchange will be assured. Such a 
 change should in any case result in a large development of trade ; but 
 should it be effected simultaneously with the opening up of the coun- 
 try by the railroads now under construction and to be undertaken in 
 the near future, that development can scarcely fail to be enormous 
 because new markets will be assured to native produce which pre- 
 viously could not be moved at all or only at the cost of heavy trans- 
 port charges. The proposal would therefore, it appears, be beneficial, 
 not injurious to trade. 
 
 It remains to consider in what manner the adoption of a gold basis 
 for the new currency would affect China's obligations to foreign gov- 
 ernments and to foreign bondholders. If the dollar be, as has been 
 suggested, fixed at 2 shillings (or thereabouts) then the value of the 
 Haikwan tael would be 3 shillings (or thereabouts), the value at which 
 it was taken by the foreign powers in the protocol of September 7, 
 1901. Now, the foreign powers maintain that the indemnities imposed 
 by that document are payable in gold ; China, that the debt is a silver 
 debt; and though the discussion has now continued for more than 
 two 3'^ears each side adheres to its own interpretation of the agreement. 
 If the gold value of the Haikwan tael were fixed at 3 shillings, all 
 cause for future discussion would cease; but if, as seems possible, 
 experts consider it advisable to fix the gold value of the dollar at 
 slightly above that of the Japanese yen — say, at 2s. Id. — then it wouM 
 be to China's interest to accept the interpretation placed by foreign 
 powers on the protocol and to pay in gold ; for though the difference 
 on a single tael is trifling, when that difference is multiplied by mil- 
 lions the aggregate is a very large sum. As regards the foreign 
 indebtedness incurred by China prior to 1901, the case, however, is 
 different. That indebtedness is a gold indebtedness and interest on 
 the loans raised has to be paid, and the principal of them has to be 
 repaid, in gold. When those loans were raised the Haikwan tael 
 exchanged for about 3s., or 36d. ; in 1902 it exchanged at one time for 
 less than 30d. 
 
 Then, the fluctuations in exchange rendering it dangerous to import 
 silver, the stock fell until it was unequal to the current demands of 
 business, and in consequence the price rose. Latterly again the out- 
 break of war between Russia and Japan, coupled with the approach 
 of the tea and silk seasons, has caused a further considerable rise, 
 and the gold valueof the Hai]?wan tael now stands at about 33^ pencei 
 But once these temporary causes have ceased to work it is possible 
 that the gold value of silver in China may again fall to the former 
 level. NoWj the sum which China has to pay during the current year 
 for the service of her foreign loans contracted prior to 1901 amounts 
 to £3,196,389 in gold and 763,000 taels in silver; and the average 
 sum due for the next ten years is practically the same. If the gold 
 value of the Haikwan tael be fixed, as suggested, at 3 shillings, China 
 would have to pay 22,072,000-odd taels, but should no gold value be 
 fixed and it fell to its former level of 30 pence, China would need, 
 
GOLD- STANDARD IN INTERNATIONAL TRADE. 185 
 
 in order to meet her obligations, no less a sum than 26,334,000 taels. 
 In other words, by adoptmg the rate proposed, China would during 
 ten years effect an annual saving 4^ millions of taels on her loan 
 obligations alone. But this is not the only saving she would effect. 
 For every £10,000 she has to pay on account of railway loans, and 
 for every £10,000 she spends in the purchase of railroad material and 
 rolling stock, or of men of war and arms, she would require 67,000 
 taels only instead of 80,000 taels — i. e., she would effect a saving of 
 13,000 taels, in the aggregate a very large sum. To the Government, 
 therefore, the adoption or the proposal would be most advantageous. 
 
 The considerations set forth above show clearly, it is believed, 
 that if it be possible, when introducing the new currency, to base 
 it on a gold standard, such action would be to the benefit of the Gov- 
 ernment and people alike. It may be well, in order to avoid misap- 
 prehension, to again state that the introduction of a gold-standard 
 currency does not mean the introduction of gold coins ; it means that 
 silver and copper coins will continue as heretofore to be employed 
 in China, but that a gold value will be fixed for these coins, and that 
 steps will be taken to insure that the gold value is maintained. 
 
 If the new currency can be established on a gold basis, there can 
 be no question but that the work should be entered upon now. The 
 
 fold value of silver in China is now comparatively high ; later it may 
 all, and China may have to content herself with a lower gold value 
 for her unit of currency than she could now secure with comparative 
 ease. China should reflect on Japan's experience. In 1871 the latter 
 country established a gold-standard currency, the value of the yen 
 being fixed at a little over 4s. The steps she took to maintain the 
 value of the yen at that level were inadequate and the country was 
 drained of gold, with the result that the silver yen became the unit 
 of currency, and so remained down to 1897, when Japan, having 
 adopted better-advised measures, succeeded in establishing her cur- 
 rency on a gold basis ; but owing to the decline which had meanwhile 
 taken place in the value of silver, Japan had to content herself with 
 fixing the value of the yen at exactly half the value at which it had 
 been fixed in 1871. 
 
 It is true that India when placing her silver currency on a gold 
 basis fixed the legal value of the rupee at more than 20 per cent above 
 the market value of the metal contained in that coin ; and it may be 
 said that what India did China can do. The only means of enhancing 
 the gold value of a silver currency is, however, by restricting the 
 amount of that currency. In India it was five years before this arti- 
 ficial restriction of the currency produced the desired effect, and dur- 
 ing that period it caused very serious interference with trade. Were 
 the currency in China to be thus artificially restricted during a series 
 of years such serious discontent would result that it would probably 
 be necessary to abandon such a policy before it became effective, in 
 order to avoid internal trouble. Whether or no China can, when in- 
 troducing her new currency, establish it on a gold basis experts alone 
 can decide, and the writer, not having expert knowledge, can not say. 
 But Mr. Jenks, who is an expert and as such has been selected by the 
 United States Government for this special work, expresses a confi- 
 dent opinion that if China really desires to do it she can do it ; and in 
 his memorandum on " A New Monetary System for China " he has 
 
186 GOLD STAKDABD IN INTERNATIONAL TRADE. 
 
 stated in a general way the action which it will be necessary for China 
 to take in order to bring this undertaking, to a successful issue. Of 
 these, two are the most important, and it is precisely these two which 
 are likely to receive the most adverse criticism from the high officers 
 of the Empire — one, the appointment of a foreign comptroller of the 
 currency; the other, the employment of the seigniorage profit from 
 coinage as one of the steps to form a special gold fund in order to 
 maintain the gold value of the currency. Hitherto the mints estab- 
 lished in the various provinces have been under the management of 
 the provincial officials ; some have reported to the throne the number 
 of coins minted annually and the seigniorage profits derived there- 
 from; but, judging from the pages of the Peking Gazette, the major- 
 ity have not submitted such reports. The seigniorage profits seem to 
 have been almost always retained to meet provincial needs. The ex- 
 tent of China is so vast that to employ a single mint, even if it were 
 large enough to meet the currency needs of the Empire, would be 
 wasteful policy, because of the expense of transporting bullion to the 
 mint for coinage and then transporting the minted coins to the several 
 parts of the Empire. The bulk of the mints already established will, 
 therefore, be retained, but it will be necessary that the control of 
 them be surrendered by the various provincial authorities and be 
 vested in one bureau or officer at the capital, on whom will rest the 
 responsibility of insuring that all coins of the same denomination, no 
 matter where minted, are of uniform weight and fineness. The trans- 
 fer of the control of the mints from the provincial authorities would 
 necessarily entail the transfer from them of the control of the seign- 
 iorage profits derived from coinage. All that is proposed, therefore, 
 is that these profits derived from coinage shall be set aside to assist a 
 fund specially raised in maintaining the coinage at its par value. 
 
 As regards the comptroller of the currency, it has to be remem- 
 bered that his duties will be of a very complicated nature, and of a 
 kind that hitherto Chinese have had no experience of. He will have 
 to watch the movements of the precious metals all over the world, 
 to note the tendencies of exchange, and to take measures of precaution 
 accordingly by buying gold if a demand for silver drives the price 
 of that metal up or by selling gold if the price of silver falls. It 
 will be his duty also, after careful examination of local conditions, 
 to determine whether or no to suspend the issue of coins of a certain 
 denomination in a given province- and should a 10-cent piece, say, 
 fall below its par value, so that one dollar exchanges for more than ten 
 of them, he will have to issue immediate orders to insure that steps are 
 taken to redeem them at their face value and so reestablish the parity 
 of the coin. On him, too, will rest the responsibility of determining 
 the amount of bank notes to be issued in any one province, and the 
 reserve in coin to be maintained in order that they may be redeemed 
 at any time on demand. No one but an expert with special training 
 would possess the knowledge requisite for the performance of these 
 duties, and it is only a foreigner who, at the outset, would have this 
 knowledge. The office would be one of such great responsibility 
 that it could not be entrusted to any but a thoroughly competent per- 
 son without grave danger to the State; but were England, who has 
 just reorganized the financial administration of Siam with signal 
 success, or were the United States, who has so readily and so disin- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 187 
 
 terestedly responded to China's appeal for assistance in this matter, 
 requested to recommend a suitable person for the position, I see no 
 reason to think that China would have ground to apprehend any evil 
 consequences, political or other, from giving him the appointment; 
 while the introduction of the monetary system, which it then would 
 be possible to establish, would, in a few years, it is anticipated, result 
 in an expansion of trade and render possible a reduction of taxation 
 that would be of the greatest benefit to the Empire. 
 
 Alfred E. Hippisley. 
 
 Addendum No. 1. 
 
 Foreign trade of China — Imports (net). 
 
 Year. 
 
 Silver value. 
 
 Gold value. 
 
 Gold value of Imit- 
 wan tael. 
 
 1891 
 
 Haikwan taels. 
 134,003,863 
 135,101,198 
 151,362,819 
 162,102,911 
 171,696,715 
 202,589,994 
 202,828,625 
 209,579,334 
 264,748,456 
 211,070,422 
 268,302,918 
 315,363,905 
 326,739,133 
 
 £32,932,617 
 29,412,657 
 29,799,566 
 25,919,580 
 28,079,567 
 33,764,999 
 30,213,014 
 30,231,185 
 39,850,158 
 32,759,888 
 39,756,342 
 40,997,958 
 39,632,245 
 
 s. d. Fence. 
 4 11 59. 
 
 1892 
 
 4 4i 52. 25 
 
 1893 
 
 3 m 47.25 
 
 1894 
 
 3 2J 38.875 
 
 1895 
 
 1896.. 
 
 3 3i 39.25 
 3 4 40.0 
 
 1897 
 
 1898 
 
 2 11} 35.75 
 2 lOf 34.625 
 
 1899 
 
 3 Oi 36.125 
 
 1900.. 
 
 1901 
 
 1902 
 
 1903 
 
 3 li 37.25 
 2 11,^ 35.5635 
 2 7J 81.20 
 2 7f 31.667 
 
 
 
 Total 
 
 2,755,490,293 
 
 433,349,776 
 
 
 
 
 Annual average, 211,960,792 Haikwan taels = £33,334,598. 
 
 These figures show that while the silver value of foreign imports 
 has increased a little over 1-10 per cent in the thirteen years, the gold 
 value of them has increased only 20 per cent; and that whatever the 
 denominating factor which determines the amount of foreign goods 
 to be purchased, that factor is not exchange, the gold value of such 
 purchases having been practically the same in the years 1891 and 1900, 
 though the gold value of the Haikwan tael was 4s. lid. in the former 
 year and only 3s. l^d. in the latter year. Similarly the gold value of 
 such purchases was practically the same in the years 1899 and 1903, 
 though the gold value of the Haikwan tael was 3s. 0|d. in the former 
 and only 2s. 7f d. in the latter year ; while the gold value of the trade 
 in 1902, the year in which exchange was at its lowest point, was 25 
 per cent higher than that of 1891, when exchange was at its highest 
 level. 
 
188 gold standard in international trade. 
 
 Addendum No. 2. 
 Foreign trade of China. — Exports. 
 
 
 Silver value. 
 
 Gold value. 
 
 Gold value of 1 haik- 
 wan tael. 
 
 1891 
 
 Haikwan taels. 
 100,947,849 
 102,583,525 
 116,632,311 
 128,104,522 
 143,293,211 
 131,081,421 
 163,501,358 
 159,037,149 
 195,784,882 
 158,996,752 
 169,656,757 
 214,181,584 
 214,352,467 
 
 £24,816,346 
 22,832,288 
 22,961,986 
 ' 20,488,879 
 23,434„411 
 21,846,908 
 24,354,889 
 22,944,422 
 29,489,696 
 24,677,621 
 25,139,348 
 37,848,608 
 28,283,117 
 
 s. d. PeTLce, 
 4 11 59 
 
 1892 --- 
 
 i a 52.25 
 
 1898 
 
 3 m 47.35 
 
 1894 
 
 3 3| 38.875 
 
 1895 
 
 8 8j- 89.25 
 
 1896 --- 
 
 8 4 40 
 
 1897 
 
 2.11f 35.75 
 
 1898 
 
 2 lOi 34.625 
 
 1899 
 
 8 i 36.135 
 
 1900 --- 
 
 8 U 37.25 
 
 1901 
 
 3 11^5 35.5635 
 
 1902 -- 
 
 2 7J 31.20 
 
 1903 - 
 
 2 7J 31.667 
 
 
 
 
 1,998,153,738 
 
 318,587,907 
 
 
 
 
 Annual average, 153,704,134 Haikwan taels=£24,506,685. 
 
 These figures show that while the silver value of exports abroad has 
 increased over 112 per cent the gold value of them has increased less 
 than 14 per cent, and that the gold value remains practically un- 
 affected by exchange, the gold value of exports abroad having been 
 to all intents and purposes on a level in the years 1891, 1897, and 1900, 
 though the rates of exchange in those years were 4s. lid., 2s. llfd., 
 and 3s. l|d., respectively. 
 
 Addendum No. 3. 
 
 Foreign trade of India. 
 
 [In thousands of rupees.] a 
 
 Year ending Marcli 31 — 
 
 Net foreign imports, i. e., 
 imports less reexports. 
 
 Native exports. 
 
 
 By sea. 
 
 By land. 
 
 Total. 
 
 By sea. 
 
 By land. 
 
 Total. 
 
 1889 
 
 654,405 
 649,037 
 677,419 
 649,473 
 616,750 
 735,894 
 684,714 
 683,188 
 720,708 
 699,098 
 687,803 
 720,120 
 776,861 
 852,736 
 826,180 
 
 37,154 
 85,058 
 85,152 
 89,797 
 86,909 
 40,374 
 43,595 
 45,773 
 47,941 
 50,227 
 55,036 
 61,631 
 64,149 
 69,004 
 68,700 
 
 691,559 
 684,080 
 712,571 
 689,270 
 653,659 
 766,368 
 738,809 
 727,981 
 768,644 
 749,320 
 722,329 
 781,751 
 841,010 
 921,730 
 894,880 
 
 930,495 
 
 991,646 
 
 959,938 
 
 1,036,884 
 
 1,020,052 
 
 1,030,714 
 
 1,038,562 
 
 1,096,167 
 
 999,504 
 
 938,816 
 
 1,094,885 
 
 1,057,908 
 
 1,045,546 
 
 1,216,449 
 
 1,258,800 
 
 44,801 
 
 49,805 
 
 30,297 
 
 39,322 
 
 33,800 
 
 34,817 
 
 87,595. 
 
 37,691 
 
 43,028 
 
 40,836 
 
 46,879 
 
 51,068 
 
 54,363 
 
 60,383 
 
 59,900 
 
 975,296 
 
 1890. 
 
 1891 - 
 
 1,040,950 
 990,335 
 
 1893 
 
 1893 
 
 1,076,206 
 1,053,853 
 1,055,031 
 1,W6,157 
 1,133,858 
 1,043,533 
 979,653 
 1,140,664 
 1,108,976 
 1,099,808 
 1,376,731 
 1,318,700 
 
 1894 ---- 
 
 1895- -- ---- 
 
 1890 
 
 1897 
 
 189H 
 
 189il 
 
 1900 - 
 
 190] 
 
 1902 
 
 1903 
 
 
 a Bupee = about 33J cents. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 189 
 
 The mints were closed to the free coinage of silver in 1893, but the 
 effect of this measure only began to make itself felt in the year 1896- 
 97, by which time the average rate per rupee, at which telegraphic 
 transfers and council bills were sold in London, had risen to 14.491d. 
 from IS.lOld. in 1894-95. In 1897-98 it had risen to 15.354d., and 
 from that time forward the gold value of the rupee has been main- 
 tained at 16d., the level aimed at by the legislation of 1893. 
 
 The average value of the import and of the export trades during 
 the five years before 1896-97 and after 1897-98 is a matter of some 
 interest. The figures are: Five years prior to 1896-97, average 
 annual value of imports, 713,000,000; exports, 1,079,000,000. Five 
 years following 1897-98, average annual value of imports, 836,000,000 ; 
 exports, 1,189,000,000. 
 
 Addendum No. 4. 
 
 Foreign trade of Japan. 
 
 Year. 
 
 Exports. 
 
 Yen. 
 
 Pounds 
 sterling. 
 
 Imports. 
 
 Yen. 
 
 Pounds 
 sterling. 
 
 Gold 
 value of 
 one yen. 
 
 1891. 
 1892. 
 1893 
 1891. 
 1895. 
 1896. 
 -1897 
 1898. 
 1899 
 1900 
 1901. 
 1902 
 1903 
 
 79,527,272 
 91,102,754 
 89,712,865 
 113,216,086 
 136,112,178 
 117,842,761 
 163,135,077 
 165,753,753 
 211,929,891 
 201,129,991 
 252,319,543 
 268,303,065 
 289,502,143 
 
 12,790,636 
 13,096,021 
 11,475,270 
 11,890,839 
 14,348,909 
 12,766,303 
 16,585,400 
 16,787,526 
 23,030,311 
 20,698,537 
 25,550,391 
 26,176,065 
 29,671,000 
 
 11?. 
 
 71,326,080 
 172 
 955 
 
 578 
 474 
 772 
 157 
 
 171, 
 219, 
 
 277, 
 220, 
 287, 
 255, 
 271, 
 317, 
 
 10,120,802 
 10,253,124 
 11,289,582 
 12,335,605 
 13,826,220 
 18,598,088 
 22,295,579 
 28,097,093 
 22,591,200 
 29,085,262 
 25,901,135 
 27,852,462 
 32,506,390 
 
 34.5 
 80.7 
 25.2 
 25.3 
 26.0 
 24.1 
 21.3 
 21.6 
 24.3 
 21.3 
 21.6 
 21.8 
 
 Japan adopted gold monometallism in 1871, but the measures taken 
 were inadequate to prevent a drain of gold abroad. In 1897 she 
 reverted to monometallism and took measures which have proved 
 effective in retaining the gold amassed in the country. The average 
 annual values of the foreign trade of Japan during the six years prior 
 to and following on the year in which the gold standard was estab- 
 lished compare thus: Six years prior to 1897 — Average annual value 
 of imports, 106,821,254 yen ; exports, 104,590,652 yen. Six years fol- 
 lowing 1897 — Average annual value of imports, 271,641,560 yen: 
 exports, 231,044,782 yen. 
 
190 
 
 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Value in copper cash of 1 tael, Shanghai currency. 
 
 Cash. 
 
 January, 1871 1,560 
 
 July, 1871 1, 600 
 
 January, 1872 1, 640 
 
 July, 1872 1, 560 
 
 January, 1873 1, 610 
 
 July, 1873 1, 620 
 
 January, 1874 1, 630 
 
 July, 1874 1,615 
 
 January, 1875 1, 595 
 
 July, 1875 1, 600 
 
 January, 1876 1, 560 
 
 July, 1876 1, 530 
 
 January, 1877 1, 500 
 
 July, 1877 1, 470 
 
 January, 1878 1, 440 
 
 July, 1878 1, 435 
 
 January, 1879 1, 460 
 
 July, 1879 1, 450 
 
 January, 1880 1, 490 
 
 July, 1880 1,490 
 
 January, 1881 1, 520 
 
 July, 1881 1, 520 
 
 January, 1882 1, 500 
 
 July, 1882 1, 520 
 
 January, 1883 1, 520 
 
 July, 1883 1, 500 
 
 f190 
 480 
 480 
 490 
 480 
 480 
 390 
 390 
 
 January, 1884 1, 
 
 July, 1884 1, 
 
 January, 1885 1, 
 
 July, 1885 1, 
 
 January, 1886 1, 
 
 July, 1886 1, 
 
 January, 1887 1, 
 
 July, 1887 1, 
 
 Cash. 
 
 January, 1888 1, 420 
 
 July, 1888 1-420 
 
 January, 1889 1, 400 
 
 July, 1S89 1,410 
 
 Januai-y. 1890 1, 350 
 
 July, 1890 1,330 
 
 January, 1891 1, 330 
 
 July, 1891 1, 370 
 
 January, 1892 1, 380 
 
 July, 1892 1,410 
 
 January, 1893 1, 410 
 
 July, 1893 1, 380 
 
 January, 1894 1, 380 
 
 July, 1894 1, 330 
 
 January, 1895 1, 320 
 
 July, 1895 1, 320 
 
 January, 1896 1, 230 
 
 July, 1896 1, 240 
 
 January, 1897 1, 220 
 
 July, 1897 1, 250 
 
 January, 1898 1, 150 
 
 July, 1898 1, 190 
 
 January, 1899 1, 190 
 
 July, 1899 1, 180 
 
 January, 1900 1, 190 
 
 July, 1900 1, 200 
 
 January, 1901 1, 210 
 
 July, 1901 1, 210 
 
 January, 1902 1, 210 
 
 July, 1902 1, 200 
 
 January, 1903 1, 150 
 
 July, 1903 1, 140 
 
 January, 1904 1, 110 
 
 May, 1904 1, 320 
 
 Value in copper cash of 1 HaiJcwan tael currency {Tientsin). 
 
 Cash. 
 
 1883 3, 286 
 
 1884 3, 286 
 
 1885 3, 286 
 
 1889 3, 074 
 
 1890 3, 074 
 
 1891 3, 286 
 
 1892 3, 263 
 
 1893_ 
 1894- 
 1895- 
 1896_ 
 1897_ 
 1898- 
 
 Cash. 
 3, 155 
 3,157 
 2,918 
 2, 7.30 
 2,625 
 2,512 
 
 2. MEMORIALS TO THE CHINESE IMPERIAL GOVERNMENT. 
 
 (o) Memorial Recommending the Adoption by China op a Gold-Standabd 
 
 MoNETABY System. 
 
 Presented hy the Chinese minister to Russia. 
 
 Owin§ to the fact that the United States and Mexican monetary 
 coimnissions have been to Eussia and completed their work and that 
 the American commissioner is now going to Cliina to confer upon the 
 coinage question, this memorial has been prepared and is respectfully 
 presented, and we humbly beg the favor of the imperial glance. 
 
 We beg to state that the United States and Mexico have appointed 
 a special commission of experts to invite the respective Governments 
 of Great Britain, France, Germany, and Russia to confer upon the 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 191 
 
 subject of the relative value of silver and gold and to consider a mone- 
 tary system for the Chinese Government. Your humble servant 
 received a telegram from the board of revenue saying that he should, 
 upon the arrival of the said commissions, appoint an official to listen 
 to their plans and report upon the matter to the board. I am now in 
 receipt of a letter from the American commissioner, Mr. Jenks, saying 
 that he has received instructions from the President to proceed to 
 China and make a thorough investigation of the matter. 
 
 The United States is well known for its successful handling of 
 financial questions and at the same time has always showed great 
 friendship for China, so that we should certainly accept without delay 
 this energy of hers in our behalf, whereby she wishes to develop a 
 system for us. I read with due reverence the Imperial edict pub- 
 lished in the third moon of the present year, by which Prince Ch'ing 
 and Chii Hung-chi were appointed to consider and deal with the 
 whole question of the monetary administration. I am pleased to see 
 that the monetary question is considered by the throne to be one of 
 great importance and requiring lengthy consideration. 
 
 In the matter of a monetary system the coinage is the first thing 
 to be considered. Your servant begs to relate in detail to the Empress 
 Dowager and the Emperor the exact state of affairs both foreign and 
 domestic. The question of coinage is in itself a nation's own affair; 
 but nowadays there is not anything in business, commerce, or govern- 
 ment that does not mutually involve the people of different nations, 
 which does not involve foreign exchange. If the monetary systems of 
 the countries do not agree, it is impossible to prevent loss. To have a 
 good monetary system a country must have a definitely fixed coinage, 
 using gold, silver, and copper at a definite fixed ratio. The coins must 
 be of the same pattern, value, and fineness throughout the country, 
 if the best interest of the people is to be considered and it is desired 
 to secure the faith of foreign nations. Those who have a gold 
 standard do not, for that reason, suffer any loss in exchange, and 
 international intercourse is easily arranged. 
 
 Financial experts have estimated the year's yearly output of gold, 
 and there is no cause for concern lest it be not enough for the supply 
 of the people of every country. As to the output of silver, there is no 
 end to it. The greater the supply of silver the cheaper it gets, so that 
 the present high pjice of gold is not in reality that gold is dear, but 
 rather that silver is cheap. China has made a practice of using silver, 
 and consequently, using this as a standard, the Chinese consider that 
 gold has dailj' gotten dearer. Other countries have made a practice 
 of using gold, on the other hand, and henc^, using this as a standard, 
 they consider that silver has daily gotten cheaper. A gold-standard 
 country is like a man who has accumulated riches to buy grain — if the 
 grain is cheap, he reaps the benefit. A silver-standard country is like 
 a farmer who has accumulated his grain and holds it for a rise in 
 price — if the price goes down, he suffers. So silver-using countries 
 and gold-using countries are in the same case as two people making a 
 barter, in which one man's daily increase of loss (on account of his 
 waiting each day for a higher price) is only the other man's daily 
 increase of gain. Therefore, if we use uncoined silver for money we 
 are in just such a case, of barterers with those countries which have a 
 gold coinage, and it is needless to say which country is the loser. To 
 use uncoined silver for money is like using uncooked rice for food or 
 
192 GOLD STANDARD IN INTJiKNATIONAL TRADE. 
 
 uncut cloth for clothing, for uncoined silver is nothing more than a 
 product of the earth. Other nations consider silver merely as a com- 
 modity and not as money. 
 
 It is already hard to meet our demands, and hereafter it will be all 
 the harder to put the country on a firm footing. At the present tinie 
 gold is used in all nations throughout the world. Even among then- 
 dependent countries there is not one Avhich does not use gold. Eussia 
 in Bokhara uses gold. England in India uses gold. The United 
 States in the Philippines uses gold. England is now planning to use 
 gold in Hongkong, and Ilussia has already begun to introduce roubles 
 into Manchuria — just as if Manchuria were one of her own depend- 
 encies, as in the other cases mentioned. Why do they hasten so? 
 Because when a country plans and marks out a frontier she must 
 reckon upon its expenses — for is not the profit of her dependency the 
 nation's own profit as well ? It is equally evident that as the power 
 of gold increases the power of silver decreases, consequently a country 
 will spare no efforts or endeavors to regulate the expenditures so that 
 her dependency will not be a burden to her. Where is there another 
 nation as rich as China in land and subjects which would not speedily 
 change her policy ? 
 
 It is very evident, then, that nations which have not a gold stand- 
 ard, but keep on with silver at a debased value, will suffer. The sys- 
 tem of coinage as adopted by the other nations has a fixed value in 
 relation to each other, and although there are exchange charges, the 
 market value is approximately the same, so that banks have no change 
 to impose upon the people, nor have foreign merchants any oppor- 
 tunity for swindling. If China has a uniform national coinage, then 
 she will be on the same footing with other nations, and there will be 
 no cause for anxiety in the matter of exchange. The three metals, 
 gold, silver, and copper, will have a fixed relative value; one silver 
 piece being worth so many copper ones, and one gold piece being 
 worth so many silver ones. Once fix the relative value, and it must 
 follow that all financial affairs, large and small, will have some defi- 
 niteness. Coins can then be used everywhere, far and near, at the 
 same value. Officials and people can then use them without having 
 them discounted for short weight. With everything uniform, business 
 affairs will be easily managed. Rapacious underlings and dishonest 
 traders will have no opportunity to squeeze. 
 
 It will be to the great internal advantage of the country, both 
 business-wise and politically. Then there will be some confidence 
 both among Chinese and foreigners, and in foreign intercourse it will 
 only be necessary to consider the ordinary price of the article, 
 whether it is high or low, and it will not be necessary to figure on 
 the danger of a rise or fall in the price of silver. It being easy, there- 
 fore, to determine loss or gain, business will flourish, capital will 
 accumulate, and it will be beneficial in every way. England's com- 
 mercial supremacy, America's sudden advance, and Japan's rapid 
 progress are all due to this one fundamental reason, and the benefits 
 they derive are innumerable. 
 
 ^Nevertheless, this is a large undertaking and is hard to bring 
 about: and those who object have some reason on their side. But 
 your servant begs to state that there is absolutely nothing to be feared 
 m spite of what the opposition may say against the plan and he will 
 
GOLD STANDARD IN INTEENATIONAL TRADE. 193 
 
 proceed to explain in detail. The opposition bring up eight counts 
 against the plan, which will be taken up one by one. 
 
 First, they say that Chinese commodities are all cheap, and that the 
 people are economical ; that copper is the ordinary means of exchange, 
 silver being used but little, and, needless to say, gold not at all. 
 
 As to this argument, they do not understand that the idea is to 
 use gold in order that foreign nations will have faith in China, and 
 it is not desired that the masses will suddenly begin using gold as a 
 medium of exchange. They may use copper or silver just as they 
 please. At present sycee silver is used in Peking, though the com- 
 mon people seldom see it and in the commercial ports the foreign dol- 
 lar is used, though the dollar is seldom seen in the country districts. 
 That is just the way it will be witli gold ; it will begin to be used at the 
 ports and its use will gradually work inward, and from the large 
 centers it will spread to the frontiers. Every place will change from 
 copper to silver and from silver to gold, gradually. There will be no 
 sudden jump from copper over to gold. P^rom the time when bartering 
 was done with furs, hides, rice, and cloth up to the present day 
 people have used as a medium of exchange, first iron, then copper, 
 then silver, and then gold, going gradually from one to another. 
 The change could neither have been checked nor could it have been 
 forced. There is, then, nothing to be concerned about in the first 
 count. 
 
 The opposition hold, secondly, that China is a large country with 
 very many people, and that there is not enough gold obtainable to 
 change in a day to a gold standard. They do not understand that in 
 inauguarating this system the desire is to let the other nations know 
 that we really have a gold reserve with which to guarantee the set- 
 tled ratio between gold and silver and to prevent fluctuations. More- 
 over this will prevent the losses sustained in trade by the sudden 
 appreciation in value of tlie imports as against the depreciation of 
 the exports. It will not be necessary to coin much gold for use in 
 trade, as it is not expected that gold alone will be used for this pur- 
 pose. The gold reserve of India is not 10 per cent of the amount of 
 other money in regular circulation. If gold and silver are both iised 
 to meet the demands of trade, a gold coinage to the amount of 15 per 
 cent of the silver coinage would be sufficient. China's silver coinage 
 is practically all in the hands of the people, and if it were all gathered 
 together, and its value estimated in gold, there would not be 10 per 
 cent of that amount in the Empire. But if the amount of silver is too 
 great the Government can issue gold and buy silver which they can 
 store away, thus reducing at once the amount of silver on the market. 
 This will cause the banlcs also to let out their gold in order to obtain 
 silver for commercial use. Then the Government can buy up gold 
 and issue silver to relieve the banks. Thus there need be no appre- 
 hension about regulating the supply and demand — the second count 
 of the opposition. 
 
 The third count is that the Chinese banks make their livelihood out 
 of exchange, discounts, false cash, etc., and they consider weight, 
 fineness, short count, and small cash as a source of profit. If the 
 country's coinage be settled and uniform this source of supply will be 
 reduced to a minimum, hence the change does not appeal to them. 
 
 As to this, they do not understand that the things they do are a 
 S. Doc. 128, 58-3 13 
 
194 GOLD STANDABD IN INTERNATIONAL TRADE. 
 
 menace to trade and should be prohibited by law, just as weights and 
 measures are established by the Government. Once establish a 
 national coinage and this practice, though not forbidden, will stop. 
 Trade, moreover, will prosper and all business interests flourish. 
 There will be more need of large banks and the small banks need have 
 no fear lest they will have no means of making money. These small 
 gains will be forbidden merely that they may begin making large 
 gains. So much for their third contention. 
 
 Now for the fourth count. Prominent official men of certain coun- 
 tries ridicule Chinese officials because in the collection of taxes and 
 duties they use silver and copper of various different kinds, and they 
 manipulate the discount and exchange so as to appropriate money to 
 themselves. They say that the salaries of these officials are so small 
 that they depend upon this to make up the difference, and as the estab- 
 lishment of a national currency would take away their livelihood they 
 invariably set up a howl of opposition to it. In this the prominent 
 foreign officials do not take into consideration the fact that reforms 
 are made for the benefit of the people and not for the benefit of these 
 mercenary officials. It s merely the fact that the currency is unstable 
 that has brought about this wretched state of affairs. If the coinage 
 were uniform this practice of appropriation of funds would be 
 stopped. This answers the fourth objection. 
 
 The fifth objection is that the mints in the various provinces now 
 reckon upon a surplus to make up deficiencies in the provincial ex- 
 penses. If, in the new monetary system this all had to be accounted 
 for, they would suddenly be deprived of these funds, and hence they 
 do not want any change. They do not understand that a national cur- 
 rency does not necessarily mean that there shall be only one mint and 
 that there can be no branch mints. 
 
 The very fact that we have had no uniform coinage system and 
 there are no coins everj'where current, caused the provinces heretofore 
 to coin silver dollars for the convenience of the people. .It was not 
 originally intended that the surplus of the mints should go to enrich 
 the various provinces. It all belongs to the nation, and why distin- 
 guish between this place and that? 
 
 Thus disposing of the fifth count, let us proceed to the sixth, 
 which is this: China's foreign indemnity of several millions is reck- 
 oned in silver. If we suddenly adopt a coinage of gold and silver 
 in reckoning the amounts due in the moneys of these various countries 
 it will be difficult to guarantee that avo will not involve ourselves in 
 trouble. They do not understand that all nations have recently 
 adopted the gold standard, and that the United States, England, 
 Germany, and France, therefore, especially desire that we also should 
 use gold for the sake of convenience in commerce. For that reason 
 England, in her commercial treaty, inserted a clause providing for the 
 adoption of a definite monetary system for China. The United States 
 has been even more solicitous, using every effort in our behalf. If 
 even these other countries take this stand, we ought to be the more 
 anxious to embrace the opportunity to adopt a firm policy; then if 
 there are one or two nations who do not wish China to become a rich 
 and powerful nation, they can not well come out publicly and try to 
 prevent it. 
 
 This answers their sixth objection, and it is claimed, seventhly, that 
 if we have a gold standard to obtain the confidence of foreign nations, 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 195 
 
 the balance of trade being constantly against us, foreign merchants 
 will be sending all our money home, and our " gold coinage " will flow 
 outward as fast as we can coin it. They do not understand that when 
 imports are great and exports small, money gets into the hands of 
 foreigners and the amount of money on the market is small. If the 
 amount of money on the market is small its value is high, and with 
 the money dear prices must go down. The foreign merchants will 
 compete against each other in buying, so our exports will increase and 
 our money return to us. Again, if money is scarce then the price of 
 foreign commodities will rise and their sale will diminish. If the sale 
 of foreign goods diminishes, they will bring over less and money will 
 return into circulation. Moreover, if money is scarce the rate of 
 interest will go up. 
 
 If the rate of interest goes up, then foreigners who had counted on 
 sending their money home will leave it here for the sake of the high 
 interest. France at the present time has 15,000 wan (wan^lO,000 
 .'. 150,000,000) francs deposited in Ncav ^'ork at interest, which she 
 does not take back to Europe. China's imports exceed her exports 
 from 10 to 15 million taels a year, but the actual silver, instead of being 
 exported, is invested in China again by the foreign merchants, so 
 that eA^en if it is not in the hands of the Chinese themselves, still that 
 is not to their disadvantage. Take Japan and Russia, for example, 
 and see their statement of their exports and imports of goods as com- 
 pared to the inflow and outflow of their wealth since they adopted a 
 gold standard. There is convincing proof. These two countries also 
 feared the very same thing, namely, that their exports would be 
 small and their gold would flow out of the countries. But we can 
 see from these countries that there is nothing to fear on this ground, 
 which is the seventh objection raised. 
 
 Eighthly, prominent officials of some countries claim that the Chi- 
 nese are fond of talking, but never do anything, and that they stick 
 to their ancient customs so hard that it is difficult to adopt anything 
 new. It was shown in the case of the law adopted in Tientsin requir- 
 ing stamped paper for all legal documents, which law was speedily 
 abolished, and is not in force to-day. They say that a new coinage 
 system is a much graver and more complicated afl'air than that, and 
 it will therefore be very hard to introdiice. These people do not take 
 into consideration the fact that the stamped-paper tax takes the 
 money away from the people, and for this reason seems to them not 
 to be "to their advantage. Still, this system can perhaps be introduced 
 gradually. The establishment of a national-currency system, how- 
 ever, is for the benefit of the people, being far from their disadvan- 
 tage in any way, so the two things are not alike at all. The wealthy 
 and prosperous provinces in the southeast already use silver dollars, 
 and within the last three years the northern provinces have come to 
 use them quite extensively. Is not this clear proof that the system 
 can be introduced, and that it will be a permanent one? So much 
 for their eighth and last objection. 
 
 Thus we see the folly of not using gold, as well as the advantages 
 gained and the dangers avoided by adopting its use. Comparing and 
 investigating the two courses, there is nothing to fear in taking the 
 step. 
 
 Your servant now begs to suggest a new plan for China. In this 
 plan there will be six points considered, and the first of these is ; We 
 
196 GOLD STANDAED IN INTERNATIONAL TRADE. 
 
 must adopt a fixed name and weight for our coins. All countries 
 having a nationfil coinage system have a special name for their coins, 
 e. g., the English pound, American dollar, Russian rouble, German 
 mark, and French franc. With the exception of the pound, which is 
 onlj' in gold, they all use silver and gold together, using two metals, 
 but a single nomenclature. One gold piece is worth 5 or 10 or 20 sil- 
 ver pieces, as the case may be, and one silver piece is worth so many 
 copper ones, and each piece has its own particular name. Having 
 established the relative value for the coins for the whole country, no 
 other coins will be allowed circulation, nor will there be the slightest 
 difference in weight. 
 
 The reason for such measures will be to prevent all chances for cor- 
 rupt practice. In China we use taels (ounces) of silver. These taels 
 are merely the signification of the weight and are not the name of any 
 coin. A piece of silver is now merely so many ounces, whereas if we 
 had a standard coinage it would have a special name. And besides 
 the ounce itself differs greatly in different parts of China, which 
 only increases the chances for tricky reckoning among the Chinese 
 themselves, and has long caused our system to be rejected by the for- 
 eigners. Once dispense entirely with the name " tael " and introduce 
 a national uniform coinage for the whole country, and our financial 
 relations at home and abroad will have stability. The American 
 commissioner at the time of the conference called our prospective new 
 coin a " tael," but that was only because there was no new name for it 
 and he used the old one temporarily; it was not that he thought the 
 new coin must of necessity be called a " tael." We call our copper 
 coins by the name of " wen " and our silver ones by the name of 
 " yuan." We call our silver pieces " yuan " because they are round, 
 and " yuan " means round. 
 
 P^or the same reason copper cash were called " yuan " in ancient 
 times. The northern and western provinces use the tael system and 
 their business is comparatively small, whereas the southern and east- 
 ern provinces use dollars (yuan) for the most part, and their business 
 is large. So it would be for the convenience of all to have a new coin 
 and call it " yuan," and moreover this measure would lead to great 
 benefits. In Hupeh they formerly used taels, but from the time that 
 silver dollars came into use the pay of the soldiers, the salary of the 
 officials, and the school expenses were every one of them paid in dol- 
 lars. They have used this system there for the past five years and 
 pronounce it most advantageous. If one province finds such to be the 
 case, then others will come to the same conclusion. 
 
 As to the weight of the new coin, the Government should take into 
 consideration the weight which the people are in the habit of using 
 as well as the general standard of other countries, and then make 
 regulation bj'' law. After a thorough investigation of the state of 
 affairs both at home and abroad, it is my opinion that we should de- 
 cide upon the now generally used weight of 0.72 ounce (as in the 
 Mexican dollar) as the standard to be adopted and adhered to, and 
 not retain the useless and uneven tael system. According to the new 
 system 1 yuan would be worth 100 small cash, which would be a very 
 simple system in exchange. Your servant discussed this matter with 
 Mr. Jenks, of the United States Monetary Commission, and he also 
 thought this plan the best, because a dollar weighing an ounce would 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 197 
 
 be too heavy and too large, and, besides, no country has such a coin in 
 use, nor, tor that matter, is there any such coin in use in the Chinese 
 jnarket. If China really adopts a coin of the weight of 0.72 of an 
 ounce, it will be more convenient and bring much better results. 
 Mexico IS now considering the adoption of a coin worth just half of 
 an American gold dollar. The new.coin is to be of the same weight 
 as the Mexican dollar, which has long been in use in China. 
 
 If we adopt such a coin as this, having a definite value with relation 
 to the American dollar, then it will have a definite value with relation 
 to the coins of every other country, because the American dollar itself 
 has a definite relative value with the coins of other countries. The 
 matter of exchange then will be perfectly simple and also definite, 
 which will be most beneficial. If our coin then has a definite name 
 and weight, we can arrange a table of values relative to gold. For 
 example, 10 silver yuan can be worth 1 large gold coin and 5 silver 
 yuan can be worth 1 small gold coin. We can also coin fractions of 
 the unit and have coins of one, two, and five tenths of that value. 
 Then we can divide these up into copper coins and have the small 
 silver 10-cent piece worth 100 cash. We can continue to use the cop- 
 per coins now in circulation and will not need to coin new ones. We 
 can add new ones, however, of 5, 10, 20, and 50 cash value for conven- 
 ience and to accord with the system. 
 
 After deciding upon the name and weight, we must consider, sec- 
 ondly, the amount of moiiey to be coined. Every nation must have a 
 certain amount of money in circulation. This depends upon the 
 number of inhabitants and their standard of living. Statistics show 
 that on a conservative average Americans spend in one month $15 per 
 man, Frenchmen spend 100 francs, and Germans spend 28 marks. 
 The Chinese, according to the experts, are an economic people, and an 
 average of $2 per man is enough. That being the case, the coinage 
 for the whole country should he limited to 800 million dollars, and 
 we could at first coin only a quarter of that amount, or 200 million 
 dollars. Of this 200 million dollars 15 per cent should be made into 
 gold coins and the rest into silver pieces. In every $100 there should 
 be one gold coin of $10 value and one of $5 value. The remaining 
 $85 out of the $100 should be made into silver coins. 
 
 Then, as to the place for the mint. All who have given the matter 
 any consideration say that a central and important place should be 
 chosen, and that there should not be a mint in each province. The 
 important matter, however, is the establishment of a uniform method 
 at the chosen mints, and not so much that we should have a single 
 mint. Eussia formerly had her coins made in Germany, and several 
 countries at first entrusted the making of their coins to other nations. 
 What we want is that the mint shall be in a convenient place, the arti- 
 sans be skilled men, and that the coining be done rapidly. China's 
 first silver coining establishment was set up at Canton ; then another 
 was establish in Hupeh, both at the instigation of Chang Chih-tung. 
 Other provinces then followed suit and erected mints, putting out 
 coins with the name of the province stamped thereon. Xow, if a 
 change is made and coins of one kind only are manufactured, it is 
 still possible to have branch mints in each province in order to hasten 
 the coinage, as well as to facilitate getting the coins into circulation. 
 
 The mixing of alloy must be done according to the principles of 
 
198 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 chemistry. The mold must be finely engraved. The design must 
 be decided by imperial decree, so as to insure a uniform coinage and 
 prevent counterfeiting, for if the coin is to be worth more than the 
 actual amount of silver therein, counterfeiters of the coin themselves 
 must be made to suffer and not the ignorant users of counterfeit 
 money. As to deciding upon a design for the coinsj the Chinese have 
 always used the dragon as their symbol, and it would be M'ell to stick 
 to it. Then the date could be engraved upon the coin, but not neces- 
 sarily the name of the province, so that there may be no apparent 
 difference in the coins to outsiders, and the coins may have free cir- 
 culation everywhere. If it is desired that the coins of each province 
 should have some means of being recognized, some mark or sign could 
 be made in the design or in a stroke of the design, that the coin may 
 be recognized on close inspection at the mint where it was made. 
 
 The third thiug to be considered is this, when the old silver coins 
 are called in and the new silver coinage decided upon, all coining of 
 the old kind must be stopped and the old money be taken in by 
 degrees for recoining. The output of the new coinage will then 
 increase daily and its use also be extended day by day. For the first 
 few years, in taking back the old coins, the Grovemment can not but 
 give the full market value of the same, in order to give the people 
 assurance in the matter; but after ten or more years the coins can be 
 bought at the rate of ordinary silver and it will not be necessary to 
 consider them at their coin value. Moreover, the' new coins will be 
 92 per cent pure silver, and the remaining 8 per cent, which will be 
 alloy, will be the nation's just seigniorage, so that the more money we 
 coin the more of this surplus will we obtain. With this surplus the 
 Government can not only pay its debts and the cost of coinage, but 
 it can also store up its gold reserve. If all the 800 million dollars 
 are coined, the surplus will amount to 64- million dollars. Such a 
 systeni must prevent, as it does in other countries, the importation of 
 foreign coins for domestic use, and the deserved seigniorage will then 
 revert to the country making the coins and can not be taken away by 
 foreigners. As China heretofore had no fixed coinage system, she 
 was forced to make use of the Mexican dollar and the seigniorage 
 went into foreign pockets and became an excessive drain upon China's 
 wealth, although there are but few people in the country who realize 
 the extent of the injury. Then, too, China is now in close connection 
 with other nations by railroad and steamship, and if we do not soon 
 take measures to prevent it, it will not be Mexico alone who is lying 
 in wait to encroach upon our sovereign rights. For this reason the 
 adoption of a new system should be pressed the more vigorously. 
 
 Fourthly, we must consider from whence is the capital coming 
 with which we are to start the new coinage. When a nation starts a 
 new monetary system, it first decides upon the amount of money to 
 be coined, then it decides upon the time of putting the new coins into 
 use. In the meantime while the amount of money coined is insuffi- 
 cient and the time for beginning its use has not arrived, it is evident 
 that the old silver still in circulation and the gold and silver in use in 
 trade can not be included in the capital for the new coinage. Where, 
 then, have we all the necessary money stored away? When a nation 
 starts a new system of coinage, do they not always count upon bor- 
 
GOLD STANDARD IN INTEBNATIONAL TRADE. 199 
 
 rowing the money first ? With two indemnities on her hands already, 
 it is assuredly not easy for China to speak of borrowing money ; but 
 to borrow money) for a coinage, when the money will stay right within 
 th€ country, is a transaction which will benefit the country ; it is not 
 in any way like borrowing money to pay debts, where the money goes 
 into the hands of another. Now the coins for such a great system as 
 this can not all be made in a day, and we should first decide how large 
 a loan we wish to make and then borrow a certain portion each year, 
 borrowing only as much as we can coin, and thereby reducing the 
 amount of interest we must pay. So, if we decided to coin 200 mil- 
 lion dollars, we can divide it up and first borrow 15 million dollars 
 gold, and with this amoimt buy 30 million ounces of silver bullion. 
 
 With this we can coin more than 30 million dollars, and with the 
 new coins buy silver bullion again. Thus we can buy and coin, buy 
 again and coin again, and so on in an endless circle, gradually making 
 up the whole amount decided upon to be coined. But in making this 
 loan we should consult with the prominent business men of the vari- 
 ous nations, and not drag the nations themselves into the affair, for 
 merchants are always solicitous for the security of their interests, 
 and will necessarily desire that China have no setbacks, but be at 
 peace. The Governments themselves, however, secretly wish us to 
 have trouble and to become involved. Therefore a commercial citizen 
 thoroughly acquainted with financial affairs should be selected and 
 appointed by the throne to proceed as a special deputy to the different 
 great nations and investigate the whole question thoroughly, discuss- 
 ing the matter with the prominent business men and financiers of the 
 world. At the same time he can inquire into the business methods of 
 the various countries and look for an opportunity to make the loan. 
 But he must not, by any means, borrow through the officials of any 
 country or allow any foreign Government to have any interest in the 
 loan. This is an important matter which must be managed with cai-e. 
 
 Fifthly, let us consider the matter of putting the new coins into 
 circulation. This is a matter which rests entirely with the Govern- 
 ment. When the Government has decided upon the date upon which 
 to put the new coins into circulation, they should pay all the officials' 
 salaries and soldiers' remunerations, etc., in the new coins. If, at 
 first, the usage in the general market is not extensive, then the Gov- 
 ernment can make regulations requiring that the new coins be used 
 in making payments due the Government. When the provinces 
 send in their returns they should be required to send them in the new 
 currency. The customs offices should accept no duties unless paid 
 according to the new system. Thus it can be pressed upon the pfeople 
 gradually until in each province it can be made a rule that all col- 
 lections, etc., above a certain sum must all be paid in the new coins. 
 "When the populace sees the great advantage of the new system, how 
 easily it is reckoned, and how it puts a stop to the " squeeze " of the 
 various kinds of money sharks, will they not realize what a nuisance 
 the old system was and gladly adopt the new one? The eastern and 
 southern provinces favored the use of the Mexican dollar for these 
 very reasons, and the longer they used it the further its use spread. 
 Suppose some one says that the new coin is not really worth its face 
 value and hence it is not to be expected that the people will take any 
 
200 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 stock in it. Just let such a person know that the old silver, though 
 full weight, will not purchase goods in the market, whereas the new 
 coins, although they are only 92 per cent pure, are current everywhere 
 and that this is the case because the authority to put a new coin into 
 circulation and to put a stop to an old one, rests with the Government 
 alone. 
 
 Lastly, we must make the people have faith in the new system ; the 
 people of China as well as the people of foreign nations must have 
 confidence in it. Your servant has already discussed the subject of 
 how we should give our own people confidence, and now as to the 
 people of other countrries. AA'hen the new system is j)ut into opera- 
 tion, we should take the gold we have borrowed and deposit it among 
 the various foreign banks, thereby letting all nations Icnow that we 
 have some gold in reser^^e. A statement should be made of the money 
 taken in and the output of the mint each year, and this statement 
 should be forwarded to the foreign ministers in Peking, This is also 
 in harmony with the general method in other countries. It is evidence 
 of the way in which things are being done, it clears away all suspicion 
 of fraud, and it insures trust in us throughout all the world. If the 
 reports of the Chinese imperial customs were not published in this 
 way each year and distributed at home and abroad, who would put 
 any faith in that system ? 
 
 The above six suggestions for a monetary plan are merely what your 
 servant has gathered from time to time from foreign books treating 
 of methods of financial administration. They comprise what he has 
 seen and heard in his travels of the last ten or twelve years in Europe 
 and America, as applied to the present situation in which China finds 
 herself in relation to other nations. The whole matter shows lack of 
 extensive investigation and thought upon the subject of the best 
 course for the nation to iDui'sue in its effort to decide upon a firm 
 financial policy. As to building up the wealth of the country and 
 establishing special schools upon these subjects for the benefit of 
 future days, these matters are certainly worth early consideration or 
 else this will be another case like the Chinese customs which has 
 brought us ridicule because it has long been managed by foreigners 
 and still no one has come for^^ard who is able to take over the work. 
 
 The plan I have suggested would be a method of constant self- 
 protection and a never-ending benefit. In that the United States 
 commissioner, Mr. Jenks, (who) is now coming to China, it is my 
 humble opinion that the Throne should appoint some high offi- 
 cial thoroughly versed in financial matters to confer with him on 
 these' important international financial questions. As the day of 
 Mr. Jenks's arrival is near, I have used what little ability I possess 
 in composing this memorial, displaying as little ignorance as possi- 
 ble, in the hope that the official who shall receive such appointment 
 may find some matters that may be useful. T humbly beg that the 
 Throne will decide whether or not my suggestions are practicable, 
 but I greatly fear lest they prove to be of no use. 
 
 In view of the fact that the United States Monetary Commissioner 
 will shortly arrive in China to investigate the coinage question, your 
 humble servant has Avith all due respect prepared this very slight 
 contribution in the form of a memorial, Avhich he craves may be 
 given the favor of the Imperial glance. 
 
GOLD 8TANDAED IN INTERNATIONAL TRABE. 201 
 
 (b) Memorial of the Board of Revenue in re Sale of Office to Raise Funds 
 
 FOB A Gold Reserve. 
 
 We have made further investigation of the suggestions submitted 
 by Hu \Yei-te, the minister to Russia, in his memorial on the reform 
 of the currency, in which he asks that gold coins may be issued in 
 addition (to silver) . His report as to the advantages and disadvan- 
 tages is very thorough. Recently there have been numerous discus- 
 sions of the financial administration which have suggested that 
 China ought to coin gold to relieve the situation c?iused by the depre- 
 ciation of silver. We, your ministers, have taken pains to investi- 
 gate the subject very carefully, and find that at present all the 
 nations on the globe, except China, have a gold coinage ; that gold is 
 dear and silver cheap, and that on this account trade suffers much 
 injury, and that without the coinage of gold it will be impossible to 
 prevent it; but a supply of gold must first be obtained before there 
 can be a gold coinage. When Japan was about to adopt a gold coin- 
 age, she first collected gold for ten years before proceeding to mint it. 
 A great deal of gold is hoarded by the Chinese people, and simply 
 because the government does not use it, it is unnecessarily wasted in 
 the manufacture of gold vessels and ornaments; besides not a little 
 in recent years has been exported to other countries. It becomes very 
 necessary, therefore, to adopt some method to secure a reserve of 
 gold which may meet the demand for minting purposes. 
 
 As to this matter we find that the memorial of the bureau of 
 national administration has already received the sanction of the 
 Throne, and is to the effect that they propose that persons who wish to 
 purchase restoration to lost rank and those Avho' desire to purchase 
 promotion, as well as those who want to be advanced on the list of 
 expectants by making subscriptions and thus secure the right to an 
 earlier appointment to fill a vacancy, shall be required to pay one-half 
 of the sums respectively required in gold, Treasury standard, at the 
 rate of 1 ounce of gold for 32 ounces of silver ; that, as to the applica- 
 tion of the rule, as those who are to purchase restoration to rank are 
 to be permitted to purchase only the former rank and nothing above 
 it, they still more ought not to be allowed to purchase the right to 
 return to the particular post formerly held, and that the privileges 
 accorded under this rule are not to be allowed in cases in which 
 removal has been for comparatively serious offenses ; that in the case 
 of those who have never had official appointments and desire to send 
 in large sums of money, they ought first to report at the board of reve- 
 nue, which should take the matter into consideration and fix the 
 amount to be paid (for the rank) , all to be paid in gold, after which 
 the board should request an edict, and if the Imperial sanction should 
 be given the board of revenue should then receive the gold. 
 
 It seems to us that by agreeing to the proposal under these restric- 
 tion* it may perhaps be possible to accumulate the gold. 
 
 As in duty bound we have prepared this supplementary report and 
 respectfully submit it, humbly praying the favor of the Imperial 
 glance. 
 
 Imperial rescript received : " Let it be as proposed." 
 
 " Respect this." 
 
202 GOLD STANDARD IN INTERMTATIOKAL TRADE. 
 
 (c) Memorial of the Financial Commission in be Establishment of a 
 
 National Bank. 
 
 This memorial proposing that the board of revenue should make 
 trial of a national bank so as to facilitate the circulation of silver coins 
 and thus aid the financial administration and increase the sources of 
 wealth, is re^'erently submitted, with a prayer for the favorable con- 
 sideration of your majesties. 
 
 Some time since, we, your ministers, presented a memorial, sug- 
 gesting that a mint should be established at Tientsin for the coinage 
 of silver. The erection of the buildings has already been begun, and as 
 soon as the machinery, which has been purchased, shall arrive, mint- 
 ing will at once begin, and thus form the commencement of the reform 
 of the financial administration; but the purpose in this present coin- 
 age is by a reform of the monetary system to secure the general cir- 
 culation of the coins, to call in the silver sycee heretofore used and 
 gradually coin it, as well as to issue paper money and to coin gold. 
 The important factor in this arrangement will be the use of the money 
 by the treasury in receipts and payments, and it becomes more than 
 ever necessary to establish a bank to aid in the circulation ; only so 
 can the scheme be put into operation without hindrance. Heretofore 
 China has had no bank; although the institutions which issue notes 
 and the cash shops established by wealthy persons in all the provinces 
 are of the same character as banks, yet no Imperial bank has ever 
 been established to form a bond of union among them, and thus it has 
 been impossible to depend upon them in distributing the Government's 
 surplus or making up its deficit. This condition of affairs has long 
 been comprehended by your majesties. 
 
 Some time ago the expectant metropolitan official of the fourth 
 bank, Mr. Chang Yu-nan, of Canton, requested permission to raise 
 shares among the Chinese merchants of the south and establish a mer- 
 cantile bank in Peking, and requested that the treasury might be in- 
 structed to contribute part of the capital stock. Your ministers also 
 memorialized recommending the approval of the scheme, as the files 
 will show. But the aforementioned gentleman has gone to the south to 
 raise shares to carry the plan into operation and has fixed no date for 
 the commencement of the enterprise, and the time has now come for 
 the reform of the monetary system, and the establishment of a bank 
 to promote the circulation of the coins is a matter of urgent impor- 
 tance. Your ministers have consulted together frequently about the 
 matter and now propose that the board of revenue shall first take steps 
 to accumulate the necessary capital, examine the regulations of the 
 various foreign banks and select such as are suitable, giving careful 
 consideration to the various advantages and disadvantages, and pro- 
 ceed to operate a bank experimentally, that it may furnish the neces- 
 sary channels for the circulation of the coinage. The detailed 
 regulations will be drawn up and submitted in a memorial by, the 
 board of revenue. 
 
 Youi' ministers respectfully submit this memorial stating the rea- 
 sons why the board of revenue should make experimental trial of a 
 bank, praying that your Imperial majesties will consider and decide 
 whether or not the scheme should be put into operation. This memo- 
 rial was submitted on the 28th of the First Moon, XXX year of 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 203 
 
 Kuang-hsu, and an imperial rescript issued saving : " Let it be as 
 proposed." 
 
 " Respect this."" 
 
 3. EXTRACT FROM REPORT ON THE FOREIGN TRADE OF CHINA 
 S95x.'5P^ ^^^^ ^^^' "^^ MR. J. W. JAMIEfeON, COMMERCIAL AT- 
 TACHE, TO HIS MAJESTY'S LEGATION IN PEKING. 
 
 [No. 3280. Annual series. Keference to previous report, Annual Series No. 3092.] 
 [Shanghai, ,Tuiy 9, 1904 ; received at foreign office August 15, 1904.1 
 
 The average rate of exchange for the Haikwan tael in 1903 was 1.3 
 per cent higher than in 1902, and the chart will serve to illustrate the 
 tortuous course it pursued in its progress upward. For the first six 
 months the average rate worked out to 2s. 6d., against 2s. 9|d. for the 
 last six months, a difference of lOi per cent, with quotations, as a 
 rule, below the parity of silver. 
 
 /903. 
 
 !n Sterling. |^«o' il C S^S-^'&'S-k:!^ <j 
 
 '' x, !"':": 
 
 fe .-.,.1.^.. "- " ------- 
 
 ,^ 1 Uf TrH ^ 
 
 ^/^ ^::::::::^j - 
 
 g - --_^ " - - ------ 
 
 
 Sjb "* c_ ■ 
 
 '^ X \J N HiT'rmiTi Til 
 
 t- - - - J ZJL " -- - - 
 
 1- . i /'S , ± " -- - - 
 
 2/^ ^ j_:;z_:tZ.± ~ " -- - - 
 
 ^^ »- _ _ t.-j^'^r 
 
 S- - - L - I " "' u " 
 
 «- _- _ ^? _ : i ~ ~~ii ' 
 
 2/r ^ x " -'^\-- 
 
 ^* '4- : :: : : c: 'J"i' 
 
 Z- - -- 5 ' I 1 
 
 i - - -- - \ ~ I ~ ~ 
 
 
 i/g . -.. J 4 
 
 ft . - < ^'s - y - -- 
 
 i- - \.' ^„" t' 
 
 2/, ■* : IS!: 5:/.: ._: _:; 
 
 £/j jj ' -\f-- - 
 
 ^ 
 
 
 PA '* -i--!-::.:::-- 
 
 
 
 CHANGE OF STANDARD. 
 
 On January 22, 1903, the Chinese charge d'affaires handed to the 
 Secretary of State at Washington a note, accompanied by a memoran- 
 dum, wherein the Chinese Government, acting in concert with the 
 Mexican Government, invited the cooperation of the United States in 
 seeking some remedy for the serious losses inflicted on the commerce 
 of both gold and silver standard countries by fluctuations in the value 
 of silver bullion. 
 
 This note was preceded by one couched in similar terms, addressed 
 to Mr. Hay by the Mexican ambassador on January 15, and on Janu- 
 ary 29 President Roosevelt transmitted to the Senate and House of 
 
 "Acting under the aforementioned memorial, approved by the Emperor, cer- 
 tain bank regulations vs^ere drafted and an otficial designated to secure private 
 subscriptions to the capital stock of a new bank. After several weeks spent in 
 explanations to business men by the official no subscriptions were secured, and 
 the project, in the original form, at least, seemed to be abandoned when the 
 American commissioner left China in September, 1904. 
 
204 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Representatives a message recommending " that the Executive be 
 given suiRcient j)owers to lend the support of the United States in 
 such manner and tq such degree as he may deem expedient to the pur- 
 poses of the two Governments." 
 
 Acting thereon, both Houses of Congress passed an appropriation, 
 enabling the President to cooperate with the Governments of Mexico, 
 China, and other countries for the purpose set forth in the "message, 
 and a commission of international excliange, consisting of Mr. H. H. 
 Hanna, Mr. C, A. Conant, and Prof. Jeremiah W. Jenks, was ap- 
 pointed. The Mexican Government appointed two comniissions, one 
 to make careful examination of local conditions in the City of Mexico, 
 the other to procure an understanding with other interested countries 
 as to the best meang of carrying out the end in view. 
 
 The Mexican and United States commissions then apjDroached the 
 leading powers having commercial and financial relations with silver- 
 using countries, and after their approval of the principle involved 
 had been secured. Professor Jenks came on to China to lay the com 
 mission's ]proposals before the Imperial Government, and to make 
 arrangements with regard to the practical steps to be taken to place 
 China's currency on a gold basis. 
 
 He has of late been engaged in interviewing the high authorities of 
 the metropolis and the provinces, and has been greatly encouraged by 
 their sympathetic attitude. It is open to question, however, whether 
 the able representations of the learned professor in person, or his lucid 
 explanatory statement in writing, have really enabled those addressed, 
 who, it has to be remembered, are without any previous training in 
 the science of economics, to grasp in all its bearings a complicated 
 problem which has perplexed financial experts for years. 
 
 The lines on which it is sought to bring about an amelioration of 
 existing conditions are, as expressed by Sir Robert Hart, such as will 
 insure a uniform exchange between gold and silver, eliminating all 
 danger of Tincertain fluctuations while permitting China to retain a 
 silver currency, and the American Commission consider that in start- 
 ing the new system, the wiser, and in the end the easier plan, would be 
 to introduce new coins, silver and copper, on a gold basis, and from 
 the beginning to maintain them at a parity witli " a standard unit of 
 value, not necessarily coined, consisting of a fixed number of grains of 
 gold of a fixed degree of fineness, approximating to the monetary unit 
 of a country with which China's commercial relations are close and 
 increasing." 
 
 The bullion value of the current silver coin representing this unit 
 should, it is suggested, be 10 or 15 per cent less than the parity 
 value. To maintain it and its subsidiary units on a parity with gold, 
 the principal measures recommended are the following: (1) Strict 
 limitation of the amount of coinage and absolute governmental con- 
 trol thereof; (2) a normal steadjf demand on the part of Government 
 for this coin and a readiness to receive it for payments due to them; 
 (3) making the coin legal tender in payment of private, as well as 
 of public debts; (4) an agreement on the part of Government to 
 redeem the silver coin by the payment of g'old, practically on demand. 
 
 For the satisfaction of all proper business needs it is held to be 
 sufficient if the Chinese Government keep a gold credit in Europe, 
 against -which they could sell bills of exchange whenever a legitimate 
 market demand arose. 
 
GOLD STANDARD IN INTEENATIONAL TRADE. 205 
 
 The necessity of making provision at the outset for the accumula- 
 tion of a gold reserve, which will suffice at all times to maintain the 
 parity of the new coins, is strongly insisted upon. To the question, 
 " How mav this gold reserve be accumulated ? " the commission 
 answer: (l) That on silver coins, substantially equal in value to the 
 Japanese yen, at the present price of silver, there would be a profit 
 from Seigniorage of some 8 to 12 per cent, and that the profit on 
 minor subsidiary coins would be much greater, which profits would 
 all have to be emploj^ed in purchasing gold. (2) That the saving 
 effected by any concession, such as the postponement of redemption 
 in gold granted by the treaty powers in respect of indemnity bonds, 
 would have to be devoted exclusively to the requirements of the new 
 monetary system. (3) That if the scheme is to be carried through 
 promptly in the most important trade centers, gold to a considerable 
 extent must be borrowed against the security of certain specific reve- 
 nues, and that the proceeds of this loan, part of which might simply 
 take the form of a gold credit, to be drawn against as circumstances 
 called for, must be placed on deposit in Europe and America. 
 
 After the establishment of the reserve provision must naturally 
 be made for its replenishment, and this might be done by means of 
 an agreement on the part of the controller of the currency in China 
 to honor silver drafts drawn against the Chinese Government by its 
 agents abroad in exchange for gold deposited in the fund. It might 
 also be possible to obtain supplies by an exploitation of the gold mines 
 within the Empire. 
 
 An issue of bank notes payable in the new currency is also contem- 
 plated, and is, in fact, essential in order to impart elasticity to the 
 system. 
 
 It does not appear that in the new scheme due weight has been given 
 to the claims for consideration which might be set up by the domestic 
 trade of the countiy. The area of the 18 pi'ovinces equals that of the 
 whole continent of Europe, less Russia, the Balkan States, Turkey, 
 and Greece, and the trade carried on among themselves by 
 343,000,000 of people, is by no means one to be left out of account. 
 So largely, howcAer, looms the injury to the foreign trade in the eyes 
 of the currency reformer, and so imperative appears to him the neces- 
 sity of China's meeting her foreign obligations in gold, that in the 
 scheme as it stands native trade has been treated as practically non- 
 existent. It is dismissed in one short sentence, which, while acknowl- 
 edging that a national silver currency, not on a parity with gold, 
 would be very advantageous to the internal trade of the country, goes 
 on to state that the import and export trades would be helped directly 
 in no way by such a system, inasmuch as the only benefits which the 
 trade Avith foreign countries could expect to reap would be indirect 
 ones arising out of an expansion of domestic trade. In the course of 
 the discussion which took place between the commissions of the 
 United States and Mexico, the former handed to the latter a memo- 
 randum dated April 18, 1903, reviewing the statistics of the foreign 
 trade of Mexico inward and outward. It was therein sought to 
 demonstrate that the fall in the gold price of silver had infiicted on 
 Mexico a ver^^ considerable economic loss, inasmuch as it apfpeared 
 that on the one hand a given amount of gold purchased fewer foreign 
 products than in former years, while on the other hand Mexican 
 products were being disposed of in increasing quantities at prices 
 which, converted into gold, showed no advance whatever. 
 
206 
 
 GOLD STANDARD IN INTERNATIONAL TRADE, 
 
 To illustrate the argument a series of figures was adduced com- 
 paring the gold prices of imports and exports in the years 1893 and 
 1902, and in order to ascertain to what extent China has suffered 
 from- the same cause, the figures of her foreign trade might be sub- 
 mitted to a similar process of investigation. The results, however, 
 can only afford approximate indications, as the system of valuation 
 adopted by the Imperial Maritime Customs has hitherto been far 
 from perfect, and the data for an extended comparison are for various 
 reasons by no means complete. 
 
 The following table gives the values in silver and in gold of 
 China's exports since 1883, and shows an increase in the course of 
 those 20 years of 205 per cent in silver and of 43.5 per cent in gold, 
 accompanied by a decline in the gold price of silver of 53 per cent. 
 In the first decennial period the rises were 66 and 27 per cent, respec- 
 tively, and the fall about 30 per cent : 
 
 Market value of exports from China {excluding treasure). 
 
 Tear. 
 
 Value. 
 
 Bate of 
 
 Currency. 
 
 Sterling. 
 
 change. 
 
 1883 -- 
 
 Haikwan taels. 
 70,197,700 
 92,401,100 
 116,632,310 
 128,504,520 
 143,298,210 
 131,081,420 
 163,501,360 
 159,037,105 
 195,784,830 
 158,996,7.50 
 169,658,760 
 214,181,585 
 214,352,470 
 
 £19,669,980 
 21,705,020 
 22,961,985 
 20,483,370 
 23,434,410 
 21,846,905 
 24,254,890 
 22,944,420 
 29,469,695 
 24,667,620 
 25,095,060 
 27,843,605 
 28,245,225 
 
 s. d. 
 5 7i 
 
 1888 - 
 
 4 8t 
 
 1893 - - 
 
 3 Hi 
 
 1894 
 
 3 2f 
 
 1895 - ... 
 
 
 1896 . --- 
 
 3 4 
 
 1897 
 
 2 llj 
 
 1898 
 
 2 lOi 
 
 1899 
 
 3 Oi 
 
 1900 
 
 3 \i 
 
 1901 
 
 2 1U 
 
 1902 
 
 2 1\ 
 
 1903 ■ 
 
 2 7j 
 
 
 
 The question now arises, have the quantities of Chinese produce sent 
 abroad corresponded with the rise in the total silver value, or have 
 higher silver prices obtained for exports contributed toward the main- 
 tenance of their gold value? 
 
 To assist in determining this point, examination has been made of 
 the quantities and values of certain staple exports in the years 1893 
 and 1903. The four articles selected — tea, silk, bean products, and 
 raw cotton — constituted 66 per cent of the total value of exports in 
 1893, and 58 per cent of the total value of exports in 1903, and the 
 difference between the gold price of silver in 1893 and in 1903 
 amounted to about 33 per cent. 
 
 Table showing quantity and value of certain staple articles of export during the 
 
 years 1893 and 1903. 
 
 Articles. 
 
 Quantity exported. 
 
 Gold value. 
 
 Increase or 
 decrease. 
 
 Value per 
 unit. 
 
 1898 
 
 1903 
 
 1898 
 
 1903 
 
 Quan- 
 tity. 
 
 Value. 
 
 1893 
 
 1908 
 
 Silk.... pounds-- 
 
 Tea do. . 
 
 Beans and beancake, 
 
 24,038,667 
 242,777,500 
 
 2,341,988 
 685,892 
 
 30,829,467 
 223,670,670 
 
 7,165,582 
 904,190 
 
 £7,503,740 
 6,016,248 
 
 496,523 
 1,213,967 
 
 £9,789,155 
 3,469,975 
 
 1,428,900 
 1,751,840 
 
 Perot. 
 + 28 
 - 7.8 
 
 +206 
 + 31.8 
 
 Per ct. 
 + 30.4 
 - 46 
 
 +188 
 + 44.3 
 
 £ 8. d. 
 63 
 5.9 
 
 43 
 
 1 15 5 
 
 £ s.d. 
 a 64 
 3.7 
 
 40 
 
 1 18 9 
 
 Raw cotton do... 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 207 
 
 (Computing the quantities of 1903 at the unit price in gold of 1893, 
 a loss of £1,816,760, or at the rate of nearly 10 per cent, appears to 
 have been sustained. But it has to be borne in mind that the fall 
 of 33.7 per cent in the price of tea was due to causes other than those 
 influencing the price of silver, and that had this article been elim- 
 inated from the list, the figures, instead of showing a loss, would have 
 shown a profit of £211,835 : 
 
 Article. 
 
 Eeportsd 
 gold value. 
 
 Value per 
 unit. 
 
 Gold value 
 
 at unit price 
 
 of 1893. 
 
 sai. 
 
 £9,789,156 
 3,469,975 
 1,428,900 
 1,751,840 
 
 S s. d. 
 6 4 
 3.7 
 
 4 
 
 1 18 9 
 
 £9, 634, SOS 
 
 
 5,498,570 
 
 'RAfl.Tifq n.TiH >ii^n.npji.1rA 
 
 1,522,685 
 
 
 1,601,170 
 
 
 
 Total 
 
 16,439,870 
 
 
 18,258,630 
 
 
 
 
 A continuation of this process, applied to a larger range of exports 
 in the years 1899 and 1903, gives the following results (proportion of 
 total exports, 74 per cent in 1899 ; 77 per cent in 1903 ; fall in gold 
 price of silver between 1899 and 1903, 12.3 per cent) : 
 
 Table showing quantity and value of imports during the years 1899 and 190S. 
 
 Articles. 
 
 Quantity exported. 
 
 1903 
 
 Gold value. 
 
 1899 
 
 Increase or 
 decrease. 
 
 "^r. ^"^1-- 
 
 Value per unit. 
 
 1899 1908 
 
 Silk pounds.. 
 
 Tea do... 
 
 Beans and bean- 
 cake cwt.. 
 
 Bav cotton. -do... 
 
 Aniseed, star .lbs. - 
 
 Bristles do-,. 
 
 Cassia lignea . do . . . 
 
 Fans .per 100.. 
 
 Feathers cwt. . 
 
 Hemp tons.. 
 
 Hides cwt.. 
 
 Mats per 100.. 
 
 Matting rolls.. 
 
 Musk lbs.. 
 
 Nutgalls cwt.. 
 
 Oils: 
 Vegetable .do... 
 Essential... lbs. - 
 
 Rhubarb c wt . . 
 
 Sesamum seed. do. 
 
 Straw braid . . lbs . . 
 
 Tallow: 
 
 Animal cwt. . 
 
 Vegetable .do... 
 
 Tobacco lbs.. 
 
 Wax, white, .cwt. . 
 
 Wool lbs.. 
 
 Wool, camel's. do.. 
 
 37,500,400 
 217,439,200 
 
 6,322,692 
 
 273,880 
 
 1,456,800 
 
 3,754,900 
 
 8,606,730 
 
 57,092,168 
 
 84,554 
 
 9,893 
 
 277,020 
 
 32,032,500 
 
 514,090 
 
 2,588 
 
 43,068 
 
 287,810 
 
 403,735 
 
 9,493 
 
 205,356 
 
 10,603,600 
 
 11,643 
 
 27,963 
 
 23,196,300 
 
 6,830 
 
 32,286,983 
 
 ,5,317,200 
 
 30,829,467 
 223,670,670 
 
 10,843,840 
 
 904,190 
 
 1.011,867 
 
 5,281,600 
 
 7,142,667 
 
 55,081,366 
 
 69,774 
 
 10,842 
 
 288,477 
 
 19,057,464 
 
 593,365 
 
 2,355 
 
 43,550 
 
 500,720 
 
 406,540 
 
 8,813 
 
 627,490 
 
 10,763,000 
 
 69,267 
 
 131,346 
 
 21,861,200 
 
 5,080 
 
 25,750.533 
 
 2,381,200 
 
 £12,359,100 
 4,736,730 
 
 1,417,667 
 448,605 
 
 36,180 
 166,522 
 
 97,632 
 
 93,035 
 146,518 
 199,197 
 591,421 
 207,995 
 341,646 
 
 63,053 
 108,694 
 
 308,000 
 81,470 
 25,378 
 84,100 
 
 433,735 
 
 • 11,553 
 35,357 
 
 347,695 
 81,307 
 
 540,490 
 82,783 
 
 £9,789,155 
 3,469,975 
 
 1,428,900 
 1,751,840 
 
 18,016 
 261,994 
 
 84,400 
 
 7;i,436 
 136,451 
 226,202 
 621,704 
 140,230 
 545,587 
 
 67,668 
 100,131 
 
 428,273 
 44,435 
 22,572 
 267,492 
 543,841 
 
 64,887 
 148,153 
 266,837 
 
 27,187 
 326,190 
 
 34,065 
 
 P.et. 
 
 - 18 
 + 3 
 
 + 71 
 +230 
 
 - 30.5 
 + 41 
 
 - 17 
 
 - 3.4 
 
 - 17.5 
 + 9.6 
 + 4.1 
 
 - 45 
 + 15 
 
 - 9 
 + 1.1 
 
 + 74 
 + 0.7 
 
 - 7. 
 +205 
 + 1.5 
 
 +495 
 +370 
 
 - 5.7 
 
 - 26 
 
 - 20.2 
 
 - .55.2 
 
 P.ct. 
 
 - 20.1 
 
 + 0.8 
 +290.5 
 
 - 60. 
 + 67.3 
 
 - 1.3.5 
 
 - 21 
 
 - 6.9 
 + 13.5 
 + 5.1 
 
 - 32. 
 + 60 
 + 7.3 
 
 - 7.9 
 
 + 39 
 
 - 45 
 
 - 11 
 +218 
 + 25.4 
 
 +461 
 +319 
 
 - 2.3.3 
 
 59 
 
 £ s. d. 
 
 6 7 
 
 5J 
 
 4 5 
 
 1 12 9 
 6 
 
 10.6 
 
 2.7 
 
 3 3 
 
 114 7 
 
 20 2 8 
 
 2 2 8 
 12 11 
 13 4 
 
 24 7 3 
 
 2 10 5 
 
 12 1 
 
 4 
 
 2 13 5 
 
 8 2 
 
 10 
 
 £ s. d. 
 6 4i 
 3.7 
 
 7i 
 9 
 
 1 
 
 1 5 3 
 
 3! 
 
 11 19 6 
 
 4 
 
 
 
 
 1 18 
 
 4i 
 10 
 
 2? 
 
 2 8 
 
 1 19 
 20 17 3 
 
 2 3 
 14 8 
 18 
 !8 14 
 2 6 
 
 17 
 
 2 2 
 
 2 11 
 
 8 6 
 10 
 
 18 8 
 
 3.7 
 
 7 
 3 
 
 3 
 3i 
 
208 
 
 GOLD STANDARD IH INTERNATIONAL TRADE. 
 
 The conversion of the given quantities of 1903 at the gold unit 
 price of 1899 discloses a loss of £2,492,230, or at the rate of 10.65 per 
 cent: 
 
 Articles 
 
 • 
 
 Value per 
 unit. 
 
 Eeported 
 gold value. 
 
 Gold value 
 
 at unit price 
 
 of 1899. 
 
 
 
 £ s. d. 
 
 
 
 Silk 
 
 pounds.. 
 
 6 4t 
 
 £9,789,155 
 
 £10,148,832 
 
 Tea 
 
 ..do.... 
 
 3 7A 
 
 3,469,975 
 
 4,846,197 
 
 
 cwt.. 
 
 3 7i 
 
 1,428,900 
 
 2,394,581 
 
 Raw cotton --. - 
 
 ! do.... 
 
 1 18 9 
 
 1,751,840 
 
 1,480,611 
 
 
 pound.. 
 
 4} 
 
 18,016 
 
 25,297 
 
 
 ...do.... 
 
 1 
 
 261,994 
 
 238,270 
 
 Cassia liirnea 
 
 do.... 
 
 2? 
 
 84,400 
 
 80,355 
 
 Fans. 
 
 .....100- 
 
 2 8 
 
 73,436 
 
 89, ,507 
 
 Feathers 
 
 cwt.. 
 
 1 19 
 
 136,421 
 
 120,650 
 
 
 ton.. 
 
 20 17 3 
 
 226,202 
 
 218,286 
 
 Hides -- 
 
 ^ cwt.- 
 
 2 3 
 
 621,704 
 
 615,417 
 
 Mats 
 
 100.. 
 
 14 8 
 
 140,230 
 
 123,079 
 
 Matting 
 
 ...roll.. 
 
 .0 18 
 
 545,587 
 
 395,576 
 
 Musk 
 
 pound.. 
 
 28 14 
 
 67,668 
 
 57,374 
 
 Nutgalls ..- 
 
 Oils: 
 
 Vegetable 
 
 cwt.. 
 
 2 6 
 
 100,131 
 
 109,765 
 
 do ... 
 
 17 
 
 428, g73 
 
 552,878 
 
 Essential - 
 
 pound 
 
 2 2 
 
 44,435 
 
 81,305 
 
 Rhubarb. 
 
 cwt.. 
 
 211 
 
 22,572 
 
 23,538 
 
 Sesamum seed 
 
 do.... 
 
 8 6 
 
 267,492 
 
 256,225 
 
 
 pound.. 
 
 10 
 
 543,841 
 
 448,458 
 
 Tallow: 
 
 
 
 
 
 
 cwt.. 
 
 18 8 
 
 64,887 
 
 69,267 
 
 Vegetable- 
 
 do.... 
 
 12 7 
 
 148,153 
 
 165,824 
 
 Tobacco 
 
 pound 
 
 3 
 
 266,837 
 
 318,809 
 
 Wax. white _ 
 
 cwt.. 
 
 5 7 
 
 27,187 
 
 60,833 
 
 Wool- - --- 
 
 pound. - 
 
 3 
 
 326,190 
 
 429,175 
 
 Wool, camel's 
 
 .do.... 
 
 3 
 
 34,0&5 
 
 86,710 
 
 Total 
 
 
 20,889,591 
 
 23,381,822 
 
 
 
 
 Applying this percentage of loss to the total value of the exports in 
 1903, the deficit amounts to £3,369,800. 
 
 Table B. — Cost of certain imports into China in gold at the prices ruling in 
 
 1899 and 1903. 
 
 Value. 
 
 1903. 
 
 At prices of 
 1899. 
 
 Percent- 
 age of 
 
 change in 
 price. 
 
 Cotton yarn . 
 Plain cottons 
 
 Sugar 
 
 Kerosene oil. 
 
 Metals 
 
 Coal 
 
 Total... 
 
 £8,814,765 
 5,525,455 
 2,103,320 
 2,071,940 
 1,993,900 
 1,118,570 
 
 £8,215,120 
 4,896,865 
 2,364,105 
 1,877,045 
 1,713,125 
 1,580,870 
 
 + 7.3 
 +12.8 
 -11.3 
 + 10.3 
 +16.3 
 -30.7 
 
 21,627,950 
 
 20,647,130 
 
 + 4.7 
 
 Note. — All values are market values in silvei% converted at the average annual sterling 
 rate of the l-ljiikwan tael. 
 
 The gold value of the above imports represents 50 per cent of the 
 gold value of China's total imports in 1903 (£43,015,415), and, apply- 
 ing this ratio of rise in price to the whole amount, China is a loser 
 by £1,950,755, at the prices of 1903, as compared with those of 1899. 
 
 Had a fall in the gold prices of her imports taken place, China 
 might have been in a measure compensated for this loss, but, as shown 
 above, so far from this being the case, gold prices of imports appear 
 to have risen and to the previous loss has therefore to be added the 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 209 
 
 further sum of £1,960,755, making an aggregate loss of £5,32Q,555, 
 or at the rate of 7.4 per cent on the whole value of her foreign trade. 
 
 The total weight of the exports of 1903, compared with that of 
 those of 1883, shows an increase of 174 per cent, and compared with 
 that of the exports of 1899, an increase of 11.28 per cent." Curiously- 
 enough, this increase in the percentage of the quantities exported in 
 1903 over those of 1899 closely corresponds with the percentage of loss 
 (10.65 per cent) shown to have been sustained by the calculation of 
 their value in terms of the gold unit price of 1899. 
 
 Assuming the above to be an accurate method of gauging the coun- 
 try's economic gain or loss, the two years cited afford an excellent 
 basis of comparison, as prior to the disturbances of 1900, 1899 was 
 the most prosperous year China's foreign trade experienced, and 
 although not conducted under ideal conditions, the trade of 1903 was 
 the largest so far on record. 
 
 But it is hardly necessary to point out that changes in prices are 
 not solely the result of fluctuations in the relative values or gold and 
 silver. A variety of other elements are contributory thereto, and the 
 part they may have played in bringing about the present situation 
 must not be overlooked. The " Economist " newspaper's total index 
 number, for instance, on January 1, 1899, stood at 1,918, as against 
 2,197 on January 1, 1904. 
 
 While, prima facie, this analysis of her foreign trade returns makes 
 it seem certain that China has to no small extent been adversely 
 affected by the fall in the gold value of silver, and provides an argu- 
 ment in favor of the introduction of remedial measures in the shape 
 of a stable currency on a gold basis, the crucial point, deserving earn- 
 est and careful. attention is this : Would it be consulting China's best 
 interests, or the contingent interests of those who trade with her, to 
 force upon her prematurely a scheme of monetary reform, which, 
 while holding out the prospect of temporary relief as far as the dis- 
 charge of her foreign obligations is concerned, might conceivably end 
 in subjecting her people to heavier taxation, or which, by seriously 
 hampering her interprovincial trade, might eventually curtail her 
 purchasing capacity ? 
 
 That currency reform is of vital importance and urgently called 
 for is by no means disputed; the divergence of opinion arises as to 
 the mode of carrying it into effect, and it is yet again contended that 
 a coinage on a silver basis must be in actual circulation throughout 
 the Empire before any attempt to place it on a parity with gold is 
 likely to prove expedient or successful. 
 
 In connection with currency, the continued appreciation of copper 
 cash, expresed in terms of silver, is worthy of note. It is on the Cen- 
 tral Yangtzu that this grievance is more particularly felt, and the 
 ever increasing number of 10-cash pieces, turned out by local mints, 
 does not seem to afford any relief. At I'chang the purchasing power 
 of silver decreased during the year by 6 per cent, at Hankow by 4 per 
 cent, and Kiukiang by 6 per cent. 
 
 Another feature of internal currency is the premium, alluded to 
 last year, on a particular issue of Carolus dollars, which in 1903 rose 
 to 50 per cent. 
 
 a The articles returned in units of pieces show a decrease of 16 per cent 
 S. Doc. 128, 58-3 14 
 
210 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 IV. DATA REGARDING THE PRESENT CURRENCY IN CHINA. 
 
 1. EXTRACTS FROM SPECIAL REPORTS OF THE IMPERIAL MARITIME 
 
 CUSTOMS. 
 
 (a) Reports on the Haikwan Banking System and Local Currency at the 
 Treaty Ports. — V. Office Series. Customs Papers No. 12. 
 
 Inspectorate-General of Customs, 
 
 Peking, Sth Decemler, 1877. 
 Sir: I have to request that you will furnish me with information on 
 the following- points in connection with the payment of duties at the 
 Haikwan Bank: 
 
 1. Who is the customs banker at your port? Is he an official or 
 engaged in trade? What is the staff employed? How is the expendi- 
 ture provided for?- 
 
 2. In what currency are duties paid at your port? In sycee or dol- 
 lars? If the latter, at what rate, and in what way was it fixed? 
 
 3. What proportion does the Haikwan tael bear to the ordinary 
 local tael, and to the Kweip'ing tael of Shanghai? What constitutes 
 Tsu-se-wen-yin (the standard of payment) ? 
 
 4. Are the rates for Chinese merchants the same as for foreigners? 
 If not, why not? 
 
 5. Does the present system work satisfactorily? Are there any 
 complaints? Have you any suggestions to make? 
 
 You will please give to this inquiry your best attention, and see that 
 the information you collect is reliable and as complete as possible. 
 You will forward copies of any dispatches or agreements relating to 
 the currency question that may be found in your archives or be other- 
 wise procurable. ^ 
 I am, sir, your obedient servant, 
 
 Robert Hart, 
 
 Inspector- General. 
 The Commissioners of Customs. 
 
 Custom-House, 
 Tientsin, Februarys, 1878. 
 
 Sir: I have the honor to acknowledge the receipt on the 10th ultimo 
 of your circular No. 32 of 1877, calling for a report on "The Haikwan 
 banking system and local currency," and to tender, in conformity with 
 your instructions, the information obtained on the subject. 
 
 Ad. 1. — When this port was thrown open to foreign trade, the then 
 Irnperial commissioner, Chung How, appointed a Tientsin merchant 
 of the name of Pang Tsze-kang, customs banker. During the 7th 
 year of Tung Chih, Pang Tsze-kang failed in business and shortly 
 afterward died. It is generally understood that on this occasion the 
 Imperial commissioner lost 40,000 taels, which he never was able to 
 recover. 
 
 The next banker employed was Sung King, formerly comprador in 
 the firm of E. D. Sassoon & Co. During the 12th moon of the 13th 
 year of Tung Chih, this man's appointment was cancelled by the 
 then superintendent, Sun Shih-ta, on the ground of unjustifiable exac- 
 
GOLD STANDAED IN INTERNATIONAL TRADE. 211 
 
 tions from duty-payers. His successor was a Cantonese of the name 
 of Chen Pei-chu, who resigned during the 6th moon of the 3rd year of 
 Kuang Hsii, when Li Chao-t'ang, the present incumbent of the super- 
 intendency, transferred the Customs Bank to Chen Te-kuang, likewise 
 a Cantonese merchant, and formerly comprador to the firm of Russell 
 & Co., who, under the style of Yii Ffing, trades in opium. Chen 
 Te-kuang employs in connection with his banking business, one lin- 
 guist, two accountants, two cashiers, one assayer, one whipper-in {i. e. 
 an employee whose specialty it is to press for payment such duty- 
 payers as have a credit with the bank), and seven servants, as carters, 
 cooks, etc. In addition to the salaries and wages of the above staff, 
 the banker has also to pay two deputies, supposed to control his pro- 
 ceedings, but who — if the superintendent and banker are on good 
 terms, as at present is the case — seem to have nothing to do but to 
 draw pay issued to each at the rate of 20 taels a month. 
 
 The banker's profits are derived from the diflference in the rates at 
 which he is allowed to collect in local currency the ought-to-be Haikwan 
 weight of sycee, and to make remittance of duties collected to the super, 
 intendent. The total gross profits thus derived by the banker here 
 vary from 5,000 to 6,000 taels a year, while his expenses for the same 
 period are estimated at 3,000 taels. 
 
 Ad. 2. — Duties may be paid either in Hang-p'ing Hua-pao taels or 
 in dollars. When paying duty, foreign merchants are charged per 
 hundred Haikwan taels, 105 Hang-p'ing taels; while Chinese are 
 charged 106 taels and 5 candareens, or 1.05 taels per cent more than 
 foreigners. By virtue of an agreement entered into by the former 
 imperial commissioner and the then British consul, Mr. Mongan, the 
 Mexican dollar is taken in payment at the uniform rate of 7 mace 
 Hang-p'ing weight, independent of the market quotations. An 
 attempt was made by the banker, Sung-king, to upset this arrange- 
 ment and to calculate dollar payments according to the changing rates 
 of the day; this however was unsuccessful, so that at the present 
 moment the above-mentioned agreement holds still good. 
 
 Ad. 3. — One Haikwan tael is equal to 1 tael 5 candareens Hang-p'ing 
 currency, and 1 Hang-p'ing tael is equal to 1 tael and a fluctuating 
 number of candareens Kwei-p'ing currency; the nearest average valu- 
 ation would be to put down 100 Hang-p'ing taels as equal to 104 taels 
 and 5 mace Kwei-p'ing currency. By the term tsu-se-wen-yin (the 
 standard) is understood first-class pure sycee, such as is claimed and 
 accepted by the Government treasuries. This pure sycee is called at 
 Tientsin T'ou-pai-pao. 
 
 Ad. 4,. — It has already been stated that Chinese merchants are 
 treated on a different footing from foreigners, and that they pay per 
 100 Haikwan taels in local currency 106.05 taels, while foreigners pay 
 only 105 taels. I have tried to find out the motive for this striking 
 inequality, but failed to meet with any other reason for it than that 
 the superintendent, in order to have an inexpensive system of banking, 
 must allow this exaction, having no other inducement to offer the 
 banker. In this connection it is necessary to state, too, that Russian 
 merchants were until very lately specially privileged, inasmuch as 
 as their duty payments were made at the rate of 103 taels local cur- 
 rency per 100 Haikwan taels. Representations made by certain Ger- 
 man merchants claiming the same favorable terms led to the lengthy 
 correspondence between the various consuls and the superintendent, 
 
212 GOLD STAHDAED IN INTERNATIONAL TRADE. 
 
 of which I just received a copy, which I now forward for your infor- 
 mation. The matter has as yet not been settled; in the meanwhile, 
 Russian merchants have been placed on the same footing and pay — 
 under protest and pending the ultimate settlement of the question — the 
 rates in force in the case of other nationalities. 
 
 Ad 5. — As far as the archives of this office are concerned, there are 
 no cases on record that give ground for serious complaints about or 
 against the present system and working of the Haikwan Bank. But 
 that should not be considered and taken for a proof of its perfection. 
 Those who have undoubtedly complaints to proffer are in the first 
 instance the superintendents of customs, who themselves, here and at 
 other treaty ports, may at any moment be exposed to great personal 
 losses, should — as has happened more than once — a Haikwan bank 
 break; and in the second instance the Chinese merchants, who are not 
 treated on the same equitable footing which is claimed and maintained 
 by foreigners. As to suggesting improvements, I have not been long 
 enough at Tientsin to give at present more complete and precise 
 information on this subject, which indeed demands quite a study of 
 peculiarities and usage; and 1 can, therefore, in this place only wind 
 up with the general suggestion that if, as will sooner or later happen, 
 the central Government is going to introduce a coinage, the customs 
 banking business at all the ports be placed under one administration, 
 which could thus form the nucleus for a Government bank, the want 
 of which is now already much felt. A move in this direction would 
 not be a loss to the majority of superintendents; on the contrary, it 
 would free them from much anxiety, while it would put a stop 
 to otherwise irrepressible illegalities, abuses, and consequent discus- 
 sions in all quarters. 
 
 I duly inclose copy of the correspondence exchanged between the 
 superintendent and commissioner, relating to the Haikwan Bank and 
 its working. 
 
 I have, etc., Detring, 
 
 Convmissioner of Customs. 
 
 To Robert Hart, Esquire, 
 
 Inspector General of Cicstoms, Peking. 
 
 [Inclosure No. 2.] 
 
 Statement of the resvlts of an inquiry into the local currency, 
 
 1. We, the undersigned, proceeded, on the 24th of April, 1878, to 
 the Customs Bank, Tientsin, in order to ascertain, by a minute and 
 careful inquiry — 
 
 {a) The relation between the standard weights for silver paid in 
 liquidation of duties to the imperial customs. Canton, and the so-called 
 Hang-ping— the weight used for the same purpose at Tientsin. 
 
 (5) The relation of the so-called ' Hua-pao compound of silver cur- 
 rent at Tientsin, to pure silver, commonly known as sycee, or in 
 Chinese, Hsi-ssii, and described as WSn-yin in the Chinese version of 
 the treaties. 
 
 2. With a view to ascertain, Ad A, the difference in weights, we 
 took with us a set of Canton weights— one for 100 Haikwan taels and 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 213 
 
 cne for 50 Haikwan taels, the former bearing the date of the 15th day 
 of the 6th moon of the 6th year of Tung Chih, and both belonging to 
 the chest of the accounts office, custom-nouse, Tientsin. 
 
 Having, by means of the scales, established the fact that the set of 
 Canton weights in our possession correspond exactly with a set of 
 Canton weights lately procured by the customs banker, we proceeded 
 to compare the local Hang-ping weights with the aforesaid Canton 
 customs weights, aud found 100 Haikwan taels to equal 104.38 Hang- 
 ping taels. 
 
 3. In order to find out. Ad B, the amount of pure silver (sycee) con- 
 tained in the alloyed ('Hua-pao) silver, as used in trade at Tientsin, 
 the undersigned took two shoes of ' Hua-pao silver, weighing together 
 105 Hang-ping taels, [i. e., the amount of this alloyed ('Hua-pao) silver 
 which has hitherto been taken by the customs bank as the fixed equiva- 
 lent of 100 Haikwan taels of sycee (pure silver)]. 
 
 The 105 Hang-ping taels of 'Hua-pao silver were then taken to the 
 crucible, melted, and refined by the ordinary Chinese process of admix- 
 ing saltpeter, which substance unites with the alloy and forms a slag 
 on the surface. After removing this, the pure silver remaining was 
 cast into two shoes; these, when put in the scales, were found to weigh 
 103.81 Hang-ping taels, or 99.47 Haikwan taels. 
 
 4. The conclusions arrived at, on the basis of the above experiments, 
 respecting the relative weight and value of Haikwan taels in pure 
 silver, and Hang-ping taels in alloyed (' Hua-pao) silver, are — 
 
 1. That 100 Haikwan taels equal in weight 104.38 Hang-ping taels. 
 
 2. That 100 Haikwan taels in pure silver equal in value 105.55 Hang- 
 ping taels in 'Hua-pao silver. 
 
 With reference to the latter result, the customs banker declared that 
 the alloy, extracted from the silver by the process witnessed by us, 
 still contained a certain proportion of silver, which might be extracted 
 by re-melting; and that accordingly the Tientsin bankers calculated, 
 and accepted in payment, 105.2.1.5 Hang-ping taels of ' Hua-pao silver 
 as equal to 100 Haikwan taels of pure silver. 
 
 5. In answer to inquiries made by the undersigned, the banker 
 further stated that shoes of pure silver, bearing the stamp of Tientsin 
 banks, may be bought in the money market, and that he is willing to 
 take them from foreigners in payment of duties, according to the 
 Canton Haikwan weights. 
 
 Deteing, 
 
 Gommissionefr 
 '"■ H. B. Morse, 
 
 Assistant Accountant. 
 
 CuSTOM-HoUSE, 
 
 Tientsin, May 13, 1878. 
 
 No. 69. ) CusTOM-HousE, 
 
 I. G. j Tientsin, May £5, 1878. 
 
 Sir: In continuation of my dispatch, No. 52, of the 13th instant, 
 "inquiry into the local currency," I have to report that I availed 
 myself of the presence of the Hu-Peh mining engineer, Mr. Crooks- 
 ton, to secure an analysis of the ' Hua-pao silver current at Tientsin. 
 I now inclose copy of a letter from him, giving the result of a so- 
 called "wet" analysis made in the laboratory of the arsenal. 
 
214 GOBD STANDARD IN INTERNATIONAL TRADE. 
 
 Taking the amount of alloy as given by the analysis at the customs 
 bankers on the 24th day of April, viz, 1.14 per cent, it would require 
 105.55 Hang-ping- 'Hua-pao taels to equal 100 Haikwan taels of pure 
 silver. On the basis of Mr. Crookston's analysis, giving 2.16 per cent 
 of alloy, 106.69 Hang-ping 'Hua-pao taels would equal 100 Haikwan 
 taels of pure silver. 
 
 I have, etc. . . Detring, 
 
 Commissioner of AJustoms. 
 Robert Hart, Esq., 
 
 Inspector- Getwral of Customs, PeMng. 
 
 [Inclosure.] 
 
 Mr. CrooTistorCs analysis of '■ Hua-pao silver current at Tientsin. 
 
 Tientsin, May U, 1878. 
 
 (t. Detring, Esquire, 
 
 Commissioner of Customs, Tientsin. 
 Dear Sir: The sample of silver, marked "'Hua-pao silvBx, current 
 at Tientsin," which you sent me on the 22d instant, I have carefully 
 analyzed, in accordance with your request, and now beg to submit you 
 the result, which is as follows, viz: 
 
 Per cent. 
 
 Pure metallic silver 97. 84 
 
 Impurities 2. 16 
 
 100. 00 
 Yours, faithfully, 
 
 A. W. Crookston. 
 
 No. 19. I CuSTOM-HoUSE, 
 
 I. G. i Nimgpo, February 12, 1878. 
 
 Sir: In accordance with the instructions contained in your Circular 
 No. 32, of date 8th December last, I have the honor to report as fol- 
 lows respecting the "Haikwan banking system and local currency:" 
 
 1. The customs banker here is the well-known Hu Kuang-yung, or 
 Hu Taotai. He is a Taotai by purchase, and has a Fantai's brevet 
 rank, but he is engaged in trade, being interested in several different 
 establishments — banks, pawn shops, medicine shops, etc. The staff 
 employed is as follows: 
 
 One resident manager; salary and perquisites about $2,400 per 
 annum." 
 
 One assistant manager, who is chief accountant; salaiy, etc., $1,200 
 per annum. 
 
 Two assistant accountants; salary of each, |450 per annum. 
 
 One treasurer, receiving about f 300 per annum. 
 
 One bookkeeper, receiving about $300 per annum. 
 
 Six writers or clerks, receiving each about $200 per annum. 
 
 One learner; salary, $60 per annum. 
 
 . « Silver dollars equal to the Mexican dollar in value. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 215 
 
 Three coolies and one cook, each receiving about $60 per annum. 
 
 The total thus received as salaries by the staff at the bank is f6,600. 
 Fohd, fuel, and oil for a year amount to about 11,500. The building 
 is the property of Hu Taotai. The total annual expenditure would 
 thus appear to be $8,100. But to this must be added loans to some of 
 the staff' in the Taotaf s Yamen, which are never expected to be repaid, 
 and have been reported to me as amounting to 7,000 taels. 
 
 These expenditures are authorized by Hu Taotai. The fixed sal- 
 aries are small, but at the end of the year the accounts are submitted 
 to Hu for inspection, and presents (included in the foregoing estimates) 
 are awarded to all the employees, high and low, based probably on a 
 percentage of the bank's profits. 
 
 When the foreign customs was first established here, a Ningpo man 
 was appointed banker; but soon after Hu Taotai succeeded him. The 
 resident managership has been held by a number of persons, including 
 two of Hu's brothers. The present manager, Yang, is a native of 
 Tz'ch'i-hien, near this place, and a pupil and proteg4 of the great 
 banker. He is engaged in trade, in several establishments, local and 
 otherwise, in some of which he is a partner with Hu. He is not always 
 at Ningpo, and Ma frequently performs his duties at the bank. 
 
 The Taotai has informed me that the present Customs Bank was first 
 authorized as such in the 5th moon of the 1st year T'ung Chih — that si, 
 June, 1862; and that in the 11th moon, 3d year T'ung Chih — that is, 
 December, 1864 — the selection, name, etc., of this bank was -duly 
 reported through the high provincial authorities to the board of revenue 
 and the Tsungli Yamen. 
 
 Respecting the way in which the bank's expenditure is provided for, 
 it is impossible without several months' time to obtain exact knowledge. 
 It is well known that the profits of the bank are considerable; indeed, 
 it has been stated to me on good authority that they amount altogether 
 to 50,000 taels per annum. First of all, there is interest. At Ningpo, 
 the money collected as duties is not paid into the Taotai's treasury at 
 regular intervals of four or five days, as is required at some ports, but 
 the banker lends it out at interest until it is requii'ed for remitting. 
 When Ku Ta-jen was Taotai, he once directed that the duties should 
 be paid into his treasury every five days, but he was met with such a 
 strenuous resistance that he soon revoked these orders. It is a prin- 
 ciple familiar enough to the Chinese that official moneys ought not to 
 be put out at interest in this way, but it is not adhered to here. Huis 
 rich, and as he sometimes accommodates the Government with advances, 
 and shares the profits of his business with those capable of exercising 
 influence on his behalf, he is allowed to have his own way in handling 
 the revenues he receives. For confirmation of this see my dispatch 
 No. 19, of January 24, 1878. 
 
 There are also other profits to the bank, such as: First, Tap'ingyii; 
 second, Sz'p'ingytl; third, 'Huifei, and, fourth, 'Huo'hao. 
 
 The Tap'ingyu is derived from the custom of collecting Haikwan 
 taels and remitting K'up'ing taels. In other words, the merchant pays 
 106.83 Ningpo taels as 100 Haikwan taels, and the bank only remits 
 104.70 Ningpo taels, this being 100 K'up'ing taels. Here is a profit of 
 1.13 Ningpo taels on every 100 Haikwan taels remitted, whicn would 
 amount to 8,136 Ningpo taels if one entire year's collection had to be 
 remitted. But for the fact here stated that K'up'ing taels only, and 
 not Haikwan taels, are remitted I do not vouch. 
 
216 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 The Sz'p'ingyii means the amount '" squeezed " by the bank in the 
 weight, exchange, or quality of sycee received, more than what a just 
 weight, a correct exchange, and an honest shroffage would admit of. 
 The 105.83 Ningpo taels demanded as the equivalent of 100 Haikwan 
 taels is too much, as I shall show further on. Though the bank col- 
 lects 105.83 Ningpo taels for 100 Haikwan taels, it paid me the other 
 day at the rate of 105.40 Ningpo taels, as was verified by the Kung-ku. 
 
 The 'Huifei are a charge of 48 taels for every 1,000 remitted, as 
 expenses of remitting. But as remittances are made by bills, these 
 expenses are not incurred; still they are charged for. I am told that 
 the bank gets one-fourth of this, the Taotai one-third, and the head 
 Shupan one-twelfth; the rest goes to various Weiyiian, to the board 
 of revenue, etc. 
 
 The 'Huo'hao, meltage, is a charge of 1.20 taels for every 100 taels 
 remitted, although remittances are not made in silver. This is shared 
 by the bank and by others at this port. 
 
 There are also small sums (from $5 to $36) annually presented to the 
 bank by the merchants and called "stationery expenses;" ostensibly 
 as compensation for the paper, ink, pencils, etc., used in keeping the 
 bank's books, etc. , and in issuing its documents. These are in practice 
 the perquisites of the bank employees. 
 
 Such comments as I may have to make concerning the sources of 
 income to the banker and his employees and others, belong under 
 the fifth section of this report. 
 
 2. Duties at this port are paid nominally in Ningpo taels — that is, in 
 sycee, not in dollars. [The Ningpo tael is called a (^hiangp'ing tael, 
 and will be so termed by me throughout this report.] 
 
 Every haikwan tael which has to be paid is first converted into 
 Chiangp'ing taels at the fixed rate of 1 Haikwan tael equals 1.0583 
 Chiangp'ing taels, and payment of the total number of Chiangp'ing 
 taels due is then made, sometimes (a) in sycee, sometimes (h) in dollars 
 at the day's rate of exchange, sometimes (c) in bills on Shanghai 
 expressed in Kweiyuan taels (that is, Shanghai taels) and calculated 
 from Chiangp,ing taels at the rate of 1 Kueiyiian tael equals 0.9483 
 Chiangp'ing taels, and most frequently (d) by the Kwochang method. 
 As the circular under reply does not ask how the rate 1.0583 was deter- 
 mined, I leave that point to be explained :f urther on. 
 
 The foregoing paragraph answers categorically, as briefly as possi- 
 ble, the questions put under 2 in the circular. But before proceeding 
 to the points under 3, I think it necessary to explain at some length 
 the process of paying duties at this port. 
 
 I have said that duties are nominally paid in Chiangp'ing taels; but 
 the actual system of paying duties here is a peculiar one. The receipt 
 for the duty is almost invariably given to the merchant at the Customs 
 Bank before the duty money has been received ; and the duty is col- 
 lected by an ally or branch of the Customs Bank either at Ningpo, a 
 few hours after the issue of the bank receipt, as is the case with most 
 merchants, or else at Shanghai a day or two after the issue of the bank 
 receipt, as is the practice with a few large and favored hongs. But, 
 stranger than this, actual dollars and actual sycee are scarcely ever 
 paid as duties, whether into the Customs Bank here or into its Ningpo 
 city or Shanghai coadjutor; indeed, of the 720,000 taels annually col- 
 lected as our revenue, the Customs Bank proper receives in coin or 
 silver about 3,000 taels; the Ningpo city branch of the Customs Bank 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 217 
 
 receives about 10,000 taels in coin or silver, about 216,000 taels in 
 drafts on Shanghai, and about 392,000 taels by the Kwochang method; 
 and the Fowk'ang (Customs) Bank in Shanghai receives about 100,000 
 taels in sycee, or dollars, or by Kwochang. 
 
 Before proceeding further, I must explain the banking system of 
 Ningpo known as "Kwochang," by which the manual transfer of dol- 
 lars or sj'cee is reduced to a minimum, thereby saving expense and risk 
 of loss in conveying money to and fro, and waste from wear in han- 
 dling, and which indeed prevents the necessity of keeping a large amou nt 
 of silver in this place. If Chang owes money to Li, he tells his banker 
 to pay Li's banker the sum required; the two bankers meet by deputy 
 or in person, each makes a minute of the transaction in his book and 
 seals are impi'essed to attest it, Money is not drawn out and conveyed 
 from one bank to another, and not even do the parties use the medium 
 of a bank check; private checks, too, 1 need not say, are not used, as 
 they are illegal. The Kwochang system appears indeed to be a near 
 approach to a system of barter in which the banks are merely recorders 
 of the bartering transactions, through the medium of imaginary money, 
 which serves simply as a standard for estimating the relative values of 
 the articles exchanged. The Kwochang system will soon be perceived 
 to be at the root of the extraordinary manner in which duties are paid 
 at this port. (See Mr. Taintor's Report on the Trade of Newchwang 
 for 1871-2, page 4. The Kwochang system, I, am told, obtains also in 
 Shanghai.) 
 
 I now propose to describe, first, how duties are paid in Ningpo, and, 
 secondly, how payment of Ningpo duties is made at Shanghai. 
 
 The following is the process, step by step, as practiced almost uni- 
 versally by the merchants of Ningpo, both foreign and native. A. B., 
 having cargo to land or ship, receives from the custom-house a duty 
 memorandum for so many Haikwan taels. He takes this to the Cus- 
 toms Bank and hands in with it a pass book, which he always uses in 
 paying duty. The banker simply notes in the pass book the sum due 
 in Haikwan taels; a like entry is also made in the banker's record 
 book, and the pass book is then returned to the merchant, and with it 
 a bank receipt for so many Haikwan taels, as if they had been paid, 
 although in fact no money has passed. The bank receipt is presented 
 to the customs and the goods are released. Now, how does the bank 
 collect the Haikwan taels due from A. B. ? 
 
 Here a brief digression is necessary. The Customs Bank, situated 
 very near the custom-house, is called T'ung Yii, and there exists in 
 the business quarter, called Chiang Hsia, outside the east gate, a sec- 
 ond bank, closely connected with the one above named, and called 
 T'ung-ch'iian. These two banks are both Hu Taotai's. The former 
 exists solely for revenue purposes; it does no general business, and is 
 regarded purely as an official bank. It keeps the records, and is the 
 only bank recognized by the Taotai. Yet it does very little of the 
 actual duty collecting. When, as only occasionally happens, coin or 
 sj'cee is to be paid as duty on the spot, T'ung Yii receives it; but, as 
 intimated above, the total amount collected in this form in a year at 
 Ningpo is only about 3,000 taels. T'ung-ch'uan, on the other hand, 
 is a bank for general business purposes. It is situated near all the other 
 banks, receives deposits, makes loans, etc. It is also the collecting 
 agent for T'ung Yii, representing T'ung Yii vis-a-vis the other banks, 
 getting silver for T'ung Yii when it is -wanted, arranging T'ung Yii's 
 
218 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 remittances to or from Shanghai, and probably managing the loaning 
 of sums received as duties until such time as they have to be remitted. 
 When, as is almost universally the case, the merchant has simply prom- 
 ised to pay duty by an entry in his pass book, this entry is made by T'ung 
 Yii, and intimation of it is sent to the T'ung-ch'uan Bank. It then 
 - becomes the function of T'ung-ch'uan to collect the amount from the 
 native bank, whichever one it may be, in which the accounts of the 
 merchant concerned are kept. 
 
 At this point a further explanation may conveniently be made. 
 Business in Ningpo is done in dollars. Sycee is so scarce here that 
 when required in an}^ considerable quantity it must be speciall}'' 
 brought from Shanghai. But there exists a nominal Ningpo tael (as 
 above stated) called Chiangp'ing, and it is always regarded as bearing 
 a fixed relation to the Haikwan tael (1 Haikwan tael equals 1.0583 
 Chiangp'ing taels). But the relation of the dollar to the Chiangp'ing 
 tael and that of the Shanghai tael to the Chiangp'ing tael vary con- 
 stantly, and on this question of exchange disputes are liable to arise 
 with the T'ung-ch'uan Bank in paying duties. 
 
 Now, to resume with A. B., to show how he pays the debt incurred 
 for duty. Returning to his shop from the custom-house he sends 
 word to the T'ung-ch'iian Bank that he has to pay so many Haikwan 
 taels as duty, and inquiries how many dollars are claimed from him as 
 the equivalent. He knows that the number of Chiangp'ing taels to be 
 paid will be 1.0583 times the number of haikwan taels due; but the 
 important question is, how many dollars will T'ung-ch'iian claim as 
 the equivalent of the Chiangp'ing taels? Should the sum of dollars 
 claimed be unfairly great, the merchant finds some bank which is will- 
 ing to pay to T'ung-ch'iian in his behalf the amount of Chiangp'ing 
 taels due in consideration of a less sum in dollars than T'ung-ch'iian had 
 demanded, and T'ung-ch'iian must then accept the sum in Chiangp'ing 
 taels. 
 
 Ordinarily, however, T'ung-ch'iian's reply would be satisfactory to 
 the merchant, and on receiving it he directs the bank in which his 
 accounts are kept — say the Tsz-yuan Bank, for example — to pay 
 T'ung-ch'iian the number of dollars specified. The matter then 
 becomes a simple one for the two banks to settle between them. 
 Here, of course, the Kwo-chang system continues in play, unless, as 
 rarely happens, T'ung-ch'iian chooses to demand real dollars. The 
 general practice is for T'ung-ch'iian simply to compare accounts on 
 the same day with Tsz-yiian, one claiming the existence of the indebt- 
 edness and the other admitting it, and that is all. It is the exception 
 for the money to be paid at the time, but if the amount is consider- 
 able, interest is charged on it at so much per day, the rate being fixed 
 afthe outset. 
 
 The various banks, therefore, pay duties for their constituents to 
 T'ung-ch'iian, this bank being kept advised by T'ung-yii what sums 
 are due and from what persons. The custom is for each merchant to 
 have an understanding with one or more of the banks that his duties 
 are to be paid up to a certain amount, and to this extent the banks 
 hold guaranties given by the merchant. 
 
 The medicine shops are allowed to. keep a running duty account 
 with the Customs Bank until the obligation amounts to 100 Haikwan 
 taels, and they then pay into T'ung-ch'iian thi'ough their own banks 
 by "Kwo-chang," the equivalent of an even 100 Haikwan taels. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 219 
 
 Tha foregoing paragraphs detail the vfnj in which about 392,000 
 taels of our duties are paid. It may be asked, "When does the real 
 money pass over from the various banics into T'ung-ch'iian's hands to 
 be remitted?" The answer is that T'ung-ch'iian sometimes requires 
 sycee, in which case the banks procure it from Shanghai, but ordi- 
 narily they pay over by instructing their Shanghai representatives to 
 pay to the Fow-k'ang Bank at that port. For the period after the 
 money is due until it is called in by T'ung-ch'iian .(whether in sycee, 
 dollars, or orders on Shanghai), interest is paid by the debtor banks. 
 This interest is the chief source of the Customs Bank's large income. 
 
 The duties paid by the two Sassoon firms on opium, amounting to 
 about 215,000 Haikwan taels per annum, are paid here in Kweiyiian 
 tael drafts on Shanghai. The amount of Shanghai taels due has first 
 to be settled here. This is done by reducing the Haikwan taels to 
 Chiangp'ing taels in the usual way (multiplying by 1.0^83), and then 
 dividing the product by 0.9483, which is a fixed rate arranged by the 
 firms in question with the Customs Bank, and the result is the 
 number of Shanghai taels to be paid. (This rate, 0.9483 Chiang- 
 p'ing taels equals 1 Shanghai tael, is a permanent arrangement 
 with the old and new Sassoons; other merchants, the tea hongs, 
 for example, convert at the rate of the day as will soon be 
 shown). Sassoons' Mngpo banker then pays to T'ung-ch'iian an 
 order on Shanghai for the sum required. My comments on this way 
 of paying duties belong to a paragraph below (see No. 4). I come 
 now to the payment of Ningpo duties at Shanghai. As is well known 
 this port is only a point of transit for teas bound from Pingsuey or 
 Fychow to Shanghai. It is at Shanghai, not here, that the tea men are 
 paid for their produce, and yet the export duty is payable at Ningpo. 
 The total amount which has to be paid on tea is from 300,000 taels at 
 370,000 annually, say about 45 pei- cent of our entire revenue of 
 720,000 taels. This payment falls chiefly on two or three houses only, 
 and by the special consent of the banker these firms paj' their duties, 
 say 100,000 taels, into the Fowk'ang Bank at Shanghai, at which place, 
 rather than here, they have available funds. The process is as follows: 
 Kiang Yii Chang, for example, presents to the bank, say on the 20th 
 of the month, a duty memorandum for a shipment of 600 piculs of 
 tea. The firm's pass book is handed in, entry is made in it of an indebt- 
 edness of 1,500 Haikwan taels as duty on the pai't of the firm to the 
 bank, and a duty receipt is issued, which enables the merchant to ship 
 the tea for Shanghai on the same day. The firm writes by same oppor- 
 tunity to its Shanghai representative that he must pa}"- 1,500 Haikwan 
 taels to the Fowk'ang Bank at that place, and the Customs Bank simi- 
 larly advises Fowk'ang to receive 1,500 Haikwan taels from Kiang Yii 
 Chang. On the 21st or 22d, or about that time, Kiang Yu Chang 
 accordingly pays Fowk'ang at Shanghai a round sum of so many 
 Kweiyiian taels, enough or nearly enough to cover the indebtedness; 
 the bank at Shanghai advises the Customs Bank at Ningpo that so many 
 Shanghai taels have been paid in, and on getting this intimation the 
 Customs Bank here makes entry in Kiang Yii Chang's pass book 
 that so many Chiangp'ing taels have been paid in to the firm's credit, 
 having ascertained the amount to be thus entered by converting 
 the Shanghai taels, as advised, into Chiangp'ing taels at the rate which 
 prevailed on the 20th, the day when the tea was shipped at Ningpo. 
 Thus, throughout the season, the principal tea firms are allowed to pay 
 
220 GOLD STANDAED IN INTERNATIONAL TRADE. 
 
 duty at Shanghai within a few days after it has become due, aiid a 
 running account is maintained with a small balance, sometimes against 
 the merchant and sometimes against the bank. From time to time the 
 account is cleared to a cash. The Hip Mow Kuang tea firm have 
 allowed me to make a copy of their pass book, and I send it herewith 
 as a sample of them all. Duties due are, it will be seen, entered in 
 Haikwan taels, called sz'p'ing, and payments at Shanghai are entered 
 in Chiangp'ing taels, they having actually been made (as above stated) 
 in Shanghai taels at Shanghai and converted at the rate current on the 
 day the duty receipt was issued. When it becomes necessary to bal- 
 ance the account the Haikwan taels entered as duties are converted into 
 Chiangp'ing taels by multiplying by 1.0583. The pass book sent with 
 this concludes with the striking of a balance on the 24th of the 11th 
 moon when it was found that 21,437.35 Haikwan taels, say 22,687.147 
 Chiangp'ing taels, had been entered as due and 20,639.10 Chiangp'ing 
 taels had been entered to the merchant's credit. The account is finally 
 cleared by the payment of two sums, viz, Chiangp'ing taels, 1,137.60 
 and 910.447. 
 
 I stated above that about 10,000 taels are paid in coin or silver to 
 T'ung-ch'iian on the spot. This hardly needs to be explained, but I will 
 simply say that this sum represents payments made in currency instead 
 of by Kwo-chang by the merchants' bankers at the very time when 
 the duties are due. 
 
 Actual sycee or dollars have to be paid as duty by everybody from 
 the 24th day of the 12th moon to the 25th of the 1st moon. 
 
 3. The Haikwan tael bears to the ordinary local tael (Chiangp'ing- 
 yin) the fixed proportion 1 Haikwan tael equals 1.0583 Chiangp'ing 
 taels. 
 
 The Haikwan tael of Ningpo, that is to say 1.0583 Chiangp'ing taels 
 bears to the Kweiyiian-p'ing tael of Shanghai an ever-varying propor- 
 tion. The practice here is to convert Haikwan taels first into local 
 taels at the fixed rate above given and then to convert the amount of 
 Chiangp'ing taels thus ascertained into Kweiyiian taels according to 
 the rate of the day which is determined on the arrival of the morning 
 steamer from Shanghai. Two firms have given me tables showing the 
 rates for 1877. 
 
 The lowest rate is 1 Kweiyiian tael equals 0.943 Chiangp'ing tael; 
 this would give 1 Haikwan tael of Ningpo equals 1.1222693 Kweiyiian 
 taels. 
 
 The highest rate is 1 Kweiyiian tael equals 0.949 Chiangp'ing tael; 
 this would give 1 Haikwan tael of Ningpo equals 1.1151738 Kweiyiian 
 taels. 
 
 The average rate calculated from the more complete of the two 
 tables supplied me is 0.9473; this gives 1 Haikwan tael of Ningpo equals 
 1.117175 Kweiyiian taels. 
 
 The average rate from the other of the two tables supplied me is 
 0.9464; and this gives 1 Haikwan tael equals 1.118237 Kweiyiian taels. 
 
 It should be observed that I am now reporting what rates exist here 
 without reference to whether they should or should not be what they 
 are. Under section 5, I shall show why JC think the rate 1 Haikwan 
 tael equals 1.0583 Chiangp'ing taels is too high, and that it should be 
 1.0553. 
 
 The Haikwan tael as paid by the Sassoons bears to the Kweiyuan- 
 p'ing of Shanghai, by the special arrangement described above, not a 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 221 
 
 varying but a fixed proportion, namely, 1 Haikwan tael equals 1.11599, 
 or, say, 1. 116 Kweip'ing taels. This is determined by taking 1 Haikwan 
 tael to equal 1.0583 Chiangp'ing taels, and then converting 1.0583 Chi- 
 angp'ing taels into Kweiyuan-p'ing by dividing bj"^ the fixed rate 
 0.9483. 
 
 The question^ What constitutes tsu-se-wen-yin ? I can not answer, 
 nor can any of the experts whom I have interrogated on the subject. 
 
 The customs banker says that tsu means that the silver should be pure, 
 i. e., free from other metals and foreign substances; the se (color) of 
 such silver should be perfectly white, and the word wen (having marks 
 or lines) refers to that corrugated appearance which the outside of a 
 shoe of pure sycee may be seen to have, as contrasted with the smoother 
 surface of an impure shoe. It is well known that it takes an appren- 
 ticeship of years before a Chinaman pretends to be a competent judge of 
 the quality of silver, and no one believes that his judgment is ever any- 
 thing more than approximate. It is for this reason that a kung-ku is 
 established at all considerable places of trade, simply because mer- 
 chants must have some tribunal to pronounce authoritavely and with- 
 out delay on the value of the silver used, and it is the common 
 understanding that the kung-ku's appraisals shall be accepted, not 
 necessarily as correct, but as authoritative. It is the crude expedient 
 of an imperfect civilization, a sort of court of arbitration where the 
 arbitrators are known to be incompetent, but are the best to be had. 
 Who can be supposed to be able to determine in the case of a shoe of 
 sycee weighing 50 taels just how many of the 5,000 candareens which 
 it weighs are not silver, but are some other substance? And to deter- 
 mine this, not by a nice process of chemical analysis, but by such 
 primitive methods as the quality of its ring when tapped, its color, espe- 
 cially as disclosed in the little holes which form underneath a shoe when 
 solidifying, or as shown on a cut surface, whether it be white or 
 yellowish, and the smooth or corrugated look of the uncut exterior of 
 the shoe. In fact, no two experts are sure to agree as to the degree of 
 purity or the exact percentage of its weight to be deducted as re- 
 presenting the admixture of foreign substance. It is well known that 
 the tsu-s§-wen-yin of Kiangsi, where the highest standard of purity 
 prevails, differs as much as is represented by 3 or 4 mace in every 1( »( ) 
 taels' weight, from the silver of Fukien, where the standard of purity is 
 the lowest,' and the other provinces range between these. But the 
 board of revenue accepts the tsu-se- wSn-yin of Fukien no less than 
 that of Kiangsi, although the qualities differ. 
 
 4. No line of discrimination is drawn between the Chinese and for- 
 eigners in the rates. 
 
 But there are different rates: Bassoons' pay in one way, the tea hongs 
 in another, and the rest of the merchants, whether foreign or Chinese, 
 in another. 
 
 Bassoons' rates are all fixed. Suppose, for example, that they have 
 to pay 25 haikwan taels; this sum is multiplied by 1.0583, giving 26.4575 
 as the amount due in Ch'iangp'ing taels. Then each 0. 9483 Ch'iangp'ing 
 tael is by fixed arrangement taken as 1 Kweip'ing tael, and consequently 
 the equivalent of 26.4575 Ch'iangp'ing taels is 27.89— the amount of 
 Shanghai taels to be paid. 
 
 The large tea hongs which pay in Shanghai reckon m the followmg 
 manner: Suppose the sum of 25 Haikwan taels to be due as duty; it 
 is set down in their pass-books as 25 Haikwan taels, and in all subse- 
 
222 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 quent calculations made in oaiancing the account, this and every other 
 sum entered in the Ningpo pass-books to the merchant's debit is con- 
 verted into Ch'iangp'ine- taels at 1.0583. To meet these dues, Shang- 
 hai taels are paid in at Shanghai, and these deposits are credited to the 
 merchant in his Ningpo pass-book in Ch'iangp'ing taels, at the rate of 
 the day on which the duty was duo. For example, 25 Shanghai taels 
 paid in by the merchant would be entered to his credit as 23.65 Ch'i- 
 angp'ing taels if the rate were 0.946, or as 23.675 Ch'iangp'ing taels if 
 it happened to be 0.947. Thus it appears that in the deposits made 
 by them, the tea merchants get the rate of the day, which is all they 
 could wish, and without the intervening medium of the fixed and too 
 high rate, 1.0583; but in the amounts entered to their debit (the duties 
 due) they have to submit to a conversion into Ch'iangp'ing taels at the 
 high rate, 1.0583. 
 
 All the other merchants take the rate, 1.0583, both in calculating 
 what is due from them and what they paj'^ in to meet these dues. 
 Twenty-five Haikwan taels due as duty is regarded as 26.4575 Ch'i- 
 angp'ing taels, and this sum is met by two Kwochang payments, in 
 the same number of Ch'iangp'ing taels or in dollars at the day's rate. 
 
 There is thus shown to be no discrimination separating Chinese and 
 foreigners. All pay at 1.0583, and in this particular all alike pay too 
 ranch. Further, bassoons' have a fixed rate for converting Ch'iangp'ing 
 taels into Kweiyiian taels, and it is too high. But the firms' account- 
 ants explain that the having a fixed rate saves dispute; the.y prefer to 
 accept a somewhat high rate rather than not to have a fixed one. 
 With an uncertain rate the bank could constantly claim too high a rate, 
 and, if it were disputed, "shut up" the recusant ones by demanding 
 payment in ready money, which would be a great inconvenience. It 
 comes to this — that these two firms pay high rate as a sort of fee for 
 the privilege allowed them bj^ the bank of paying in an exceptional 
 way. Besides, the rate 0.9483 is agreeable to them, as they are paid 
 at this rate for the opium which they sell. 
 
 5. The present system works very satisfactorily in several important 
 respects. It is in accord with the other banking practices of this place. 
 It accepts the Kwochang system, and thus bears very lightly on the 
 trade; it saves merchants from having to bring sycee here from Shang- 
 hai. By means of the city bank, T'ungch'iian, the risk and trouble of 
 bringing money to the Customs Bank proper is prevented. ' It accom- 
 modates Sassoons' by allowing them to pay virtually in Shanghai; it 
 also trusts the large tea hongs, so that they may pay where it is most 
 convenient for them. And with all these facilities allowed, the bank 
 has never been a loser. 
 
 I am not aware of any complaints having been made. At the same 
 time I am aware that the tea hongs, being subject as they are to a con- 
 stantly shifting rate, have disputes occasionally with the Customs 
 Bank when the time comes for clearing up accounts. Hip Mow 
 Kwang's representative told me that the firms sometimes "cut" the 
 Customs Bank as much as 200 taels, and it may be taken for granted 
 that this would not be submitted to were it not just. It has also 
 reached me that the bank through whose hands our confiscation accounts . 
 pass is in the habit of charging unduly high rates to persons sentenced 
 to pay fines. This I can easily put a stop to by levying fines in dollars, 
 and by having confiscated goods sold in the san)e currency. 
 
 The first and the most directly practical suggestion that I have to 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 223 
 
 make is that the rate of 1 Haikwan tael equals 1.0683 Ch'iangp'ing taels 
 shguld be reduced. The customs banker tells me that this rate has 
 existed since the opening of the office, and that it was determined in 
 the following manner: It was taken for granted that 111.40 Shanghai 
 taels equal 100 Haikwan taels, and I do not go behind this arbitrary 
 statement, though, by the way, this proportion may very likely prove 
 on investigation to be incorrect. Accepting 111.40 Shanghai taels as 
 100 Haikwan taels, the question is. How many Ch'iangp'ing taels equal 
 111.40 Shanghai taels? This depends on how many Ch'iangp'ing taels 
 equal 1 Shanghai tael? The banker here answers, 0.95, Cn'iangp'ing 
 equals 1 Shanghai tael, and hence 105.83 Ch'iangp'ing equals 111.40 
 Shanghai taels equal 100 Haikwan taels. Now, the fact is that the 
 average value of the Shanghai tael is less than 0.96, as claimed by the 
 banker. 
 
 The average I'ate based on Davidson & Co.'s table is Ch'iangp'ing 
 taels, 0.947327, equals 1 Shanghai tael; and by this the proper fixed 
 rate for Ningpo would be 100 Haikwan taels equal 105.53 Ch'iangp'ing 
 taels. 
 
 Similarly, the average rate based on the Kiang Yii Ch'ang table is 
 Ch'iangp'ing taels 0.94643 equals 1 Shanghai tael; and by this the 
 proper fixed rate for Ningpo would be 100 Haikwan taels equal 105.43. 
 
 Both the Davidson rate and the Kiang Yii Ch'ang rate are much 
 below the banker's rate (105.83). The Davidson rate is based on a 
 more comprehensive period than the other, and would be the more 
 acceptable to the customs banker, being the higher of the two. 
 
 The Kung-ku gave me as the average value of the Kweip'ing tael 
 0.945 Ch'iangp'ing; this would make the Haikwan tael at Ningpo only 
 worth Ch'iangp'ing taels 1.05273. 
 
 Again, I obtained from the customs banker two packages of sycee, 
 each of which he certified to be worth 10 Haikwan taels. These I 
 submitted to the Kung-ku here, and they were pronounced to be worth 
 10.54 Chiangp'ing taels. This test would give 105.40 as the correct 
 rate for 100 Haikwan taels. 
 
 There is, then, evidence enough that the rate heretofore taken is 
 too high, and in my opinion it is advisable to take the correct Shang- 
 hai rate, probably something below 111.40, and to determine from it 
 a new rate for Ningpo, in consultation with the Taotai, and on the 
 basis of the current rate of Shanghai taels at Ningpo for the past 
 three years 1876, 1876, and 1877. 
 
 So far as I have been able to ascertain, the carrying out of the fore- 
 going suggestion would remove the only thing which might be re- 
 garded as cause for complaint locally. 
 
 I do not understand from your circular that the points therein 
 raised were to be discussed beyond their connection with the "pay- 
 ment of duties at the Haikwan Bank." But the foregoing paragraphs 
 have disclosed that abuses far from trivial are practiced by the bank- 
 ers, and probably by some of the ofiicials of the Chinese Government, 
 in connection with the revenues from the maritime customs. Some 
 of these abuses are frauds against the Government, others frauds 
 against the merchants. The interest on mone;^s received as duties 
 should go to the Government, not to Hu Taotai; the Haikwan taels 
 collected should all go to the Government, and not alone an equal 
 number of taels of a smaller kind (K'up'ing); the 'Huifei should not 
 be charged to the Government when tnere are no remittances made 
 
224 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 in sycee, and the 'Huo'hao should not be charged when there is no 
 nieltage. In these points it is the Government principally that buffers, 
 though perhaps the charges made under some of these heads are not 
 only winked at, but are distinctly authorized. But to indicate just 
 what ones are legal and what illegal is probably beyond the power of 
 any foreigner; nor, I suppose, would even the high officers of the 
 Government be certain, gave some exceptions, to thank anyone who 
 should expose publicly these privately well-known abuses. 
 
 The only abuse of those I have pointed out which directly assails 
 the rights of the merchant, whether foreign or native, is the Sz'p'ing- 
 yii, and the remedy for this is certainly in our hands. We should see 
 to it that the fixed rates of exchange are not allowed to be a cash too 
 high. Readjust these and the merchant will then have only himself 
 to thank if he submits to minor "squeezes" — certainly so in ports 
 like this where there are many banks and a Kung-ku. 
 
 The inquiries I have made have opened a far broader field of thought 
 than I can possibly venture to go over, excepting by way of the barest 
 suggestion. Can not the foreign customs be made instrumental in 
 some degree to ameliorate the currency of the coast and of the Yang- 
 tze ? In the south, where dollars are paid as duty by weight accord- 
 ing to a fixed rate, the commissioners should be supplied with sets of 
 standard weights from the board of revenue, and should have power 
 to inspect and correct the weights of the customs banker. At Foo- 
 chow a merchant told me that he had found the weights used by our 
 banker to be heavier than those deposited at the British consulate. It 
 would also be a good plan to get out from Europe a set of the most 
 accurate money scales for each oflice. At the southern ports where 
 the question of touch does not give any serious trouble, owing to the 
 use of dollars, these scales would be an absolute check on the banks, 
 and would prove their superiority to Chinese scales. In the north, 
 however, it will be difficult to check the Haikwan banker until a coin 
 of some kind is minted by the Government. I will not go further in 
 this direction than to ask whether the Haikwan tael should not be 
 given up in favor of the K'up'ing tael, which is the nearest of them 
 all to being the same all over China, which our influence might go far 
 toward making exactly the same, and which is the tael in which all 
 other revenues are assessed. 
 
 I have, etc., Edwd. B. Drkw, 
 
 Commissioner of Customs. 
 
 Robert Hart, Esq., 
 
 Inspector'- Genial of Customs, Peking. 
 
 TAELS. 
 No. 143.] Custom- House, 
 
 Canton, December 20, 1878. 
 
 Sir: I have the honor to furnish the information called for by your 
 circular No. 32, of 187Y, with reference to the Customs Bank at this 
 port. 
 
 1. After the suppression of the Cohong system by the British treaty 
 of 1842, the Haikwan commissioned a money changer to open a bank 
 for the receipt of customs duties. In 1844 four more partners were 
 added, and this number has been maintained to the present time. The 
 founder of the house has been dead some time, but his place is filled 
 
GOLD STANDABB IN INTERNATIONAL TRADE. 225 
 
 by a son, who is superintendent of the bank. The stamp used for 
 certifying the payment of customs duties is given in the margin." The 
 first character in each set is the family name, and the two following 
 the shop name of the different proprietors. 
 
 The principal establishment of the bank is situated about ten min- 
 utes' walk from the custom-house, but there is a small branch office 
 in the street adjoining the custom-house at which duties on sundry 
 cargo may be paid, but under certain disadvantages which will be 
 explained hereafter. The staff of the bank consists of from 40 to 60 
 persons, and the official provision made to meet the expenses is a grant 
 of 8 mace per 100 taels of all duties collected. This grant, however, 
 forms a very small part of the income of the bank, which, owing to 
 the large sums of money passing through its hands, and the power it 
 exercises of fixing the rates for sycee, must necessarily be very large. 
 
 Besides its duties proper as the receiver of the customs revenue, the 
 bank engages in general business. All checks issued bear the customs 
 allowance stamp. This distinction is probably made to enable the 
 Haikwan Bank to keep up the fiction of only receiving duties in pure 
 silver, and to guard against the revenue which passes through its hands 
 becoming involved in the event of unfortunate speculations. The two 
 branches of the bank are under the same management. 
 
 2. The Haikwan banker professes to receive duties in sycee only, 
 and it is, of course, in this currency that his accounts are rendered to 
 the Haikwan. But a large portion of the smaller payments especially 
 are made in dollars, whicn are received by weight with the addition of 
 a premium to make them up to sycee standard, Tsu-sS-wen-yin. This 
 premium varies from day to day. It is regulated by the supply of 
 dollars in the market, and is probably largely influenced by the 
 requirements of the large provinciaj treasuries. A record has been 
 kept in this office since the middle of last July, showing the daily 
 rates for sycee — first, as fixed by the Haikwan Bank for cashing Haik- 
 wan tael checks issued in the name of (Chinese) {e. g., the customs 
 allowance); second, the rate at which sycee is purchasable (with dollars) 
 at the money shops; and, third, the rate at which dollars are received 
 in payment of duties by the branch of the Haikwan Bank in the street 
 adjoining the custom-house. The fluctuations have been as follows 
 since that time: First, Haikwan Bank's rate for payments, 7.700 taels 
 to 8.400 taels; second, money shop's rate, 8.400 taels to 10 taels; third, 
 Haikwan Bank, branch office rate for receipts, 9.400 taels to 11.200 
 taels. The rates first and third, are simply arbitrary. From the for- 
 mer the loss on the customs allowance exceeds on an average $300 per 
 month; from the latter, the small shippers who pay duties at the 
 branch office are overcharged from 1 per cent to 1^ per cent. The 
 following sets of calculations will show more clearly the effects of the 
 present system. The amount to be paid or received is in each instance 
 10,000 Haikwan taels. The premia are the rates of the day. 
 
 Haikwan taels. 
 
 First, (a) Customs allowance : 10,000 
 
 (6) Premium [Haikwan Bank rate for payments], 8.2 taels 820 
 
 (c) Difference of scales, 0.22 taels 22 
 
 Local taels (dollar silver) 10, 842 
 
 Dollars, at 7.1.7 taels = $15,121.34. 
 
 «In Chinese characters. 
 S. Doc. 128, 58-3 15 
 
226 GOLD STAHDABD IN INTERNATIONAL TKADE. 
 
 Note.— The Haikwan scales are 0.4 taels per cent heavier than the 
 ordinary local scales, but the banker only allows us 0.23 taels per cent. 
 The conversion into dollars is made at 0.717 taels, whereas the average 
 weight is about 0.7.1.0 taels. 
 
 Haikwan taels. 
 
 Second, (a) Duties to be paid 10,000 
 
 (b) Premium [money shop rate] at 9.2 taels 920 
 
 (c) Difference of scale, 0.4 taels per cent 40 
 
 Local taels (dollar silver) 10,960 
 
 Dollars at 0.7.1.0 taels = 115,436.62. 
 
 Note. — A comparison of first and second will show that a loss of 
 $315.28 would be sustained on the customs allowance for one month. 
 On the 30th November, when the rates were the same as at present, 
 Mr. Chalmers saw the private memorandum book of a shipper, which 
 showed that he had paid duty that da}' at the rate of 9.6.0.0 taels pre- 
 mium, or 4 per cent more than the current market rate. 
 
 Haikwan taels. 
 
 Third. Duties to be paid 10,000 
 
 Premium [branch office rate], 10.500 taels 1, 050 
 
 Difference of scale, 0.4 taels per cent 40 
 
 Local taels 11,090 
 
 Dollars at 0.7.1.0 = $15,619.72. 
 
 It will be seen from the above calculations that the Haikwan Bank 
 is not entirely dependent on the ofiicial allowance for its maintenance. 
 It is true that the larger shippers, by arranging their payments through 
 other banks, escape these exactions ; but even when payments are made 
 in sycee, a small percentage is clfarged on account of the alleged impu- 
 rity of the silver. 
 
 A special charge of 0.1.6.2 taels per picul is made on all tea duties 
 collected for the ostensible benefit of an institution. The money really 
 goes to Howkua as the representative of the 13 Cohong merchants, 
 and is appropriated under the sanction of the provincial authorities to 
 liquidate a large claim they have against the provincial government 
 for advances (2 million taels) made at the time the Elliot indemnity 
 was paid in 1812. The charge was first levied in 1843 at the ratp of 
 0.3.0.0 taels, but was reduced in 1857 to 0.1.6.2 taels, the present rate. 
 The annual yield is now a little over 15,000 taels ; but in former days, 
 when Canton was the chief seat of the tea trade, and the charge nearly 
 double the present rate, the income derived must have been very 
 nearly 100,000 taels a year. A small portion — I have not been able to 
 ascertain how much — is set aside for the support of the institution 
 already mentioned. 
 
 3. As stated above, the official weights used by the Haikwan banker 
 are 0.4 per cent heavier than the weights of the local scale. 
 
 4. Nearly all the customs duties are paid by Chinese, as it has 
 become the custom here for foreigners to buy produce duty paid, and 
 consequently the legality of the special charge on tea duties and the 
 other exactions in excess of market rates have not, so far as I am 
 aware, been called in question. It is even doubtful whether the for- 
 eign merchants here, with their ignorance of Chinese and implicit 
 confidence in their compradors, are aware of the extra charges to 
 which they are, at least indirectly, subjected. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 227 
 
 5. The Haikwan Bank appears to be fairly well managed, and to 
 perform its duties without hitch or delay. Its position here is so 
 powerful that native merchants would hardly venture to challenge its 
 "squeezes," even if they were heavier than they are now. The best 
 remedy would be the issue of a Haikwan tael currency by the Imperial 
 Government, declared to be a legal tender for customs duties. This 
 would do away at once with all questions and disputes about weight 
 and purity, and would be the means of introducing a reform which 
 would in time make its influence felt in every village throughout the 
 Empire. 
 
 I am, etc. , William Caetwmght, 
 
 Commissioner of Oustams. 
 Egbert Hart, Esq. , 
 
 Inspector- Oeneral of Customs, Pehmg. 
 
 (6) Sycee: Weight, Value, Touch — V. Office Series: Customs Papers No. 47. 
 
 [Tranalation of a memorandum on the weights and monetary system of Shanghai, drawn up by 
 Mons. Q. Pietsch, of the Comptoir d'Escompte de Paris, and dated July, 1864.] 
 
 Weights. 
 
 The tael is a weight which is in use all over China; -its weight varies 
 considerably in the different cities of the Empire. 
 
 In transactions between Chinese and foreigners the Canton tael is 
 the one in general use, as the port from which it takes its name is the 
 one which was first opened to foreign trade in China. 
 
 In Shanghai use is made in business of two weights: (1) The Canton 
 tael, for goods imported, viz, for silver in bars, whether from England 
 France, or America. (2) The Shanghai tael, for goods of Chinese 
 origin, viz, for gold, bar and leaf; also for "sycee" silver. This 
 question, however, will be gone into further on. According to local 
 usage 100 Canton taels equal 102^ Shanghai taels. 
 
 I. CANTON TAEL. 
 
 According to the supplementary Franco-Chinese and Anglo-Chinese 
 treaties signed at Shanghai in November, 1858, the Canton tael ought to 
 weigh in French weight, 37.783 grams; in English weight, 1.333 ounces 
 avoirdupois equals 1.215 ounces troy, or equals 24.30 pennyweights, 
 equals 583.20 grains. These proportions are based on the convention 
 made at Canton in 1770 between the supercargoes of the old East India 
 Company and the privileged Chinese merchants who formerly there pos- 
 sessed the monopoly of the trade Avith foreigners. But in reality the 
 Canton tael as in ordinary use in China is one-half per cent lighter than 
 the above-mentioned standard, and does not weigh more than 87.58 
 French grams (according to the scales of the agency of the Comptoir 
 d'Escompte de Paris); according to the basis adopted by the English 
 banks, 1.208 ounces troy weight, 24.16 pennyweights, 579.84 grains; 
 3,000 taels equal 302 pounds troy, or, better, equal 3,624 ounces troy; 
 according to the standard of India equals 3.221i tolahs (the weight 
 known in India as a tolah being 180 grains troy or 11.662 grams). 
 
 According to Article XXVI of the French treaty of June 27, 1858, 
 and Article XXIY of the English treaty of the same month, the head 
 
228 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 of the customs in each of the ports opened to trade ought to receive 
 for himself and also deposit at the French and English consulates offi- 
 cial (legales) scales both for goods and money, as well as weights and 
 measures in exact conformity with the weights and measures in use at 
 the Canton customs, marked with a stamp and a certificate (cachet) 
 stating that they so conform to their standard. These standards were 
 intended to serve as a basis for all payments of customs duties or to 
 the Chinese Grovernment; also that recourse might be had to them in 
 all cases where there might be disagreement as to the weight or meas- 
 ure of goods. 
 
 II. SHANGHAI TAEL. 
 
 Having found that, contrary to the above-mentioned stipulation, the 
 Chinese Government has not deposited at the consulates any standards 
 of weights and that the weights in ordinary local use do not bear any 
 official stamp of the Chinese Government, which does not usually inter- 
 fere in such matters, I went to the Chinese custom-house of this city to 
 compare the weights which are in use there with those employed by 
 the agency of the Comptoir d'Escompte. After making myself 
 acquainted with the conformity of the two weights, I made with some 
 legal French weights a series of comparative weighings, which give 
 the result that the Shanghai tael weighs 36.64 French grams; 565.70 
 grains troy (perhaps only 565.43 grains — the English, as it appears, 
 reckon it as 566. grains in round numbers); 3.143 Indian tolahs. 
 
 The Shanghai tael is therefore a real weight, and not one merely in 
 name, as was told me on my arrival here. 
 
 At the Shanghai custom-house I found another weight, which is 
 called the "Haikwan" or "customs" tael. One hundred Haikwan 
 taels weigh 102.90 Shanghai taels. This tael, it appears, is not in use 
 commercially. 
 
 III. WEIGHTS IN USE FOR MERCHANDISE. 
 
 Besides the tael, there are other weights in use in China for goods. 
 Subjoined is a list. The tael is the unit. 
 
 1 grain millet is a shu. 
 10 shu =1 lei. 
 
 10 lei =1 chu (pearl). 
 
 24 chu =1 liang (tael) =1.333 ouncSs avoirdupois or 37.873 grams. 
 
 16 liang=l chin (catty)=1.333 pounds avoirdupois or 604.53 grams. 
 
 2 chin =1 yin. 
 30 chin =1 chiin. 
 
 100 chin =1 tan (pioul) =133J pounds avoirdupois or 60.453 kilograms. 
 120 chin =1 shih (stone)=159.99 pounds avoirdupois or 72.544 kilograms. 
 
 In dealings where valuable goods are concerned the tael is subdi- 
 vided into decimal fractional parts, as indicated in the table below, 
 where the tael is dealt with as a monetary designation. 
 
 Monetary system. 
 
 I. MONEYS. 
 
 The tael is not only a weight, it is also an ideal value or monetary 
 account term (monnaie de compte) in use in all the ports of north China. 
 
 In the English colony of Hongkong the current value is the Mexi- 
 can dollar, but I am ignorant as to what is the usage in the Chinese 
 southern ports, such as Canton, Foochow, Amoy, and Formosa. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 229 
 
 The value of the tael varies in the different cities in the same way as 
 its weight. Considered in either sense there are considerable differ- 
 ences between the taels of Peking, Tientsin, Hankow, Kiukiang, 
 Shanghai, Chefoo, Ningpo, etc. To estimate these differences prop- 
 erly it would be necessary to give oneself up specially to the study of 
 the usage of each town. This is how the case stands in Shanghai. 
 
 (a) JSominal monm/. — Accounts are reckoned and kept in Shanghai 
 currency taels. This standard of value serves equally well for exchange 
 or ordinary business (matieres et marchandises). 
 
 The subdivisions of the tael and their relations are: 
 
 Tael 
 (Liang). 
 
 Mace 
 (Ch'ien). 
 
 Candarin 
 (F«n). 
 
 Cash 
 (LI). 
 
 1 
 
 'I 
 
 100 
 
 10 
 
 1 
 
 1,000 
 100 
 10 
 
 (5) Actual money. — The only actual coined money is the li (small coins 
 of copper), called by the English "cash" and by the French sapeque 
 (from the Portuguese word sapeca). 
 
 It has been in use in China for more than 2,000 years. Its value as 
 money is reckoned, as stated above, as the one-thousandth part of a 
 tael; in reality, it has deteriorated, and its price is variable, according 
 to the demand for the interior. At the moment the rate is 1,370 cash 
 for 1 tael, which gives the value of a single cash as a little over half a 
 French centime. 
 
 II. MONEY IN CIRCULATION. 
 
 Sycee, — For commercial transactions on a large scale a monetary 
 imit so small as a cash would be of no use. All payments are made in 
 silver bullion (sycee), a term employed in banking to express fine sil- 
 ver, in consequence of its resemblance to sai sot, "fine silk." 
 
 The expression in ordinary use among the natives is not, however, 
 sycee, but wSn yin, "pure silver." The ingots are of different sizes. 
 The ordinary weight is about 50 taels; there are some of 5 taels weight 
 or less. Their form bears some resemblance to that of the Chinese 
 shoe, from which "shoes" is the designation ordinarily given them by 
 foreigners. 
 
 I shall keep to this expression, in order to distinguish these Chinese 
 ingots from bars coming from Europe and America. 
 
 Although these shoes of sycee are the principal element in the mon- 
 etary circulation in China, the Chinese Government does not take any 
 cognizance of the making or issue of them, which matter is in the 
 hands of those who cast them and of the bankers and money changers. 
 
 The money cast into shoes is as much made from ingots and moneys 
 imported from foreign parts as from native sources, but it is impossi- 
 ble to estimate how much China can draw annually from its own mines. 
 
 At Hoshan (Yunnan), and at Tungsing, on the borders of Cochin 
 China, there are silver mines farmed out by the Government, the 
 renters of which employ from 40,000 to 50,000 workmen. The annual 
 product is estimated at 2,000,000 taels. There are, besides, other 
 mines in the interior of the Empire less rich than these if considered 
 individually, but whose united product would be, in all probability, 
 something consid'ferable. 
 
230 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Refined silver is cast into s.ycee. The name of the caster and the 
 date and place of the casting are stamped on the shoes. 
 
 For any fraud discovered afterwards, no matter at what period, the 
 founder remains responsible and liable to severe punishment. 
 
 On leaving the hands of the founder the shoes ai-e submitted to the 
 inspection of a Government officer or public appraiser, called Kung-ku. 
 After having examined them, he places on them two marks in Chinese 
 ink, one to indicate the weight, the other to indicate the fineness. 
 Marked with this official stamp (cachet) the shoes go into circulation 
 as a current value. 
 
 The assays of the Chinese are exceedingly primitive and imperfect; 
 shoes are received always and everywhere in payment without ques- 
 tion at a conventional value based on the marks of the Kung-ku, which 
 will be explained further on. 
 
 The fineness of the shoes of silver taken separately is not uniform, 
 but operating on some quantities experience has shown that their 
 average standard is ninety-eight dne-hundredths or 98 touch — touch, 
 as they say here, being equivalent to assay. 
 
 The designation of the standard of fineness is, then, as in France, 98 
 touch, signifying ninety-eight one hundredths or nine hundred and 
 eighty one thousandths. 
 
 Three remittances of silver received from Shanghai by the agency 
 in Calcutta on the 29th May and 15th and 20th December, 1862, and 
 melted at the Calcutta mint were recognized as of an average fineness 
 of 16^ to 16 B, i. e., nine hundred and eighty-two one thousandths. 
 
 To wit : standard of silver in India 220 —240 220—240 
 Better 15J 16 
 
 235i-240 236—240 
 
 or 981.25 983.33 
 
 Twss ^s ^1 average. « 
 
 To form a basis on which to establish the value of sycee silver the 
 Chinese take the weight and the touch marked on the shoes by the 
 Kung-ku, making therefore some odd enough calculations, as maj' be 
 seen from some figures which follow. 
 
 Chinese memorandum, giving weight, fineness, and value of 38 shoes 
 
 «This seems to mean as follows : 
 
 The standard of silver in currency in India is 220 parts of pure silver in 240 of 
 coinage ; to put this in decimal form it means that 1,000 parts contain 916.66 of pure 
 silver. 
 
 Betterness seems to mean that 240 parts of a mixture contain (220+B) parts oi 
 pure silver. 
 
 In this instance ISJ betterness put in decimal form =15^ parts in 240 or 64.583 per 
 1,000. 
 
 In the same way : 16 betterness =16 parts in 240 or 66.66 per 1,000. 
 
 ^, , 916.66 - , ,, , 15* 64.583 916. 666-|-64. 583 
 
 Therefore, ^ qqq fine better by g^Q or ^ qqq = r"000 ~ approximately 
 
 981.25 , ' ' ' 
 
 -^^000 as above. 
 
 Similarly, a betterness of 16 produces ■. qqq , or an average of about , ^„„ as given 
 above. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 231 
 
 of sycee counted and verified at the agency of the Comptoir d'Escompte 
 de Paris at Shanghai on the 16th March, 1864: 
 
 
 
 Premium 
 
 
 
 Premium 
 
 
 
 Premium 
 
 
 Weight in 
 
 for better- 
 
 
 Weight in 
 
 for hetter- 
 
 
 Weight in 
 
 for hetter- 
 
 Shoes. 
 
 Shanghai 
 taels. 
 
 ness in 
 
 Shoes. 
 
 Shanghai 
 taels. 
 
 nessin 
 
 Shoes. 
 
 Shanghai 
 taels. 
 
 nessin 
 
 
 Shanghai 
 taels. 
 
 
 Shanghai 
 
 
 Shanghai 
 taels. 
 
 
 
 
 
 taels. 
 
 
 
 
 49.90 
 
 2.60 
 
 
 49.83 
 
 2.10 
 
 
 48.94 
 
 1.40 
 
 
 51.15 
 
 2.80 
 
 
 50.06 
 
 2.66 
 
 
 49.93 
 
 2.40 
 
 
 49.95 
 
 2.60 
 
 
 60.66 
 
 0.80 
 
 
 50.88 
 
 2.30 
 
 
 49.87 
 
 1.90 
 
 
 60.01 
 
 2.00 
 
 
 50.02 
 
 2.50 
 
 
 46.30 
 
 1.90 
 
 
 50.80 
 
 2.75 
 
 
 50.24 
 
 2.76 
 
 
 49.67 
 
 2.20 
 
 
 50.00 
 
 2.60 
 
 
 60.43 
 
 2.70 
 
 
 50.94 
 
 2.75 
 
 
 51.09 
 
 2.75 
 
 
 60.00 
 
 2.00 
 
 
 50.56 
 
 2.10 
 
 
 51.42 
 
 2.80 
 
 
 49.58 
 
 2.10 
 
 
 49.98 
 
 2.60 
 
 
 60.26 
 
 2.50 
 
 
 50.68 
 
 2.30 
 
 
 50.20 
 
 2.75 
 
 
 41.62 
 
 1.66 
 
 
 51.08 
 
 2.80 
 
 
 49.67 
 
 2.10 
 
 
 50.64 
 
 2.50 
 
 
 60.97 
 
 2.75 
 
 
 40 62 
 
 1 60 
 
 
 50 42 
 
 2.65 
 2.80 
 
 
 
 
 
 50.90 
 
 2.80 
 
 
 51.42 
 
 38 
 
 1,890.12 
 
 89.70 
 
 
 49.94 
 
 2.65 
 
 
 
 
 
 
 
 In all, 1,979.82 taels of Shanghai weight, equalling, at the rate of 
 100 taels currency equals 98 taels of Shanghai weight (fixed rate), 
 2,020.22 taels current. 
 
 Memorandum of a similar verification made in May, 1864, at the 
 Agra Bank, Shanghai, which has had the goodness to place .the in- 
 formation at ray disposal : 
 
 (1) 69 shoes weighing 3, 000. 48 taels Shanghai weight. 
 
 (2) Premium for betterness 140.50 ,, „ ,, 
 
 (3) At-V/- 
 
 3,140.98 ,, „ ,, 
 
 3, 205. 01 Shanghai currency taels. 
 
 Memorandum of another verification made in June, 1864, at the 
 agency of the Comptoir d'Escompte : 
 
 (1) 20 shoes weighing. 
 
 (2) " 
 
 Premium for betterness 
 
 980. 54 taels Shanghai weight. 
 48.60 „ 
 
 1, 029. 14 
 
 (3) 
 
 1, 050. 14 Shanghai currency taels. 
 
 Few persons are familiar with these calculations, many are entirely 
 ignorant of them, others have adopted them mechanically without tak- 
 ing any notice of the basis on which they stand. Strange to say, I 
 have never found in Shanghai anyone who has been able to give me 
 conclusive explanations in this particular matter. 
 
 Left to my own reflections and calculations, I have arrived by induc- 
 tion at the following theory, which appears to me to be in perfect 
 accord with the actual state of the case. 
 
 In each of these calculations, which are always the same, there are 
 three striking figures which present themselves: 
 
 (1) The first indicates the weight of the shoes in Sanghai taels. 
 
 (2) The second expresses a difference between two degrees of fine- 
 ness of about 4i to 5 per cent, the real standard of the shoes being 
 98. It appears to me that after deducting this difference of 4.5, the 
 remaining cipher, 93.5, would be the standard touch in the sense indi- 
 cated farther on. 
 
232 
 
 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 In practice this calculation bears a close resemblance to that in use 
 in England, where the standard touch is the invariable basis of price 
 for precious metals — when an ingot is of a touch above or below, it is 
 brought by a calculation to the standard touch by adding or substract- 
 ing a quantity of proportional weight. 
 
 (3) The third cipher indicates the conventional value of the shoes in 
 currency taels of Shanghai at the fixed rate of 100 current taels for 98 
 taels weight of Shanghai taels. 
 
 By analysing and recasting into a European mould these calculations, 
 at first sight so confused, I have arrived at the following results: 
 
 ?Taels weight Shanghai. 1,000 currency taels. ?Taels. 1,000 currency taels. 
 
 2,020.22 1,890.60 or better 2,020.22 1,890.60 
 
 935.60 taels (of a touch of 98) 100 
 
 98 
 
 916.88 taels of i^^ 
 
 ?Taels weight Shanghai. 1,000 currency taels. ?Taels. 
 
 3,205.01 3,000.48 or better 3,205.01 
 
 936.18 taels (of a touch of 98) 100 
 
 1,000 currency taels. 
 3,000.48 
 
 98 
 
 917.14 taels of +^ 
 
 ?Taela weight Shanghai. 1,000 currency tael ?Taela. 
 
 1,050.14 980.54 or tter 1,050.14 
 
 933.72 taels (of a touch of 98) 100 
 
 1,000 currency taels. 
 980.54 
 
 98 
 
 915.05 taels of ^^ 
 
 Mean 935.40 of ^A 
 
 916.66 of iU 
 
 It will be seen that this figure varies infinitely without the variations 
 exceeding some thousandths. 
 
 After a number of weighings and calculations, which have always 
 come to the same result, I believe I can assert that the following pro- 
 portions represent correctly the actual basis of the monetary system 
 of Shanghai. 
 
 A quantity of silver weighing 936.40 Shanghai taels of the denom- 
 ination •j*'/xr — i- e., 91(5.66 Shanghai taels (weight) of the denomination 
 To¥¥ — has the conventional value of 1,000 taels currency. In other 
 words, 1 tael of silver Shanghai weight of the standard denomination 
 
 9354 916f . .,..,. 1 . oi, 
 
 ■" equivalent to 1 tael of bhanghai currency within a 
 
 or 
 
 IS 
 
 9800 "' 1000 
 
 margin of 2 or 8 thousands, more or less. 
 
 If a Shanghai currency tael, instead of being a simple "money of 
 account," were good and proper silver money struck into real coin it 
 would weigh 1 Shanghai tael or 86.64 grams, its standard of touch 
 
 would be 
 
 9161 
 1000' 
 
 and its intrinsic value, francs 7.35tVV (calculating silver 
 
 at the par value of francs 218.89 for 1 kilogram of Htt)- 
 
 Calculation: {x) ? francs=l,000 currency taels. 
 
 1,000 currency taels=916f taels weight of Shanghai fineness. 
 1=36.64 grams. 
 1,000=1 kilogram. 
 1=218.89. 
 10,000=2; (francs) =916fX36.64x218.89 
 
 .916f x36.64X21 8.89 
 10,000 
 
 =735.18 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 233 
 
 intrinsic par value, premium on silver at Paris and freight from Paris 
 to Shanghai not included. 
 
 But as the currency tael of Shanghai is no more than an ideal value, 
 it cannot be better defined than by designating it as a sign represent- 
 ing the proportion of weight and fineness above mentioned. 
 
 Let us now examine if the result obtained at the Calcutta Mint con- 
 firms the theory set forth above. According to this theory, the result 
 ought to be as follows: 
 
 (x) ? rupees =100 currency taels. 
 
 1,000=9161 taelB weight Shanghai fl'neness. 
 
 1=3.143 tolahs fine. 
 916S=1,000 tolahs standard. 
 1=1 rupee. 
 
 (a;) =314.30 rupees. 
 
 Less mintage, 2. 1 per cent 6.60\ „ ,^., 
 
 Loss In casting, 2 per mill 0. 63/ '""^ 
 
 307.07 rupees. 
 
 Commission i per cent. 
 
 Freight H 
 
 Insurance f ,, 
 
 Landing and shipping J ,, 
 
 Contingencies J ,, 
 
 Interest (note below). 
 
 21 „ = 8.07 
 
 Net 299.00 rupees. 
 
 See now the actual result: 
 
 1862 cost at Shanghai. 
 
 Sent first time Tls. 48, 852. 13 = Bs. 149, 796. 6. 11 or Es. 306. 63 per Tls. 100. 
 Sent second time 10, 000 = 30, 574. 11. 9 305. 75 100. 
 
 .Sent third time 16. 500 = 50, 469. 6. 7 305. 88 100. 
 
 Total Tls. 75, 352. 13 = Es. 230, 840. 9. 3 or Rs. 306. 35 average. 
 From this deduct, as above, 2| per cent. = 8. 04 
 
 Es. 298. 31 
 
 (Loss of interest for one month is compensated for by the interest 
 gained on the drafts made against the sycee.) 
 
 To two-thousandths or thereabouts the reality and the theory agree. 
 
 These small differences will always exist; they are unimportant and 
 result from the fact that the purity, and even the standard, of sycee 
 silver is not always the same. 
 
 The conclusions to be drawn from the above calculations have some 
 interest : 
 
 (1) The standard of the currency tael of Shanghai of TKnn is in 
 
 conformity with the rupee standard of 220-240. 
 
 (2) The cost of Shanghai sycee and its out-turn at the mint receiving 
 houses in India stand on fixed bases. 
 
 (3) The intrinsic par value (per Shanghai 100 taels to 2 per mil or 
 thereabouts) of Ks. 814.30 and the net par value of Es. 299 (298 at the 
 lowest) is the rate which represents a minimum out-turn on which an 
 exporter of sycee can count in any case. 
 
 The result of this is that whenever the exchange for three days' 
 sight bank bills on Calcutta or Bombay falls below 298, drafts may be 
 sold and covered by sycee with the absolute certainty of making 
 
234 
 
 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 money. In 1861 and 1862 the course of exchange was often enough 
 in this position. 
 
 Whether or not my theory relative to the monetary system of this 
 place be confirmed or modified by experience, this is certain : The ver- 
 ification of a box of sycee does not present any difficulty, and the 
 operation can be performed without its being necessary to have any- 
 thing to say to or to be done by the comprador. Eules to be followed: 
 
 (1) Verify your weights and assure yourself that your Shanghai tael 
 has the required weight of 36.64 grams. 
 
 (2) Then weigh your shoes; ascertain the total weight and calculate 
 the value, reckoning 100 taels current for 93.54 Shanghai taels 
 (weight). 
 
 In this way you will be sure of finding out to a few thousands the 
 current value of j'our sycee. 
 
 When a great number of shoes pass through one's hands such an 
 operation can not take place every day, but in any well-ordered finan- 
 cial establishment it ought to be made at least once or twice a month, 
 it being of course understood that a daily approximate verification 
 should be made. 
 
 The entire mechanism of China for keeping money in motion is 
 extremely crude and inconvenient. Silver is ordinarily packed in 
 boxes, each containing about 60 shoes, weighing altogether a little 
 over 3,000 taels or 110 kilograms. To carry one such case two coolies 
 must be paid, by the trip, at the rate of 50 cash (25 centimes French 
 money) a head. 
 
 To paj' 100,000 taels (800,000 francs) 66 coolies are consequently 
 required. 
 
 From a bank to a private person this expenditure is charged to the 
 latter; from one bank to another, to the one bujdng. 
 
 One can readily imagine the inconveniences of such a system. The 
 simplest means of obviating it would be the establishment of a clearing 
 house, which would, so to speak, represent generally the coffers of all 
 the bankers and merchants, through the medium of which they would 
 effect all their receipts and payments; but the place is not yet ripe for 
 institutions of this sort. 
 
 Some of the English banks issue bank notes payable to bearer, but 
 I do not know to what extent or if the notes issued remain long in 
 circulation. 
 
 Shanghai, JuVy^ I86J1.. 
 
 Weighing trial, August, 1880. 
 
 SHANGHAI TAEL. 
 
 Weight in grains. 
 
 Weight in grams (0.0648=1 grain). 
 
 (1) According to Mr. Veitch, o£ the Hong- 
 
 kong and Shanghai Banking Cor- 
 poration 565. 973 
 
 (2) By weighing trials at this oflce ob- 
 
 tained 564. 229 
 
 (3) Average 565.101 
 
 (1) No information obtainable. 
 
 (2) By calculation of Mr. Veitch's state- 
 
 ment,666.973grainsx0.0648gram.. 36.6750504 
 
 (3) By calculation of what I found the 
 
 Shanghai tael, 564.229 grains x 
 0.0648 gram 36.562 
 
 (4) By weighing trials at this office ob- 
 
 tained 3§. 555 
 
 (5) Average 36.59735 
 
GOLD STANDARB IN INTERNATIONAL TRADE. 
 
 235 
 
 Weighing trial, August, i,?,SO— Continued. 
 
 HAIKWAN TAEL. 
 
 Weight in grains. 
 
 (1) According to the Hongljong and 
 
 Shanghai Banking Corporation, 
 102.90 Shanghai taels=100 haiijwan 
 taels, and 1 Shanghai tael=565.973 
 grains; thus, 1 Haikwan tael 582. 3862 
 
 (2) According to Mr. Veitch,ol the Hong- 
 
 kong and Shanghai Banking Cor- 
 poration 581.630 
 
 (3) By weighing trials at this office ob- 
 
 tained 581. 938 
 
 (4) Average 581.984 
 
 Weight in grams (0,0648=1 grain). 
 
 (1) No information obtainable. 
 
 (2) By calculation of Mr. Veitch's state- 
 
 ment, 581.680 grainsxO.0648 gram. . 37. 689624 
 
 (3) By calculation of what I found the 
 
 Haikwan tael, 681.938 grainsx 0.0648 
 
 gram 37.7096 
 
 (4) By weighing trials at this office ob- 
 
 tained 37. 686 
 
 (5) Average 37.69501 
 
 K'U-P'ING TAEL. 
 
 (1) According to the Hongkong and 
 
 Shanghai Banking Corporation, 
 101.80 Shanghai taels=100 K'u- 
 p'ing taels, and 1 Shanghai tael= 
 565.973 grains; thus, 1 K'u-p'ing 
 tael 576.160514 
 
 (2) TheHongkongand ShanghaiBank- 
 
 ing Corporation can not give any 
 information respecting the K'u- 
 p'ing tael. 
 By weighing trials at this office 
 obtained 576.339 
 
 (3) 
 
 (4) Average 576.2497 
 
 (1) No information obtainable. 
 
 (2) By calculation of weight given by 
 
 Hongkong and Shanghai Banking 
 Corporation, 576.1605 grainsxO.0648 
 gram 37.3352 
 
 (3) By calculation of what I found the 
 
 K'u-p'ing tael, 576.339 grainsxO.0648 
 gram 37.336 
 
 (4) By weighing trials at this office ob- 
 
 tained witn two different weights — 
 
 Itael weight 37.320 
 
 6 mace and 4 mace (=1 tael) 37.258 
 
 (5) Average 37.3173 
 
 TOUCH OR FINENESS. 
 
 There is no positive standard of touch or fineness for the different 
 ta;els. 
 
 g. h. noetzli. 
 Statistical Department, 
 
 Shanghai, August 28, 1880. 
 
 New weighing trial, September, 1880. 
 SHANGHAI TAEL. 
 
 Weight in grains. 
 
 Weight in grams (0.0648=1 grain). 
 
 
 664. 954 
 
 (1) 1 tael weighed 
 
 36.690 
 
 
 1, 130. 201 
 
 73.117 
 
 ltael= 
 
 565. 100 
 
 i taei= 
 
 36.568 
 
 
 1, 695. 448 
 
 3 taels weighed 
 
 109. 777 
 
 ltael= 
 
 665.149 
 
 ltael = 
 
 36. 592 
 
 
 282. 614 
 
 
 18.275 
 
 1 tael= 
 
 565.228 
 
 1 tael= 
 
 36.550 
 
 Average 
 
 565.117 
 
 Average 
 
 No information obtainable as to the 
 weight in grams. 
 
 86.587 
 
 (2) According to the information of 
 
 
 (2) By calculation of Mr. Veitch's state- 
 
 
 Mr. Veitoh, of the Hongkong and 
 
 
 ment, 565.973 grainsxO.0648 gram. 
 
 36.676 
 
 Shanghai Banking Corporation.. 
 (3) By my first weighing trial, 28th Au- 
 
 565.973 
 
 
 
 
 (8) By my first weighing trial, 28th Au- 
 
 
 gust, 1880 (weights procured from 
 Hongkong and Shanghai Bank- 
 
 
 gust, 1880 
 
 36. 655 
 
 
 
 
 ing Corporation) 
 
 564.229 
 
 (4) Bycalctilation,565.117grainsx0.0648 
 
 
 
 
 gram 
 
 36. 6195 
 
 The fundamental difficulty is that the weights do not agree among 
 themselves, so that it is impossible to know which is the correct weight. 
 
236 
 
 GOLD STANDABD IN INTERNATIONAL TRADE. 
 
 Oa the whole, I would not hesitate to take 565.10 grains and 36.56 
 grams as the weight of a Shanghai tael. 
 
 HAIKWAN TAEL. 
 
 Weight in grains, 
 
 (1) Itael weighed 682.031 
 
 2 taels weighed 1, 163. 861 
 
 1 tael= 681. 930 
 
 3 taels weighed 1, 743. 741 
 
 ltael= B81.247 
 
 9 mace and 1 mace ( =1 tael) weighed 584. 309 
 
 7 mace and 8 mace (= 1 tael j weighed 682. 864 
 
 6maceand4mace (=ltael)weighed 580.938 
 5 mace, 4 mace, and 1 mace 
 
 (= Itael) weighed 584.463 
 
 Average 582.2207 
 
 (2) According to the Hongkong and 
 
 Shanghai Banking Corporation, 
 102.90 Shanghai taels=100 Haik- 
 wan taels, and 1 Shanghai tael 
 =565.973 grains; thus, 1 Haikwan 
 tael 582.3862 
 
 (3) Mr. Veitch, of the Hongkong and 
 
 Shanghai Banking Corporation, 
 
 gives .• 581.630 
 
 (4) By my flr.st weighing trial, 28th Au- 
 
 gust, 1880 581.938 
 
 (5) If 102.90 Shanghai taels=100 Haik- 
 
 wan taeis, and 1 Shanghai tael, as 
 found by the new weighing trial, 
 =665.117 grains, then 1 Haikwan 
 taelis 581.5053 
 
 Weight in grams (0.0648=1 grain). 
 
 (1) Itaelweighed 37.677 
 
 2 taels weighed 75. 360 
 
 ltael= 37.675 
 
 3 taels weighed 112,894 
 
 1 tael= 37. 631 
 
 9maceandlmaee (=1 tael) weighed 37.845 
 
 7maceand3mace(=l tael ) w eighed 37. 740 
 
 6 mace and 4 mace ( =1 tael) weighed 37. 602 
 6 mace, 4 mace, and 1 mace 
 
 (=1 tael) weighed 37.847 
 
 Average 37.6965 
 
 No information obtainable as t» the 
 weight in grams. 
 
 (2) Bv fniculation, 582.3862 grains 
 
 xO 0618 gram 37.7386 
 
 (3) Bycaloulation,581.630gTainsx0.0648 
 
 gram 37.6896 
 
 (4) By my first weighing trial, 28th Au- 
 
 gust, 1880 37.686 
 
 (6) By calculation, 581.5053 grains 
 
 xO.0648 gram 37.6815 
 
 The weights (a new set) for the new weighing trial were obtained 
 from the Haikwan Bank, after some delay for the purpose of having 
 them assayed. The above figures, however, show how imperfectly the 
 task was performed. I am under the impression that the bank forgot 
 to have the weights assayed, and when I called for them was ashamed 
 to say so. I would be inclined to take 681.938 grains and 37.686 
 grams as the most approximate. This weight is thirty one-hundredths 
 grain above Mr. Veitch's statement, thirty one-hundredths grain below 
 the found average, and equal to the 2 taels weight. 
 
 K'U-P'ING TAEL. 
 
 Weight in grains. 
 
 Weight in grams (0.0648=1 grain). 
 
 (1)1 tael weighed 
 
 576. 463 
 
 (1) 1 tael weighed 
 
 2 taels weighed 
 
 37 254 
 
 2 taels weighed 
 
 1,151.846 
 
 74.560 
 
 ltael= 
 
 676.923 
 
 ltael= 
 
 37. '275 
 
 
 1,726.962 
 675.654 
 
 
 
 1 tael= 
 
 ltael= 
 
 37.323 
 
 8 mace and 2 mace (=1 tael) 
 
 
 8 mace and 2 mace (=1 tael) 
 
 
 weighed 
 
 675.494 
 
 weighed 
 
 87.257 
 
 7 mace and 3 mace (^1 tael) 
 
 
 7 mace and 3 mace (=1 tael) 
 
 
 weighed 
 
 676.671 
 
 weighed 
 
 87.330 
 
 5 mace, 3 mace, and 2 mace 
 
 
 6 mace, 3 mace, and 2 mace (=1 
 
 
 
 576.309 
 
 
 37. 314 
 
 
 
 
 Average 
 
 675.849 
 
 Average 
 
 No information obtainable as to the 
 weight in grams. 
 
 37.297 
 
 (2) According to the Hongkong and 
 
 
 (2) By calculation, 576.1605 grains X 
 
 
 Shanghai Banking Corporation, 
 
 
 0.0648 gram 
 
 37.3352 
 
 101.80 Shanghai taels = 100 
 
 
 
 
 K'u-p'ing tiiels, and 1 Shanghai 
 
 
 
 
 tael=665.973 grains; thus, 1 
 
 
 
 
 K'u-p'ing tael 
 
 576.1606 
 
 
 
 (2a) At 666.117 grains for the Shanghai 
 
 
 (20) By calculation, 576.289 grains x 
 
 
 tael, 1 K'u-p'ing tael would be. . 
 
 575. 289 
 
 0.0648 gram 
 
 37. 2787 
 
 (3) By my first weighing trial, 28th 
 
 (3) By calculation of my first weigh- 
 
 
 August, 1880 , 
 
 676. 339 
 
 ing trial, 576.839 grains x 0.0648 
 
 
 
 
 gram 
 
 37. 346 
 
 (4) Dr. S. Wells Williams, in his 
 
 
 (4) By my first weighing trial, 28th 1 
 August, 1880 J 
 
 37. 820 
 
 Chinese Commercial Guide, page 
 
 
 37. 258 
 
 '276, gives 
 
 679 
 
 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 237 
 
 The weights used in the above trial were procured from the Haik- 
 wan Bank, after waiting for some time to have them assayed; but 
 here also they were found to differ among themselves. 1 would be 
 inclined to take the result of the weighings of the 2 taels and 3 taels— 
 575.923 and 575.654 grains, giving an average of 575.788 grains, 
 37.275 and 37.323 grams, giving an average of 37.299 grams — as the 
 weight most likely to be correct. 
 
 TOUCH OR FINENESS. 
 
 There is no standard as to touch or fineness for the different taels. 
 
 g. h. noetzli. 
 Statistical Department, 
 
 Sha/iighm, 30th September^ 1880. 
 
 Memorandnim. 
 
 1. The Shanghai market {or £ktei-p''ing) tael (not a weight). — Fine- 
 ness —2 or 2 per cent discount. 
 
 The Shanghai or Kuei-p'ing tael used in the record of values has no 
 corresponding weight. There are copper or brass weights for Haik- 
 wan or Ssu-p'ing taels, for K'u-p'ing taels, and for Ts'ao-p'ing taels; 
 but I am told that there are no copper or brass weights called Kuei- 
 p'ing weights. Shanghai sycee is known as tou-kuei yin, also as chiu- 
 pa yin. 
 
 2. The Kuei-p'ing tael is not a weight, but is the result of a calcu- 
 lation, the elements in which are the actual weight of the silver in 
 Ts'ao-p'ing taels. The addition to this of whatever percentage is 
 indorsed by the Kung-ku on each shoe for its quality or betterness. 
 The conversion of the total of the two sums into the so-called Kuei- 
 p'ing taels at the rate Ts'ao-p'ing taels 98 = Kuei-p'ing taels 100. 
 
 For example, a shoe of sycee that has to be valued is taken to the 
 Kung-ku office; there the weight, say, 50 Ts'ao-p'ing taels, is written 
 on the shoe; also the premium for quality, say, Ts'ao-p'ing taels 2.70. 
 The owner can then say that he has 50 Ts'ao-p'ing taels of sycee of 
 2.70 premium. Should he wish, however, to express the value of his 
 sycee in the so-called Kuei-p'ing tael, the total of the two figures must 
 be divided by 0.98 (i»A) or multiplied by VV, e. g., 1 shoe 50 Ts'ao- 
 p'ing taels weight + premium Ts'ao-p'ing taels 2.70 = Ts'ao-p'ing 
 taels 52.70 -f- 0.98 = Kuei-p'ing taels 63.77. 
 
 Ts'ao-p'ing taels. 
 
 Weight 50. 00 
 
 Premium 2. 70 
 
 .98) 52.70 (53.77 
 490 
 
 370 
 294 
 
 760 
 686 
 
 740 
 686 
 
238 
 
 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 The following is a copy of the tally of box No. 1 of the remittance 
 of sycee from Chefoo ex Fungshun on 26th July last, the valuation 
 being made at the Haikwan Bank on the 27th July by deputies from 
 the Kung-ku office: 
 
 Shoes. 
 
 Actual 
 weight. 
 
 Premium for quality of sycee 
 per shoe. 
 
 Shoes. 
 
 Actual 
 weight. 
 
 Premium for quality of sycee 
 per shoe. 
 
 
 Ts'ao-p'ing 
 
 Ts'ao-v'ing tads. 
 
 
 'n'ao-p'ing 
 tads. 
 
 Ts'ao-p'ing taels. 
 
 1 
 
 51. 37 
 
 2.80 
 
 
 22.... 
 
 50.10 
 
 2.70 
 
 
 2 
 
 50.97 
 
 
 3at2.8e=Tl8. 8.40 
 
 23.... 
 
 50.97 
 
 
 
 3 
 
 50.82 
 
 " 
 
 
 24.... 
 
 SO. 60 
 
 
 
 4 
 
 50,03 
 
 2.76 
 
 
 25.... 
 
 50.60 
 
 
 
 5 
 
 60.02 
 
 
 
 26.... 
 
 50.13 
 
 
 
 6 
 
 50.92 
 
 " 
 
 
 27.... 
 
 51.15 
 
 
 
 7 
 
 50.72 
 
 
 
 28.... 
 
 50.80 
 
 
 
 8 
 
 50.72 
 
 '* 
 
 
 29.... 
 
 60.19 
 
 
 
 9 
 
 50.84 
 
 " 
 
 
 30.... 
 
 50.24 
 
 
 17 at 2.70=Tls. 45.90 
 
 10 
 
 50.50 
 
 '* 
 
 
 31.... 
 
 50.20 
 
 
 
 11 
 
 49.95 
 
 '* 
 
 
 32.... 
 
 60.84 
 
 
 
 12 
 
 50.21 
 
 " 
 
 18 at 2.75=Tls. 49.50 
 
 33.... 
 
 49.94 
 
 
 
 13 
 
 50.36 
 
 " 
 
 
 34.... 
 
 50.28 
 
 
 
 14 
 
 49.90 
 
 •' 
 
 
 35.... 
 
 49.87 
 
 
 
 15 
 
 50.94 
 
 " 
 
 
 36.... 
 
 51.26 
 
 
 
 16 
 
 49.87 
 
 " 
 
 
 37.... 
 
 50.18 
 
 
 
 17 
 
 50.81 
 
 " 
 
 
 38.... 
 
 50.95 
 
 
 
 18 
 
 19 
 
 51.30 
 60.02 
 
 w 
 
 
 39.... 
 40.... 
 
 50.14 
 50.30 
 
 ^:P\ 2at2.65=Tls. 5.30 
 
 20 
 
 21 
 
 50.36 
 50.02 
 
 
 
 
 Total TiTomiunil09 lOtaels 
 
 •i 
 
 
 
 2, 019. 38 total weight. 
 
 
 
 
 109. 10 
 
 premium in Ts'ao-p'ing taels. 
 (2,171.918 
 
 
 .98) 2,128.48 
 
 
 
 
 196 
 
 
 
 
 168 
 
 
 
 
 98 
 
 
 
 
 704 
 
 
 
 
 686 
 
 
 
 
 188 
 
 
 
 
 98 
 
 
 
 
 900 
 
 
 
 
 882 
 
 
 
 
 180 
 
 
 
 
 98 
 
 
 
 
 820 
 
 
 
 
 784 
 
 
 
 
 36 
 
 The object of the two foregoing operations is, first, to reduce sycee 
 of a given premium to its equivalent in terms of a sycee without pre- 
 mium, and, second, to reduce that figure to its equivalent in terms of 
 a sycee that is either 2 per cent inferior to sycee that bears no pre- 
 mium or that is subject to a discount in weighing. 
 
 I have been told that 98 Ts'ao-p'ing taels are taken to equal 100 taels 
 kuei yin as a mere discount on weight. I have also been told that the 
 relation of 98 to 100 is set down to the inferiority of the original kuei 
 yin sycee as compared with the present standard of the Kung-ku office. 
 In Edkins's Progressive Lessons in Chinese, page 29, the following 
 definition is given: "Kiu-pah yin, Shanghai sycee, literally, sycee at 
 2 per cent discount." 
 
 On inquiry at the Kung-ku office" I obtained a memorandum in 
 
 « I have not been able to find any confirmation ot the statement that Shanghai 
 sycee is sycee of the dollar purity; my authority from the Kung-ku office says that 
 it differs s<5mewhat in fineness from the dollar. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 239 
 
 answer to certain questions to the effect that the weight adopted by the 
 Kung-ku is the Ts'ao-p'ing weight used, before the opening of Shang- 
 hai to foreign trade, by the merchants in the pulse and grain trade; that 
 the sycee used by the trade was called yiian-ssii yin, and was cast in 
 small round cakes of about a tael's weight each, which were current 
 much as dollars now are; that it was also called tou-kuei yin, because 
 it was the regulation sycee of the pulse and grain trade; and that com- 
 pared with the present standard of the Kung-ku, kuei yin sycee would 
 have its quality expressed by the term chii hsui erh shi — that is, each 
 100 taels weight of such sycee would have a discount of 2 taels and be 
 taken only as 98 taels. 
 
 On the Kung-ku scale of touches, then, this yiian-ssu yin would 
 have its standard expressed by minus two (—2), e. g. : 
 
 so 
 
 be a 
 
 ■P - 
 Percentages.. (-h6. 168), -f 6 (-f-5.6) +5, +4, +S, +2, +1, 0, -1, -2, -3, 
 
 
 a 
 
 Degrees of bettemess. 
 
 Degrees of worseness. 
 
 The scale proceeds by 5 candarins per 60 taels or 1 mace per 100 taels, 
 but for sake of brevity the whole numbers only are given in the illus- 
 tration. 
 
 The yiian-ssii or kuei yin is no longer met with, the current sycee 
 varying from 4 to 6 degrees of betterness, but the denomination of 
 value is kept up, and all values are expressed in their equivalents in 
 the imaginary kuei yin. 
 
 The term Kuei-p'ing seems somewhat misleading (there being no 
 weight of that name), so, instead of writing 100 taels Kuei-p'ing, we 
 might preferably write 100 taels of kuei yin. 
 
 The following calculation is submitted for finding the rate of ex- 
 change between, say, Ts'ao-p'ing sycee and kuei yin: 
 
 at 
 
 O m 
 
 m 
 
 <o a) 
 
 ftps 
 
 
 Percentages. 
 
 
 a. 
 
 (106.168) Haikwan. 
 
 To find the relation which sycee of the 
 
 b. 
 
 106. 
 
 d quality bears to the sycee of the j 
 
 c. 
 
 (105.6) K'u-p'ing. 
 
 quality: 
 
 d. 
 e. 
 
 105 Ts'ao-p'ing. 
 104 
 
 (,;=S.) or 
 
 f- 
 
 103 
 
 100?=98a- 
 
 g- 
 
 102 
 
 105a;=100(Z 
 
 h. 
 
 101 
 
 d=Aw. 1.071428; 
 100jXl05:cXd_i05j 
 
 X. 
 
 100 
 
 98a;Xl00ci 98 
 
 i. 
 
 99 
 
 Or by analysis: 
 
 J- 
 
 98 Kuei yin. 
 
 100rf=105a; 
 
 k. 
 
 97 
 
 98a;=10q; 
 ^_100i 
 98 
 100d_105Xl00i 
 98 
 
 98 
 
240 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 no 
 
 One of the premises of the calculation is tha.tj=,r--^x; this is merely 
 a comparison of percentages. It follows that 100 taels of the 7 quality 
 equal 98 taels of the x quality, and that x=-^; and 1 tael of the x 
 
 9r 
 
 quality equals -r^ taels of the,;' quality: 
 
 ._98 
 100;=98a; 
 "98'-'' 
 
 In the foregoing calculations sycee of different grades has had its 
 value expressed in terms of sycee of the x quality by adding the per- 
 centage of premium to the weight; by the above formula x equals 
 
 — -_7, so whatever coefficient there may be of x, whether it be 52.70, 
 as in the first example, or 2,128'.48, as in the second example, may be 
 
 multiplied by -j-^j in lieu of x, the answer being the equivalent in kuei 
 
 98 
 
 yin sycee. In the calculations, in place of multiplying by 100 and 
 dividing by 98 a step is saved by dividing by the decimal 0.98. 
 
 The Chinese method of making the calculation on the suan-pan to 
 find the equivalent in kuei yin of 100 Ts'ao-p'ing taels weight of sycee 
 at 5 per cent premium is — 
 
 Ts'ao-p'ing taels. 
 
 To 100.00 
 
 Add for premium 5. 00 
 
 For 100 taels add 2 per cent 2. 00 called shto shang sh^n chia 6rh. 
 
 For 7 taels add 2 per cent 0. 14 
 
 For 0. 14 taels add 2 per cent 0. 0028 
 
 For 0.0028 taels add 2 per cent 0. 000056 
 
 Ts'ao-p'ing taels 107. 142856 -1- 
 
 The process may be carried on until the repeating decimal 0.142857 is 
 obtained in the answer. The direct division of 105 by 98 gives the 
 same answer: 107.142857, 142857, etc. 
 
 3. Fineness. — I was told at the Oriental Bank that through remit- 
 tances to India the average fineness of Shanghai sycee, as assayed by 
 the mints in India, was found to be 982, and at the Comptoir d'Escompte 
 that it was 980 or 982. The comprador of the Oriental Bank Corpora- 
 tion stated that the Chinese term 2.70 premium (per 60 taels) corre- 
 sponded to 986," but it is hardly worth while to make a calculation on 
 the basis of a single statement. Were, however,, a certified statement 
 obtainable of the out-turn as to fineness of a shipment of sycee in 
 which each shoe had been marked by the Kung-ku as of a given pre- 
 
 « My authority from the Kung-ku office considers that- 
 
 
 
 2.70 corresponds to 988 
 
 2.95 corresponds to 993 
 
 3.15 corresponds to 997 
 
 2.75 989 
 
 3.00 994 
 
 3.20 998 
 
 2.80 990 
 
 3.05 995 
 
 3.25 999 
 
 2.85 991 
 
 3.10 996 
 
 3.30 1000 
 
 2.90 992 
 
 
 
 taking as his basis that foreign bar silver is stamped as 998; but never naving had 
 occasion to make the calculation, gives these figures as approximate only. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 241 
 
 mium — say, 2.70 — then a basis would be obtained from which the 
 foreign expressions corresponding to the terms for betterness of sycee, 
 such as 2.6, 2.65, 2.7, 2.75, etc., could be calculated and given in 
 thousandths (||H)- 
 
 The out-turn of several remittances to India can be referred to, but 
 the records do not state that the sycee experimented on was of a uni- 
 form touch. In the foregoing tally of 40 shoes it is seen that the 
 shoes of sycee in one box were of four different grades of fineness. 
 A "lot" of sycee may contain shoes from different provinces and 
 varying in betterness from 2 taels or less up to 3 taels premium (per 
 50 taels weight, or double these figures per 100 taels weight). 
 
 I am further told that the smelting establishments wnich convert 
 bar silver or dollars into sycee, and which recast certain sycee for the 
 percentage of gold contained in it, have no fixed standard of fineness; 
 the shoes turned out will enter into the currency of the place whether 
 they be of 2.6, 2.65, 2.7, or 2.76 touch. 
 
 It appears, then, that in the absence of further information as to the 
 Chinese standard of the sycee sent to India no conclusion can be come 
 to as to the proper foreign equivalents for the terms in the Chinese 
 scale of touches. 
 
 The required touch or premium for K'u-p'ing taels is taken as 2.8 
 per 50 taels, or 5.6 taels per 100 taels weight; it would appear, then, 
 that the fineness of K'u-p'ing sycee could be ascertained approximately 
 by having a number of shoes, certified to by the Kung-ku as being of 
 this exact quality, submitted to a foreign mint for assay. From the 
 result the entire Chinese scale of touches could be calculated, or the 
 same experiment might be made with sycee picked at the Ts'ao-p'ing 
 or at the Haikwan standard; in any case a basis would be obtained for 
 calculating the requirements for a coin equivalent to the Haikwan, 
 K'u-p'ing, Ts'ao-p'ing, or Shanghai tael. It would, however, still be 
 a question whether the Kung-ku offices at different places have a com- 
 mon standard of valuation,'' and whether a valuation made by an unof- 
 ficial Kung-ku office would be accepted at a provincial treasury. 
 
 4. Haikwan taels. — 
 
 Weight each 581.47 grains. 
 
 Fineness 6 Haikwan taels premium per 100. 
 
 Distinction has to be made between a tael's weight and a tael's value. 
 
 As to weight: I procured from the Haikwan Bank manager a set of 
 weights called kuan or Ssii-p'ing fa-ma, made of brass, with the 
 exception of the weights for candarins, which are of ivory in small 
 strips. The 50-tael weight has cast on it the characters (Chinese). 
 
 These weights I have compared with a set of troy weights belonging 
 to the Comptoir d'Escompte, obtaining results varying from 581.71 
 grains to 581.60 grains per tael; but as in weighing the subdivisions 
 or lesser Haikwan weights had to be used, which were found not to 
 agree closely with the 50-tael weight, it may be better to arrive at the 
 
 «I have been informed since writing the above that sycee, considered at Shanghai 
 to bear a premimii of 3.2 taels per 100, at Chefoo would only be considered as of the 
 unity standard — that is, as having no premium and no discount. 
 
 Shanghai premium, 3.2 taels said to equal unity standard at Chefoo. 
 Shanghai premium, 4.8 taels said to equal unity standard at Hankow. 
 Shanghai premium, 2.7 taels said to equal unity standard at Soochow. 
 
 S. Doc. 128, 58-3 16 
 
242 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 weight of the Haikwan tael by multiplying the weight obtained for 
 the Ts'ao-p'ing tael, viz, 565.637 grains, by the accepted proportion, 
 100 Haikwan taels weigh 102.80 Ts'ao-p'ing taels. 
 
 565.637X102.80=581.47 grains, weight of 1 Haikwan tael. 
 1 Haikwan tael weighs (or should weigh) 581.47 grains. 
 
 At the Kung-ku office the Haikwan 50-tael weight was considered 
 to be the most reliable of the set. Furthermore, its ascertained 
 weight in Ts'ao-p'ing taels agrees with the figure used by the Haik- 
 wan Bank in its calculation on page 23. 
 
 By using a set of gram weights belonging to the Comptoir I found 
 1 Haikwan tael to weigh 37.68 grams, and on another trial to weigh 
 37.66 grams. The first result is verified as follows: Multiply the 
 weight taken for the Ts'ao-p'ing tael, 36.6527 grams, by the propor- 
 tion 100 Haikwan taels weigh 101.80 Ts'ao-p'ing taels. 
 
 36.6527X102.80=37.6789 grams, weight of 1 Haikwan tael. 
 1 Haikwan tael weighs (or should weigh) 37.68 grams. 
 
 If the figures 37.6789 be multiplied by 15.43234:9 (the number of 
 grains equivalent to a gram) the result is 581.47 grains — the weight 
 submitted above for the Haikwan tael. 
 
 In the Reports on the Haikwan Banking System, page 100, it is 
 stated that tael weights from the [Wuhu] Haikwan Bank were weighed 
 by Mr. Tain tor, the Haikwan tael being found to weigh 582.94 grains 
 troy, and the Wuhu tael, 565.7035 grains. On page 97, Mr. Kopsch 
 gives the weight of 1 Haikwan tael as 38.08 grams nearly; multiplj'ing 
 this figure by 15.432349, the equivalent 587.66 grains is obtained. 
 According to Mr. Taintor, 1 Haikwan tael weighed 582.94 grains; 
 according to Mr. Kopsch, 1 Haikwan tael weighed 587.66 grains. As 
 given above, 1 Haikwan tael weighs 581.47 grains. The 50-tael 
 weighl mentioned above was found at the Kung-ku office to weigh 
 51.40 Ts'ao-p'ing taels and indorsed to that effect; hence, 100 Haikwan 
 taels weigh 102.80 Ts'ao-p'ing taels. 
 
 The Haikwan tael as a denomination of value: In practice in Shang- 
 hai the Haikwan tael is not a denomination of weight, but of value; it 
 ma.j theoretically be a tael's weight of sj^cee of 6 taels touch or pre- 
 mium per 100; but as such sycee is not generally current at Shanghai 
 the equivalent in Shanghai taels is accepted in the collection of duties, 
 the calculation being — 
 
 As the Haikwan tael weight of brass bears to the Ts'ao-p'ing tael weight the propor- 
 tion 100:102.80: Shanghai 
 
 Ts'ao-p'ing taels. 
 
 To 100.000 
 
 Add for difference in weight 2. 800 
 
 Add for touch or premium, 6X 102.8 Haikwan taels 6. 168 
 
 Meltage fee, etc 204 
 
 Ts'ao-p'ing taels 109. 172 
 
 (That is, 109.172 Ts'ao-p'ing taels (without premium), less meltage fee, 
 equals 100 Haikwan taels of the standard 6 taels premium.) 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 243 
 
 Ninety-eight Ts'ao-p'ing taels being taken to equal 100 Shanghai 
 taels, we have the proportion — 
 
 Ts'ao-p'ing Tls. 98 : Shanghai Tls. 100 :: Ts'ao-p'ing Tls. 109.172 : lll.-l 
 98) 109.172 (111.4 
 98 
 
 111 
 
 98 
 
 137 
 98 
 
 392 
 392 
 
 Haikwan taels, 100=Shanghai taels, 111.4. 
 
 To pay 100 Haiiswan taels one must hand the bank sycee or dollars or 
 cash at the market rate, or the tael notes issued by the foreign banks, to 
 the value of lllA Shanghai taels. The calculation, however, includes 
 a meltage fee, and the item of premium, 6 taels, is in excess of what 
 is generally required, 2.8 taels per weight of 60 taels, or 5.6 taels per 
 weight of 100 taels, being said to be the standard for K'u-p'ing, or 
 provincial treasurer's, sycee." "Why the meltage fee should be charged 
 when the bank is not forced to take a given weight of dollars is not 
 apparent. Were the meltage, etc., fee dropped out and the standard 
 for K'u-p'ing sjxee taken, the calculation would be — 
 
 100 + 2.80 + 5.60 = 108.40^.98 = 110.61 Shanghai taels. 
 
 The calculation given above is that communicated by the Haikwan 
 Bank manager and printed in the Shanghai Report on the Haikwan 
 Banking System, page 111. 
 
 5. JPu-pHnff taels — 
 
 Weight, each 575.82 grains. 
 
 Fineness 5.60 taels per 100. 
 
 Distinction has to be made between a tael's weight and a tael's value. 
 
 As to weight: I procured from the Haikwan Bank a set of brass 
 weights with the characters K'u-p'ing cut on them, which were com- 
 pared for me at the Kung-ku office with the sets of troy and gram 
 weights from the Comptoir as well as with the Kung-ku Ts'ao-p'ing 
 weights. It was found that the 50-tael K'u-p'ing weight weighed 50. 90 
 Ts'ao-p'ing taels, and it was indorsed accordingly; hence — 
 100 K'u-p'ing taels weigh 101.80 Ts'ao-p'ing taels; 
 
 also that 1 K'u-p'ing tael weighed 575.812 grains. 
 
 For the sake of uniformity we may multiply the weight obtained for 
 the Ts'ao-p'ing tael, viz, 565.637 grains, by 101.80, the proportion 
 given above, and take the result, 675.818 grains, as the weight of the 
 K'u-p'ing tael. 
 
 1 K'u-p'ing tael weighs (or should weigh) 575.82 grains. 
 
 In grams the K'u-p'ing tael was found to weigh 37.30. If, however, 
 the weight of the Ts'ao-p'ing tael in grams, 36.6627, be multiplied by 
 101.80, the fixed proportion, the result obtained is 37.312 grams; the 
 
 « 2. 8 or 5.6 is the touch used in calculating the oflBcial rate of exchange between 
 K'u-p'ing and Shanghai taels; 2.8 is, however, considerably below the pure silver 
 which the Chinese may lay claim to collect. 
 
244 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 same figure is obtained by dividing 675.818 by 15.432349, to reduce 
 grains to grams. 
 
 1 K'u-p'ing tael weighs (or should weigh) 37.312 grams. 
 
 As regards value and fineness: The standard for K'u-p'ing sycee is 
 said to be 2.80 taels premium per shoe of 50 taels weight, or 5.60 taels 
 per 100 taels weight. 
 
 The rate for converting K'u-p'ing into Shanghai taels is 100 K'u- 
 p'ing taels = 109.6 Shanghai (kueiyin) taels, and is arrived at as shown 
 in the following calculation: 
 
 As the K'u-p'ing tael weight of brass bears to the Ts'ao-p'ing tael 
 weight the proportion 100 : 101.80, so — 
 
 Shanghai 
 Ts'ao-p'ing taels. 
 
 To 100.00 
 
 Add for difference in weight 1. 80 
 
 Add for touch or premium 5.60 
 
 Ts'ao-p'ing taels 107.40 
 
 (That is, 107.40 Ts'ao-p'ing taels (without premium) equal 100 
 K'u-p'ing taels of the standard 6.60 taels premium.) 
 
 Ninety-eight Ts'ao-p'in^ taels being taken to equal 100 Shanghai 
 taels, we have the proportion — 
 
 Ts'ao-p'ing Tls. 98 : Shanghai Tls. 100 :: Ts'ao-p'ing Tls. 107.40 : 109.6. 
 98) 107.40 (109.592 
 98 
 
 940 
 
 882 
 
 580 
 490 
 
 900 
 882 
 
 180 
 100 K'u-p'ing taels=kuei yin or 109.60 Shanghai taels. 
 
 The above calculation differs from that for the conversion of Haik- 
 wan into Shanghai taels in that the premium is considered as expressed 
 in Ts'ao-p'ing taels, and that no meltage fee enters into the calculation. 
 
 I have been told in the Haikwan Bank that a remittance would not 
 necessarily be of sycee picked for the 2.80 touch. To remit 2,000 
 K'u-p'ing taels, the sycee would be put up in packets of 100 K'u-p'ing 
 taels weight each, the cover of the packet would be marked with the 
 touch of the sycee, say 2.75 taels per 50 taels, or 6.50 taels per packet; 
 the difference between 5.50 taels and the standard 6.60 taels, viz, 1 
 mace for each packet, would have to be made good, and to make up 
 the 2,000 K'u-p'ing taels an additional 2 K'u-p'ing taels weight of 
 broken sycee would have to be put in the box. 
 
 On the 21st or 22d ultimo 1 took advantage of the Kung-ku apprais- 
 ers being at the Haikwan Bank to have compared a bank weight, 
 marked with Chinese characters expressing the fact that it is the 
 standard treasury weight of that locality, with the weights brought 
 from the Kung-ku office, with the result that it weighed 101.80 Ts'ao- 
 p'ing taels. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 245 
 
 6. Ts''ao-pHng tends — 
 
 Weight each 565.637 grains. 
 
 Ti^npTipsiH i 5-^0 taels per 100 Kung-]£u standard. 
 
 ^^'' i 5.00 taels per 100 official. 
 
 As to weight: The Ts'ao-p'ing tael weight « of brass is the basis of 
 all monetary calculations when the value of sycee is in question, it 
 being used for weighing the sycee. 
 
 I have compared the troy weights of the Comptoir with the Ts'ao- 
 p'ing weights at the Comptoir, the Haikwan Bank, and the Kung-ku 
 office, with results varying from 565.72 grains to 565.56 grains as the 
 weight of 1 Ts'ao-p'ing tael; but as the weights of the Kung-ku office 
 are accepted as the local standard, and their balances considered to be 
 accurate, I prefer taking the weight ascertained there to an average of 
 several weighings at different places. By the Kung-ku weights a brass 
 weight of 100 ounces troy weighed 84.86 Ts'ao-p'ing taels. 
 
 100 ounces=48,000 grains-f-84.86=565.6375. 
 1 Ta'ao-p'ing tael weighs 565.6375 grains. 
 
 In this experiment the balance between the 100-ounce weight and 
 the 84.86 taels was considered exact. The Chinese in weighing do not 
 use any fractional part of a candarin, but were a half candarin (5 li) 
 added to or subtracted from 84.86 taels the difference in the result 
 would only be 0.033 of a grain. 
 
 At the Kung-ku office I found 950 grams to balance 25.93 Ts'ao- 
 p'ing taels; the result worked out is 1 Ts'ao:p'ing tael weighs 86.64 
 grams. But as in this case the weight in taels is small a,nd the pos- 
 sible discrepancy of a half candarin in weighing would have a greater 
 effect on the answer than in the foregoing calculation, I prefer to take 
 the Ts'ao-p'ing tael as equal to 565.6375 grains, and to ascertain the 
 equivalent in grams by dividing that figure by 15.432349, the number 
 of grains equal to 1 gram. 
 
 565. 6375-4-15. 432349=36. 6527. 
 1 Ts'ao-p'ing tael weighs (or should weigh) 36.6527 grams. 
 
 Also by the Kung-ku weights — 
 
 102.80 Ts'ao-p'ing taels weight=100 Haikwan taels weight. 
 101.80 Ts'ao-p'ing taels weight=100 K'u-p'ing taels weight. 
 
 In 1864 the manager of the Comptoir d'Escompte at Shanghai gave 
 the weight of the Shanghai tael as " troy grains 665.70, perhaps only 
 565.43;" the present manager of that bank gives the weight as 565.63 
 grains. 
 
 As regards value and fineness: The standard for Ts'ao-p'ing sycee is 
 said to be 2.75 per 50 taels weight, or 5.50 taels premium per 100 taels 
 weight; that is, for tsu-s§ Ts'ao-p'ing sycee. In written bank orders, 
 to prevent dispute, the standard of the sycee must be specified. 
 
 The writer Sun tells me that when salaries were paid in Ts'ao-p'ing 
 taels the equivalent realized for 100 taels was 107.143 Shanghai taels, 
 the calculation being — 
 
 Ts'ao-p'ing taels. 
 
 To 100.00 
 
 Add for premium 5. 00 
 
 Ts'ao-p'ing taels 105. 00 
 
 Not uniform at different places. 
 
246 GOLD STANDARD IN INTEENATIONAL TEADE. 
 
 (That is, 106 taels Ts'ao-p'ing (without premium) equal 100 Ts'ao- 
 p'ing taels with 5 taels premium as the standard.) 
 
 98 Ts'ao-p'ing taels being taken to equal 100 Shanghai taels — 
 
 Ts'ao-p'ing Tls. 98 : Shanghai Tls. 100 : : Ts'ao-p'ing Tls. 105 : 107.1428. 
 98 ) 105 ( 107.1428 
 
 700 
 686 
 
 140 
 98 
 
 420 
 392 
 
 280 
 196 
 
 840 
 
 784 
 
 56 
 100 Ts'ao-p'ing taels weight of sycee at 2.5 premium=107.143 taels Shanghai. 
 
 I am far from submitting these notes as authoritative; but offer 
 them mainly with a view to indicating the field for inquiry in this 
 connexion. 
 
 Pascal Martin. 
 
 Shanghai, mth October, 1880. 
 
 COPY OF A LIST PREPARED BY THE WRITER SUN. 
 
 Haikwan Tls. 100=Shanghai Tls. 111.4.0.0 
 
 =K'u-p'ing Tls. 101.6.4.2 (from multiplying 91.24 by 111.4) 
 
 =Ts'ao-p'ingTls. 103.9.7.3 (from multiplying 93.333 by 111.4) 
 
 Shanghai Tls. 100=Ku-p'ing Tls. 91.2.4.0 
 
 =Haikwan Tls. 89.7.6.6 
 
 =T8'ao-p'ing Tls. 93.3.3.3 
 
 Ts'ao-p'ing Tls. 100=Shanghai Tls. 107.1.4.3 
 
 K'u-p'ing Tls. 100=Shanghai Tls. 109.6.0.0 
 
 Memo, re silver of various sorts at Shanghai, with values and 
 
 weights; 1896. 
 
 1. Shanghai is the great trading center; all kinds of merchandise 
 arrive and depart and many banks are open there, doing large business. 
 
 2. Accounts are kept in Shanghai taels, called kuei yin, also called 
 tau qui yin, also called chiao pai yin. 
 
 3. There are also Ts'ao-p'ing taels and K'u-p'ing taels and Kuan- 
 p'ing taels. 
 
 4. For Ts'ao-p'ing and K'u-p'ing taels there are scales and weights, 
 but the Kuei-p'ing and Kuan-p'ing taels are names or designations of 
 value simply, and there are no corresponding scales and weights. 
 
 5. There is a Kung-ku office for testing and valuing silver at 
 Shanghai, 
 
GOLD STANDARD IN INTEENATXONAL TRADE. 247 
 
 6. When silver is brought to this Kung-ku office it is weighed with 
 the Ts'ao-p'ing scales ana weights which were used by the merchants 
 in the gram and pulse trade before the treaties opened the port. The 
 office then writes on the silver its weight in Ts'ao-p'ing taeJs and also 
 its touch or quality. A subsequent calculation has to be made to fix 
 its value in Kuei-p'ing, K'u-p'ing, or Kuan-p'ing taels. 
 
 7. Ninety-eight Ts'ao-p'ing taels are equal to 100 kuei yin taesl; 
 but as there are no Kuei-p'mg scales and weights, it is not known 
 whether this dijfierence is a discount on weight or on touch. Formerly 
 
 the tau kuei yin was styled or yuan-ssii yin, and then was made 
 
 up of small round cakes weighing about 1 tael each; and as for kuei 
 yin, when compared with the Kung-ku's present standard, its quality 
 is expressed thus: Chii hsui erh shi, which means 100 taels weight 
 of kuei yin silver has a discount of 2 taels and is taken as being only 
 98 taels. 
 
 8. The yiian-ssu silver is now not met with. Current silver or 
 sycee varies in touch from 4 to 6 degrees of betterness; and these 
 degrees are expressed in kuei yin taels. 
 
 9. When asked to calculate on th6 suan-pan the value of 100 taels 
 Ts'ao-p'ing in kuei yin silver, a Shanghai banker — 
 
 Taels. 
 
 Will first put down 100 
 
 Will add for betterness 5 per cent 5 [105] 
 
 ForTls. 100 will add 2 per cent 2 [107] 
 
 ForTls. 7 will add 2 per cent 0.14 
 
 For Tls. 0. 14 will add 2 per cent 0. 0028 
 
 For Tls. 0.0028 will add 2 per cent 0. 000056 
 
 And the result will be Shanghai silver 107. 142856 
 
 10. Similarly, if the value of 100 K'u-p'ing taels is to be expressed 
 in Shanghai silver — seeing that the standard for K'u-p'ing silver is 
 said to be 5.60 taels and that 100 K'u-p'ing taels equal 101. 80 Ts'ao-p'ing 
 taels in weight, a banker would — 
 
 Taels. 
 
 First of all set down 100 
 
 Add for weight 1. 80 
 
 Add for touch _ 5. 60 
 
 Thus making Ts'ao-p'ing taels 107.40 
 
 equal to 100 K'u-p'ing taels, and further calculation shows that as 98 
 Ts'ao-p'ing taels are equal to 100 Shanghai taels, so 107.40 Ts'ao-p'ing 
 taels are equal to 109.60 Shanghai taels; therefore, 100 K'u-p'ing taels 
 equal 109.60 Shanghai taels. 
 
 11. So, too, in the case of the Haikwan tael — inasmuch as 100 Haik- 
 wan taels equal in weight 102.80 Ts'ao-p'ing taels and the touch is said 
 to be 6 taels on 100 taels weight, a banker would — 
 
 Taels. 
 
 First of all set down 100 
 
 Add for weight 2.80 
 
 Add for touch, at Haikwan taels 6 per cent on 102.80 6. 168 
 
 Addformeltage 0.204 
 
 Thus making Ts 'ao-p 'ing taels 109. 172 
 
 equal 100 Haikwan taels. But as 98 Ts'ao-p'ing taels are equal to 
 100 Shanghai taels, so 109.172 Ts'ao-p'ing taels are equal to 111.4 
 Shanghai taels; that is, 100 Haikwan taels equal 111.4 Shanghai taels. 
 
248 GOLD STANDARD IK INTERNATIONAL TRADE. 
 
 12. As regards comparative values, therefore, the following may be 
 taken as the standard: 
 
 Ts'ao-p'ing Tls. 100 = Shanghai Tls. 107.1.4.3 
 K'u-p'ing Tls. 100 = Shanghai Tls. 109.6.0.0 
 HaikwanTls. 100 = Shanghai Tls. 111.4.0.0 
 Shanghai Tls. 100 = K'u-p'ing Tls. 91.2.4.0 
 i.e., HaikwanTls. 89.7.6.6 
 i.e., Ts'ao-p'ing Tls. 93.3.3.3 
 
 .13. "What precedes refers chiefly to comparative values; accordingly, 
 if one desires to know how many English pounds sterling can be bought 
 in London with so much Haikwan or K'u-p'ing or Ts'ao-p'ing silver 
 at Shanghai, he has only to ask the market remitting rate for Shanghai 
 kuei yin and calculate accordingly. Just now 3 English shillings is 
 the exchange value of the Shanghai kuei yin tael; that is, 1,000 
 Shanghai taels will buy a draft for 3,000 shillings, i.e., £150. 
 
 14. If one asks about weights without reference to touch of silver 
 or any such items, the following figures give the results of compari- 
 sons of weights made at the Kung-ku, Taot'ai's yamSn, and foreign 
 French and English banks at Shanghai (the Ts'ao-p'ing scales and 
 weights are the bases of all calculations): 
 
 101.80 Ts'ao-p'ing taela=100 K'u-p'ing taels. 
 
 102.80 Ts'ao-p'ing taels=100 Haikwan taels. 
 
 1 Ts'ao-p'ing tael in English weight weighs 565.6375 grains. 
 
 1 Ts'ao-p'ing tael in French weight weighs 36.6527 grams. 
 
 1 K'u-p'ing tael weighs "^'^P^'^- 
 
 1 Haikwan tael should weigh < 37 68 grams 
 
 15. Accordingly, if we discuss money and remittances from Shanghai 
 to London, and if 1,096 Shanghai taels equal 1,000 K'u-p'ing taels, 
 and if the exchange value of the Shanghai tael is 3 shillings, then 
 200,000,000 K'u-p'ing taels are equal to 219,200,000 Shanghai taels, 
 and therefore would buy £32,880,000. If we discuss weights and 
 purchase of the commodity silver by weight, then, inasmuch as 480 
 grains equal one ounce, and one K'u-p'ing tael weighs 575.82 grains, 
 200,000,000 K'u-p'ing taels weight will equal 115,164,000,000 grains, 
 i. e., 239,925,000 ounces; and, further, seeing that at present bar sil- 
 ver is quoted at 30^% d. per ounce, 239,925,000 ounces of silver would 
 cost in London £30,552,949 4s. 4id. But of course the simultaneous 
 purchase of so large a quantity of silver would probably send up its 
 price, and freight, etc., would have to be paid on it from London to 
 Shanghai; so that to lay down in Shanghai 200,000,000 K'u-p'ing taels 
 weight of bar silver bought in London would in the end cost more 
 than 3,055 wan pounds sterling of mere figuring calculation. There 
 would, besides, be the time required to bring out so much — possibly 
 two or three months. 
 
 16. If it is said that a Chinese tael weight is equal to 579.84 grains, 
 the tael spoken of is the Canton tael and originated in 1770 (Chien 
 Lung 34th year) with the 13 factories at Canton before the treaties. 
 According to the treaty tariff rules 100 Chinese catties are equal to 
 
 133i pounds ■ . ^ ; therefore, one Chinese tael will weigh 
 
 1.333 coarse weight . . ^, „ . „„„ „„ 
 
 ~W °"°''®^ avoirdupois ' ^- ®-' "^'^^^ ounces, i. e., 583.20 grains 
 
 fl * l-i4- 
 
 T— , or French weight 37.783 grams. But really the Canton 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 249 
 
 tael ordinarily used is one-half per cent lighter, weighing only 37.58 
 French grams, or 579.84 English grains. 
 20. IX. '96. 
 
 K^u-pHng weights. 
 
 1. In transactions between Chinese and foreigners the Canton tael 
 is the one in general use, as the port from which it takes its name is 
 the one which was first opened to foreign trade in China. 
 
 According to the supplementary Franco-Chinese and Anglo-Chinese 
 treaties signed at Shanghai in November, 1858, the Canton tael ought 
 to weigh — 
 
 In French weight, 37.783 grams. 
 
 In English -weight, 1.333 ounces avoirdupois=1.215 ounces troy, or 
 
 =24.30 pennyweights. . 
 
 =583.20 grains. 
 
 These proportions are based on the convention made at Canton, in 
 1770, between the supercargoes of the old East India Company and 
 the privileged Chinese merchants who formerly there possessed the 
 monopoly of the trade with foreigners. 
 
 But in reality the Canton tael, as in ordinary use in China, is i per 
 cent lighter than the above-mentioned standard and does not weigh 
 more than 37. 58 French grams (according to the scales of the agency 
 of the Comptoir d'Escompte de Paris) ; according to the basis adopted 
 by the English banks: 
 
 1.208 ounces troy weight. 
 24.16 pennyweights. 
 579.84 grains. 
 ******* 
 
 2. The Ts'ao-p'ing tael weight of brass is the basis of all monetary 
 calculations when the value of sycee is in question, it being used for 
 weighing the sj^cee. 
 
 I nave compared the troy weights of the Comptoir with the Ts'ao- 
 p'ing weights at the Comptoir, the Haikwan Bank, and the Kung-ku 
 oflBice, witli results varjdng from 565.72 grains to 565.56 grains as the 
 weight of 1 Ts'ao-p'ing tael; but, as the weights of the Kung-ku office 
 are accepted as the local standard and their balances considered to be 
 accurate, 1 prefer taking the weight ascertained there to an average 
 of several weighings at different places. By the Kung-ku weights a 
 brass weight of 100 ounces troy weighed 84.86 Ts'ao-p'ing taels. 
 
 100 ounces=48,000 grains^84.86=565.6375. 
 1 Ts'ao-p'ing tael weighs 565.6375 grains. 
 1 Ts'ao-p'ing tael weighs (or should weigh) 36.6527 grams. 
 
 Also by the Kung-ku weights — 
 
 101.80 Ts'ao-p'ing taels weight=100 K'u-p'ing taels weight. 
 ******* 
 
 3. K''u-pHng taels. — As to weight: I procured from the Haikwan 
 Bank a set of- brass weights with the characters K'li-p'ing cut on them, 
 which were compared for me at the Kung-ku office with the sets of 
 troy and gram weights from the Comptoir, as well as with the Kung-ku 
 Ts'ao-p'ing weights. It was found that the 50-tael K'u-p'ing weight 
 weighed 50.90 Ts'ao-p'ing taels, and it was indorsed accordingly; 
 
 II6IIC6 
 
 100 K'u-p'ing taels weigh 101.80 Ts'ao-p'ing taels. 
 
250 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 For the sake of uniformity, we may multiply the weight obtained 
 for the Ts'ao-p'ing tael, viz., 565.637 grains, by 101.80, the proportion 
 given above, and take the result, 576.818 grains, as the weight of the 
 K'u-p'ing tael. 
 
 1 K'u-p'ing tael weighs (or should weigh ^ 575.82 grains. 
 
 1 K'u-p'ing tael weighs (or should weigh) 37.312 grams. 
 
 ******* 
 
 (The above extracts are taken from memoranda drawn up by M. 
 Pietsch, of the Comptoir d'Escompte, in 1864, and Mr. P. Martin, of 
 the Shanghai customs, in 1880.) 
 
 (c) Scarcity op Copper Cash — Mr. Woodruff's Remedial Suggestions — V. Office 
 Series, Customs Papers, No. 50. 
 
 Memorials to the Throne from several provinces having recently 
 drawn prominent attention to the inconvenience and distress caused by a 
 steady rise in the value of the ordinary Chinese medium of exchange — 
 the copper cash — as measured by silver, the accompanying dispatch 
 from Mr. Woodruff, commissioner of customs, suggesting a line of 
 policy for adoption by the Government to restore the cash to its former 
 stable position, is now issued for the use of the service. 
 By order. 
 
 Alfred E. Hippislet, 
 
 Chief Secretary 
 Inspectorate-General of Customs, 
 
 Peking, August 13, 1896. 
 
 No. 1337.] CusTOM-HousE, 
 
 lohang, June SO, 1896. 
 
 Sir: On the 11th of March the governor of Hupeh, and on the 23d 
 of May the viceroy and governor jointly fixed a relative rate between 
 Hupeh dollars, dollar and cash notes, and copper cash. I beg to 
 inclose copies of the proclamations, with Mr. Parr's translations. 
 
 The fixing of the rate was to remedy the present most harmful 
 " dearness " of cash, but the scheme has been rendered nugatory if, as 
 reported, the Government offices do not accept it; and for them it 
 would be revolutionary, as it is well known that a considerable por- 
 tion of their income is derived from a manipulation of the exchange 
 between silver and cash. There is, however, a practical palliative for 
 a part of the evil. 
 
 The "dearness" is apparently due partly to a fall in the value of 
 silver and partly to a scarcity of the cash. 
 
 The instability in the value of silver is caused by the irregular 
 diminution of demand in western countries, and can be remedied only 
 by international bimetallism. When this comes in and silver, again 
 linked with gold, consequently fluctuates less than now with other 
 commodities, when there has been a root and branch reform of China's 
 S3^stem of official salaries and official accounts, and when its currency 
 is imperially, not provincially, managed, it will be possible to make 
 cash token coin, rate them to silver, and keep the two interchangeable 
 at par. But until part at least of this has come to pass there is no 
 remedy for the fluctuations in exchange between silver and cash. 
 
GOLD STAISDARD IW INTERTSTATIONAL TRADE. 251 
 
 The consequences of these fluctuations would obviously only be worse 
 were silver legal tender in China by tael instead of, as now, by weight 
 and purity. Standard silver coins should be avoided until the world 
 has returned to its senses. 
 
 As to the other part of the evil — the scarcity of cash — its original 
 cause was probably insufficient Government coinage. To supply the 
 deficiency there has been an unusual influx of inferior cash, which, 
 making the good cash the "dearer" money, has inevitably tended to 
 drive it out of circulation into the melting pot and elsewhere. Par- 
 tially effective prohibition of the inferior cash has increased the 
 stringency. 
 
 Attempts have already been made in the right direction by issuing 
 new cash from the new mints. I venture to suggest that the Imperial 
 Government go further, and — 
 
 1. Assume, through deputies, a closer direction of the provincial 
 mintage to insure uniformity, continuity, etc. 
 
 2. Proclaim to the people that after a date named the old cash will 
 no longer be legal tender; that one pattern of the new cash has been 
 selected and made legal tender for the whole of China; that all old cash 
 brought to the mints will be re-minted without fee into new cash, and 
 that all material (i. e. , the selected metals in their due proportions) 
 brought to the mints will be minted without fee. 
 
 3. Itself buy up and remint old cash, and while the great dearth 
 continues even buy material and mint new cash for Government 
 expenditure. 
 
 4. Put the whole strength of the two new mints, day and night, into 
 the minting of new cash, even to the deferring, if necessary, of the 
 silver coinage, and encourage the establishment of more branch mints 
 with foreign machinery. 
 
 5. After the issue of the new cash is fairly under way, see that the 
 inferior cash in circulation are confiscated and destroyed. 
 
 So long as cash are "dear " because of scarcity there will be a profit 
 in the metals when coined that will attract people to the mints. When 
 the volume of the new cash becomes sufficient for the needs of trade 
 their currency value will necessarily approximate their intrinsic value 
 (cost) relatively with commodities in general, including silver, and the 
 mints thus merely providing a market for the metals at the market 
 price will become less attractive. If the cash become redundant they 
 will be less profitable as currency than as metals. In brief, under 
 this system, China's cash currency — its only standard coinage —would 
 be, as all currencies should be, automatic, and once established the 
 Government would only have to provide the people with facilities for 
 its free coinage. 
 
 If silver continues to fall in value, cash, freed from the " dearness" 
 of scarcity, and therefore to that extent less "dear" in silver, must 
 still be ' ' dear " when measured in it, and if China is not reformed the 
 exchange will still be manipulated by interested persons; but the 
 present unusual fluctuations of cash relatively with commodities (that 
 exist, however, disguised in retail price by well-known devices) will 
 be rendered to the benefit of everybody but the money changers. 
 I have, etc., 
 
 F. E. Woodruff, 
 Commissioner of Custmns. 
 
 Sir Egbert Hart, Bart., G. C. M. G., 
 
 Inspector- General of Customs, Peking. 
 
252 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 [Inclosure No. 3.] 
 
 The governor of Hupeh in the matter of issuing a proclamation. 
 
 Formerly a string of cash was equivalent to a little over 6 mace in 
 silver. Since last year, however, the price has been daily increasing. 
 At present a string is equal to as much as 8 mace 2 candarins, a price 
 not hitherto reached. Though this "dearness" is generally attributed 
 to insuiEciency of cash, yet it is doubtful if hoarding for speculative 
 purposes and smuggling out of the country have not also largely contrib- 
 uted to bring this about. If, therefore, this state of things is allowed 
 to continue, not only will the market be afPected, but the poor people 
 will suffer seriously in their efforts to gain a livelihood. It now 
 becomes necessary to think of some means to remedy this evil; steps 
 must be taken to lower the high price of cash. 
 
 Let the rate for cash be fixed at Hankow taels o. 7. 3. o. per 
 thousand. 
 
 Let the Shan-hou-chii (a kind of large Government council) appro- 
 priate 100,000 strings of standard cash from tlie revenue collected and 
 issue notes of 1,000 cash each, equal to 7 mace 3 candarins in silver, 
 both to be put into immediate circulation. > 
 
 Let the treasurer provide silver for the Hupeh mint, to be coined 
 into dollars, and let these dollars be each worth 1,000 standard cash. 
 
 These measures are adopted in the hope that the dollars and notes 
 may supplement the copper cash in circulation, so as to restore it to 
 its normal rate and at the same time meet the increased demand. 
 
 The provincial treasurer and the taotai of the Shan-hou-chii having 
 requested me to notify the people to the above effect, 1, besides giving 
 instructions to all officials concerned, hereby issue this proclamation 
 for the information of all officials, merchants, soldiers, citizens, and 
 others. When you transact business, pay duties, taxes, and all other 
 Government dues, or receive money from the Government, remember 
 that treasury notes and local dollars are legal tender, each note of 
 1,000 cash to be equivalent to Hankow taels o. 7. 8. o. and each dol- 
 lar to 1,000 standard cash. These are fixed rates, so if merchants or 
 others dare to disobey my orders by again raising the rate of cash or 
 by hoarding for speculative purposes, etc. , they shall, when discovered, 
 be severely punished. On the other hand, if, when the people pay 
 taxes, duties, etc., any customs official or district magistrate refuses to 
 accept the above-mentioned dollars or notes, he will, on the charge 
 being proved, be impeached. 
 
 Let all obey this without hesitation. 
 
 A special proclamation. 
 
 Kuang Hsii, 22d year, 1st moon, 28th day. 
 
 [Inclosure 4.] 
 
 Chang, button of the first class, pi'esident of the board of war, vice- 
 president of the imperial censorate, viceroy, and in supreme control of 
 the military and commissariat departments in Hunan and Hupeh; and 
 T'an, button of the first class, vice-president of the board of war, sec- 
 ond vice-president of the imperial censorate, t'i-tu of Hupeh, Wuchang, 
 etc. , in the matter of issuing a proclamation. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 253 
 
 We obtained some time ago, through a memorial to the Throne, per- 
 mission to establish mints at Wuchang to coin silver dollars for circu- 
 lation in the different provinces. Owing to the scarcity of "standard " 
 cash in Hupeh it was subsequently decided to give the silver dollar a 
 fixed "cash" value, and to order it to be accepted as legal tender in 
 payment of land taxes, customs duties, likin, and salt tax. 
 
 Since many provinces had their own dollars, and since the dollars 
 coined by any particular province could only be used in payment of the 
 Government taxes of that province, it was ultimately discovered that, 
 in order to prevent complications, they should bear on their faces the 
 name of place or province where coined. Notice to this effect has 
 alreadj' been given. 
 
 We now find that the troubles caused by the cash question are daily 
 increasing, and have therefore evolved a plan to remedy this evil. We 
 have instructed the provincial treasurer to establish a government 
 bank at Wuchang for the purpose of buying and selling copper cash 
 and silver dollars. 
 
 We also find that the moneys annually collected in payment of land 
 taxes, likin daties, etc., amount to large sums, and that a scarcity of 
 standard cash is experienced in the country as well as in the cities; 
 indeed, the many ways devised by the people, and the difficulties they 
 meet with when attempting to buy standard cash for the purpose of 
 paying taxes, can easily be imagined. 
 
 Now, the reform of the currency must begin with the cash issued in 
 payment of public taxes. Since, therefore, a silver dollar is partially 
 to supersede copper cash, it must be given a fixed "cash" value for 
 public convenience. 
 
 Let one silver dollar coined by this province be equivalent to 1,000 
 standard cash, and let merchants and others buy them at this rate and 
 pay the customs officials and magistrates with them at the same rate — 
 there shall not be the slightest discount — so as to insure public 
 confidence. 
 
 Meanwhile additional machinery will be purchased to enable the 
 mints to coin 50, 10, and 5 cent pieces, all to bear the name of the 
 province, and to be valued at a proportionate rate of 1,000 cash to the 
 dollar, and to be used in the same way as standard cash. Dollar notes 
 bearing the seal of the provincial treasurer will also be issued and put 
 into circulation concurrently with the 1,000-cash notes issued by the 
 Shan-hou-chii, so that the latter may not run short. 
 
 Let it be known to soldiers, citizens, etc. , that though standard cash 
 are scarce, the local dollars and cash and dollar notes are the same as 
 standard cash; let three kinds of currency be in circulation among the 
 people. 
 
 From the wealthy trader to the humble peasant, whoever uses the 
 above-mentioned dollars and notes in paying taxes will thus be enabled 
 to do so with greater facility. 
 
 In cases where silver is required instead of cash, let one dollar be 
 equal to the silver value of 1,000 cash. 
 
 Dollars are easily carried and are not cumbersome, and after they 
 have been in circulation for some time they can not fail to restore the 
 price of copper cash to its normal state. 
 
 We are informed that when the people pay taxes, likin, etc., the 
 officials, shupan, clerks, etc., purposely object to the size of the cash 
 paid, and would accept only the largest coins; they even go so far as 
 
254 GOLD STANDARD IN INTEENATIONAL TKADE. 
 
 to exact illegal fees. These abominable practices are truly regrettable. 
 Now, since there are dollars and dollar and cash notes, the officials 
 must be ready to accept them as legal currency as soon as they are 
 presented. No exaction is to be allowed in future; and we also hereby 
 warn magistrates and customs officials that if they refuse to accept the 
 dollars, etc., mentioned above on any pretext whatever, or raise objec- 
 tions for the purpose of extorting money, they will be impeached or 
 otherwise severely punished after the charge brought against them by 
 the suffering merchant shall have been proved. 
 
 This important step is taken to remedy the evils of the cash cur- 
 rency, out of pity for merchants and others. The above rules shall 
 and must be carried into effect, and the evil designs of shupan, etc., 
 can never interfere with their i)eing enforced. 
 
 Let this be obeyed by all. 
 
 A special proclamation. 
 
 Kuang Haii, 22nd year, 4th moon, 11th day. 
 
 {d) China's Defective Currency. — Mr. Woodbufp's Remedial Scggestions (with 
 NOTES BY Dk. J. EdKINS). — CnSTOMS Papeks No. 52. 
 
 1. On March II, 1896, the governor of Hupeh, and on May 23, the 
 viceroy and governor jointly, fixed a relative rate between Hupeh dol- 
 lars, standard copper cash, and cash and dollar notes. The most 
 excellent purpose of their proclamations was to remedy the present 
 harmful "dearness" of cash; but it is stated that difficulties for both 
 officials and people have, unhappily, made it impossible to carry out 
 the plan. 
 
 2. The relative rate. — Formerly western countries had a joint stand- 
 ard of silver and gold at 16 or 16 to 1; but, later, Great Britain, Ger- 
 many, France, the United States, and other nations suddenly changed 
 to a single gold standard, to the great disturbance, these twenty years 
 or more, of the market values of silver and gold, in which the markets 
 of China have necessarily shared, so that its officials and people must 
 dread that the rate of to-day would be loss on the morrow. In view 
 of this, it would seem best to temporarily continue to exchange cash 
 by tael, and silver by weight and purity at the rate of the day; but 
 the single gold standard is doing world-wide harm, and in time all 
 countries must unite in an international agreement for the former 
 joint standard, and then China can rate cash to silver. 
 
 3. The dea/rness of cash. — Whereas at Ichang in 1882-83, 1,000 stand- 
 ard cash were obtained for Ichang 0.68 taels of silver 990 fine, now 
 they cost 0.86 taels, to the affliction of the people. This dearness is 
 due to both a lessening in value of silver and the increasing scarcity 
 of cash. The lessening of the value of silver has been caused by the 
 western nations giving gold a monopoly as standard money and setting 
 silver aside. Until there is an international agreement, China has no 
 remedy. As to the scarcity of cash, there has been but little minting 
 these twenty or thirty years^ — people having taken advantage of the 
 insufficiency to secretly coin and circulate small cash. In trade, one 
 wishes to keep the larger and part with the smaller, but so the large 
 cash have been hoarded or melted to make utensils, and necessary pro- 
 hibition by Government of the coining and circulating of the unlawful 
 cash, has intensified the dearth. Evidently, then, although the fall in 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 255 
 
 the value of silver is beyond China's control, it is within its power to 
 remedy the scarcity of cash. 
 
 4. Remedial suggestions. — Feeling sorrow for the distress of the 
 people, the Government has already had cash minted, but it is stated 
 that the new cash do not circulate nationally and may prove inade- 
 quate. In this connection it is suggested that — 
 
 {a) The coinage departments of the board of revenue and works 
 should decide on the materials of which a national cash is to be coined. 
 There should be more than one ingredient (as in the reign of Kien 
 Lung, for example, copper, zinc, lead, and tin were so used), in the 
 hope of a greater stability in their aggregate market value, which 
 should be approximately the same as in the old standard cash. 
 
 {h) The new, cash should be improved by the use of machinery, but 
 should be similar in appearance to the old, so that they may circulate 
 the more readily as being only a new minting of old cash. 
 
 (c) The people should be notified that after a date named the old 
 cash will be prohibited. 
 
 {d) In advance of that date, but only so long as the present dearth 
 continues, the mints should buy old cash and either recoin them into 
 new cash, or melt them and sell the materials, and should, in addition, 
 buy fresh materials to coin into new cash. The new cash should be 
 used either in Government expenditures or to exchange with the 
 people for old cash. 
 
 ((?) The public should be notified that before the date named all old 
 cash should be taken to the mints to be recoined. If at the moment 
 the mints have no new cash ready, the people are to wait for them; if 
 there are new cash ready the mints are to issue them at once and after- 
 wards recoin, or melt and sell the old cash. Old standard cash should 
 be given new cash in exchange to their face value; old small cash, to 
 their market value. No fee should be charged. 
 
 {f) The public should also be permitted to bring the materials for 
 new cash and have them coined into or exchanged for new cash free of 
 charge. 
 
 (g) So long as the dearth continues the mints should work night and 
 day to provide a sufficiency, even if this temporarily delays the coinage 
 of silver. 
 
 (A) At the date named, when new cash are in sufficiency everywhere, 
 all old cash still in circulation should be confiscated and recoined or the 
 materials sold. 
 
 (i) After the date named the people should still be permitted to at 
 any time take the materials to the mints and have them coined into 
 cash free of charge. 
 
 6. Free coinage of cash. — The Government already pays the mint 
 expenses of the cash it issues; the only change would be that instead 
 of issuing as many as it thinks the people will need it should provide 
 as many as the people have found that they need. For when cash are 
 dear because of scarcity, the metals of which they are made are worth 
 more in them than in the market, so people would bring them to the 
 mints for the profits through free coinage. When the cash become 
 sufficient the metals are worth no more in them than in the market, 
 and people will cease to be eager. When they are redundant the 
 metals will be worth most in the market. The overstocked cash shops 
 must devise ways to avoid loss, and not only will no one take metals 
 to the mints but cash will be sent to other places or melted to obtain 
 the market profit on the materials. 
 
256 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 This is the method of western countries with gold and silver. If it 
 were adopted by China for cash, not only would there be no cash 
 famines, but unprincipled men would no longer have opportunities to, 
 by means of the dearth, oppress the people. Freedom from the fear 
 of these evils would facilitate trade, and the consequently increased 
 revenue would far more than recoup the Government's coinage 
 expenses. 
 
 6. SiUer currency difficulties. — The mints with foreign machinery 
 have coined a limited number of dollars, and foreign dollars are used 
 to some extent, but for the rest the silver currency is sycee, exchanged 
 by weight and purity. The chief defects are — 
 
 (a) The Chinese money balances are not accurate, no two giving 
 exactly the same result. 
 
 (5) There are different units of weight. Besides the customs and 
 treasury taels every province has its own market and other taels, all 
 differing from each other. 
 
 (c) The work of the assay offices is too crude to inspire confidence. 
 
 {d) The purity of the sycee current in one place differs from that 
 in another, so that, for example, Hupeh sycee does not circulate in 
 Kiangnan. 
 
 Because of these defects there are constant disputes over the weight 
 and purity of the sycee that waste time and money and are a serious 
 obstacle to trade. 
 
 7. Remedial suggestions. — As most important it is suggested that — 
 [a) Every official treasury and every mint should procure a delicate 
 
 inoney balance of western make to serve as a standard, which should 
 be in exact agreement with the foreign balance used at the Canton 
 mint. 
 
 (6) The weight of a customs and a treasury tael's-weight of pure 
 silver, expressed in grams or grains troy, should be, respectively, 
 the standard of the customs and treasury taels, and each province 
 should similarly fix the standards of its market and other taels. 
 
 (c) The fineness of the Chinese and of the current foreign dollars 
 should be notified. 
 
 {d) China's standard silver dollars should be 900 fine, in agreement 
 with the United States, the Latin Union, and Japan. 
 
 {e) It should be notified that fractional silver coins less than 900 fine 
 issued by the Government will, on presentation at the mint or treas- 
 ury, be given standard dollars to their face value in exchange without 
 charge. 
 
 (/■) Temporarily, all sycee stamped by an assay office brought to a 
 mint should be scientifically refined into silver 900 fine, stamped with 
 "900 fine" and the weight in customs taels, and returned without 
 charge. 
 
 8. Taxes. — It is further suggested that after a date named the moneys 
 received for taxes, besides, as at present, accepting standard cash at 
 their market value, shall only be undefaced Chinese dollars, foreign 
 dollars, in the fineness of which has been notified, and sycee stamped 
 900 fine by the mints — all reckoned by the weight of the pure silver 
 in them. When the Chinese dollars and 900 fine sycee become suffi- 
 cient, a date should be again named after which foreign coins will be 
 received. 
 
 9. The mints. — China's territory is extensive, its population large, 
 and its need for cash pressing. More mints with foreign machinery 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 257 
 
 should be established at important points through the provinces to 
 mint both dollars and cash. 
 
 10. A national currency.— It is essential that the copper cash, Chi- 
 nese silver coins, and mint-stamped svcee, from whatever mint, should 
 be uniform, in order that they may be current throughout China. 
 Not only should there be one mint law for all the provinces, but all 
 provinces should execute it uniformly. The coinage departments of 
 the board of revenue and works should therefore station deputies well 
 versed in the mint enactments at the mints to cooperate with the 
 superintendents, and should also periodically send competent inspect- 
 ors to visit and report on the mints, that absolute uniformity of coin- 
 age throughout the Empire may be insured. 
 
 11. The cash standard.— Chxmi's present standard of copper cash, 
 with silver current by weight and purity, is inferior to the Western 
 system of a free coinage of standard gold and silver money, the Gov- 
 ernments themselves issuing the silver and copper token coins; but at 
 present the market values of gold and silver throughout the world are 
 greatly disturbed, and it seems best for China to temporarily pursue 
 the course suggested in this paper. When an international monetary 
 agreement has been effected, China can make gold and silver the 
 standard, and again itself issue the cash, and then a relative rate can 
 be fixed between cash and dollars. 
 
 F. E. Woodruff, 
 Oommissioner of Chistoms. 
 CusTOM-HousE, Ichang., December 4.., 1896. 
 
 NOTES. 
 
 2. The relative rate. — Since Great Britain adopted the gold standard 
 about eighty years ago, the sudden change of standard should be said 
 to refer to Germany, France, and t'he United States of America, and 
 Great Britain should not be included. 
 
 It would be well to s&j that China, instead of waiting for the future 
 action of the western powere in modifying the present standard of 
 currency, should herself take a decided part in negotiations with west- 
 ern powers on this point. She should win them over, one by one, to 
 bimetallic views, viz., Japan, the United States, Eussia, Germany, and 
 France. In order to do this effectually, (3hina should have a foreign 
 adviser on currency, to assist the board of revenue. China should 
 provide from the archives of the revenue board and of the treasurer's 
 yamfin in each province statistical particulars showing the amount of 
 cash and of silver in circulation. This is an important point, because 
 the opinion of Chinese financiers would have weight in international 
 negotiations in proportion to the amount of China's internal and for- 
 eign trade as measured by the volume of her currency. 
 
 3. The dearness of cash. — The dearness of cash, due to want of 
 minting during late years, is being fast removed. The native corre- 
 spondents in the papers express surprise that in cities where new cash 
 are in the market no important change in the copper cash value of sil- 
 ver is noticeable. The reason of this is that what is called dearness of 
 cash is really cheapness of silver. Where new cash have been made 
 
 S. Doc. 128, 58-3 17 
 
258 GOLD STANDAKD IN INTERNATIONAL TBADE. 
 
 in the largest quantities, the exchange is still not materially improved; 
 this shows that the main evil from which China suffers in regard to 
 money is the cheapness of silver. 
 
 In the tightness of money it is not known what is the proportion 
 which is due to the scarcity of cash, and what proportion is due to the 
 fall of silver. 
 
 6. Sil/ver currency difficulties.— While silver is cheap, China might 
 just as well buy Mexicans for her use as to make dollars for herself. 
 The time is scarcely come for a silver currency. The Chinese say 
 themselves that Thibet has silver coinage, because there is silver in 
 Thibet; and that China has copper currency, because China has cop- 
 per. But this is not all. Copper cash are suited to China as dollars 
 are not: this has been so in the past. Now, however, through the 
 immense amount of copper in use, market prices have changed; 3 cash 
 buy as much food as 1 cash bought formerlJ^ This opens a door for 
 the entrance of dollars. The Chinese, however, need be in no hurry 
 to mint them while they can get Mexicans and British dollars at so 
 cheap a rate, as long as foreign dollars are preferred by the commer- 
 cial class. 
 
 10. Anational currenay. — In securing a national currency with uni- 
 formity in the coins it would be a great advantage to have all the cash 
 made in Yunnan, where copper is found with several prefectures. It 
 would cost no more to export the cash when made than it does to con- 
 vey the copper. There were formerly cash made at Mentgsz. Here 
 a mint might be organized under foreign superintendence having con- 
 nection with the customs establishment there. 
 
 China should employ foreign financiers to assist the provincial treas- 
 urers, and they should do the work which inspectors of mints should 
 have assigned to them. 
 
 11. The cash standard. — From A. D. 600 to 1700 the standard was. 
 on the whole steady, but with occasional variations 1,000 cash were 
 equal to 1 tael of silver; 10,000 cash were equal to 1 tael of gold. In 
 1770 the tael of gold was equal to 15i taels of silver. This change was 
 caused by the appreciation of gold probably, but this has not yet been 
 clearly shown. Yet the fact that 1,000 cash were still nearly equal to 
 1 tael of silver during the last century may be taken in evidence that 
 the appreciation then observed was in gold. Thus it is shown that if 
 Chinese financiers would bestir themselves they might be able to adduce 
 facts in the history of money which, when brought before the next 
 international conference on currency, would possibly have a decided 
 effect on the minds of the members of the conference. 
 
 J. Edkins. 
 
 2. EXTRACT OF REPORT MADE BY H. B. MORSE, OF THE CHINA 
 BRANCH OF THE ROYAL ASIATIC SOCIETY. « 
 
 Introduction. 
 
 All nations have passed through the stage of chaos in their currency 
 and measures. In western countries modern legislation has done much 
 to reduce irregularity to order, though even there the old special units 
 
 a Mr. Morse collected his material by sending circular letters in the name of the 
 Royal Asiatic Society to people in various parts of China conversant with the situa- 
 tion there. The statements give the nature of the investigation, the questions asked 
 and various extracts from the replies. 
 
GOLD STANDAED IN INTEBNATIONAL TRADE. 259 
 
 still linger on in common usage. In China some spasmodic efforts have 
 been made from time to time to secure uniformity, but they have never 
 gained much support, and, as will be seen from the following tables, 
 chaos reigns supreme through the whole of the Empire. In many of 
 the following contributions reference is made to the difficulty of finding 
 any standai'd, even local. 
 
 An apology is due to the various contributors to this inquiry for 
 not printing their papers as received; it is hoped, however, that thej 
 will recognize the utility of presenting the information in summarized 
 tables rather than giving detached information under all heads for each 
 place. Where any contributor has given special information it has 
 been appended in the shape of notes under the proper head. 
 
 I have not attempted to prepare any general summaries. The reason 
 for this will be obvious, when, on referring to the tables, it is remarked 
 that many provinces are unrepresented, many others only covered at a 
 few points, and two only (Kansu and Kiangsu, the latter fairly com- 
 pletely) are adequately reported on. The apathy of the mercantile 
 residents in China on this subject, which so closely affects their inter- 
 ests, is remarkable, not one paper having been received from any 
 member of that influential body, and were it not for the efforts on 
 their behalf made by the missionaries. Catholic and Protestant, this 
 inquiry would have had no result. 
 
 An earnest appeal is made to all residents in China, whether mem- 
 bers of the societj'' or not, to contribute further information on this 
 important subject. There are three points to be kept in view: 
 
 1. To check and (if wrong) rectify the statements made in the tables 
 now submitted. 
 
 2. To send full information on the lines of this paper regarding 
 places not now reported on. 
 
 3. To thus collect the material for an intelligent summary of the 
 currency and measures of China by some competent hand. 
 
 The paper now presented is only preliminary, and it is hoped that 
 the society may soon be enabled to publish tables covering every part 
 of China. 
 
 H. B. MoKSE. 
 
 Pakhoi, January 11, 1890. 
 
 CiRCULAK ON Currency and Measures in China. 
 The points on which information is sought are as follows: 
 
 CUKEENOy. 
 
 1. What are the kinds of tael of silver (the Haikwan or tael 
 
 excluded) known in your district? Please give names in full, thus 
 Hsiang-p'ing Hua-pao Yin, together with the colloquial name. 
 
 2. What is the actual weight in grains (43 7i grains equal to one 
 ounce avoirdupois) of the tael of each Ping (local scale) ? 
 
 3. What is tne touch or fineness of each of the several kinds of silver 
 (pure silver being taken as 1,000 fine)? 
 
 4. In each tael of currency weighing (so many) grains, how many 
 grains are there of pure silver (1,000 fine) ? 
 
260 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 5. How manj' tacls of each of the currencies mentioned by you ai'e 
 considered to be the equivalent locally of 100 K'u-p'ing taels of pure 
 silver? 
 
 6. What relation do Mexican dollars bear to the tael commonly used 
 locally? (100 taels equals how many dollars). 
 
 7. What kinds of copper cash are used in your district? What is a 
 Tiao, and what its value? 
 
 8. What relation do copper cash bear to the Mexican dollar and [or] 
 the local tael ? 
 
 9. To what extent are cash notes (paper money) used locally? If 
 used at all please give some account of them. 
 
 10. Are bank notes (or bankers' checks) for silver used in your 
 district otherwise than as checks? 
 
 Gold. 
 
 Rev. P. Hoang (1) states: 
 
 Gold ingots are not in common use in trade, but only for hoarding. 
 Hoarded gold is generally in one of two forms. One is in ingots 
 shaped like a small boat, about 0.09 meter (3.6 inches) long, 0.02 meter 
 (0.8 inch) wide, and weighing 360 grams (5,555 grains equals 11.575 
 ounces troy) ; this is called Gin ten. The other is in the form of gold- 
 leaf, measuring about 0.2 meter (8 inches) square, and weighing about 
 30 grams (463 grains); this gold-leaf is called Gin ye tze. The unit of 
 value of gold is called huan; e. g., ii 1 ounce of gold is worth 18 
 ounces of silver, it is quoted Shih pai yin huan. The relative value 
 of gold to silver was in the beginning of the Ming dynasty (1375) 
 four times greater; under the Emperor Wan-li (1574) of the same 
 dynasty, seven to eight times greater; at the end of the Ming dynasty 
 (i635) ten times; under the Emperor Kang-hsi (1662) of the present 
 dynasty, ten and more times; under the Emperor Kien-lung (1737) 
 twenty times and more; in the middle of the reign of Tao-Kwang 
 (1840) eighteen times; at the beginning of the reign of Hien-fung 
 (1850) fourteen times; and at present (1882) generally eighteen times. 
 
 Silver and Coppbh Cash. 
 
 The report contains a table giving for various provinces, prefec- 
 tures, and towns the names in both English and Chinese, of the tael or 
 various taels in use there; the weight of the taels in grains and grams; 
 the fineness of the silver in each, and the weight of the fine silver in 
 grains and grams; the equivalent value of the special tael in Haikwan 
 taels and in Ku'p'ing taels, and the value of the local taels in silver 
 dollars. Besides this, an account is given of the copper cash in use in 
 the different localities, there being given, first, the denomination; 
 second, the actual number in the tiao, and, third, the tiao in 1 tael. 
 A last column is left for notes. 
 
 In this table 78 different kinds of taels are enumerated of varying 
 weights. It happens, of course, at times that two of these taels in 
 different localities may be of the same weight, but speaking generally 
 they vary each from the other. The heaviest tael in the list is the 
 Haikwan tael, at 583.3 grains or 37.79 grams. The lightest seems to 
 be the Quei-p'ing tael, 620 grains or 33.69 grams, in WSnchow-fu, 
 Chekiang Province. The others vary all the way between these. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 261 
 
 The actual number of copper cash in the tiao varies from 1,000, 
 which is supposed to be the normal amount, to as low as 50 in Peking. 
 From 480 to 500 seems to be not uncommon, and it is quite usual for 
 a small discount of 2 to 20 cash to be made for the string. 
 
 Notes. 
 
 Note 1. — Note on Tientsin currency. — Of the two equivaleni, values 
 given for the Hang-p'ing tael at Tientsin, the first (100 Haikwan taels 
 equal 105 T'u taels) is the rate at which foreign merchants pay duties; 
 the second (100 Haikwan taels equal 106.05 T'u taels) is the rate fixed 
 for Chinese merchants in paying duties. 
 Note 6.— Rev. E. T. Williams (17) states: 
 
 1. The tael. — There are three kinds of tael commonly used in Nan 
 kin: The "K'u-p'ing," known also as "Sueh-hwa Yin," the "Ts'ao 
 p'ing," called " Wan Yin," and the " Siang-p'ing," or "Ti-ch'ao Yin." 
 
 As a matter of fact, however, these are three methods of reckoning 
 rather than three kinds of tael. The "Ts'ao-p'ing" is the standard and 
 the tael commonly used in Nankin. In "Ts'ao-p'ing" 100 taels are 
 100 taels, but if a transaction is conducted in "K'u-p'ing^" to every 
 100 taels 2 taels must be added; that is, 100 "K'u-p'ing" taels 
 are equal to 102 "Ts'ao-p'ing." 100 "Siang-p'ing" are but 98 
 "Ts'ao-p'ing." The "Ts'ao-p'ing" tael contains 563.72 grains. The 
 "Siang-p'ing" is used in paying the army and the prizes awarded stu- 
 dents at the semimonthly examinations, although the latter are sup- 
 posed to be paid in " K'u-p'ing" taels. My Chinese teacher says it is 
 a common saying among students that the prizes are awarded in 
 "K'u-p'ing," the examining official pays them in "Ts'ao-p'ing," the 
 minor officials distribute them in "Siang-p'ing," and by the time it 
 reaches the student the tael has become a Mexican dollar, which, on 
 being exchanged, is found to be bad. 
 
 I have not been been able to discover the fineness of the various 
 kinds of silver or the number of grains of pure silver in each tael. 
 To every such question the bankers I have asked answer that they do 
 not know. They determine the relative value by touch and color, but 
 say there is no established I'atto. No doubt they are wrong, but I 
 have not been able to push my inquiries farther. 
 
 A Mexican dollar by weight is said to be 0.74 tael, but it does not 
 of course exchange at this rate. At present it is worth but 0.68 tael. 
 A hundred taels are equal to 146.86 dollars. 
 
 2. Cash. — All the cash used in this region are of one denomination — 
 about one fifteen-hundredth of a tael; but there is a large quantity of 
 bad cash and small cash in circulation. 
 
 A tiao consists of ten strings or 974 good cash reckoned as 1,000. 
 Each string contains nominally 100, but in reality only 98 or 95. The 
 95 cash string is called a "ti-tsz," and is indicated by a knot on the 
 end of the string. In every tiao there are two ti-tsz. In three strings 
 or more one may be a ti-tsz; in seven or more two ti-tsz are allowed. 
 
 On every string of good cash there may be two or three small cash 
 or counterfeit cash; as a matter of fact there are many more. 
 
 These spurious cash are called by various names: " Ts'ing-pau," 
 "hiao-p'ien-p'ien," " shui-shang-p'iao," a light, thin variety, said to 
 float on water, the " sha-tsz-tsz," which contains a great deal of sand, 
 and the "ngo-yen" in which the hole is very large and the coin very 
 
262 GOLD STANDAKD IN INTEENATIONAL TRADE. 
 
 small. This is not to be confounded with an ancient coin of the same 
 name. Other names are: " Sui-ts'ien " and " lii-cheu-kw'an," so-called 
 because much of this counterfeit cash was formerly made at a place of 
 this name in Anhuei. 
 
 There is still another variety of small cash known as " hung-ts'ien," 
 because made of red copper. It is of ancient manufacture, and, 
 although s.purious, passes as good coins on account of the quality of 
 the copper. As many as five o^ this variety may be found on each 
 string. 
 
 A Mexican dollar exchanges for 1,030 good cash in summer, and 
 1,080 in winter. A tael exchanges for from 1,500 to 1,600. 
 
 There are strings, however, known as " yih-kiu-tih," " 'rh-pah-tih," 
 and " san-ts'ih-tih," containing 10, 20, or 30 small, to 90, 80, or 70 large 
 cash. One can, of course, exchange at a much higher rate for this 
 sort of cash. 
 
 At the pawn shops a tiao is 1,000 in reality as well as nominally. No 
 shortage is allowed. This is true, too, in the payment of taxes and of 
 bank discount. 
 
 I presume it was not your purpose to inquire as to the dates of the 
 coins or tfie inscriptions they bear. There is great variety in this 
 respect, though most of the cash belongs to the present dynasty, by 
 far the larger part bearing the Style of Kien-lung. It is quite com- 
 mon, however, to find coins of the Sung dynasty, and there are many 
 varieties issued by old-time rebel kings. It seems strange to a for- 
 eigner to find coins 200 years old in general circulation, but to be able 
 to handle coins of the tenth century in this matter-of-fact way is simply 
 marvelous. To the Chinese collector, of course, with his coins of 2,000 
 years ago, these seem quite modern. Most of the light, thin cash 
 mentioned above as the " shui-shang-p'iao " bear the style "Kwang 
 Chung T'ung Pao," are of unknown date, and are said to be of foreign 
 coinage. <* 
 
 In using large quantities of these small cash, 1,000 hung ts'ien best 
 quality will pass for 900 cash, of medium grade 1,000 are equal to 800, 
 and of poorest .quality 1,000 are reckoned but 700 good cash. Of the 
 ts'ing-pau there are three grades, rated respectively at 600, 700, and 
 800 cash per 1,000. There are three grades of the hiao-p'ien-p'ien 
 also, which pass for 450, 500, and 550 per 1,000, and two grades of the 
 sha-tsz'-tsz' which command 400 and 500 cash per 1,000. 
 
 4. Spanish dollar. — In addition to the varieties of currency just 
 mentioned, the Spanish dollar is also yevy commonly used, its value 
 compared with that of the Mexican dollar being as 10 to 8, that is, 8 
 Spanish dollars are equal to 10 Mexicans. The Spanish dollar exchanges 
 here for from 1 ,200 to 1,300 cash. Going north from Nankin into the 
 interior it is difficult to use the Mexican. Its exchange value falls as 
 low as 900 cash, but the Spanish dollar is in demand in these districts. 
 
 6. Hang Yin. — A variety of silver used here, though for certain 
 special purposes only, is the ''Hang Yin." 
 
 This too, however, is simply a method of reckoning. A tael of the 
 "Hang Yin" is but 700 cash. Its use seems confined to the payment 
 of marriage and funeral directors and yamen runners. 
 Note 9. -^r. D. J. Macgowan (18) states: 
 
 Ts'ao-p'ing tael is used in markets and all ordinary transactions. 
 
 « These areAnnamite. — H. B. M. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 263 
 
 K'u-p'ing tael is used in paying taxes. 
 
 Hsiang-p'ing tael is used in paying volunteers — called hsiang, because 
 Hupeh furnishes the greater portion of China's extemporized forces. 
 
 Chiang-p'ing tael is used in dealings with Ningpo merchants. 
 
 -Kuei-p'ing tael (Kuei= usage) used in the Shanghai trade; the 
 "usage" consists in discounting 98 taels = 100. 
 
 Hsiang-p'ing tael (Hsiang= rations) is used to pay regular troops. 
 
 Note 10. — Mr. E. H. Parker (21) states, respecting Foochow: 
 
 The Hsin-i-p'ing tael is worth 2.4 per cent and the Hsiang-p'ing tael 
 3.3 per cent less than the K'u-p'ing tael. The K'u-p'ing tael being a 
 definite weight in avoirdupois, anyone can calculate for himself the 
 weight of the others. The Hsiang-p'ing was introduced during the 
 rebellion, and is only used for paying the soldiers. For sales of land 
 only an imaginary tael called Wen-kwang is used, and is always 
 wprth 800 large cash; this is to guard against variations in the silver 
 market, and has no other practical exchange significance. 
 
 Note 13. — Rev. C. Bone (19) states, respecting Hsin-hui: 
 
 I have not been able to ascertain that there are any special names 
 for the different taels, except the perfect tael, which is called Ch'u sze 
 ma. This is the ancient tael and the ideal. In business, Mexican 
 dollars are used, or broken dollars, and the "touch" of the silver 
 will, of course, depend on the touch of the original dollars. There 
 are, however, three kinds of tael in general use, and called after the 
 business people among whom they obtain: 
 
 {a) In banks, warehouses, and retail shops in which corn, oil, and 
 rice are sold the tael is reckoned at 99Y instead of 1,000. (b) The 
 tobacconist's tael is 998 instead of 1,000. (c) In purchase of land or' 
 houses the perfect tael is used, which is 1,000 or even slightly over. 
 About 10 taels (sometimes a little more, sometimes a little less) must 
 be added to 100 local taels to make them equal to the Governmeiit or 
 ideal tael. 
 
 Note 18. — Regarding Shensi and Kansu, Rev. C. F. Hogg states: 
 
 From experience in several provinces, I should say that the local 
 tael averages 1,500 cash in value all the year round. In Han Chung 
 it has sunk to one thousand one hundred odd, and risen to close on 
 1,900. The demand for cash at the New Year increases its value. In 
 Han Chung and Si-ngan the price of silver is usually between 1,500 
 and 1,600 cash. In Lanchou from 1,450 to 1,550. Rain, examinations, 
 and the opium season increase the demand for cash and so raise its price. 
 
 Paper Money. 
 
 Cash notes are common in many parts of the Empire, and are exten- 
 siveljr used from their convenience. See especially the memorials of 
 the governor of Kirin given in the North-China Herald, Vol. XLII, 
 page 175, and Vol. XLIII, page 50. Silver notes, except those of the 
 foreign banks, are not used at all. The remarks of the various con- 
 tributors on this subject are abstracted as follows: 
 
 S/ieng-kinff.—Nmchwa.ng. Mr. W. B. Russell (29) states: 
 
 Cash notes are in circulation to the amount of about 3,000,000 tiaos 
 or 300,000 taels. The reason why they are so cheerfully accepted in 
 the market is because they are convenient to be carried and no exchange 
 of debased cash is to be made. 
 
 No bank notes or checks are used locally. 
 
264 GOLD STANDARD IK IISTTEKNATIONAL TRADE. 
 
 Shensi—Xansu.—Uev. C. P. Hogg (22) states: 
 
 In Si-ngan, paper notes, value 1,000 (i. e. 500) and 2,000 (i. e. 1,000) 
 cash, are issued and largely used. Spurious notes are afloat in quanti- 
 ties, so that neighboring money shops are usually appealed to before 
 the notes change hands. In Lanchou, paper notes equivalent to 1,000 
 cash (actual value) are largely used also. 
 
 In Han Chung, oil-cloth notes are used-value 1,000 cash. Different 
 hsiens and large towns in this and other f us also issue notes. The 
 Han Chung f u notes present quite a creditable appearance, are stout, 
 of a yellowish brown color, and are oiled after signature, or rather 
 after value and cipher have been inserted; these appear to be the 
 equivalent of the "signature" in Chinese bank notes. Banks some- 
 times shut their doors, but the notes of established houses are readily 
 accepted without reference. Silver drafts may be given in payment 
 for goods. They are always payable to bearer, notwithstanding that 
 there may be no'intimation of the fact in the document itself, and that 
 the payee's name may be inserted in full. A special clause has been 
 added at times by some of the Hankow bankers in drafts made pay- 
 able to foreigners. Ch'u w^n yin is interpreted relatively, the stand- 
 ard being the Ch'ai se yin of the place on which the draft is drawn. 
 
 Kiangsu, Nanking.— Rey. E. T. Williams (17) states: 
 
 The use of paper money is very common in Nanking, especially of 
 the 300, 400, 500, and 1,000 cash notes, called "p'iao-tsz." These are 
 very well engraved and printed on good, strong paper in red and blue 
 inks. A note of ordinary size is 7^ inches long and 41 inches wide. 
 The design consists of a border, usually made up (largely) of human 
 figures. One before me, as I write, has a border composed of charac- 
 ters and scenes from some ancient drama. Within this is a second 
 border, consisting of an extract from the classics in very small type. 
 Inclosed by these borders is an oblong space containing the name of 
 the bank, its location, the value of the note, its number and date, and 
 the mark or stj'le of the bank. Before being put in circulation the 
 note must also bear the great seal of the bank upon its face. Each 
 person, too, as the note passes through his hands, adds his private 
 mark, so that it soon becomes defaced. There are also 2,000, 5,000, 
 and even 100,000 cash "p'iao-tsz," but these are not so common. 
 Notes for 50, 100, and 200 cash, printed upon red paper and called, 
 "t'iao-tsz," are used at New Year, chiefly for presents to children 
 and servants. At other times they are rarely seen. The small foreign 
 silver pieces are slowly taking the place of these. Silver notes are 
 used in trade, but not to any great amount. Their use is almost 
 wholly confined to merchants in their dealings with one another. 
 
 Regarding Ningpo in Chekiang, Dr. S. P. Barchet (16) states: 
 
 Paper money, as a universal and unquestioned tender, is unknown 
 in Ningpo, but wholesale dealers (e. g., fishmongers) will give notes 
 payable ten days after issue, which are readily taken instead of money, 
 for they can be cashed by bearer at any time. Shops also issue cash 
 or promissory notes, but these will not be paid till they fall due (usu- 
 ally from ten to forty days). Cash notes issued by small jfirms are 
 risky in proportion to the length of time before they fall due. The 
 greatest risk is incurred where parties borrow the name and credit of 
 other firms, issuing cash notes in their name. It often happens that 
 when such cash notes fall due they are not even then paid in hard cash, 
 but in cash notes on somebody else and again on somebody else till the 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 265 
 
 last holder finds himself the loser. It is probably owing to such 
 experience that cash notes are indorsed or verified, and when cash 
 notes change hands reference is made to the original party issuing 
 them, to have them again verified. This involves a great loss of time 
 and makes most people prefer cash. When it is wished to have the 
 amount paid into a bank or other firm a small deduction is made (from 
 5 to 10 cash on the dollar). Bank notes are not used otherwise than 
 as checks. 
 
 Fukien, Foochow.—Mx. E. H. Parker (21) states: 
 
 Cash notes or ch'ien-p'iao for 100, 200, 300 cash are called p'iao-t'iao; 
 for 400, 500, 600 they are called hsiao-p'iao. There are no others but 
 for thousands, from one to ten, called ta-p'iao. 
 
 A check is called chi-ch'ien, tsz-t'iao. Bank notes range from 1 tael 
 to 2,000 taels, and are called yin-p'iao. 
 
 [Extracts from North-China Herald for 1889.] 
 
 The (nirrency question in Kirin — Excessive issue of papefr money. 
 
 January 17. — The governor of Kirin states that the currency system 
 of the town of Kirin is carried on on a most pernicious system, and as 
 a remedy for the great inconvenience and suffering which it entails 
 upon the people he suggests that a portion of the subsidy which the 
 province receives yearly from Peking should in future be remitted in 
 copper cash. Cash, he states, is the proper standard for the monetary 
 requirements of the people, and paper money is only to be resorted to 
 when it proves insufficient. If the latter could be made to circulate 
 freely and the price of commodities, whether paid in cash or paper, 
 could be equalized, it would prove a real convenience for the people, 
 to which no objection could be raised, as in the other provinces where 
 paper money is used to supplement the ordinary currency. In Kirin, 
 however, the case is quite different. Here the notes no longer repre- 
 sent a cash value, and being inconvertible have given rise to abuses 
 Greater than any ever resulting from the financial expedients of the 
 ung dynasty. The commercial transactions of the town are all based 
 on a gigantic system of credit, against which prohibitions have been 
 issued from time to time without effect. The notes of the system lay 
 in its convenience for use in the market where money was required to 
 pass rapidly from hand to hand, and in course of time its use was ex- 
 tended until it assumed its present dimensions and afforded facilities 
 to dishonest merchants for fraudulent practices and overtrading. The 
 notes were put on the market without any regard to the capital pos- 
 sessed by the establishment issuing them, and people seeing that they 
 could buy sycee or goods with mere paper, naturally preferred to hide 
 away their cash, and make gain without employing money at all. 
 Merchants who came to the city to trade, observing the high price of 
 silver and articles of commerce, feared that they would lose heavily on 
 any goods purchased there, and took their cash to other places where 
 they could invest it better. The consequence was that there is an 
 unusual scarcity of cash in Kirin, and that prices have gone up to an 
 enormous height. The soldiers and officials suffered more than any 
 other part of the population. By an old regulation a part of their 
 
266 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 salary was paid out of the local revenue, and to begin with was issued 
 at a discount of :^() per cent. The chief source of revenue is a tax upon 
 distilleries paid in inconvertible paper, of which it took considerably 
 over 4 tiao to make a tael, but which was issued to the officials and 
 soldiers at the rate of 3 tiao to the tael. But this did not represent 
 the total loss. The other cities in the province would not accept the 
 inconvertible paper of Kirin; therefore the soldier was obliged, if he 
 wished to return home, to exchange his paper money for silver at the 
 current high market rates. When he reached home he had to convert 
 his silver into cash, and as the price of silver was lower than in Kirin 
 he again sustained a heavy loss. The country people who brought 
 produce into town found themselves unable to sell it unless they took 
 the price in paper money, and as this was utterly useless in the country 
 they were obliged to exchange it at a ruinous loss before returning. 
 Vendors of firewood, and other poor creatures who had carried heavy 
 burdens from a long distance into the city, would often want a few 
 cash to buy food to appease their hunger, and would find themselves 
 unable to obtain it, to such a pitch had the abuses of the currency sys- 
 tem attained. After a consultation with the local, civil, and military 
 authorities, memorialist drew up a set of regulations for reducing the 
 price of silver, and placing the copper and paper money on a uniform 
 basis, and took steps to have them enforced among the mercantile com- 
 munitj^ During a specified period, when outstanding notes were pre- 
 sented for payment, at least 20 per cent of the amount was to be given 
 in cash, and after the third moon of next year, the further issue 
 of inconvertible paper was to be entirely discontinued. It is feared, 
 however, that in making such a radical change, a difficulty might at 
 first be experienced in obtaining cash to meet the requirements of trade. 
 ' Che late governor proposed to open a local mint for the coinage of cash, 
 but the difficulty of procuring copper renders this scheme unsuited to 
 the exigencies of the case. Kirin draws from the board of revenue in 
 Peking quarterly subsidies for defense purposes, and half-yearly allow- 
 ances for the maintenance of a drilled force in the province. It is 
 suggested that of each of these payments, 10,000 taels should be issued 
 in copper cash at an exchange of 3,000 cash to the tael, and be for- 
 warded in carts to Kirin along with the remittances in silver. Or if 
 it is thought better, the board might direct one of the provinces which 
 coins copper cash and has communication by sea with Manchuria to 
 forward a similar amount of cash by steamer to Niuchwang, whence 
 it could be sent overland to Kirin, where it might be used in the 
 payment of salaries instead of a direct remittance from the board. — 
 Referred to the consideration of the board of revenue. — Ibid.', p. 175. 
 
 The subject of Chinese currency demands not a brief paragraph, but 
 a comprehensive essay, or rather a volume. Its chaotic eccentricities 
 would drive any occidental nation to madness in a single generation, 
 or more probably such gigantic evils would speedily work their own 
 cure. In speaking of the disregard of accuracy we have mentioned a 
 few of the more prominent annoyances. One hundred cash are not 
 100, and 1,000 cash are not 1,000, but some other and totally uncertain 
 number, to be ascertained only by experience. In wide regions of the 
 Empire 1 cash counts for 2, that is, it does so in numbers above 20 so 
 
GOLB STANDARD IN INTEBNATIONAL TRADJl. 267 
 
 that when one hears that he is to be paid 500 cash he understands that 
 he will receive 250 pieces, less the local abatement, which perpetually 
 shifts in different places. There is a constant intermixture of small 
 or spurious cash, leading to inevitable disputes between dealers in any 
 commodity. At irregular intervals the local magistrates become 
 impressed with the evil of this debasement of the currency and issue 
 stern proclamations against it. This gives the swarm of underlings in 
 the ma,gistrate's yam^n an opportunity to levy squeezes on all the cash 
 shops in the district and to make the transaction of all business more 
 or less difficult. Prices at once rise to meet the temporary necessity 
 for pure cash. As soon as the paying ore in this vein is exhausted, 
 and it is not worked to any extent, the bad cash return, but prices do 
 hot fall. Thus the irrepressible law by which the worse currency 
 drives out the better is never for an instant suspended. The condition 
 of the cash becomes worse and worse until, as in some parts of the 
 Province of Honan, everyone goes to market with two entirely distinct 
 sets of cash, one of which is the ordinary mixture of good with bad, 
 and the other is composed exclusively of counterfeit pieces. Certain 
 articles are paid for with the spurious cash only. But in regard to 
 other commodities this is matter of special bargain, and accordingly 
 there is for these articles a double market price. That enormous 
 losses must result from such a state of things is, to any westerner, 
 obvious at a glance, although the Chinese are so accustomed to incon- 
 veniences of this sort that they seem almost unconscious of their exist- 
 ence, and the evils are felt only as the pressure of the atmosphere is 
 felt. Chinese cash is emphatically "filthy lucre." It can not be 
 handled without contamination. The strings of 500 or 1,000 (nominal) 
 pieces are exceedingly liable to break, which involves great trouble in 
 recounting and retying. There is no uiiiformity of weight in the cur- 
 rent copper cash, but all is both bulky and heavy. Cash to the value 
 of a Mexican dollar weigh not less than 8 pounds avoirdupois. A few 
 hundred cash are all that anyone can carry about in the little bags which 
 are suspended for this purpose from the girdle. If it is desired to use 
 a larger sum than a few strings the transportation becomes a serious 
 matter. The losses on transactions in ingots of sycee are always great, 
 and the person who uses them is inevitably cheated, both in buying 
 and in selling. If he employs the bills of cash shops the difficulty is 
 not greatly relieved, since those of one region are either whollj' uncur- 
 rent in another region not far away, or will be taken only at a heavy 
 dis'count, while the person who at last takes them to be redeemed has 
 in prospect a certain battle with the harpies of the shop by which the 
 bills were issued as to the quality of the cash which is to be paid for 
 them. Under these grave disabilities the wonder is that the Chinese 
 are able to do any business at all, and yet, as we daily perceive, they 
 are so accustomed to these annoyances that their burden appears 
 scarcely felt, and the only serious complaint on this score comes from 
 foreignei's. — Ibid., p. 411. 
 
 Want of control over the circulating^ medjiwm. 
 
 About sixty years ago a student of Chinese history in Soochow made 
 some deep researches into the question of the currency. The currency 
 was then becoming more and more out of the reach of Government 
 
268 GOLD STANDARD IN INTERNATIONAL TRADK. 
 
 control. Foreign trade was increasing. Tiie Government had for 
 nearly two centuries left silver to work its own way as money paid- by 
 weight, and received it in payment of taxes from each arrondissement. 
 Only the copper cash were issued by the Government. For silver 
 there was no mint and never had been but once, and that for a short 
 time, yet this metal had grown to be one of the most important ele- 
 ments in domestic as well as foreign trade. It was the same with paper. 
 Paper notes representing money were issued by private capitalists in 
 alllarge cities, and the Government had no interest in them. Their 
 success as a circulating representative of silver was entirely at the risk 
 of the native bank Silver and paper both represented money in all 
 the large transactions of trade. The small market negotiations in cop- 
 per cash, which belong to the daily life of the people, and which, while 
 as transactions they are counted by millions, are always small in bulk, 
 were the only trading operations of which the Government issued the 
 circulating medium. How strikingly different was this state of things 
 from that which exists in the West, where gold, silver, copper, nickel, 
 and stamped paper are all issued by the governments as monej'. Our 
 author knew nothing of this, of course, but he was still able to cast 
 his eye over a wide range of financial facts. China had had a long 
 history of financial experiments and a succession of prosperous and 
 disappointing experiences. With the national annals before him, each 
 dynasty having its special chapter on finance, it never struck him that 
 China was, or could be, deficient in financial knowledge or unable to 
 meet the new conditions of the time. He attempted to show that a 
 change in policy was I'equired in finance, and the conclusion he arrived 
 at, and which he tried to prove by argument, was that a Government 
 paper currency ought to be again issued and the use of silver prohib- 
 ited. The people should attend to agriculture rather than to trade. 
 This was their proper occupation, and would lead them to a spirit of 
 contentment. The circulating medium of trade ought to be in the 
 hands of the prince as a source of revenue. 
 
 The reasons, he said, why the monarch can not easily control the 
 currency or derive revenue from it are fivefold. Coppersmiths melt 
 coin because they wi.sh to use the copper in making wash basins, tea- 
 kettles, and images of the gods. This is the first interference with the 
 monarch's authority. In addition to this, lead and spelter are employed 
 to make spurious coin in the furnaces of law breakers aiming at a little 
 profit. This is the second interference; and the third is the extending 
 use of foreign dollars. (It is worthy of remark that through the whSle 
 of his book the author, writing in 1831, makes no allusion to opium; 
 yet it is unquestionable that the spi-ead of Spanish dollars first and Ameri- 
 can dollars afterwards was very much connected with the opium trade. 
 At the same time he makes no allusion to the silk or the tea trade. 
 His point is simply that it is a loss to the Chinese Government not to 
 have the profit arising from the control of the currency. As to com- 
 mercial questions he seems to have no information, nor did he seek any. ) 
 His fourth reason why the Government fails to derive benefit from 
 the circulating medium is that the market price of silver is entirely in 
 the hands of the merchants. He would like the Government to regu- 
 late the currencjr b}' authoritj^ — not knowing that it is disastrous and 
 vain for official authority to attempt to modify prices. China has 
 learned many lessons since the day when this author lived. The fifth 
 
GOLB STANDARD IN INTERNATIONAL TRADE. 269 
 
 cause of the feebleness of the Government in regard to the control of 
 the money market is the fact that bank notes and bills of exchange are 
 issued by private capitalists. 
 
 Our author's advice to the Government was to make a law prohibit- 
 ing the use of silver in money payments and at the same time restore 
 the issue of Government bank notes which had been so long discon- 
 tinued. In his opinion this was the only policy by which the live evils 
 from which the Government suffered could be eradicated and the coun- 
 try made prosperous. In support of this view he appeals to the his- 
 tory of money in China. Ancient statesmen saw the propriety of 
 drawing a revenue of cereal products from one locality, of textile 
 fabrics from another, and of coined money from a third. They did 
 not see the need of a large issue of coins, except occasionally when 
 floods and drought compelled the adoption of this expedient. 5lor did 
 finance ministers in very early times limit money to silver or to copper. 
 Pearls and jade, tortoise-shell and cowries, bundles of silk and grass- 
 cloth, served as money in China's ancient markets. About 800 B. C. 
 an old poem says: "A simple-looking lad, you were carrying cloth to 
 exchange it for silk." The official master of the market, says the 
 comment, stamped the cloth for use in barter, and it was 2 inches in 
 width and 16 inches long. The author adduces this as classical author- 
 ity for an issue of Government bank notes. But as the poem mentions 
 merely barter, and the explanatory remark is that of an author of 200 
 A. D., how can we know whether the market officer stamped the cloth 
 or not? It may have been a simple case of barter. Whatever is 
 meant it would scarcely be by stamping, for this mode of giving 
 official validity was hardly in use so early. Why, for example, do we 
 find that the cash of the Ch'in dynasty, 220 B. C, were issued without 
 any inscription upon them? Books tell us that the Han dynasty 
 monarchs were the first to direct characters to be inscribed upon their 
 coins. This practice commenced about 200 B. C. and was never after- 
 wards neglected. He refers to another example — that of painted 
 squares of white deer skin, which in the reign of Han Wu-ti were used 
 as money. They were priced at 400,000 cash each, and were presented 
 to the Emperor by the high nobility or by his relatives at the daily 
 audiences or at high festivals', after which they could pass into circu- 
 lation for the amount mentioned. At that time there was also a silver 
 coinage, the silver being mixed with tin as an alloy, on account of the 
 whiteness of that metal. This alloy of tin was doubtless intended to 
 prevent all attempts at melting the imperial coins. The melter could 
 only lose by the act, and if it was not worth his while he would not 
 place the coins in his melting-pot. This seems to be a clear historical 
 instance of silver coinage lasting for a very short time. Neither the 
 silver coins of Han Wu-ti nor the painted squares of white deer skin 
 remained long in use; and the high value assigned to the deer skin 
 would suggest that it was something like the million-pound bank note 
 of Samuel Rogers, which he displayed in the chimney-piece of his 
 breakfast parlor. It was more an object of admiration than of utility, 
 in an age of luxury and gaudy show. As to the origin of paper cur- 
 rency in China, we must look to an age later than the Han dynasty." — 
 Ibid., p. 171. 
 
270 GOLD 8TANDAED IN INTERNATIONAL TRADE. 
 
 Ten reasons for a paper currency. 
 
 In the Ming dynasty, about 1600 A. D., when the board of revenue 
 was desirous to return to the use of paper money, the governor of one 
 of the provincess stated in a memorial what appeared to him to be the 
 ten advantages of paper money. The first was that it could be manu- 
 factured at the capital of each province for use in that province. The ' 
 second was that it could circulate widely. The third was that it could 
 be carried with ease, being light. The fourth was that it could be 
 readily kept in concealment. The fifth was that it was not liable to 
 division like silver into difi'erent grades of purity. The sixth was that 
 it did not need weighing, as was the case with silver, whenever it was 
 used in a commercial transaction. The seventh advantage was that 
 silversmiths could not clip it for their own nefarious profit. The 
 eighth was that it was not exposed to the peering gaze of the thief's 
 rapacity. The ninth was that if paper took the place of copper, and 
 copper ceased to be used for making cash, there would be a saving in 
 the cost of this metal to the Government, or the copper saved could be 
 used in manufacturing arms for the troops. The tenth advantage 
 would be that if paper were used instead of silver, the silver might be 
 stored up by the Government. 
 
 Our author in citing these ten reasons for adopting a paper currency 
 adds that the last two are defective. In adopting paper for the mer- 
 cantile classes the copper coins would remain in use to meet the neces- 
 sities of the common people. So also silver should continue to be used 
 in making ornamental articles and headgear of various kinds. It 
 would be a mistake to shut it up in the Government treasury and pi'e- 
 vent its being accessible to silversmiths. There is a fallacy lying 
 hidden in our author's reasoning. He thought that the authority of 
 the Government was all that was essential to the successful establish- 
 ment of a circulating medium, not reflecting that if paper were so 
 employed there was need of a corresponding store of gold. or silver 
 in readiness to pay value for the notes if the people lost confidence in 
 them and wished for their metallic equivalent. It did not strike him 
 that the financial credit of the Government bank can be sustained only 
 by payment in gold or silver to discontented holders of paper. He 
 thought only of supplying the demand for ornaments and not of a run on 
 the treasury. In fact, China is too large a country and the merchants 
 as a body too powerful by their numbers for the Government to 
 attempt successfully the prohibition of silver, nor can it refuse to allow 
 the issue of paper money by private banks. The difficulty in estab- 
 lishing a national bank is found in the fact that the Government can 
 not take better care of the interests of the mercantile classes than each 
 private capitalist can ,do for himself, and in the difference which exists 
 in the commercial conditions of the various provinces. 
 
 In the ten reasons for adopting a paper currency, when it is sug- 
 gested that each treasurer of a province should issue ba,nk notes, it 
 may well be asked, why not leave native banks in possession of this 
 privilege, which is not only a benefit to themselves but to trade gener- 
 ally % It is certainly a great advantage to travelers that through the 
 wide business connections of the Chinese bankers, bills of exchange 
 may be bought in Shanghai and cashed in any of the provincial capitals 
 of the empire. Both to native and foreigner this is an unquestioned 
 benefit, and renders traveling tenfold easier than if the silver had to 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 271 
 
 be carried in the traveler's trunks. In the fifth and sixth reasons 
 alleged for Crovernment paper currency the Chinese writer touches 
 upon two patent and unanswerable objections to the present system. 
 Tne silver is weighed at each transaction, and it is circulated in vary- 
 ing states of purity. The scales at which silver is weighed differ in 
 each locality and the traveler feels himself outwitted. His money 
 becomes less at each new point in his journey, and a general feeling of 
 dissatisfaction with the currency grows upon him on his return; how- 
 ever, he would naturally become more reconciled to the tyranny of 
 the scales had he silver left to weigh, for when he arrived again at 
 places of large trade, his sycee weighs as much in proportion to bulk 
 as before. The scale differs to allow the money changers in towns of 
 small trade to pay their expenses, and when this is understood the 
 indignation of the traveler sinks somewhat. But there is a worse 
 trouble than the variation in scales. It is the variations in the purity 
 of the silver. It becomes alloyed in many ways and is reduced to 
 purity only by re-melting. Blacksmiths melt the silver, and in all 
 places of large trade there are assaying offices which certify thepurity 
 of silver for a small sum. Silver sent to Peking to represent taxes 
 has cut into it by the treasurer of the province, the name of the arron- 
 dissement from which it comes, and of the blacksmith who melted it. 
 Only silver of first purity is allowed to be sent to Peking. In this way 
 the Government indirectly aids in rendering the silver which is in cir- 
 culation as money much more pure than it would otherwise be, but the 
 introduction of new silver into the money market is the work of 
 merchants alone. Also the law does in a direct way by statute under- 
 take to protect silver from the incessant efforts of the unprincipled, 
 who for private profit in every possible way try to diminish its purity. 
 But it is so hard to discover the evil-doer that statutes are promulgated 
 in vain and the owner of the metal is in fact only protected by the 
 shroff and the assaying office. When it is considered how much impure 
 silver is in circulation there does seem strong reasons for a silver coin- 
 age. This would at once improve the standard and raise the average 
 of purity. To reject the precious metals as currency because their 
 purity is tampered with, in favor of paper, would be a mistake. The 
 cure for the evil is to maintain the efficiency of the statutes which aim 
 at the punishment of crimes against the currency. Mexican dollars 
 are now much more uniform in value than sycee silver, and the con- 
 venience of a coin is so great that it is remarkable that the Chinese 
 Government does not follow Japanese example and establish a mint. — 
 Ibid., p. 203. 
 
 The history of ^jape)' currency. 
 
 The first attempt at paper currency in China of which any record 
 remains was in 806 A. D., when bills of exchange were called "flying 
 money." Merchants in the capital could by an ordinance then first 
 made receive Government bills in return for the merchant's copper 
 money. On arrival at any provincial capital they could receive from 
 the provincial treasurer the amount stated on the bill. There was a 
 return to this system, which was a sort of banking facility offered to 
 the merchants by the Government, about the year 960 A, D. A bureau 
 
272 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 was instituted in Kai-feng-fu, then tiie capital, for the transaction of 
 this business. 
 
 In 1023 Szechuen was suffering from the iron cash coinage which 
 the Government from scarcity of copper was forcing on the people 
 there. The paper notes then put in circulation at Ch^ng-tu by the 
 Government were meant as a relief. They were to be returned once 
 in three years. The idea sprang up among the rich merchants and was 
 accepted by the Government, and the merchants conducted the busi- 
 ness. The Hmit of capital represented by the notes was 1,255,300 
 strings, a string being 1,000 copper cash. In 1150 A. D. the Golden 
 Tartars had just conquered north China, and about this time they 
 adopted a currency in paper, because they found copper scarce. Cop- 
 per, silver, and gold have always been chiefly found in south China. 
 A north China kingdom finds it convenient to use paper so far as pos- 
 sible, to prevent its being dependent on a southern neighbor. From 
 this time forward, during a century of the Golden Tartars and another 
 century of the Mongol domination, strenuous efforts were made to 
 maintain a paper currency. Colonel Yule, Doctor Bushell, and others 
 have printed facsimiles of the notes of these periods. They are found, 
 for example, in Yule's Marco Polo and in the Journal of the Peking 
 Oriental Society published this year. All the efforts of the Govern- 
 ment did not secure the credit of the notes at par. On the contrarj^ 
 they became depreciated to an extreme degree. This, however, did 
 not prevent the Government of the Ming dynastj% which acquired the 
 sovereignty in 1368 A. D., from continuing for a time paper currency, 
 which was finally abandoned as silver flowed into the country through 
 the foreign trade which brought to the southern ports a portion of the 
 products of Mexican and Peruvian mines. It was American silver 
 that gave the death blow to paper currency in China. The arrival of 
 sufficient silver was the real relief which Chinese .trade required. 
 Notes were finally abolished about 1620 A. D. Thus the conquest 
 made by silver over paper occupied about a century or a little more, 
 from the commencement of the trade of the Spaniards and Portuguese 
 with Canton.— Ibid., p. 292. 
 
 Silver in China. 
 
 The silver used in China as a circulating medium in her commerce 
 has been increasing, in quantity especially, for four hundred years, and 
 most rapidly of all during the present century. Each industrious 
 Chinaman represents so much wealth by his labor — that is, so much sil- 
 ver, for silver has now for several centuries been the standard of money 
 value in this country. The increase. of population means an increase 
 of wealth wherever there is scope for industry; and in localities where 
 opportunity is wanting, it leads to emigration.' At the beginningof the 
 Ming dynasty, in the latter half of the fourteenth century, the public 
 currency had fallen into a most unsatisfactory state through the Gov- 
 ernment not being able to maintain the credit of the paper notes then 
 used. Yunnan was conquered, and it contained many silver mines, and 
 these were worked to increase the quantity of silver then rapidly 
 coming into use as a medium of exchange. We are told that in 1578 
 the Government received from Yunnan 13,761 taels in paper money, 
 944 piculs of grain, and 5,769 strings of shells. Two hundred years 
 later the amount received in heliip, cloth, and silver amounted to 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 273 
 
 14,801 taels of this last metal. The strings of shells used as money had 
 disappeared. The cumbersome grain tribute in heavy bags had become 
 changed for silver. But hemp and cloth were still received by the Gov- 
 ernment tax collector because they could be exchanged for silver, and 
 the expense of conveyance of these articles was not very great. Yet 
 after a few more decades this mode of paying taxes will again be 
 exchanged for silver, which in a country like China has proved to be 
 the most economical form of tribute. The Government in these cir- 
 cumstances began to prize silver very highly. It keeps its value as an 
 article in great request for ornamental work. It is cheaper to convey 
 than other kinds of tribute. It is acceptable in trade, and the mer- 
 chant is far more willing to part with his goods for silver than for 
 paper money. Hence the Government made efforts to obtain more of 
 it. They set criminals to work in the mines of Yunnan. This was in 
 1460; and they do not seem to have allowed Chinese employers of labor 
 to manage mining operations. They considered it good policy to keep 
 the mines in their' own hands, and they ordered the high officers to 
 report fully on an}' failure in the working or diminution in the yield of 
 metal. Then in 1463 the works were suddenly ordered to be stopped, 
 probabl}' because of earthquakes, for a few years later, in 1511, the 
 governor of Yiinnan sent up a memorial advising that all the mines 
 should be stopped, on account of fresh earthquakes; but they were 
 opened again in 1514, notwithstanding other objections which were 
 pressed at the time, such as the gathering of a rough-spirited popula- 
 tion at the mines, and the neglect of agriculture in the province, lead- 
 ing to want of food to supply the needs of immigrants. At this very 
 time American silver began to enter the country through foreign 
 trade at Canton and Amoy. More silver was thus introduced and a 
 real need supplied, for it enabled Government to abandon both the 
 shell currency in the southwest and the paper currency everywhere, 
 ^nd the merchants were very glad to see the last of the Governments, 
 (sic) and to have in their place this shining metal. Silver was now 
 wanted by everyone, to keep in store or use in buying as he pleased. 
 The value of silver in copper cash has gone through great vicissi- 
 tudes. It has been three thousand, and it has been one thousand per 
 tael. In 1696 A. D., a tael of silver was worth 1,750 cash, and it is 
 now, 1889 A. D., worth 1,380 in the Shanghai market. In the reign 
 of Yung Cheng, about 1730 A. D., 36 taels of silver were paid for a 
 month's maintenance to 21 workmen at cash foundries in Yiinnan — 
 that is to say, If ounces of silver would then support an able-bodied 
 workman for a month. In 1655 the casting of cash in Yunnan was com- 
 menced, on account of copper being produced there in abundance. The 
 disuse of paper made a new supply, both of silver and of copper cash, 
 a necessity, and from that time forward both metals have been needed; 
 and when the growth of population is remembered they must still con- 
 tinue to be required in increasing quantity. Two centuries ago the 
 workman could live for 100 cash a day. Now more is required, because 
 prices have risen and every one who carries on his shoulder his baskets 
 of market produce from his little farm to the adjoining local center of 
 merchandise expects more money for it than did his grandfather did. 
 The old currency needs to be modified to meet the new conditions. 
 Copper cash are not enough for the uses of common life. Silver is 
 required to do what the cash, through gradual sinking in value can not 
 
 S. Doc. 128, 58-3 18 
 
274 GOLD STANDARD IN INTEBNATIONAL TRADE. 
 
 do. Two hundred cash are wanted to buy that amount of food and 
 clothing for which in former times 100 would have been enough — that 
 is to say, the man who goes to market to buy must cai-ry with him 
 twice as much weight in copper as his great-grandfather did. It is 
 more convenient in these circumstances to have small silver coins, and 
 this is our convenience in the West, or small notes issued by native 
 banks and properly stamped and inscribed may be used, as they still 
 are in Peking. 
 
 Yet small silver coins could not now in China take the place of cop- 
 per cash. Copper must continue to rank in China as the most widely 
 useful of all currencies, because of the disproportion in the expense of 
 living in large cities and in country districts, and the wide differences 
 in climate existing between the north and the south and between moun- 
 tain and plain in so large a country as China. That coin is most 
 adapted to China which has the most minute divisibility. A dollar 
 which is now worth 3s. 3d. is divisible into a thousand separate coins 
 composed of a mixture of copper and zinc. It suits-the prices of mar- 
 ketable articles and the incomes of the people to retain this subdivison 
 in current coins. Ev-en silver is circulated in very small lumps as well 
 as in large ones, and the small hand steelyard used in weighing it is 
 subdivided into hundredths of an ounce. Such a steelyard is part of 
 the kit of every traveler, as a check on the weighing of the money- 
 shops. — Ibid., p. 584. 
 
 Copper cash. 
 
 The older books written by Chinese archeologists on the history of 
 cash contain at the beginning examples of money professing to come 
 down from the primitive ages. Some of them belong to Fuhi and 
 others to Shennung. The foreign collector of cash ought to know if 
 he has such coins in his cabinet that this immense antiquity is given ta 
 them by medieval mythmakers. The best modern numismatists do 
 not recognize such a claim. Yet they appear in a book of so much 
 authority as Hsi Ch'ing Ku Chien, compiled \>j an imperial commis- 
 sion and published 1749 A. D. Seven hundred years ago, when the 
 capital was at Hangchow, the first complete book on Chinese coins was 
 published. Since that time archeologists have been numerous, and a 
 persistent effort has been made to collect newly-found coins. Builders 
 of houses and walls, countrymen at work in the fields, restorers of 
 bridges, and diggers of canals in any part of China from time to time 
 meet with old cash which are added to the current coins in circulation 
 or are sold or presented to local numismatists. There never has been 
 a law against the use of old cash mixed with the new, nor has there 
 been any official effort made to collect them, and in consequence it is an 
 ever^' da3' occurrence to meet with coins made a thousand years ago. 
 The traveler in China does not know, unless he examines carefullj', 
 how many relics of distant centuries constantly pass thi'ough his hands 
 or through those of his "faithful Achates." 
 
 The chief interest attaches to coins of a time anterior to the book- 
 burning — 211 B. C. That was the period when literature and the arts 
 and sciences took a mighty spring upward. It was the time when 
 great books were written, destined to be ever after preserved by a 
 
 grateful nation as those precious heirlooms which a mad conqueror in 
 is enmity against the sages failed to destroy. The coins of that time 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 275 
 
 are indicators of progress in commerce and the arts in various localities 
 of northern China. We may consider it as proved that bronze castings 
 and the manuf actureof iron implements, as well as goldsmiths' and silver- 
 smiths' work, were well advanced long before Confucius. The history 
 known as Kwo yii shows that this was the case in regard to work in 
 bronze. But cash were cast before 624 B. C. , for it is recorded in that 
 year that larger coins than had been before made were then cast in 
 Honan, on the banks of the Yellow, River by order of the Chow emperor. 
 From the collections of the numismatists it appears that a square hole 
 in the middle and a legend of two characters were in use as early as 
 this in Chinese coins. Hwo was the word for " money," meaning that 
 which is changed (hua) for something else. Pao, " valuable, ' was 
 prefixed to it. But coins must have existed before this, and in the 
 Han dynasty it was fully believed that Kiang Tai-kung, the chief min- 
 ister of WSn Wang in the twelfth century before our era, introduced 
 them in Shensi when in office and afterwards in Shantung when he 
 retired to his principality. His special repute is for advancing com- 
 merce, and it was under his fostering care that the salt trade of north- 
 ern Shantung came to exercise a decided influence on the development 
 of internal commerce in ancient China. The history of Pankoo 
 ascribes to Kiang Tai-kung the origin of round coins as distinguished 
 from knives and pieces of cloth. We may adopt this view and may 
 connect it with improvements in metallurgy and new acquisitions of 
 foreign knowledge at the beginning of the Chou dynasty. If Kiang 
 Tai-kung is rightly credited with the origination of round cash, the 
 period of that improvement is then fixed to the twelfth century before 
 our era. Yet it may be that he is credited with it because he promoted 
 trade and was possessed of political sagacity shown in other useful 
 measures. If at any time between the eleventh and fifth centuries 
 before our era the coins called cash were introduced by an.y statesman 
 in northern Shantung, whose name did not shine out with luster in 
 history, it was very likely that the improvement would be attributed 
 to Kiang Tai-kung. It would be by a suggestion from the strings of 
 seashells then used as money that the idea of a hole for stringing the 
 new copper coins would be most probably derived. Further it would 
 be before the time of Kwan Chung, the great administrative statesman 
 of the seventh century, for in the book purporting to be written by 
 Kwan Chung, there are several references to the coining of cash, but 
 the compiler does not attribute the invention to Kwan Chung himself. 
 Perhaps in these circumstances it may be best to assign the first round 
 metal coinage to about the ninth century, the age of Siuen Wang, 
 when the country was prosperous and wars were conducted success- 
 fully. But this may be too late, and there is really no very strong 
 reason based in the old literature of China why to Kiang Tai-kung the 
 honor of introducing a copper currency should not be assigned. The 
 remarkable old workCh6wli, in describing the administration through 
 all its departments, mentions among them a cash office for the manu- 
 facture and issue of cash. But this book was probably small at first, 
 and its bulk increased from one period to another, and this particular 
 statement may have been inserted, we know not when, by some 
 unknown ofllcial. We must wait for more discoveries from under- 
 ground. The railway from Peking to Hankow will in Chihli and 
 Honan proceed through a country occupied by a people who for four 
 thousand years at least have ploughed and sown the land, carried the 
 
276 GOLD STANDAED IN INTERNATIONAL TRADE. 
 
 produce to market, exchanged it for something necessary for use or 
 ornament, and returned to their homes with their new possessions. 
 The railway works may anywhere in that region, "rich with the spoils 
 of time," yield interesing treasures which will throw light on the past. 
 Should there be a line made from the city of Confucius, or from 
 Taishan to the north of it, to Tientsin, it would bisect the very terri- 
 tory which belonged as a feudal fief to the traditional founder of the 
 copper currency of China. As about many other ancient matters, so 
 on the question of the origin of this currency, our successors will know 
 with certainty what now can not be determined. — Ibid., p. 745. 
 
 3. MONEY SYSTEM OF MANCHURIA. 
 
 (a) Report fbom the American Consul at Niuchwang. 
 
 [From Daily Consular Reports, No. 2010, July 22, 1904.] 
 
 The following paper on money in Manchuria, prepared by Mr. 
 Arthur Henckendorif, of the Eusso-Chinese Bank at Niuchwang, was 
 transmitted by the United States consul at that place under date of 
 May 5, 1904: 
 
 I think it would not be possible to find a more intricate or compli- 
 cated monej'^ system than that at present in vogue in Manchuria. 
 This is owing, I should say, to the fact that they have not there a fixed 
 recognized standard of silver w^hich can be taken as a basis for 
 exchange operations. 
 
 Although China's currency is on a silver basis, yet there is no stand- 
 ard of silver common to all their provinces. 
 
 For instance, the silver of Niuchwang has a touch of 99.2 — or, in 
 other words, 8 ounces of alloy to 992 ounces of pure silver. The touch 
 of the silver of Liaoyang, Mukden, Kirin, and Tiding is supposed 
 to be the same as that of Yingkou, but it never is, Ymgkou silver 
 usually being finer by 1 or 2 ounces in the thousand. Kwangchingtsu 
 silver has a touch of 99, which puts it below Yingkou silver, while, 
 on the other hand, Harbin silver has a 'touch of 99.8, which puts it 
 above that of Niuchwang. "^Vhen we think that the touch is only one 
 of the items which has to be taken into consideration in the everyday 
 exchange operations which take place between the various Manchu- 
 rian towns, we can understand that the negotiating of a rate between 
 Chinese currency is not a simple matter. This constant practice in 
 exchange of the Chinese banker accounts, I should say, for much of 
 his quickness of perception. 
 
 The hard-coin currency in Manchxiria consists of the sycee, small 
 coin, and, of late, the ruble ; yet the bulk of the merchandise bought 
 and sold is not bought or sold against these hard effectives. All prices 
 and rates quoted are against transfer money or mo-lu yingtzu — ^in 
 other words, goods money, or huo yingtzu. This transfer or mo-lu 
 yingtzu is a peculiar and muddled system. The arrival of the ruble 
 and the estnblishment of quick communication with Manchuria, thus 
 enabling the rapid transportation of treasure to and frorn Manchuria, 
 is in large part responsible for the muddling. 
 
 The transfer money is a purely nominal currency not substantiated 
 in any way by an elfective — in other Avords, it is a credit. We will 
 say, for instance, that a merchant starts business in Niuchwang and 
 
GOLD STANDABD IN INTERNATIONAL TRADE. 277 
 
 that his capital is deposited in some bank in Shanghai. The first 
 thing he will do will be to sell his draft on Shanghai in the market 
 at the market rate. The purchaser will transfer to the credit of the 
 merchant, at the place where he banks, the equivalent, in transfer 
 money, of his draft, and with this credit he can purchase his goods or 
 do his banking. This transfer money can at any time be sold for 
 silver or ruble effectives. 
 
 The Chinese year has four settling days, or mao-kou, when all trans- 
 fer money which has been issued has to be released. The method of 
 redeeming transfer money has undergone several changes during the 
 last few years. The first system was that transfer money should be 
 redeemed at full value in hard silver at the end of every three months. 
 This system was continued until about two years after the Japanese 
 war. During this period the eifective currency was sycee and copper 
 cash, small coin not having then made its appearance in large 
 amounts. 
 
 Tiao notes were largely issued by bankers and merchaiits of good 
 standing. Silver at that time was only purchasable with cash, not, 
 as now, with transfer money. All other exchange quotations between 
 Yingkou and the other provinces were in transfer. At this time hard 
 sycee was subject to a premium of from 50 cents to 1 tael per shoe of 
 taels, or, roughly, about 2 per cent — that is to say, 53.50 hard sycee 
 taels were equivalent to 54 or 54.50 transfer taels. On the settling 
 day, when the holder of transfer was paid full value in sycee — that 
 is to say, in sycee at par with transfer — he actually received about 2 
 per cent more than the -original amount; this 2 per cent represented 
 the interest he received on his money. By this it may be seen that 
 transfer money increased in value as it approached the settling day, 
 owing to the fact that it was accruing interest. 
 
 After the Japanese war the Chinese Government started to mint 
 dollars in the various provinces; this had the effect of raising the 
 price of silver and causing a scarcity in the silver market, as the Gov- 
 ernment was buying large quantities. This scarcity of silver made 
 it very inconvenient to have to settle up in ready silver, as the market 
 was often very tight, and consequently the premium on silver would 
 go up very high, thus causing a heavy loss to issuers of transfer ; so 
 it was arranged that transfer upon falling due should not be re- 
 deemed at par in silver, but should have a premium added to it. 
 This premium was usually slightly smaller than the premium on 
 sycee, and represented the accrued interest. This system had the 
 effect of somewhat diminishing the demand for hard sycee. 
 
 During the Boxer trouble the transfer issued was not settled up for 
 a period of nine months. The next settling day it was settled up by 
 the issuers of transfer paying $81.50 for each shoe of transfer, the 
 shoe then being worth about $79, the difference between these amounts 
 standing for the interest. Since then settlements have been made 
 both by paying small coin and by paying a premium. 
 
 I mentioned a little while ago that before the Japanese war- there 
 were tiao notes and copper cash in currency. These gradually dis- 
 appeared after the appearance of the small-coin dollar, so that now 
 even in the stalls in the streets you will hardly hear the word tiao 
 mentioned, all business being done in small coin. 
 
 Of late the ruble has been a very important factor in the Man- 
 churian currency. The ruble was brought into circulation by the 
 
278 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Eussian railway and the troops. The Chinese took to it readily, owing 
 to the ease with which it could be carried backward and forward, 
 thus saving the expense of shipping specie. 
 
 The currency of Laioyang is slightly different from that of Niu- 
 chwang. The effectives there are the small coin, sycee, copper cash, 
 and rubles. They have there also a system very much like the trans- 
 fer of Niuchwang — that is, the tieh yingtzu, or note money. This 
 consists of tiao notes issued on demand by bankers and merchants of 
 good standing, payable upon presentation, not in copper cash, as 
 would be expected, but in small coin, at the rate of the day. (The 
 present exchange is about 11 tiaos to the dollar; the tiao there is the 
 same as the tiao here — that is, 160 cash.) The present rate is about 15 
 tiaos to the tael. This quotation stands good merely for transfers of 
 the tael and tiao against goods bought or sold ; if ready silver is re- 
 quired, an extra premium of about 1 tiao, more or less, according to the 
 market quotation, must be paid. For instance, if a person buys 100 
 pieces of goods the price of which is 1 tael apiece, and the market rate 
 is 15 tiaos to the tael, he would have to pay 1,500 tiaos for these 100 
 pieces of goods ; but if, on the other hand, he wants to buy 100 taels of 
 hard sycee, he will have to pay 1,600 tiaos — that is, 1,500 tiaos plus the 
 premium of 1 tiao (or whatever the market rate may be) on each 
 tael — thus making it 100 tiaos more. 
 
 The money system of Moukden and Tiding is practically the same 
 as that of Liaoyang. 
 
 The system in KAvangchingtsu and Kirin is quite different again. 
 There they have a system of transfer money very much like the sys- 
 tem in Niuchwang. The exchange there is chiefly between tiaos and 
 silver. The tiao there is three times the value of the Yingkou, Liao- 
 yang, and Tieling tiao. It is valued at 480 copper cash. Bu.t in 
 Kwangchingtsu and Kirin there is'no cash to speak of, nor are many 
 tiao notes issued, so that the tiao is more or less a nominal currency 
 used merely for business transfers, the actual settlements being made 
 in sycee according to the rates quoted in the market. 
 
 The price of rubles is quoted in tiaos. The ruble has a fixed rate 
 of 2 tiaos. The difference in rise or fall in exchange is made up by 
 a premium on the ruble, which rises and falls as the value of the silver 
 increases or decreases. In Chi-chi-har and Harbin all business is 
 done in hard effectives, either sycee, rubles, or small coin. 
 
 (6) The Defeat of the Traveling Ruble. 
 
 As an instructive 'and illuminating comment on the Chinese system 
 are added the following extracts from a chapter of Mr. B. L. Put- 
 nam Weale's book, Manchu and Muscovite, imder the above title : 
 
 So by 1901 the ruble had a very firm and enviable position and bid 
 fair to become master of the economical situation in Manchuria. The 
 Chinese Eastern Railway, which was being rebuilt at a truly phe- 
 nomenal rate, now jumped into the fray, and arbitrarily and without 
 any right to do so decreed that henceforth passenger tickets and 
 freight charges must be paid for in ruble notes without distinction. 
 Up till then, a'ou see, the Harbin Railway administration had not felt 
 sufficiently strong to tackle the Chinese on what is a matter of life and 
 
 death to everyone of them as soon as they are old enough to walk 
 
 that is, on the dollar question. But the presence of large bodies of 
 
GOLD 8TANDAED IN INTERNATIONAL TRADE. 279 
 
 occupation troops made the Slav foolishly confident, and caused him 
 to commit a first great faux-pas, which was to be the ruin of the 
 ruble. Tell a Chinaman he has got to do something that you have 
 neither' the organization nor the power to make him do and you are 
 simply inviting disaster. Above all, when it is a question of the 
 Chinaman's pocket, act most warily and be warned in time. 
 
 Here it is necessary to explain that the real currency of Manchuria, 
 as in other parts of China, is merely copper cash, not the small copper 
 cash of the central and southern provinces, but the so-called large 
 cash of the north. As these cash are too small a denomination in 
 which to conduct commercial transactions of any magnitude, it may 
 be said that the " tiao " is the unit of value in the big market places. 
 "What is the tiao? The tiao is simply a certain number of copper 
 cash. In north China, or say the metropolitan province of Chihli, it 
 is 100 large cash; in Niuchwang it is 160; in Moukden more, and 
 finally in Kirin several hundred cash go to the tiao, and, roughly, in 
 this last named place, 2 tiao equal 1 provincial dollar. But there is 
 another point to note. The tiao is an imaginary coin ; in fact, it is no 
 coin at all. It is simply a multiple of copper cash settled on long ago 
 in the dim past and varying according to the district in which you 
 happen to be, and is not coined into silver pieces. To simplify mat- 
 ters, Chinese bankers in Moukden, Kirin, and in fact in every mart of 
 importance, issue paper tiao notes of various denominations, and these, 
 notes correspond almost exactly to the country bank notes of Euro- 
 pean countries. 
 
 These notes are, therefore, only negotiable in their districts of 
 issue. If, for instance, I have got 1,000 tiao in Moukden notes, say 
 £20, and I propose to go into Kirin city to buy produce, I must first 
 cash my notes in Moukden and get a Kirin credit in silver taels ; that 
 is, an order on a Kirin bank to pa.y me so many local taels' weight of 
 silver on demand. Arrived in Kirin, I present my draft and am told 
 that my credit in Kirin tiao at the current rate of the day is so and so 
 and so much. 
 
 Are you beginning to see what a hornet's nest the Russians were dis- 
 turbing when they attempted, unauthorizedly, to tamper with the 
 Chinaman's birthright, the exchange question and the vast profits it 
 brings him ? However, there is yet another point. 
 
 In 1897, I think it was, mints to coin dollars of the same nominal 
 weight and fineness as the Mexican dollars Avere opened in Kirin city 
 and in Moukden. Unfortunately no figures are available to show 
 what number of coins were yearly placed on the markets, but there is 
 some reason to suppose, although the work was very intermittent, that 
 the totals ran into millions. More attention, however, was given to 
 the minting of subsidiary coins — that is, 5, 10, 20, and 50 cent pieces — 
 than to dollars, because adulteration and short weight are not so easily 
 detected or so objected to in minor coins as they are in big ones, and 
 the mint profits are, therefore, more secure. These mints were opened 
 with one object, that of supplying convenient tokens for the ever- 
 growing minor trade and traffic between foreigners and Chinese in 
 Manchuria. 
 
 Reviewing rapidly what has been written above, the reader will see 
 at once that the real money of Manchuria is the larger copper cash ; 
 that for commercial transactions the tiao, a certain multiple of copper 
 cash, is the value used ; that for petty dealings of a semif oreign char- 
 
280 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 acter minted dollars are locally employed, and that, finally, for set- 
 tling adverse trade balances, silver bullion or sycee is shipped from 
 one point to another. The ruble was, therefore, in every way an 
 interloper, at first tolerated by the Chinese bankers because they could 
 squeeze a beloved exchange profit out of it, whether they were buying 
 or selling. Once, however, they saw their entire monetary system 
 threatened by the arbitrary decrees of Eussian bureaucrats they pre- 
 pared for battle, and when the dollar-loving Chinaman prepares for 
 battle, look out for squalls. 
 
 During the first part of 1901 nothing much was noticeable, but after 
 the evacuation protocol of April, 1902, was signed in Peking ominous 
 rumors became suddenly current in every tea house and hong in Man- 
 churia. The Russians were going, everybody said, and were leaving 
 their useless paper money behind in millions of innocent Chinese 
 hands. Who guaranteed this paper ? What was this paper, and was 
 there no redress ? 
 
 These were the questions that were being freely asked and nervously 
 answered, and the Chinese bankers, the conscious instigators of false 
 rumors untraceable to anyone, smiled quietly in their back parlors, 
 knowing that they would succeed. Briefly put, the battle, although 
 just commenced, was already won. Distrust and suspicion, those 
 twin fiends that conquer the strongest, had taken hold of the multi- 
 tudes, and the game was absolutely in the hands of 1,000 native 
 " banking people. For although the Eussian did not probably in the 
 first instance dream of forcing his paper money onto IVIanchuria, 
 events so shaped themselves that he thought he could use the ruble 
 as a powerful weapon of conquest. Manchuria had a Eussian rail- 
 way; Eussian guards everywhere; Eusso-Chinese banks in many im- 
 portant towns; Eussian authorities controlling the seaports; in fact, 
 it seemed like Eussia herself to purblind employees who traveled up 
 and down the empire of the 5-foot track. Therefore, why not make 
 an end of all pretense at once and spread the famous paper money, of 
 which there is apparently no end, stamped with the effigy of an om- 
 nipotent Czar, and symbolic of Russia's victory all over the country ? 
 
 But, as I have already said, it is best not to go too far in a country 
 the size of France and Germany rolled into one, and withal possessed 
 of a population to whom money is as the breath of life. Two years or 
 even One year ago tens of millions of ruble notes were hoarded in 
 every native bank in Manchuria ; to-day who will find me 1,000,000 ? 
 
 A year ago the Harbin Eailway administration addressed a query 
 to St. Petersburg as to what should be done with the millions of silver 
 dollars and hundreds of millions of copper cash stored in the railway 
 city, and representing railway receipts during pre-Boxer days. The 
 answer promptly came : Ship away the dollars and keep the copper 
 cash pending further instructions. 
 
 So the dollars were duly sent away. One million or so came to 
 Shanghai, were sold on the local market only to be promptly bought 
 up by native houses from the north that have Shanghai branches, and 
 shipped back to Moukden and Newchwang inside of a fortnight. 
 Some of the dollars went to Tientsin and were back within forty-eight 
 hours in Manchuria. The Eussian was vainly attempting in a most 
 puerile fashion to kill the minted dollar in Manchuria; which, after 
 all, is itself something of an intruder in the country. If such small suc- 
 cess attended the fight against a semi-foreign coin, what were the 
 
GOLD STANDARD IN tNTBRNATlONAL TRADE.. 881 
 
 chances against the elusive and imaginary tael, the still more fictitious 
 tiao, and the very matter-of-fact copper cash? Absolutely nil, of 
 course. 
 
 So to-day we find a conservative English banker estimating that 
 nearly 70,000,000 paper rubles are exported to Shanghai from Man- 
 churia by Chinese merchants and changed into silver dollars or silver 
 credits; native bankers stating that more than this amount goes to 
 Tientsin and Chefoo, carried there by Chinese hands and once more 
 promptly cashed into beloved silver. What does all this mean? 
 That the ruble is entirely discredited by astute Chinese, and that 
 whether the Russo-Chinese bank in Manchuria makes its payments 
 in paper or not is a matter of entire indifference; for no sooner is 
 paper received than prompt measures are taken to cash it into some- 
 thing more finite than a mere piece of parchment bearing an excellent 
 likeness of his Imperial Majesty the Czar. 
 
 And with this nuge drain going on every Eussian enterprise is 
 being rapidly crippled. Harbin, to take one instance only, has spent 
 all its money, and, what is more, all its credit in building itself new 
 houses capable of more effectively resisting the terrible winter. The 
 Chinaman is the only man who has profited by this, for, although the 
 houses are nearly all ready, there is no one with money enough to live 
 in them, so slack has business become. The rubles have all disap- 
 peared and been hidden in the coffers of the Russo-Chinese bank, 
 alone able, among a host of would-be empire builders, to purchase 
 back in silver what has been emitted in paper. In both Port Arthur 
 and Dalny it is the same story. Tight money, or no money at all, are 
 the cries one everywhere hears. Where have all those fabulous tons 
 of paper rubles disappeared to ? Wliere, indeed ? 
 
 So the real commercial life of Manchuria rolls on uninterruptedly 
 in spite of the Russian invasion, in spite of imperial decrees, in spite 
 of every attempt. Chink, chink, go the silver dollars ; chunk, chunk, 
 the heavy sycee of pure silver ; clank, clank, the iron and copper cash 
 of a people who understand business, and these sounds are full of 
 ominous meaning for the incautious Slav. The railway, it is true, 
 must still be paid for in rubles, but then in no country in the world 
 is the native such an adept at exchange banking as in the land of the 
 blue gown. If you want 100 rubles, or even 10,000, you can buy them 
 almost anywhere in Manchuria, for Chinese dealers are quite ready to 
 make a profit, and the soldiery are being daily fleeced of more mil- 
 lions. But, though you purchase rubles with ease, you are simply buy- 
 ing a foreign currency which has no more entered into the commercial 
 life of the people than the golden sovereign has at Hongkong. And 
 then in Hongkong England has at least some trade, which is more 
 than can be said or the Russian in Manchuria. 
 
 The fact is, the Chinaman is inordinately a lover of the tangible. 
 He likes his money in solid coins or solid bullion, even if they are all 
 debased or fallen in value ; that is, something he can handle and that 
 is intelligible to the merest child. It is true that he may conduct huge 
 transactions in mere credits, but in every case he knows that differ- 
 ences and balances are going to be settled in solid bullion payments. 
 The ruble, therefore, has had its fling, and after a half-hearted 
 attempt to oust the Manchurian currencies, it is condemned like 
 everything else Russian in Manchuria to the dreary existence of a 
 railway life. 
 
282 . GOLD STANDARD IN INTERNATIONAL 'TRADE. 
 
 A year ago in Moukden you covilcl put down your paper money any- 
 where unchallenged. To-day bring out a .50-ruble note and your 
 bland Chinaman asks you to be good enough to wait a minute while 
 he runs and changes. It is true that the wily Jap has somewhat con- 
 tributed to this unkindly suspicion, for quite unauthorizedly he took 
 upon himself to make up for the tightness in the northern markets by 
 opening private ruble factories in Osaka, and flooding the place with 
 truly excellent likenesses of the great Czar's money. But apart from 
 this, the local Chinese have been asking, with all the rest of the world, 
 how long this enormous Manchurian expenditure, which has made 
 them richer than they ever were before, can go on without bringing 
 an almighty crash'; and they are quite right to ask the question. 
 Eussia must have spent 500,000,000 or 600,000,000 rubles if she has 
 spent 100 in Manchuria during the past few years, and most of this 
 has gone into Chinese pockets. The Chinaman has surely had his 
 revenge in the sweetest way possible for the brutalities of 1900, by 
 killing the ruble and pocketing the change. The political crisis may 
 be settled one way of the other, but it can have no influence on one 
 thing — the fate of the ruble. The ruble is already defeated and paid 
 for. The Chinese have triumphed with a cash victory in spite of a 
 material defeat. Russia may pin down Manchuria with her bayo- 
 nets, but the Chinaman has his hands in the pockets of the Ruski sol- 
 diery and civilianry, and will starve them all to death when he likes. 
 
Appendix B. 
 
 THE PHILIPPINE ISLANDS. 
 
 1. EXTRACT REGARDING CURRENCY FROM REPORT OF THE SEC- 
 RETARY OF FINANCE AND JUSTICE. 
 
 The evils resulting from the rapid fluctuations in the value of 
 the Mexican silver dollars and Spanish-Filipino currency in the 
 islands were fully set forth in the last annual report from this office. 
 It was there stated that between January 1, 1902, and October 
 25, 1902, the insular government had sustained an aggregate loss 
 of $956,750.37^, measured in gold dollars, by reason of shrinkage 
 in the value of the silver in the treasury. That loss still continued 
 to increase by the successive changes in the official ratio between 
 local currency and gold until the aggregate loss reached the sum of 
 $1,615,562.38 on June 30, 1903. During the latter portion of the 
 fiscal year 1903, however, the official ratio had been made such that 
 large sums of United States money had been paid into the treasury 
 instead of local currency, so that the amount of local currency 
 steadily diminished and of United States money steadily increased. 
 
 The value of silver in the markets of the world commenced to rise 
 in February, 1903, and has continued to rise, with more or less fluctua- 
 tions, down to near the 1st of November, 1903, the date of this report. 
 But the amount of local currency remaining in the treasury during 
 the period of the rise in price of silver was so small, compared with 
 what it had been during the period of depreciation in the price of 
 silver, that but a very small portion of the losses caused by the depre- 
 ciation was recouped. 
 
 During the period last referred to there was another source of loss 
 to the treasury in the fluctuating currency. Tlie official ratio between 
 (he two currencies was maintained at such a rate that very little 
 Mexican or local currency came into the treasury in payment of public 
 dues, it being more profitable to pay in United States money than in 
 local currency; but as the assets of the government were largely in 
 local currency, it necessarily made its payments in local currency, and 
 at the official ratio. This resulted in a materially larger number of 
 Mexican dollars being paid out to satisfy the government's current 
 liabilities than would have been paid out had the official ratio and the 
 commercial ratio been the same. From this source there was a large 
 loss to the treasury. 
 
 283 
 
284 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 The following are the ratios in effect during the fiscal year 1903 
 between Mexican or local currency and money of the United States : 
 
 From July 1 to 7, 1902, the ratio existing was $2.27 Mexican 
 currency for" $1 of money of the United States ; July 7 to September 
 23, 2.35 to 1; September 23 to October 26, 2.40 to 1; October 26 
 to November 12, 2.46 to 1; November 12 to November 23, 2.50 to 
 1; November 23 to January 25, 1903, 2.60 to 1; January 25 to 
 March 11, 2.66 to 1 ; March 11 to April 4, 2.60 to 1 ; April 4 to May 1, 
 2.55 to 1 ; May 1 to May 14, 2.50 to 1 ; May 14 to June 30, 1903, 2.45 
 to 1.' 
 
 To meet the manifest and universally acknowledged hardships of 
 an unstable currency, disastrous alike to all business interests and to 
 the government, the Congress of the United States on the 2d day of 
 March, 1903, passed an act entitled "An act to establish a standard of 
 value and to provide for a coinage system in the Philippine Islands," 
 whereby a system of a new currency was authorized by Congress, sub- 
 stantially in accordance with the recommendations made by the Com- 
 mission in each of its three reports. The beneficial effect of the new 
 legislation by Congress was immediately felt in business circles. 
 While it was impossible for the new system to be put into immediate 
 operation, yet the fact that such a system was to be in force in a short 
 time restored confidence to business men to a very large degree, and 
 enabled the government to make its forecast of income and expense 
 with more certainty. The beneficial and steadying effects of the new 
 law were felt almost from the moment of its approval by the Presi- 
 dent of the United States. Arrangements were immediately made, 
 through the Bureau of Insular Affairs at Washington, for the pur- 
 chase of silver and other metals for the new coinage, and for the coin- 
 age of the same at the mints of the United States, and for the prepa- 
 ration of the silver certificates authorized by the act of Congress 
 referred to, through the Bureau of Engraving and Printing at Wash- 
 ington. The designs which were accepted for the new coins were 
 made by Senor Melecio Figueroa, a Filipino, and are very attractive. 
 
 The purchases of silver for the new coinage undoubtedly contrib- 
 uted to the increase in the niarlset value of silver, though other causes 
 operated to produce that result. The price of silver steadily advanced 
 from 49.1 cents per ounce in New York on March 26, 1903, when the 
 insular government commenced to purchase, to 59.5 cents per ounce 
 on or about November 1,-1903, when the government ceased such pur- 
 chases, it being then considered that the amount already coined and to 
 be coined from silver and other metals purchased down to that date, 
 coupled with the Spanish-Filipino coins and United States money in 
 circulation in the islands, would furnish a sufficient circulating 
 medium for all the demands of business until the commerce of the 
 islands should increase. Down to November 1, 1903, 11,707,005 ounces 
 of silver had been purchased for the new coinage, at a cost of $6,317,- 
 460.63, averaging 54.108 cents per ounce. Metals for minor coins had 
 been purchased at a cost of $86, 042.01. From the metals so purchased 
 there had been coined and shipped to Manila down to November 1, 
 1903, 14,500,000 Philippine pesos, half -pesos to the value of 1,550,000 
 pesos, 20-centavo pieces to the value of 1,070,000 pesos, 10-centavo 
 pieces to the value of 510,000 pesos, 5-centavo pieces to the value of 
 362,500 pesos, 1-centavo pieces to the value of 79,200 pesos, and half- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 285 
 
 centavo pieces to the value of 54,550 pesos. Of the currency so coined, 
 14,543,650 pesos in all, including subsidiary and minor coins, had been 
 received in Manila up to and including October 31. On October 31 
 there were likewise in transit' to Manila 1,560,000 in pesos, 1,000,000 
 in half-pesos, 500,000 in 20-centavo pieces, 60,000 in 10-centavo pieces, 
 70,000 in 5-centavo pieces, 20,800 in 1-centavo pieces, 16,800 in half- 
 centavo pieces, making an aggregate of 3,227,600 pesos in transit. 
 This makes a total of 17,771,250 pesos in value of Philippines currency 
 received and in transit on October 31. A large portion of the minor 
 coins so received have been stored in the insular treasury, but deposits 
 have likewise been made in the local banks that are legal government 
 depositories and have by them been placed in circulation to a greater 
 or less extent. The insular government has likewise, since the 1 st of 
 August, 1903, distributed the Philippine pesos in payment of all its 
 civil employees, and in payment of its other obligations so far as 
 practicable. 
 
 Early in the inauguration of the new system a question of great 
 practical importance arose as to what should be done with the Mexi- 
 can and Spanish-Filipino coins in the islands. Strong pressure was 
 brought to bear by the local banks and other dealers in currency to 
 induce the Commission to enact a law to prohibit the further importa- 
 tion of Mexican dollars, or impose a heavy tax upon such importation, 
 and agreeing to take up or redeem all the Mexican currency in the 
 islands at a fixed valuation. It was urged that the government under 
 those circumstances might well redeem all the existing local currency, 
 both Mexican and Spanish-Filipino, at a uniform ratio of 1 peso 
 of the new currency for 1 peso of the old. The result of such action 
 would necessarily have been to have given an immediate fictitious 
 value to the local currency then in the islands, and to have enabled 
 the banks and others who might get possession of it to obtain a much 
 larger price than its true and actual value. The result likewise 
 would have been to have imposed upon the government a great ex- 
 pense by reason of paying a fictitious value for the local currency in 
 the islands, probably largely in excess of the whole profits that may 
 be made from seigniorage on the new coins. It was also probable 
 that the demonitization of the Mexican coins would tend of itself 
 rapidly to expel them from the islj^nds, and that the danger of their 
 importation was not then imminent. After careful consideration it 
 was determined that the ordinary laws of supply and demand should 
 be allowed to have full sway, for the present at least, and that the 
 Mexican dollars should be allowed to flow wherever the current natur- 
 ally tended to take them, and that the government should not redeem 
 them or any part of them at any time or at any price. 
 
 The result so far has demonstrated the wisdom of this conclusion. 
 For some time before the inauguration of the new system the fact 
 that it was to be inaugurated, in connection with other large causes, 
 has tended to produce a constantly accelerated flow of Mexican 
 dollars out of the islands. From January 1, 1903, down to March 
 1, 1903, and before the act of Congress had passed, the exporta- 
 tion of Mexican dollars amounted to approximately 1,600,000 pesos, 
 and the importation of them to approximately 1,200,000 pesos. From 
 that date down to the 1st day of August, when the new currency 
 began to be put into circulation, the exports of Mexican dollars 
 
286 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 amounted to approximately 11,400,000 pesos, and the imports to 
 approximately 251,000 pesos. From the 1st day of August to the 
 1st day of November, 1903, the export of Mexican dollars amounted 
 to 4,766,900 pesos, and the imports to 774,707 pesos, including a small 
 amount of Spanish-P'ilipino money. The importations and exporta- 
 tions of Mexican dollars from the 1st day of January, 1 903, to the 1st 
 day of November, 1903, aggregated approximately 17,767,000 and 
 2,226,000, respectively, leaving a net excess of exports over imports 
 amounting to approximately 15,541,000, which is approximately the 
 amount of the new coinage that has been introduced into the islands. 
 So that the currency available in the islands has not been at all 
 diminished by reason of the export of Mexican. 
 
 It is impossible to estimate with any exactness the number of Mexi- 
 can dollars still left in the islands. Mr. Jones, manager of the Hong- 
 kong and Shanghai Banking Corporation at Manila, estimates that 
 not more than 4,000,000 pesos Mexican are still remaining in the- 
 islands. Other estimates are much higher. The amount of such 
 coins in all the banks and in the insular treasury on the 1st day of 
 October, 1903, was much less than 1,000,000 pesos. There was no 
 record of the amount of such coins in the islands at any time ; nearly 
 all of them were introduced in violation of Spanish law, and, there- 
 fore, necessarily no record was made thereof. The Mexican dollars 
 were the coinage of a foreign country, in part unlawfully introduced 
 into the islands, and the insular government manifestly owes no duty 
 in regard to them. Other considerations pertain to the Spanish- 
 Filipino coins. They were issued by authority of the Government 
 that controlled the Philippine Islands, and are in the hands of the 
 residents of these islands. They are not used in Asiatic countries, so 
 that it is impracticable to export them to those countries, as is done 
 with the Mexican dollars. It was considered that good faith and fair 
 dealing required that the insular government should on some just 
 basis redeem the Spanish-Filipino coins, and it is proposed to take 
 such action at an early date upon a basis to be hereafter determined. 
 This basis, however, will not be in excess of the commercial value of 
 Mexican dollars, and after a reasonable time will probably be the 
 bullion value of the coins. The Spanish-Filipino coins that are in the 
 insular treasury are already being transported to San Francisco to 
 be coined into new Philippine coins in the mint there located. The 
 official ratio between United States money and local coins, both Mexi- 
 can and Spanish-Filipino, for payment of public dues has been main- 
 tained at $1 of United States money for $2.30 of the local coins since 
 August 1 to November 1, 1903. This ratio was an artificial one, and 
 gives to the local currency materially less than its commercial value. 
 
 The result has been that very little of it has been paid into the 
 treasury for payment of public dues during that period. On the 
 23d day of October, 1903, the civil governor issued a proclamation, 
 in accordance with the act of Congress of March 2, 1903, providing 
 that Mexican dollars would not be received for public dues after 
 the 1st day of January, 1904. After that date another date will 
 doubtless be fixed after which the Spanish-Filipino coins will not 
 be received in payment of public dues; but between the date of 
 January 1, 1904, and the date when Spanish-Filipino coins become 
 demonetized the ratio between United States money and the Spanish- 
 
GOLD STAND-ARD IN INTERNATIONAL TRADE. 287 
 
 Filipino coins for payment of public dues ought to be a fair conl- 
 mercial ratio, so that such coins will come into the treasury in pay- 
 ment of public dues, and upon coming in they ought to be there 
 retained and shipped, from time to time, to San Francisco to be 
 recoined into the new Philippine coins. During the same period pro- 
 vision ought also to be made for their redemption by the treas- 
 urer at the official ratio, irrespective of whether thev are or are not 
 tendered in payment of public dues. It will i-equire considerable time 
 to get in the Spanish-Filipino coins, the amount of which is esti- 
 mated at between 11,000,000 and 15,000,000 pesos, to expel the Mex- 
 ican pesos, and to introduce the new Philippine coins throughout the 
 remote provinces. The number of Philippine pesos, subsidiary and 
 minor coins, deposited in the banks and by them put into circulation, 
 and put into circulation by payment directly from the treasury for 
 salaries, wages, and other obligations of the government, is as follows, 
 prior to the 1st day of November, 1903 : 
 
 On October Bl there were held in the vaults of the treasury 
 9,517,004.22 pesos, and in circulation 5,026,645.78 pesos, of which last 
 amount 3,246,473.50 pesos consisted of money held in the vaults of 
 the four principal banks of Manila. The aggregate of these two 
 items— 9,517,004.22 and 5,026,645.78— is 14,543,650 pesos, the total 
 number at that time received in the islands. 
 
 In accordance with the provisions of said act of Congress, steps 
 were immediately taken to secure the printing of the new silver cer- 
 tificates, such certificates, lacking only the seal and numeral, having 
 been received in the islands up to and including October 30 to the 
 amount of 5,000,000 Philippine pesos. The work of printing the 
 numerals and seals upon them was immediately begun under the 
 direction of the treasurer, and their disbursement, in exchange for 
 silver pesos deposited in the treasury, commenced on the 28th day of 
 October, 1903. From that date and during the first week in Novem- 
 I)er about 400,000 of them were placed in circulation. They form 
 an exceedingly convenient means of exchange and relieve the burden- 
 someness of making payments in the heavy silver coin, either old or 
 new, and come as a great relief for business men and all others who 
 have occasion to receive or pay out money. 
 
 The act of Congress above referred to, and likewise the act of Con- 
 gress approved July 1, 1902, entitled "An act temporarily to provide 
 for the administration of the affairs of civil government in the Philip- 
 pine Islands, and for other purposes," provided in general terms the 
 safeguards that might be employed to make certain the maintenance 
 of the parity of the Philippine peso with gold. To put those pro- 
 visions of the act of Congress into effect, and to supply such other 
 means as were deemed necessary for maintaining the parity between 
 the new currency and gold, and to supply the necessary machinery 
 for issuing and safeguarding the issuing of silver certificates, the 
 Commission on the 10th day of October, 1903, passed Act No. 938, 
 entitled "An act constituting a gold-standard fund in the insular 
 treasury, to be used for the purpose of maintaining the parity of the 
 silver Philippine peso with the gold-standard peso, and organizing 
 a division of the currency in the bureau of the insular treasury 
 through which such fund shall be maintained, expenditures made 
 therefrom, and accretions made thereto, and providing regulations 
 
288 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 for the exchange of currencies and for the issue and redemption of 
 silver certificates," which, for brevity in this report, is termed the 
 " Gold standard act." 
 
 That act provides for the creation of a " gold-standard fund," to be 
 used for the purpose of maintaining the parity of the silver Philip- 
 pine peso with the gold-standard peso provided in the act of Congress 
 approved March 2, 1903. It states that all funds in the insular treas- 
 ury which are the proceeds of the certificates of indebtedness issued 
 under said act of Congress, all profits of seigniorage made in the 
 purchase of bullion and coinage therefrom, all profits from the sale of 
 exchange by the insular government between the Philippine Islands 
 and the United States, and all other receipts in the insular treasury 
 accruing from the exercise of its functions of furnishing a convenient 
 currency for the islands shall constitute a separate and trust fund. It 
 can not be used to pay any of the expenses of the insular government, 
 except those connected with the purchase of bullion and the coinage 
 of the same, those which are incident to the transportation of such 
 money to the Philippine Islands from the place of coinage, putting of 
 the money into circulation, including the preparation and issue of the 
 silver certificates, and the carrying out of such financial transactions 
 as may be authorized by law to maintain the circulation of the new 
 currency and for the maintenance of the parity of value between the 
 silver Philippine peso and the subsidiary and minor coins with gold, 
 with the proviso that there may be withdrawn from the gold-standard 
 fund such amount as the Philippine government may deem proper to 
 pay the principal and interest of the certificates, or any part of its 
 indebtedness incurred under section 6 of the act of Congress of March 
 2, 1903. There is created in the bureau of the insular treasury a 
 division of currency, the chief of the division to be appointed by the 
 civil governor, with the advice and consent of the Commission, at an 
 annual salary of 6,000 pesos Philippines currency. It is made the 
 duty of the chief of the division of currency to examine the books of 
 the treasurer and auditor, to make report of the funds in the treasury 
 which are to constitute the gold-standard fund and to be segregated 
 as such, and to make his report thereof to the treasurer. 
 
 If the treasurer and auditor concur in the recommendations so 
 made, a segregation shall be mada in accordance with that report on 
 the books of the treasurer and auditor. In case of any difference of 
 opinion between the chief of the division of currency, the treasurer, 
 and the auditor, the method of segregation is to be finally determined 
 by the secretary of finance and justice. After the segregation has 
 been effected all receipts for moneys coming into the treasury that 
 ought to be deposited to the gold-standard fund shall be submitted 
 to the chief of the division of currency for his initialing and proper 
 notation of the same. A^Tien any money is to be withdrawn from the 
 gold-standard fund, or transferred from the treasury in Manila to a 
 depositary elsewhere, or vice versa, the warrant or draft or tele- 
 graphic transfer of the same must state specificallj' that it is from the 
 gold-standard fund, and shall be initialed and noted by the chief of 
 the division of currency. No transaction in the treasury with refer- 
 ence to the coinage of money, the circulation, the maintenance, and 
 iDreservation of the gold-standard fund, the maintenance of the parity, 
 or the issue or retirement of silver certificates shall take place until 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 289 
 
 first submitted to the chief of the division of currency. It is made 
 his duty to keep a set of books dealing solely with the financial oper- 
 ations of the government in coinage and currency matters and in the 
 administration of the gold-standard fund, and to make a monthly 
 statement of the same to the insular treasurer and to the secretary of 
 finance and justice. But the actual custody and control of all insular 
 funds, including the gold-standard fund, remains in the insular 
 treasurer, as heretofore, and he is responsible for the same ; the duties 
 of the chief of the division of currency to be performed under his 
 supervision. 
 
 For the purpose of maintaining the parity of the Philippine silver 
 peso with the Philippine gold peso, which latter is the theoretical 
 standard, under the act of Congress referred to, and of keeping the 
 currency equal in volume only to the demands of trade, five special 
 provisions are made. The treasurer is authorized — 
 
 First. To exchange at the insular treasury for Philippines currency 
 offered in sums of not less than 10,000 pesos, or United States money 
 offered in sums of not less than $5,000, drafts on the gold-standard 
 fund deposited in the United States or elsewhere, charging a pre- 
 mium of three- fourths of 1 per cent for demand drafts and 1| per cent 
 for telegraphic transfers, and to direct the depositaries of the funds 
 of the Philippine government in the United States to sell upon the 
 same terms and in like amount exchange against the gold-standard 
 fund in the Philippine Islands. The premium to be charged for 
 drafts and telegraphic transfers may be temporarily increased or 
 decreased by orders of the secretary of finance and justice, should 
 the conditions at any time existing, in his judgment, require such 
 action. 
 
 Second. To exchange at par, on the approval of the secretary of 
 finance and justice. United States paper currency of all kinds for 
 Philippines currency, and the reverse. 
 
 Third. On like approval, to exchange for Philippines currency 
 United States gold coin or gold bars in sums of not less than 10,000 
 pesos or $5,000, charging for the same a premium sufficient to cover 
 the expenses of transporting United States gold coin from New York 
 to Manila, the amount of such premium to be determined by the sec- 
 retary of finance and justice. 
 
 Fourth. To withdraw from circulation until paid out in response 
 to demands made upon it, in accordance with the jjro visions of the 
 act, Philippines currency exchanged and deposited in the Treasury. 
 
 Fifth. To withdraw from circulation United States paper currency 
 and gold coin and gold bars received by the insular treasury in 
 exchange for Philippines currency, until the same shall be called out 
 in response to the presentation of Philippines currency, or until an 
 insufficiency of Philippines currency shall make necessary an 
 increased coinage, in which event, for the purpose of providing such 
 coinage, the coin so obtained shall become part of the gold-standard 
 
 fund. 
 
 The insular treasurer and the treasurers of the several provinces are 
 authorized to exchange Philippine pesos on demand for the subsidiary 
 and minor Philippine coins, and the reverse, in sums of 10 pesos or 
 any multiple thereof. 
 
 S. Doc. 128, 58-3 19 
 
290 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 The issue and redemption of silver certificates is to be conducted 
 under the immediate supervision of the chief of the division of cur- 
 rency, and his boolis are to contain detailed accounts of the issue and 
 redemption thereof. The treasurer is authorized to issue silver cer- 
 tificates upon receiving deposits of the standard Philippine pesos, in 
 accordance with regulations fully provided in said act, which are de- 
 signed to secure safety in the preparation of the plates, engraving, 
 printing, and circulation thereof. The more important safeguards in 
 this respect are that when the silver certificates have been entirely 
 completed, cut, counted, and placed in proper bundles, they shall be 
 deposited in the reserve vault, there to remain until required for 
 circulation, and not to be considered while so remaining in the vault 
 as available cash for the government, and shall not appear as such on 
 the books of the treasury, although the treasurer shall be responsible 
 for the same as money; that, from time to time, the treasurer shall 
 withdraw such amount of silver certificates from the reserve vault as 
 may be required to meet the demands for their purchase, in accord- 
 ance with the provisions of section 8 of the act of Congress of March 
 2, 1903. All certificates so withdrawn from the reserve vault are to 
 be thereafter treated as cash available for the government, and the 
 pesos received in exchange for the silver certificates sold are to be 
 deposited in the reserve vault and held for the payment of the cer- 
 tificates on demand, and shall constitute a trust fund to be used for 
 no other purpose. Certificates mutilated or otherwise unfit for circu- 
 lation when paid into the insular treasury shall not be reissued but 
 retained for future destruction, with safeguards in the act fully 
 provided. 
 
 The theory of the act of Congress referred to, and of the gold- 
 standard act passed by the Commission, is substantially that a 
 gold-standard circulating medium may be maintained at a parity 
 with gold without any large use of a gold currency by the aid of 
 the means provided for maintaining the parity between the two 
 currencies. The essential elements of the system are based upon the 
 maintenance of a reasonable gold-standard fund, the rigid restriction 
 of the amount of new coinage so as to meet only the demands of com- 
 merce, the retirement of a sufRcient amount of such coinage whenever 
 it shall become apparent that there is more in circulation than the 
 demands of commerce require, the issuance of more of the new cur- 
 rency whenever it becomes apparent that there is a shortage of such 
 currency in circulation, and the furnishing of reasonable facilities for 
 the conversion of gold coin or other money of the United States into 
 Philippines currency, or the reverse, as the demands of commerce may 
 require. The theory and system are substantially the same as those 
 adopted by the British Government to maintain the parity of the 
 rupee in India, by the Japanese Government to maintain the parity 
 of the yen in Japan, and by the Dutch Government to maintain the 
 parity between the silver coins in circulation and the gold standard in 
 Java. The new currency system about to be inaugurated in the 
 Straits Settlements is based upon the same theory. An attempt to 
 to introduce the same system upon a much larger scale, and particu- 
 larly with reference to a silver coinage but a gold standard, for 
 Mexico and a coinage that shall circulate throughout the Empire of 
 China, has been under consideration during the past year, largely 
 
GOLD STANDARD IN INTEBNATIONAL TRADE. 291 
 
 through the instrumentality of commissions appointed by the United 
 States Government and by the Eepublic of Mexico. The Philippines 
 government is so largely interested in this question in its larger sense, 
 
 farticularly as it relates to the neighboring country of China, that 
 10,000, in money of the United States, has been appropriated from 
 the insular treasury toward the payment of the expenses of that com- 
 mission in its work in China. 
 
 Among other things provided by the act of Congress approved 
 March 2, 1903, for maintaining the parity of the value of the silver 
 Philippine peso and the gold Philippine peso, was one authorizing 
 the issue of temporary certificates of indebtedness bearing interest 
 at a rate not exceeding 4 per cent annually, payable at periods of 
 three months or more, but not later than one year from the date of 
 issue, in denominations of $25, or some multiple thereof, redeemable 
 in gold coin or any lawful money of the United States, according to 
 the terms of issue prescribed by the insular government, with a pro- 
 vision that the amount of such certificates outstanding at one time 
 shall not exceed $10,000,000, money of the United States, and that 
 such certificates shall be exempt from the payment of all taxes or 
 duties of the government of the Philippine Islands, or any local 
 authority therein, or the Government of the United States, as well as 
 taxation in any form by or under any State, municipal, or local 
 authority in the United States or the Philippine Islands; the pro- 
 ceeds of such certificates to be used exclusively for the maintenance 
 of the parity and for no other purpose,' except that a sum not exceed- 
 ing $3,000,000 at any one time may be used as a continuing credit for 
 the purchase of silver bullion in execution of the provisions of the act. 
 In pursuance of this authority, the insular government on the 23d day 
 of March, 1903, authorized the sale of $3,000,000 of such certificates, 
 payable in one year in gold coin or money of the United States. These 
 certificates were sold through the Bureau of Insular Affairs at Wash- 
 ington, at a premium of 2.513 per cent. The rate of interest being 4 
 per cent, and the time which they were to run being one year, after 
 dediTcting the premium, the net interest paid would be 1.487 per cent. 
 The money realized in this transaction was deposited to the credit 
 of the gold-standard fund, with the Guaranty Trust Company in 
 New York, which paid at the rate of 3^ per cent per annum for use of 
 the money. It therefore resulted, inasmuch as the money remained 
 for a considerable period on deposit with the Guaranty Trust Com- 
 pany, that the interest received from that deposit more than paid the 
 interest above stated that the government must pay upon the cer- 
 ificates, so that the transaction cost the government less than nothing, 
 and was an actual source of profit. 
 
 On the 25th day of August, 1903, $3,000,000 more of the certificates, 
 to run for the same period and to bear the same rate of interest, were 
 sold at a premium of 2.24 per cent, and the proceeds were deposited 
 with the Guaranty Trust Company at New York. The last issue of 
 bonds sold at a slightly lower price than the first because of a greater 
 stringency in the money market of New York at the time of the second 
 sale. The special reasons for the exceedingly favorable terms upon 
 which the certificates were sold were, first, the entire safety of the cer- 
 tificates ; second, the fact that they were made exempt from taxation ; 
 and, thirdly, that the Secretary of the Treasury of the United States 
 
292 GOLD STANDARD IN INTEBNATIONAL TRADE. 
 
 authorized their deposit by national banks as security for deposits of 
 United States funds held by the banks. The last circumstance gave 
 to them an especial value. 
 
 These two transactions probably are unique in the history of gov- 
 ernment loans, in that the Government has actually made a profit out 
 of its debts. 
 
 The facts in regard to the passage of the gold standard act and the 
 introduction of the new currency have been brought down substan- 
 tially to November 1, 1903, so that as much light as practicable may 
 be thrown upon the workings of the new currency and upon the prog- 
 ress that has been made upon its inauguration. 
 
 Mr. E. W. Kemmerer, who was an instructor of economics in Pur- 
 due University, <at Lafayette, Ind., and had made a special study, of 
 finance and currency, has been brought to the islands to aid in the 
 establishment and maintenance of this new system, and was duly 
 appointed to, and now occupies, the position of chief of the division 
 of currency created by the gold standard act. 
 
 The opinion is confidently entertained by this office that no single 
 step has been taken since xVmerican occupancy that will ultimately 
 redound more to the business interests and prosperity of the islands, 
 of its people and business men, than the successful inauguration of 
 the new system of stable currency. 
 
 It is not to be anticipated that the new currency or United States 
 currency can immediately supplant the use of the old. The moment 
 that silver commences again to fall in value the intrinsic value of 
 the existing local coins diminishes, and the more desirable they become 
 for the use of the exporter and the large purchaser who employs na- 
 tive labor or buys native commodities. Selling his goods in the for- 
 eign markets of the world upon practically a gold basis, the gold 
 which he receives will enable him to purchase more of the depreciated 
 coin with which to pay his employees or to purchase commodities in 
 the interior. The habitual j)rice of commodities and of labor being 
 fixed in local currency, is not materially affected by the change in the 
 world value of that local currency ; so that it will always be advan- 
 tageous to the class of purchasers and exporters mentioned to make 
 use of the cheaper currency in payment instead of the better one, and 
 it is difficult to provide, except by extremely drastic legislation, meas- 
 ures that will prevent such use, to a certain extent, of the existing 
 coins. It is not certain that it is in the interest of the commerce of 
 the country that such steps should be taken now, if at any time. 
 
 The new currency upon a fixed and stable basis will have all the 
 qualities of a legal tender, will be receivable for public dues, will be 
 the official money of the country, can be converted at the treasury at a 
 moment's notice into gold money of the world, and possesses such 
 superior elements and advantages that all commercial transactions can 
 be based upon it with safety and certainty, and Government forecasts 
 can be made with all the advantages of an absolute gold currency. 
 The great economic law that where a good currency and a debased 
 one exist side by side, both having a debt-paying capacity, the bad cur- 
 rency drives out the good, has little application to the situation here. 
 Such local cxirrency as may remain in use in the islands will have no 
 debt-paying capacitjr, except in fulfillment of special contracts pay- 
 able in that commodity only, and will not be money in any technical 
 
GOLD 8TAKDARD IN INTERKATIONAX TRADE. 
 
 293 
 
 sense of that term. It will be a commodity pure and simple. It will 
 not be a case of poor money driving out good money, because the only 
 money will be good money. Nor is it feasible for the new coinage to 
 be driven out to other countries by the local currency, because the 
 Philippines currency is not a coin in circulation in other countries, 
 and will there be available only for reexportation to the Philippine 
 Islands, or for bullion, and for bullion purposes it will not be worth 
 its current value in the Philippine Islands, unless the market price of 
 silver should increase to a very marked degree and for a much larger 
 percentage than appears within the range of probability. On the 
 whole, it seems now almost certain that the new system, with a uni- 
 form gold standard, will be the actual basis throughout the Philip- 
 pine Islands and in general use therein within a comparatively few 
 months. 
 
 It ought to be remarked that, since the Philippine Government has 
 announced that it is out of the market for the purchase of silver, the 
 market price of silver has gradually fallen, owing in part to that 
 announcement. At the same time the outflow of Mexican dollars 
 from the islands has substantially ceased, because it is no longer prof- 
 itable for purposes of exportation. It is not impossible that some 
 may be imported in the near future. 
 
 Banks and Banking. 
 
 Since the last report from this office no new banks have been estab- 
 lished in the islands by any governmental authority, nor have new 
 offices been opened by American or other foreign banking institutions. 
 The funds belonging to the insular government have been more 
 largely retained in the treasury during the fiscal year 1903 than 
 before that time, but the funds not so retained in the treasury vaults 
 have been distributed between the Chartered Bank of India, Austra- 
 lia, and China ; the Hongkong and Shanghai Banking Corporation ; 
 the International Banking Corporation of Connecticut, and the Guar- 
 anty Trust Company of New York, at New York and Manila — all 
 authorized depositaries for funds of the United States Government 
 and for the government of the Philippine Islands. At the close of 
 the fiscal year 1903 funds belonging to the insular treasury were dis- 
 tributed as follows : 
 
 Where deposited. 
 
 Insular treasury 
 
 Chartered Bank of India, Australia, and Cnina . 
 Hongkong and Shanghai Banking Corporation . 
 
 International Banking Corporation 
 
 Guaranty Ti-ust Co. ; 
 
 At New York 
 
 At Manila 
 
 Philippines 
 currency. 
 
 $492,489.^ 
 476,839.77 
 465,555.34 
 
 499,787.40 
 
 United States 
 currency. 
 
 $4,141,304.02 
 363,623.11 
 745,690.92 
 736,840.60 
 
 1,586,873.49 
 682,528.99 
 
 Local 
 currency. 
 
 $138,001.88 
 167,737.09 
 177,785.43 
 
 213,971.93 
 
 The so-called "American Bank " was organized in the city of Ma- 
 nila during the fiscal year 1902, with a paid-up capital of $25,000, 
 which has not been increased up to the present time. That corpora- 
 tion was formed as a corporation by voluntary association under the 
 
294 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Spanish laws, no new general corporation laws having been passed 
 by the Philippine Commission, and no charter having been granted 
 to the American Bank by the Commission. Its status as a legal cor- 
 poration is doubtful, in view of the fact that the granting of fran- 
 chises is deemed to be an act of the sovereign power, and that the pres- 
 ent sovereign power has never- sanctioned or authorized the granting 
 of any franchise to the American Bank, or to any other corporation 
 formed after the American occupancy by virtue of existing Spanish 
 laws. 
 
 In the former report from this office a recommendation was made 
 that Congress be urged to provide for a banking system in the Phil- 
 ippine Islands, or specifically to authorize the Commission to estab- 
 lish such system, with the right to authorize the issue of bank notes. 
 The Congress has legislated upon the subject of currency in the Phil- 
 ippine Islands without providing for the creation of banks of issue. 
 It is doubtful whether the recommendation made in the former report 
 ought now to be renewed. Since the date of that report provision has 
 been made for the institution of a wholly new currency system for the 
 islands, including the issue of silver certificates by the treasurer in 
 exchange for Philippine pesos deposited in the treasury for their 
 redemption. While the new silver certificates are not legal tender in 
 the payment of ordinary obligations, though they are receivable for 
 public dues, and are not bank notes, nor money in the ordinary sense 
 of those terms, yet thej' form a convenient means of exchange in 
 ordinary commercial transactions, and perform to some degree the 
 functions of ordinary paper currency. It is probably advisable that 
 the workings of the new system should be observed for a time before 
 asking for further legislation in that respect. It is possible that the 
 new silver certificates, coupled with a large amount of United States 
 paper currency which is now in circulation in the islands, and is legal 
 tender, together with the amount of bank notes that are in circulation 
 issued by the Spanish-Filipino Bank, will furnish all the facilities for 
 the present that are needed. It is therefore recommended that Con- 
 gress be not asked to legislate at its coming session in regard to the 
 establishment of banks of issue. 
 
 2. EXTRACT FROM THE REPORT OF THE CHIEF OF THE BUREAU OF 
 INSULAR AFFAIRS, WAR DEPARTMENT, 1904. 
 
 Philippine Cukeency. 
 
 At the date of my last annual report, October 31, 1903, it was shown 
 that a total in pesos, subsidiary and minor coinage of ¥=17,881,650 had 
 been coined and shipped to the islands; that the purchase of silver 
 bullion had been suspended, and that the Philippine Commission had 
 determined that this amount of pesos, supplemented by the recoinage 
 of Spanish-Filipino coins, which they estimated was some 12,000,000 
 pesos, would be adequate for the inauguration of the coinage circula- 
 tion in the Philippines. Experience in the past year has proved the 
 accuracy of the Commission's estimate, especially as to the amount of 
 Spanish-Filipino coins. 
 
 There have already been withdrawn from circulation, shipped to 
 the United States, recoined into the new currency, and reshipped to 
 
GOLD STANDAED IN INTERNATIONAL TRADE. 
 
 295 
 
 the islands and there entered into circulation, or in transit or awaiting 
 shipment, a total of 11,723,000 Spanifsh-Filipino pesos, as follows: 
 
 Date. 
 
 Invoice. 
 
 Pace value 
 in Spanish- 
 Pilipmo cur- 
 rency. 
 
 Value in Phil- 
 ippine cur- 
 rency at pre- 
 vailing ratio 
 date of 
 shipment. 
 
 Value in 
 
 United States 
 
 currency. 
 
 Not. 13, 1903 
 Dec. 11,1903 
 
 (Pesos _ 90,000.00 
 
 IMed. pesos. 510,000.00 
 
 Pesos 200,000.00 
 
 Med.pesos 110,000.00 
 
 Peseta 90,000.00 
 
 fPesos 500 000 00 
 
 600,000.00 
 400,000.00 
 
 01,556,000.00 
 
 ■SI, 090, 000. 00 
 
 ■ 1,230,000,00 
 1,810,000.00 
 
 '1,000,000.00 
 
 1,102,000.00 
 430,000.00 
 
 1,055,000.00 
 
 950,000.00 
 500,000.00 
 
 P-.')21,r39.13 
 347,826.09 
 
 1,414,545.45 
 
 990,909.09 
 
 1,088,495.57 
 1,601,769.91 
 
 909,090.90 
 
 975,221.24 
 890,909.09 
 
 959,090.90 
 
 863,636.36 
 454,545.45 
 
 $260,869.56 
 173,913.05 
 
 Feb. 10,1904 
 
 Med.pesos... 1,000,000.00 
 
 Peseta 62,000.00 
 
 Med. peseta . 4 000 00 
 
 707,272.72 
 
 
 Pesos.. - 310 465 00 
 
 
 Mar. 15,1904 
 
 Apr. 14,1904 
 May 12,1904 
 
 Med.pesos 755,000.00 
 
 Peseta 22,000.00 
 
 Med. peseta 2,468.50 
 
 Mixed 66.50 
 
 Pesos 585,000.00 
 
 Med.pesos 625,000.00 
 
 Peseta 20,000.00 
 
 Pesos 810,000.00 
 
 Med.pesos 900,000.00 
 
 495,454.55 
 
 544,247.78 
 800,884.96 
 
 June 13, 1904 
 
 Peseta 100,000.00 
 
 Pesos 105,000.00 
 
 Med.pesos 865,000.00 
 
 Peseta 25,000 00 
 
 454,545.46 
 
 
 Med. peseta 6,000.00 
 
 
 July 14,1904 
 
 Pesos 169,000.00 
 
 Med.pesos. 846,000.00 
 
 Peseta 83,500.00 
 
 Med.peseta 3,500.00 
 
 487,610.62 
 
 Aug. 15,1904 
 
 Pesos 100,000.00 
 
 Med.pesos 325,000.00 
 
 195,454.54 
 
 
 Peseta 6,000 00 
 
 Sept. 13, 1901 
 
 (Pesos 155,000.00 
 
 Med.pesos 805,000.00 
 
 Peseta 68,500.00 
 
 Med.Peseta 6,500.00 
 
 479,545.45 
 
 Oct. 15,1904 
 
 Invoice not received ... 
 
 431,818.18 
 227,272.72 
 
 Oct. 31,1904 
 
 
 
 Total . 
 
 
 11,723,000.00 
 
 10,517,779.18 
 
 5,258,889.59 
 
 
 
 " The shipment of February 10 contained, in addition to 1,,566,000 pesos, 39,490 kilograms of bar 
 silver and 50,585 kilograms of blanks, the bar silver assaying 1,171.39 standard ounces and the 
 blanks 1,614.11 standard ounces. 
 
 b The shipment of March 15 contained also burnt silver which assayed 463 standard ounces. 
 
 The weight in standard ounces after melting, and the United States 
 currency value of the silver contained in the Spanish-Filipino coins, is 
 shown in the following table, covering shipments upon which reports 
 have been received, namely : 
 
 Date of shipment. 
 
 Face value in 
 
 Spanish- 
 Filipino cur- 
 rency. 
 
 Yield. 
 
 Bullion value 
 in United 
 States cur- 
 rency. 
 
 November 13, 1903 
 December 11, 1903. 
 February 10, 1904 . 
 
 March 16, 1904 
 
 April 14, 1904 
 
 May 12, 1904 
 
 Total 
 
 600,000.00 
 400,000.00 
 1,556,000.00 
 1,090,000.00 
 1,230,000.00 
 1,810,000.00 
 
 Standard oz. 
 465,092.53 
 318,357.10 
 
 1,214,196.84 
 848,974.04 
 965,313.85 
 
 1,420,125.90 
 
 6,686,000.00 
 
 5,227,060.26 
 
 180,782.94 
 700,498.18 
 489,792.72 
 556,911.85 
 819,303.40 
 
 3,015,611,71 
 
296 
 
 GOLD STANDARD IN IKTEENATIONAL TBADE. 
 
 From the foregoing statement it will appear the expectation has 
 been realized that the Spanish-Filipino coins would contain so much 
 pure silver as to make their recoinage profitable, because the value of 
 the silver contained in these coins would be equal or slightly above the 
 market value of bullion. 
 
 The same methods of shipment as described in detail in the last 
 annual report have been followed without the loss of a centavo. A 
 small shipment of minor coinage was corroded by water, due to an 
 accident in the carrying ship. This slight damage was covered by 
 insurance, which paid the cost of reburnishing the metal. 
 
 There has been recoined and returned to Manila from the Spanish- 
 Filipino coins sent to the San Francisco mint an aggregate of 
 ^=7,276,016 in denominations, as shown by statement following, repre- 
 senting shipments to October 31, 1904 : 
 
 Denomination. 
 
 Amount 
 
 coined in 
 
 pesos. 
 
 Standard 
 ounces. 
 
 Approximate 
 cost. 
 
 Peso - 
 
 P6, 558, 000. 00 
 264,000.00 
 232,016.00 
 222,000.00 
 
 5,683,600.00 
 228,800.00 
 200,838.85 
 192,188.75 
 
 13,279,000.00 
 
 50 centavos 
 
 132,000.00 
 
 20centavo3 --. 
 
 10 centavos - 
 
 115,868.57 
 110,866.58 
 
 
 
 Total 
 
 7,276,016.00 
 
 6,305,407.60 
 
 3,637,735.15 
 
 
 
 Under authority of United States law the civil governor, on the 
 23d day of October, 1903, issued a proclamation "That Mexican 
 silver dollars shall be receivable for public dues, at a rate to be fixed 
 from time to time by the proclamation of the civil governor, until the 
 first day of January, nineteen hundred and four, and that on and 
 after that date such coins shall cease to be so receivable." Steps were 
 taken to get in and retire from circulation the Spanish-Filipino coin- 
 age by fixing the ratio from time to time. On June 21, 1904, an exec- 
 utive order was issued providing that " No Mexican pesos will be 
 received in payment of public dues, and neither Mexican pesos or 
 Spanish-Filipino coins will be purchased by the government between 
 June thirtieth and September thirtieth, nineteen hundred and four, 
 and after the last-named date they will be purchased only at their 
 bullion value." On January 1, 1904, the Mexican peso was demone- 
 tized and their further importation prohibited. On January 7 drastic 
 legislation was passed, effective October 1, discouraging the further 
 circulation of anything but the new Philippine and IJnited States 
 currency. This legislation provided for a progressive tax on com- 
 mercial paper and bank deposits in other than currency based upon 
 the gold standard. Under these provisions the Mexican currency in 
 the islands found a more favorable exchange in other near-by coun- 
 tries and was gradually exported from the islands. This exportation 
 was facilitated by reason of the unusual demand for them due to 
 abnormal conditions in north China. The Spanish- Filipino currency 
 has been practically all recoined. The circulating currency is now, 
 therefore, the new Philippine coinage and such moneys of the United 
 States as find their way to the islands. 
 
 On October 30, 1904, the civil governor reported by cable on the 
 working of the new currency system as follows : 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 297 
 
 " Ihe approach of October 1, when first currency-taxing provisions 
 became effective, caused large exports of Mexican pesos commercially 
 and large inflow of Spanish-Filipino coins in the treasury. 
 
 " In September 1,197,500 Mexican pesos were exported and 538,622 
 Spanish-Filipino pesos came into the treasury and were withdrawn 
 from circulation. During September actual circulation of new cur- 
 rency increased 1,891,000 pesos. In October to date 1,682,995 pesos 
 Mexican currency have been exported commercially, and 950,000 
 Spanish-Filipino pesos received by insular government for recoinage. 
 Have on hand nearly 500,000 Spanish-Filipino pesos for recoinage. 
 Increase of actual circulation new coins for October approximately 
 1,300,000 pesos. 
 
 " Every bank in Manila published notices refusing to receive old 
 currency on deposit after September 30. Eailroads receive no old 
 currency at any price. Nearly all accounts of banks throughout the 
 islands have been reopened in the new currency. Banking business 
 has called in its old notes; issued new ones based upon the new cur- 
 rency. All new contracts are being made new currency. 
 
 " Business throughout the archipelago conducted now mainly on 
 new basis, banks and large dealers cooperating with the government. 
 Very little old currency left, and existing taxing provisions will 
 eliminate that by January 1 next. The gold standard is an estab- 
 lished fact and now meets approval of the entire public. Business 
 conditions much improved." 
 
 On the date of this report there are in the islands 24,924.520 new 
 Philippine pesos, of which ¥^15,963,043 are in actual business circula- 
 tion. The balance is in the treasury, banks, or in the hands of dis- 
 bursing officers. The above ¥"15,963,043 of course includes the silver 
 certificates, of which ¥"7,230,000 are in circulation. 
 
 The various steps taken by the civil government to gain this result 
 were met by violent opposition and predictions of inevitable disaster, 
 made to the government officials both in Manila and Washington, but 
 in every case, as soon as definite legislative action had been taken, the 
 atmosphere cleared, and the business interests commended, by acqui- 
 escence and cooperation, the action of the government. 
 
 The Philippine currency act was passed by Congress April 3, 1903, 
 The first new Philippine peso was placed in circulation July 23, 1903. 
 
 Since that time the Government has eliminated thirty or forty mil- 
 lions of debased currency and has substituted for it a currency based 
 upon the gold standard without serious jar or dislocation, all accom- 
 plished within seventeen months. In the minds of financiers and 
 bankers, this accomplishment is considered a wonderful achievement, 
 unique in the history of the world. 
 
 Silver Cebtificates. 
 
 In the last report it was shown that the following amounts of silver 
 certificates, or paper money, with respective denominations, had been 
 shipped to the Philippines : 
 
 P2,000,000 in 2's. 
 4,000,000 in 5's. 
 4,000,000 in lO's. 
 
298 
 
 GOLD STANDARD m IKTERNATIONAL TRADE. 
 
 Since November 1, 1903, there have been forwarded additional sil- 
 ver certificates aggregating 7,980,000 pesos, making a total issue to 
 this date of 17,980,000 pesos of denominations as follows : " 
 
 Pesos. 
 
 2-peso certificates 2, 330, 000 
 
 5-peso certificates 4,650,000 
 
 10-peso certificates 11,000,000 
 
 Orders have been placed with the Bureau of Engraving and Print- 
 ing for an amount which, with the above total, will aggregate 
 20,000,000 pesos in value, and there are still due from said department 
 for delivery to the insular treasury the following certificates : 
 
 Pesos. 
 2-peso certificates 670, 000 
 
 5-peso certificates X 350, 000 
 
 Such shipments of certificates have been insured in each instance, 
 and the expenditures that have been incurred in connection with their 
 preparation and shipment have been paid from Philippine revenues 
 hy the disbursing officer of this Bureau as follows : 
 
 Date of ship- 
 ment. 
 
 Forwarded on transport- 
 
 Peso value. 
 
 Insurance. 
 
 Co.=!t of 
 preparing. 
 
 Total cost. 
 
 Feb. 20,1904 
 
 Sherman . . 
 
 2,040,000 
 1,000,000 
 1,990,000 
 2,950 000 
 
 $31.25 
 25.00 
 31.25 
 31.25 
 
 $3,766.24 
 1,471.19 
 2,076.37 
 3,078.03 
 
 $3,787.49 
 
 Apr. 80,1904 
 May 26,1904 
 June 23, 1904 
 
 
 1,496.19 
 
 
 2,107.62 
 
 PhorTnan 
 
 3,109.28 
 
 
 Total 
 
 
 
 
 118.75 
 
 10,381.83 
 
 10,500.58 
 
 
 
 
 
 The Philippine Commission has advised the War Department that 
 at present only the largest denomination that the act of Congress au- 
 thorizes — namely, .10-peso certificates — are in demand, and also that 
 it is very desirable that Congressional authority be secured to issue 
 larger denominations. This recommendation was brought to the 
 attention of Congress and has resulted in the following provision in 
 the before-mentioned bill, which is pending in the Senate : 
 
 " Sec. 10. That section 8 of an act of Congress approved March 2, 
 1903, entitled 'An act to establish a standard of value and to provide 
 for a coinage system in the Philippine Islands,' is hereby amended by 
 striking out the word ' ten ' in said section and inserting in lieu thereof 
 the words ' five hundred,' so that said section when amended shall 
 read as follows : 
 
 " Sec. 8. That the treasurer of the Philippine Islands is hereby au- 
 thorized, in his discretion, to receive deposits of the standard silver 
 coins of 1 peso authorized by this act to be coined, at the treasury 
 of the government of said islands or any of its branches, in sums of 
 not less than 20 pesos, and to issue silver certificates therefor in 
 denominations of not less than 2 nor more than 500 pesos, and coin 
 so deposited shall be retained in the treasury and held for the pay- 
 ment of such certificates on demand, and used for no other purpose. 
 Such certificates shall be receivable for customs, taxes, and for all 
 public dues in the Philippine Islands, and when so received may be 
 reissued, and when held hy any banking association in said islands 
 may be counted as a part of its lawful reserve." 
 
 a Since the above was written the remainder of the 20,000,000 pesos has been 
 shipped. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 299 
 
 Redemption of Philippine Silver Cektificates. 
 
 In August last the Treasury Department stated they were con- 
 stantly having Philippine silver certificates presented for redemption. 
 As no provision had been made for the redemption in the United 
 States of Philippine paper money, the civil governor was communi- 
 cated with and authority obtained so that such silver certificates 
 might be redeemed through both of the depositary banks, charging 
 such bills against the gold-standard fund on deposit with the bank, 
 transmitting monthly by registered mail the certificates to the insular 
 treasurer at Manila. 
 
 Temporary Certitticates of Indebtedness. 
 
 Under the provisions of section 6 of the act of Congress approved 
 March 2, 1903 — Philippine currency act — there were sold prior to 
 November 1, 1903, two issues of temporary certificates of indebtedness 
 amounting each to $3,000,000. The first issue maturing May 1, 1904, 
 was for the purpose of establishing a continuing credit for the pur- 
 chase of silver bullion. The proceeds of the sale of the second issue, 
 maturing September 1, 1904, was for the maintenance of the parity. 
 
 On October 10, 1903, the Philippine Commission passed an act con- 
 stituting a gold-standard fund in the Philippine treasury, in the fol- 
 lowing language : "An act constituting a gold-standard fund in the 
 insular treasury for the purpose of maintaining the parity of the sil- 
 ver Philippine peso with the gold-standard peso, and organising a 
 division of the currency in the bureau of the insular treasury through 
 which such fund shall be maintained, expenditures made therefrom, 
 and accretions made thereto, and providing regulations for the ex- 
 change of currencies and for the issue and redemption of silver 
 certificates." 
 
 The first section of this act reads as follows : 
 
 " Section 1. All funds in the insular treasury which are the pro- 
 ceeds of the certificates of indebtedness issued under and by authority 
 of section six of an act of Congress entitled "An act to establish a 
 standard of value and to provide for a coinage system in the Philip- 
 pine Islands," approved March second, nineteen hundred and three, 
 all profits of seigniorage made by tlie insular government in the pur- 
 chase of bullion and the coinage therefrom, and the issue of Philip- 
 pine pesos and the subsidiary and minor coins, all profits from the sale 
 of exchange by the insular government between the Philippine Islands 
 and the United States made for the purpose of continuing the parity 
 of the silver Philippine peso with the gold-standard peso, and all 
 other receipts in the insular treasury inuring to the insular govern- 
 ment in the exercise of its functions of furnishing a convenient cur- 
 rency for the islands, shall constitute a separate and trust fund in the 
 insular treasury to be known as the " gold-standard fund," and to be 
 used for the purpose of maintaining the parity of the silver Philip- 
 pine peso with the gold-standard peso provided in the said act of Con- 
 gress, approved March second, nineteen hundred and three. Such 
 fund shall not be used to pay any expenses of the insular government 
 or to satisfy any of the appropriations of the insular government, 
 except only those connected with the purchase of bullion, the coinage 
 of the same into the money of the Philippine Islands, and those 
 
300 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 which are incident to the transportation of such money to the Phil- 
 ippine Islands from the place of coinage, to the putting of money into 
 circulation, including the preparation and issue of silver certificates, 
 and to the carrying on of such financial transactions, by exchange 
 and otherwise, as may be authorized by law to maintain the circula- 
 tion of the currency provided for in the said act of Congress ap- 
 proved March seconcl, nineteen hundred and three, and the subsidiary 
 and minor coinage provided for by said act and by an act of Con- 
 gress entitled "An act temporarily to provide for the administration 
 of the affairs of civil government in the Philippine Islands, and 
 for oth«r purposes," approved July first, nineteen hundred and two, 
 and .to the maintenance of the parity of value between the silver 
 Philippine peso and the subsidiary and minor coins, the coinage of 
 which is provided for by the acts above mentioned, and the gold 
 peso, which by the act of March second, nineteen hundred and 
 three, is made the standard of value in the Philippine Islands: 
 Provided, That whenever the public interest permits there majj^ be 
 withdrawn from the gold-standard fund such amount as the Philip- 
 pine government may deem proper to pay the principal and interest 
 of all, or any part of, the certificates of indebtedness issued under 
 section six of the said act of Congress of March second, nineteen 
 hundred and three." - 
 
 The proceeds of these two issues, together with the seigniorage, con- 
 stituted a gold-standard fund. 
 
 In February of this year the civil government of the Philippine 
 Islands advised the War Department by cable that the Philippine 
 Commission considered it advisable to take ujd the first issue of these 
 certificates, which matured May 1, 1904, by a third isue of $3,000,000. 
 The same method as was followed in the advertisement of public sale 
 of the other issues, and which is set forth in detail in my last annual 
 report, was followed in the sale of the new issue. The Secretary of 
 the Treasury authorized the following statement as to their recogni- 
 tion by the Treasury Department : 
 
 " These certificates of indebtedness will be at once accepted at par 
 by the Treasury Department as security for deposits of the public 
 money of the United States in national banks in substitution for 
 State, municipal, or Philippine bonds, and certificates of indebtedness 
 now held to secure such deposits; and in substitution for United 
 States bonds now held as security for deposits, on condition that the 
 Government bonds thus released be used as security for additional 
 circulation whenever, in the judgment of the Secretary of the Treas- 
 ury, it is desirable to stimulate an increase in national-bank circu- 
 lation." 
 
 Bids were opened on April 15, 1904, and it was found that the bid 
 of the American National Bank, of Kansas City, Mo., of $101,181 for 
 the entire issue was the most advantageous, and the award was accord- 
 ingly made. This thus puts the bond on a basis a little over 2| per 
 cent. This issue was oversubscribed ten times. 
 
 These certificates, like the former ones, were each for $1,000, and 
 numbered serially from 6001 to 9000. 
 
 The total proceeds amounted to $3,035,430, and the first issue of 
 certificates, numbered from 1 to 3000, maturing May 1, 1904, was paid 
 off by the proceeds of the last sale of certificates. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 301 
 
 On the 7th of July, 1904, Governor Wright advised the War 
 Department by cable that although the Philippine government could 
 without embarrassment pay off and retire second issue maturing 
 September 1, 1904, it was thought wise to make an additional one for 
 that purpose. The Secretary of the Treasury authorized the same 
 statement as to their recognition as with the last preceding issue. 
 
 The same method as heretofore was followed in the sale, and in 
 the presence of bidders, on October 22, 1904, when the bids were 
 opened it was found that the bid of $101.41 by M. L. Turner, of 
 Oklahoma City, Okla., was the most advantageous, which was accord- 
 ingly accepted, and, with interest considered, placed the bonds on 
 nearly a 2^ per cent basis. This issue was oversubscribed nine times. 
 These certificates were numbered from 9001 to 12000, and of the same 
 denomination as formerly. 
 
 The proceeds of the issue, $3,042,300, were deposited with the insu- 
 lar depositary in New York City and were used to pay off the second 
 issue. 
 
 At the time of the sale of these two issues the money market was 
 what is called " easy " or " a soft bond market." Expert financiers 
 anticipated that the Government could expect but a very slight 
 premium, if any, and the sale was therefore gratifying to the Philip- 
 pine government and hardly to be anticipated by the state of the 
 money market. It was due not only to the credit of the Philippine 
 government, but also to the recognition given by the United States 
 Treasury Department. 
 
 Philippine Land (FEiAPt) Purchase Bonds. 
 
 In the past year the negotiations for the purchase of the so-called 
 friar lands had resulted in contracts covering upward of 410,000 
 acres, at a price of $7,239,000 gold. 
 
 In the act of Congress approved July 1, 1902, the following provi- 
 sions for the issue of bonds for the purchase thereof appears : 
 
 " Sec. 63. That the government of the Philippine Islands is hereby 
 authorized, subject to the limitations and conditions prescribed in this 
 act, to acquire, receive, hold, maintain, and convey title to real and 
 personal property, and may acquire real estate for public uses by the 
 exercise of the right of eminent domain. 
 
 " Sec. 64. That the powers hereinbefore conferred in section sixty- 
 three may also be exercised in respect of any lands, easements, appur- 
 tenances, and hereditaments which, on the thirteenth of August, 
 eighteen hundred and ninety-eight, were owned or held by associa- 
 tions, corporations, communities, religious orders, or private individ- 
 uals in such large tracts or parcels and in such manner as in the 
 opinion of the Commission injuriously to affect the peace and welfare 
 of the people of the Philippine Islands. And for the purpose of 
 providing funds to acquire the lands mentioned in this section said 
 government of the Philippine Islands is hereby empowered to incur 
 indebtedness, to borrow money, and to issue, and to sell at not less 
 than par value, in gold coin of the United States of the present stand- 
 ard value or the equivalent in value in money of said islands, upon 
 such terms and conditions as it may deem best, registered or coupon 
 bonds of said government for such amount as may be necessary, said 
 
302 GOLD STAIfDAED IN INTERNATIONAL TRADE. 
 
 bonds to be in denominations of fifty dollars or any multiple thereof, 
 bearing interest at a rate not exceeding four and a half per centum 
 per annum, payable quarterly, and to be payable at the pleasure of 
 said government after dates named in said bonds not less than five 
 nor more than thirty years from the date of their issue, together with 
 interest thereon, in gold coin of the United States of the present 
 standard value or the equivalent in value in money of said islands ; 
 and said bonds shall be exempt from the payment of all taxes or 
 duties of said government, or any local authority therein, or of the 
 Government of the United States, as well as from taxation in any 
 form by or under State, municipal, or local authority in the United 
 States or the Philippine Islands. The moneys which may be realized 
 or received from the issue and sale of said bonds shall be applied by 
 the government of the Philippine Islands to the acquisition of the 
 property authorized by this section, and to no other purposes. 
 
 " Sec. 65. That all lands acquired by virtue of the preceding section 
 shall constitute a part and portion of the public property of the gov- 
 ernment of the Philippine Islands, and may be held, sold, and con- 
 veyed, or leased temporarily for a period not exceeding three years 
 after their acquisition by said government on such terms and condi- 
 tions as it may prescribe, subject to the limitations and conditions pro- 
 vided for in this act : Provided, That all deferred payments and the 
 interest thereon shall be payable in the money prescribed for the 
 payment of principal and interest of the bonds authorized to be issued 
 in payment of said lands by the jareceding section, and said deferred 
 payments shall bear interest at the rate borne by the bonds. All 
 moneys realized or received from sales or other disposition of said 
 lands or by reason thereof shall constitute a trust fund for the pay- 
 ment of principal and interest of said bonds, and also constitute a 
 sinking fund for the payment of said bonds at their maturity. Ac- 
 tual settlers and occupants at the time said lands are acquired by the 
 government shall have the preference over all others to lease, pur- 
 chase, or acquire their holdings within such reasonable time as may 
 be determined by said government." 
 
 About the 18th of December, 1903, the civil governor of the Philip- 
 pine Islands notified the War Department of the closing of the con- 
 tract, which had the approval of the Secretary of War, and the 
 question of issuance of bonds, what kind they should be, amount, 
 denominations, and the various details as to engraving, printing, pay- 
 ment, interest, and all other information necessary to their advertise- 
 ment and sale was taken up by cable. Much work was necessary to 
 make decision and work out all these details. All the experts of the 
 various bureaus of the Treasury Department had to be consulted, and 
 as well was it necessary to gain practical information as to the best 
 method of floating these bonds, which information was as kindly fur- 
 nished by expert financiers of New York houses connected with bond- 
 ing companies as it was by the experts of the Treasury Department. 
 
 Registered bonds were determined upon. It was believed unwise 
 to open a separate registering office in the Bureau of Insular Affairs, 
 if the Philippine government could make use of the expert Register 
 Office of the Treasury Department. The Secretary of the Treasury, 
 on the request of the Secretary of War, kindly undertook this work, 
 as well as the payment by the Treasurer of the interest on the bonds, 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 303 
 
 the method being to transfer, through the disbursing officer of this 
 Bureau, to the Treasury Department the amount of Philippine money 
 that was necessary to meet these payments. In coming to this con- 
 clusion it became necessary for the Secretary of the Treasury and the 
 Secretary of War to ask the opinion of the Attorney-General as 
 to the construction of certain language of the above section, which 
 opinion is embodied in the appendix. 
 
 The Philippine government limited the issue to $7,000,000, since 
 the indications were that the premium would easily cover the addi- 
 tional contract amount. 
 
 Accordingly, on December 30, 1903, a circular was issued announc- 
 ing that the bonds would be dated February 1, 1904, bearing interest 
 at 4 per cent, payable quarterly, redeemable at the pleasure of the 
 Philippine government after ten years, and payable in thirty years 
 after date of issue in gold coin of the United States ; both principal 
 and interest being payable at the Treasury of the United States ; that 
 the bonds would be registered and transferable at the office of the Reg- 
 ister of the Treasury ; that they should be in denominations of $10,000 
 and $1,000 in proportion to suit the purchaser or purchasers; that 
 bids would be opened January 11, 1904, and delivery of interim certifi- 
 cates made February 1, 1904, for which the engraved bonds would be 
 substituted later. 
 
 The Secretary of the Treasury authorized the statement — 
 
 " That the Philippine land-purchase bonds will be accepted at par 
 as security for deposits of public money, should further deposits be 
 made; and may be substituted for Government bonds now held as 
 security for deposits on condition that the Government bonds thus 
 released be used as security for additional circulation whenever, in 
 the judgment of the Secretary of the Treasury, it is desirable to stim- 
 ulate an increase in national-bank circulation." 
 
 This circular was given the widest publicity in the United States 
 and in Manila. When the bonds were opened on January 11, 1904, 
 they were found to contain, in all, tenders for $33,237,000. 
 
 The most advantageous bid was found to be the joint one of Harvey 
 Fisk & Sons, Fisk & Robinson, and the National City Bank of New 
 York, of $107,577 for the entire $7,000,000, and they were accordingly 
 awarded the bonds. The premium realized was thus $530,390, which 
 more than justified the decision to limit the issue to $7,000,000. 
 
 The money was equally divided between the two Philippine deposi- 
 taries in the United States, with interest for the six months period 
 contemplated in the contract of purchase at the rate of 3^ per cent. 
 The bonds were thus floated at practically 3 per cent. But $2,000,000 
 of this amount has been paid out. This $2,000,000, at the request of 
 the title holder, is awaiting payment in London. 
 
 The examination of the titles of all the friar lands have been con- 
 cluded. The survey of the British-Manila Estates Company (Lim- 
 ited) has been accepted by its representative, and $200,000 have been 
 paid from the friar fund in New York, and $98,782.07 paid in cash in 
 Manila. 
 
 These estates include the two haciendas of San Juan and San Nico- 
 las, in the town of Imus (usually known as the " Imus estate ") , in 
 the province of Cavite, consisting of 18,419 hectares, 56 ares, and 12 
 centares, formerly the property of the Eecoletos order in the Philip- 
 pines. 
 
304 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Likewise the survey of the estates called Sociedad Agricola de 
 Ultramar have been accepted by its representative. This includes 
 the former estates of the Augustinian order in the Philippines, com- 
 prising some 18 diiferent haciendas or estates, of which the purchase 
 price was some $2,212,404. Two million dollars of this amount have 
 been transferred from New York to London, in accordance with and 
 awaiting the demand of its representative, and the balance was paid 
 in Manila. 
 
 In the case of the Philippine Sugar Estates Development Company 
 (Limited), comprising the lands formerly owned by the Domican 
 order, a joint survey of several of the haciendas, which the govern- 
 ment survey had shown to be short to the amount of the value of 
 several hundred thousand dollars, has been requested by the govern- 
 ment. Again, questions have arisen as to the titles of the large 
 haciendas of Binan, Santa Rosa, Santa Cruz de Malabon, together 
 with a portion of Lolomboy. 
 
 It is the opinion of the government attorney who examined the 
 titles that the title was in a separate and independent foundation, 
 which had never joined in the conveyance. The amount of the pur- 
 chase price aggregates $3,671,657, to be definitely determined accord- 
 ing to the resurvey. 
 
 Pay for that part of these estates as to which there is no doubt has 
 been offered, as well as a proposition to bring the titles in dispute 
 before the courts. The government is anxious to gain complete pos- 
 session of these lands to parcel them out, not only in order that the 
 transaction should be completed, but also that the land may be earning 
 legitimate revenue for tlie friar land fund. 
 
 Depositaries of Philippine Funds. 
 
 The Guaranty Trust Company and the International Banking Cor- 
 poration remain the two depositaries of insular funds in New York. 
 The latter bank maintains a branch office in Washington and also in 
 Manila. The same two English corporations — the Hongkong and 
 Shanghai Banking Corporation, and the Chartered Bank of India, 
 Australia, and China — continue as depositaries in Manila of insular 
 funds. All such funds are secured by bonds with the American 
 Surety Company of New York and the Fidelity and Deposit Com- 
 pany of Maryland. These two surety companies have also contracts 
 for bonding all insular employees who disburse moneys. 
 
 The treasury of the Philippine Islands still remains the only depos- 
 itary designated under the act of July 1, 1902, of the public" moneys 
 of the United States in the Philippine Islands. 
 
 The following statements will indicate the business with these banks 
 in the United States as depositaries of the funds of the civil govern- 
 ment of the Philippine Islands : 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 305 
 
 Statement of the account of the Ghiaranty Trust Company of New York in account 
 with the civil government of the Philippine Islands, October 31, 190^. 
 
 Debtor. 
 
 Creditor. 
 
 Balance Oct. 31, 1903: 
 Gold standard 
 
 fund $3,146,003.61 
 
 Congressional 
 
 relief fund 82,033.69 
 
 $3,228,037.30 
 
 8,805,922.77 
 
 150,000.00 
 
 6,017,730.00 
 
 7,456.00 
 
 140,019.48 
 258.00 
 
 30,000.00 
 
 ;«,ooo.oo 
 
 1,138,352.29 
 
 58.38 
 
 13,782.95 
 
 8,661.82 
 183,530.08 
 
 Withdrawals: 
 
 Insular treasurer's transfer 
 drafts 
 
 $3,896,853.39 
 
 Transferred to London on 
 
 2,000,000.00 
 
 
 Treasurer of the United 
 States. -.. - - 
 
 
 Deposits: 
 
 Treasurer of the United 
 States 
 
 70,000.00 
 
 James Q. Jester, disbursing 
 
 agent, Washington, D. C... 
 Carson Taylor, disbursing 
 
 office, exposition board — 
 M. P. Healy, disbursing 
 
 oiiice, exposition board 
 
 J. S. Manning, disbursing 
 
 oflSce, constabulary 
 
 Thos. Hardeman, disbursing 
 
 office, honorary commis- 
 
 8,590,000.00 
 
 Land purchase bond ac- 
 
 306,490.22 
 
 Certificates of indebtedness- 
 Proceeds, sale proof coin sets . 
 J. G. Jester, disbursing 
 agent 
 
 6,000.00 
 36,863.78 
 
 C. H. Whipple 
 
 
 American if ational Bank, 
 
 60,000.00 
 
 M. L. Turner, bond award- .. 
 
 Cash for drafts issued 
 
 Auditor for War Depart- 
 
 Balance due the insular gov- 
 ernment- 
 Friar lands 
 
 bond fund $1,766,238.07 
 Gold stand- 
 ard fund. 2,141,198.67 
 General 
 fund 880,164.94 
 
 
 Superintendent of mint, 
 Philadelphia _ 
 
 
 Superintendent of mint, San 
 
 
 
 4,787,601.68 
 
 
 
 
 19,753,809.07 
 
 19,753,809.07 
 
 Balance Oct 'Jl, i904-_- 
 
 4,787,601.68 
 
 
 
 
 Statement of the account of the International Banking Corporation at Wash- 
 ington, D. C, in account with the civil government of the Philippine Islands. 
 
 Debtor. 
 
 Creditor. 
 
 Deposits : 
 
 Treasury of the United 
 
 44,145,187.00 
 10,000.00 
 2,668.77 
 
 20.00 
 83,024.16 
 
 Withdrawals, J. G. Jester, dis- 
 bursing agent, Washington .- 
 Balance due the insular gov- 
 ernment: 
 General fund. $131,556.86 
 Friar lands 
 bond fund.. 3,666,843.07 
 
 $443,000.00 
 
 United States Quartermas- 
 ter's Department 
 
 Miscellaneous receipts and 
 refunds.. 
 
 3,797,899.93 
 
 Proceeds from damaged $20 
 note received from treas- 
 urer, Philippine Islands ... 
 Interest on deposits — 
 
 
 
 4,240,899.93 
 
 4,240,899.93 
 
 ■Ralnnrp Oct 31 1904 
 
 3,797,899.93 
 
 
 
 
 Mention has already been made of the fact that the money realized 
 from the sale of the land purchase, or friar bonds, was equally divided 
 between the two depositaries in the United States at the rate of 3^ per 
 cent for a period of six-months, and at the end of that period, which 
 was about June 22, 1904, the banks represented that they were not 
 iustified in paying -that rate of interest thereafter on account ot the 
 iaree amount of ready money in the market at that time, as well as 
 the fact that thi^ money was virtually on call by the Philippine gov- 
 ernment. The Philippine government acquiesced and the interest 
 was accordingly reduced. 
 S. Doe. 128, 58-3 20 
 
306 
 
 GOLD STANDARD IN INTERN ATION A L TRADE. 
 
 The unpaid balance of the so-called friar money is on call with the 
 Guaranty Trust Company at 2 per cent and with the International 
 Banking Corporation at 2^ per cent, under the condition of fifteen 
 days' notice of withdrawal. 
 
 For the same reasons the interest on the gold-standard fund with 
 the Guaranty Trust Company was reduced from 3-J- to 2^ per cent, the 
 relief fund from 3^ to 2| per cent, the Treasurer's general account is 
 2 per cent with botla the Guaranty Trust Company and the Interna- 
 tional Banking Corporation, being reduced from 3 per cent, and the 
 funds to the credit of the disbursing agent of this Bureau is 2 per cent 
 with both banks. 
 
 Interest on Philippine funds deposited with the Guaranty Trust Company of New 
 York and the International Banking Corporation, Neiv York (also Washington 
 branch), October 1, 1903, to September 30, 1904. 
 
 Fund. 
 
 Guaranty 
 Trust Co. of 
 New York. 
 
 International 
 
 Banliing 
 Corporation. 
 
 Total. 
 
 
 $71,043.07 
 76,259.35 
 18,371.28 
 8,250.92 
 9,605.46 
 
 $77,262.70 
 
 $148', 305. 77 
 
 Gold standard 
 
 76,259.35 
 
 
 l,8n.]3 
 3,950.33 
 
 20,182.41 
 
 Disbursing agent, Philippine revenues 
 
 12,201.25 
 
 Relief 
 
 9,605.46 
 
 
 
 
 Total 
 
 183,530.08 
 
 88,024.16 
 
 266,554.24 
 
 
 
 Note.— Interest on disbursing agent's funds is credited to general account of treasurer. 
 
 METHOD OF TRANSFER OF FUNDS BETWEEN THE UNITED STATES AND THE 
 
 PHILIPPINE ISLANDS. 
 
 The gold-standard act provides that the insular treasury or the 
 Philippine depositaries in the United States may sell on demand, in 
 sums of not less than 10,000 pesos, or $5,000, exchange against- the 
 gold-standard fund, charging for the same a premium of three-quar- 
 ters of 1 per cent for demand drafts and 1^ per cent for telegraphic 
 transfers. Under the discretionary power of the same act, the secre- 
 tary of finance and justice of tlie Philippine Islands has but recently 
 changed these rates, respectively, to three-eights of 1 per cent and 
 three-quarters of 1 per cent, which affords a cheap method for the 
 transfer of funds both ways without actual transportation of the 
 money. 
 
 When the Philippine government desired to increase the money on 
 deposit with the New York depositaries, it has been accomplished by 
 taking advantage of the War and Navy departments' desire to trans- 
 fer United States money belonging to any of their bureaus from the 
 United States to the Philippines. The method being followed is to 
 notify the civil governor by cable of the bureau desiring transfer and 
 the amount to be deposited in the treasury of the Philippine Islands, 
 as depositary of the United States. The Philippine treasurer, when 
 that has been accomplished, informs by cable the Treasurer of the 
 United States, who in turn transmits an equal amount to such Philip- 
 pine depositary as this Bureau designates in New York, and then the 
 amount so placed with the treasurer of the Philippine Islands is sub- 
 ject to the directions of the Treasurer of the United States. 
 
GOLD STANDARD IN INTERNATIONAL TIRADE. 307 
 
 0. AN ACT [No. 1042] FOR THE PURPOSE OF MAINTAINING THE PAR- 
 ITY OF THE PHILIPPINES CURRENCY IN ACCORDANCE WITH 
 THE PROVISIONS OF SECTIONS ONE AND SIX OF THE ACT OF 
 CONGRESS APPROVED MARCH SECOND, NINETEEN HUNDRED 
 AND THREE, BY PROHIBITING THE IMPORTATION INTO THE 
 PHILIPPINE ISLANDS OF CERTAIN KINDS OF COINS. 
 
 By authority of the United States, he it enacted l>y the Philippine 
 Commission, that : 
 
 Section 1. The importation into the Philippine Islands of Mexi- 
 can currency, Spanish-Filipino currency, or any other metallic cur- 
 rency which is not upon a gold basis, is hereby prohibited ; and any of 
 the aforementioned currencies Avhich are imported, or of which the 
 importation is attempted, contrary to the provisions of this act, shall 
 be liable to forfeiture, under due process of law, the bullion value, in 
 terms of Philippines currency, of one-third of the sum so forfeited to 
 be payable to the person upon whose information, given to the proper 
 authorities, the seizure of the money so forfeited is made, and the 
 other two-thirds to be payable to the Philippine government, and to 
 accrue to the gold-standard fund: Provided, That money actually on 
 shipboard in transit to the Philippine Islands, and for Avhich bills 
 of lading have been made out on or prior to the date of the passage 
 of this act, shall be permitted to enter: And provid.ed further, That 
 each first-class passenger shall be permitted to bring into the Philip- 
 pine Islands a sum of the aforementioned currencies not exceeding 
 in value fifty Philippine pesos; each second-class passenger a sum 
 not exceeding twenty Philippine pesos; and each third-class passen- 
 ger a sum not exceeding ten Philippine pesos. 
 
 Sec. 2. The importation or the attempt to import any of the said 
 currencies contrary to law is hereby declared a criminal otfense, pun- 
 ishable, in addition to the forfeiture of said currency as above pro- 
 vided, by a fine of not more than ten thousand pesos or imprisonment 
 for a period not exceeding one year, or both, in the discretion of the 
 court. 
 
 Sec. 3. The provisions of section one of this act shall be enforced 
 by the collector of customs of the Philippine Islands in accordance 
 with the provisions of act numbered three hundred and fifty-five, as 
 amended by act numbered eight hundred and sixty-four, except that 
 currency seized and forfeited under the provisions of this act shall 
 not be sold at auction, but shall, as provided in section one of this act, 
 be paid into the treasury of the Philippine Islands to the ci-edit of the 
 gold-standard fund, and the sum due to the informer shall be paid 
 in Philippines currency by the treasurer from that fund. 
 
 Sec. 4. This act shall take effect on its passage. 
 
 Enacted, January 14, 1904. 
 
308 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 4. AN ACT (No. 1045) FOR THE PURPOSE OF PROVIDING REVENUE AND 
 OF MAINTAINING THE PARITY OF THE PHILIPPINES CURRENCY 
 IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS ONE AND 
 SIX OF THE ACT OF CONGRESS APPROVED MARCH SECOND, 
 NINETEEN HUNDRED AND THREE, BY PROVIDING FOR THE PUR- 
 CHASE OF MEXICAN DOLLARS AS BULLION, BY IMPOSING A TAX 
 UPON WRITTEN CONTRACTS PAYABLE IN CERTAIN KINDS OF 
 CURRENCIES, AND BY REQUIRING THE PAYMENT OF A LICENSE 
 TAX BY ALL PERSONS, FIRMS, OR CORPORATIONS CONDUCTING 
 THEIR CURRENT BUSINESS, EITHER WHOLLY OR IN PART, IN 
 SAID CURRENCIES, AND FOR OTHER PURPOSES. 
 
 By authority of the United States, he it enacted hy the Philippine 
 Oommission, that: 
 
 Section 1. For the purpose of this act, the expression " local cur- 
 rency " shall signify Mexican coins, Spanish and Spanish- Filipino 
 coins, and all other metallic moneys not upon a gold basis in circula- 
 tion in the Philippine Islands, and bank notes payable in said moneys. 
 
 Sec. 2. The secretary of finance and justice is hereby authorized, 
 whenever in his judgment the public interest may require, to direct 
 the insular treasurer and all provincial and municipal treasurers 
 to purchase Mexican dollars as bullion at their bullion value, said 
 value to be determined from time to time by the insular treasurer, 
 with the approval of the secretary of finance and justice. The cost 
 of the bullion so purchased shall be a proper charge against the gold- 
 standard fund, and the money coined therefrom shall accrue to that 
 fund. 
 
 Sec. 3. Whenever any contract, debt, or obligation, payable by the 
 terms thereof in local currency, is sought to be enforced in any court 
 and the i-ight of the plaintiff is established, it shall be the duty of the 
 court to render judgment for the plaintiff to recover as damages the 
 lawful sum due to him, in Philippine pesos, instead of in the currency 
 mentioned in the contract, debt, or obligation. For the purpose of 
 determining the amount of such judgment, the court shall receive 
 evidence as to the real and just value in Philippines currency of the 
 currency named in the contract, debt, or obligation, including evi- 
 dence of the local market value of such currency, its value in neigh- 
 boring countries as currency, its value in the great markets of the 
 world, its. bullion value, and any other facts necessary to determine 
 its true value. The ]ocal market value, whether affected by the pro- 
 hibition of the importation of such currency or by other causes, shall 
 not be conclusive evidence of the amount of the judgment to be ren- 
 dered in such cases. Payment of a judgment thus rendered shall 
 extinguish all liability on the contract, debt, or obligation. 
 
 Sec. 4. Whenever any contract, debt, or obligation is made pay- 
 able in local currency, the debtor or person under obligation to make 
 payment may tender to the creditor in lieu of such currency the just 
 amount due thereon in Philippine pesos, computed in the manner 
 stated in the preceding section, and the effect of such tender shall be 
 the same as though the tender'had been made in the kind of currency 
 named in such contract, debt, or obligation. 
 
 Sec. 5. The two last preceding sections shall apply to all contracts, 
 debts, or obligations made before the passage of this act, as well as to 
 those made subsequent thereto. 
 
 Sec. 6. Every check, note, draft, bond, bill of exchange, and every 
 contract whatsoever, payable wholly or in part in local currency and 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 309 
 
 A^^J^ or made upon, or subsequent to, October first, nineteen hun- 
 dred and four, shall bear upon its face an internal-revenue stamp or 
 stamps of a face value in Philippines currency to the amounts herein- 
 after provided, said stamp or stamps to be properly canceled at the 
 signing of said check, note, draft, bond, bill of exchange, or contract 
 with the initials of one of the parties thereto and the date of the 
 transaction. The rates of the stamp tax required upon every check, 
 note, draft, bond, bill of exchange, and upon every written contract 
 whatsoever, payable wholly or in part in local currency, except as 
 otherwise provided in this act, shall be as follows: 
 
 (1) An ad valorem rate of one per centum levied in Philippines 
 currency upon the face value in local currency of each aforemen- 
 tioned instrument drawn or made during the month of October, nine- 
 teen hundred and four. 
 
 (2) An ad valorem rate of two per centum levied in Philippines 
 currency upon the face value in local currency of each aforemen- 
 tioned instrument drawn or made during the month of November, 
 nineteen hundred and four. 
 
 (3) An ad valorem rate of three per centum levied in Philippines 
 curr(jncy upon the face value in local currency of each aforemen- 
 tioned instrument drawn or made during the month of December, 
 nineteen hundred and four. 
 
 (4) An ad valorem rate of five per centum levied in Philippines 
 currency upon the face value in local currency of each aforemen- 
 tioned instrument drawn or made subsequent to December thirty-first, 
 nineteen hundred and four. 
 
 Provided, That the aforementioned tax shall not be collected upon 
 the following : 
 
 (a) Checks, drafts, or bills of exchange drawn against a deposit 
 of local currency and made payable to a person, firln, or corporation, 
 or made payable to a bank and used in the purchase of a draft or bill 
 of exchange payable to a person, firm, or corporation, in settlement 
 either wholly or in part of a bona fide specific debt payable in local 
 currency by the depositor and contracted in writing or reduced to 
 writing prior to the first day of October, nineteen hundred and' four. 
 
 (&) Checks, drafts, or bills of exchange payable in local currency 
 and presented to a bank for deposit, payment, or sale by a creditor 
 who has received the same in payment of a bona fide specific debt 
 payable in local currency, contracted in writing or reduced to writing 
 prior to the first day of October, nineteen hundred and four. 
 
 (c) Deposit receipts, or other evidences of de2oosits of local cur- 
 rency, given by a bank or other corporation or person to any person, 
 firm, or corporation making a deposit of local currency, in accordance 
 with the provisions of this Act, and for the purpose of providing 
 funds for the payment of bona fide specific obligations payable in 
 local currency and contracted in writing or reduced to writing prior 
 to the first day of October, nineteen hundred and four. 
 
 (d) Checks, drafts, notes, bills of exchange, and contracts of any 
 kind, the purpose and effect of which is the prompt shipment out of 
 the Philippine Islands of the amount of Mexican currency the pay- 
 ment of which is called for in said check, draft, note, bill of exchange, 
 or contract of any kind. 
 
 (e) Checks, drafts, notes, bills of exchange, and contracts of any 
 kind, the purpose and effect of which is the prompt transfer of local 
 
310 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 currency to the government of the Philippine Islands in accordance 
 with the provisions of law. 
 
 (/) Contracts of any character whatsoever whose sole purpose and 
 effect is the transference of a local-currency account to a Philippines- 
 currency basis. 
 
 {g) Checks, drafts, or bills of exchange payable only in a foreign 
 country. 
 
 Sec. 7. Every transfer of ownership by indorsement or otherwise 
 after September thirtieth, nineteen hundred and four, of a check, 
 draft, note, bond, bill of exchange, or any contract whatsoever, pay- 
 able wholly or in part in local currency in the Philippine Islands after 
 September thirtieth, nineteen hundred and four, except such instru- 
 ments as are specified in subsections (a), (&), (c), {d), (e), (/), and 
 {g) oi section six, shall be considered a separate and distinct contract, 
 and as such shall require a stamp or stamps. 
 
 Sec. 8. A tax of one per centum per month, payable quarterly, in 
 Philippines currency, shall be levied upon the average daily balance 
 of each deposit of local currency held after December thirty-first, 
 nineteen hundred and four, by any bank, corporation, or individual 
 receiving deposits in the Philippine Islands, and it shall be the duty 
 of every bank, corporation, or individual receiving deposits in the 
 Philippine Islands, which shall receive or continue local-currency 
 deposits after December thirty-first, nineteen hundred and four, to 
 furnish the collector of internal revenue, within ten days after the 
 beginning of each quarter of the calendar year, a statement of the 
 names and addresses of holders of local-currency deposits held by 
 them during the preceding quarter, together with the average daily 
 balance of each deposit, respectively, for each month of said quarter, 
 and such other information as the collector of internal revenue shall 
 require for the proper administration of this Act ; and it shall be the 
 further duty of such banks, corporations, or individuals to pay said 
 tax to the collector of internal revenue within thirty days after the 
 beginning of each quarter of the calendar year, deducting the amount 
 of the tax from the depositor's account. The tax receipt of the col- 
 lector of internal revenue shall be a sufficient voucher for the bank, 
 corporation, or individual as to the proper use of the money, and shall 
 be accepted by the depositor as money paid. Such average daily 
 balance shall be calculated by adding together the sums of deposit 
 to the credit of the depositor at the close of each business day in said 
 month and dividing the sum so obtained by the number of days 
 upon which said deposit was held : Provided, That any person wish- 
 ing to maintain a local-currency deposit after December thirty-first, 
 nineteen hundred and four, for the purpose of keeping funds for the 
 payment at a future date of a bona fide specific local-currency obliga- 
 tion contracted in writing or reduced to writing prior to October first, 
 nineteen hundred and four, may, by obtaining in advance the express 
 permission in writing of the secretary of finance and justice, and hav- 
 ing the same registered with the collector of internal revenue or his 
 deputy, maintain such a deposit up to the time of the maturity of said 
 local-currency obligation without paying the aforementioned tax. 
 
 Sec. 9. Every checlc, draft, note, bond, bill of exchange, and every 
 contract whatsoever payable in local currency, and every deposit so 
 payable shall be presumably subject to the taxes levied in accordance 
 with the laro visions of this act; and the obligation shall rest upon 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 311 
 
 the drawer or maker, holder or beneficiary, and, in case of transfer by 
 indorsement, upon eacli indorser, indorsee, or holder of said check, 
 draft, note, bond, bill of exchange, or bank deposit, who claims ex- 
 emption, to prove that he is entitled to any of the exemptions pro- 
 vided in this act. No check, draft, note, bond, bill of exchange, or 
 any contract whatsoever, payable in local currency, shall be exempted 
 from the payment of the stamp tax provided for in sections six and 
 seven of this act, unless the contract for which exemption is claimed 
 shall be registered- with the collector of internal revenue or his deputy 
 before October first, nineteen hundred and four, and a certificate be 
 attached thereto by the collector of internal revenue or his deputy 
 certifying the exemption; and no deposit of local currency shall be 
 exempted from the payment of the tax on bank deposits as provided 
 in sections eight and nine of this act unless the exemption is obtained 
 as herein provided, together with a certificate certifying the same, 
 prior to January first, nineteen hundred and five. 
 
 .Sec. 10. Every check, draft, note, bond, bill of exchange, and every 
 contract whatsoever which is not properly stamped in accordance 
 with the provisions of this act shall be void, and every person, firm, 
 bank, or corporation who gives or receives such check, draft, note, 
 bond, bill of exchange, or contract which is subject to the stamp tax 
 under this act without its being properly stamped, or who shall 
 receive or keep a deposit of local currency or make such a deposit 
 without observing the provisions of this act, shall be guilty of a 
 criminal offense, and shall be liable to a fine not exceeding the face 
 value in Philippines currency of fifty per centum of the number of 
 pesos of local currency called for in said check, draft, note, bond, bill 
 of exchange, or contract, or of the deposit so kept. 
 
 Sec. 11. (a) All persons, firms, or corporations who engage in any 
 business Avhatsoever in the Philippine Islands after December thirty- 
 first, nineteen hundred and four, and make use of local currency to 
 any extent whatever in either buying, selling, or renting goods, prop- 
 erty, or services must, previously to engaging in such business and 
 annually thereafter, in addition to the other licenses now required by 
 law, obtain a license from the collector of internal revenue in the 
 manner prescribed in the provisions of the industrial-tax law for the 
 issuance of industrial licenses : Provided, That persons, firms, banks, 
 or other corporations may deal in checks, drafts, notes, bonds, bills of 
 exchange, and contracts which are mentioned in paragraphs {a), (6), 
 (c), (d), (e), if), and (g) of section six as not subject to a stamp 
 tax, or mav make such local-currency deposits as are exempted from 
 taxation by section eight and nine without securing such a license: 
 And provided further, That a bank, corporation, or individual may 
 purchase local currency with the purpose and effect of promptly ship- 
 ping said currency out of the country without securing such a license : 
 And provided further. That the collection of accounts, debts, or other 
 obligations made or incurred prior to January first, nineteen hundred 
 and'^five, shall not be considered current business subject to the provi- 
 sions of this section. , • , ^, i -n 
 (&) The licenses .shall be classified in accordance with the classifa- 
 cation of rates of the industrial taxes, and the amount payable for a 
 license of the first class shall be ten thousand pesos, Philippines cur- 
 rency • for a license of the second class, five thousand pesos, Philip- 
 pines currency; for a license of the third class, one thousand pesos, 
 
312 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Philippines currency; and for a license of the fourth class, five hun- 
 dred pesos, Philippines currency. 
 
 (e) Each separate factory, shop, store, or other business establish- 
 ment, and each separate trade or business whether owned, managed, 
 or carried on by the same or different persons, firms, or corporations, 
 shall be considered for the purposes of this act a separate industry, 
 and shall require for its legal conduct or management a separate 
 license of the class provided for in this act. This section of this act 
 shall be administered in accordance with the provisions of the indus- 
 trial tax law so far as those provisions are not contrary to the provi- 
 sions of this act. 
 
 {d) Any person, firm, or corporation who shall use local currency 
 in the conduct of his business Avithout a license and contrary to the 
 provisions of this act shall be guilty of a criminal offense, and shall 
 be subject to a fine of not exceeding ten per centum of the license fee 
 required for his business, in addition to the payment of the license fee. 
 Each separate transaction in local currency contrary to law shall con- 
 stitute a separate offense and shall subject the offender to a separa'te 
 fine of not exceeding ten per centum of the license fee. 
 
 Sec. 12. Immediately upon the passage of this act it shall be the 
 duty of the chief of the division of the currency to prepare and have 
 published in the j)rincipal languages and dialects of the Philippine 
 Islands an announcement explaining the new Philippines currency, 
 and the more important laws and official regulations pertaining to the 
 use of that currency, and the methods provided for the withdrawal of 
 local currency from circulation. Copies of this announcement shall 
 be sent to all the provincial governors, provincial and municipal treas- 
 urers, presidents and municipal councilors of the Philippine Islands, 
 and shall be posted and advertised as widely as possible throughout 
 the Philippine Islands. 
 
 Sec. 13. This act shall be administered by the collector of internal 
 revenue for the Philippine Islands. 
 
 Sec. 14. This act shall take effect on its passage. 
 
 Enacted, January 27, 1904. 
 
 5. FINANCIAL SECRETARY'S ORDER OP NOVEMBER 3, 1904. 
 
 Advise depositories in the United States of gold standard fund to 
 sell demand drafts on the Philippine treasury at three-eighths of 1 
 per cent and telegraphic transfers at three-fourths of 1 per cent in 
 sums not less than $5,000, rate temporarily fixed by secretary of 
 finance and justice, in accordance with subsection 1 of section 7, act 
 938. 
 
Appendix C. 
 
 PANAMA. 
 
 I. LAW PROPOSED IN PANAMA. 
 
 NATIONAL CONVENTION OF PANAMA— MONETARY QUESTION. 
 
 Project approved in the session of March 10, 1904 : 
 That the order of the day be changed and the following substi- 
 tuted: That the project for a law on the monetary question be first 
 discussed and then passed to a committea of this assembly, consisting 
 of a deputy for each province, to examine the project andreport upon 
 it within fifteen days. Let the immediate publication of the project 
 be ordered. 
 
 Project of a Law Relating to Money. 
 
 The national convention of Panama decrees : 
 
 Article 1. The monetary unit of the Republic shall be the gold 
 peso, of equal dimensions, weight, and alloy as the actual gold dollar 
 of the United States of America, divisible in one hundred parts or 
 cents. 
 
 Art. 2. The actual gold dollar of the United States of America 
 and its multiples shall be legal tender in the Republic at their nom- 
 inal value, equivalent to gold pesos. 
 
 Art.- 3. In the event of their emission being considered convenient, 
 the national gold coins shall be of 1, 5, 10, and 20 pesos, and of equal 
 dimensions, weight, and alloy as the actual coins of the United States 
 of America of the same A'alue, expressed in dollars. The Executive 
 Shall determine the form and other details with regard to the coinage 
 and emission of national gold coins. 
 
 Art. 4. The fractians of the national peso shall be of silver and of 
 nickel. 
 
 Art. 5. The fractional silver coins ghall be 900 millesimals fine, 
 with 100 millesimals of copper alloy. 
 
 Art. 6. The value, weight, and diameter of the national silver coins 
 shall be as follows : Coins of 50 cents shall weigh 25 grams and have a 
 diameter of 37 millimeters, those of 25 cents shall weigh 12^ grams 
 and be of 30 millimeters in diameter, 10-cent pieces shall weigh 5 
 grams and be of 23 millimeters diameter, and 5-cent pieces will weigh 
 2^ grams, with a diameter of 18 millimeters. The Executive shall 
 determine the form and other details regarding the coinage and emis- 
 sion of national silver coins. 
 
 Art. 7. The national silver coins shall be legal tender at their nom- 
 inal value in all transactions; but they shall not be coined in greater 
 
 313 
 
314 GOLD STANDARD IK INTERNATIONAL TRADE. 
 
 quantity than is absolutely necessary for the conversion into national 
 coin of the Colombian silver coin actually in circulation in the Repub- 
 lic, nor shall new emissions be made. Only the worn-out silver coins 
 shall in future be recoined, or the coins of one class may be converted 
 into coins of another class. ' 
 
 Art. 8. The Government of the Republic is obliged to maintain the 
 par or equal value of the legal gold and silver coins, and the Execu- 
 tive is authorized to dictate provisionally — until the ordinary or 
 extraordinary meeting of the Legislature — such measures as it may 
 deem convenient for the maintenance of the national silver coin at 
 its emission value. 
 
 Art. 9. The Colombian silver coins actually in circulation in the 
 Republic shall be withdrawn and exchanged for new legal gold and 
 silver coins at the rate of 225 pesos of Colombian money for 100 pesos 
 of the new money. 
 
 Art. 10. During the conversion into national coin of the Colombian 
 silver coin now in circulation in the Republic, they shall continue to 
 be legal tender at the rate of exchange at which they will be con- 
 verted; that is, at 225 per cent. 
 
 Art. 11. The Executive shall determine the time when the Colom- 
 bian silver coins now in circulation shall cease to be legal tender, but 
 in no case shall it be later than the 31st of December next. After the 
 date to be fixed bj^ the Executive the Colombian shall not be legal 
 tender any more. 
 
 Art. 12. The obligations contracted before the enacting of the pres- 
 ent law that are tacitly or expressly payable in Colombian silver coin 
 (of 0.835 m. fine) shall be redeemable in national gold and silver coin 
 at the before-expressed rate of 225 pesos of Colombian money for 100 
 pesos of the new money. 
 
 Art. 13. If the emission of nickel coins for fractions of a peso be 
 deemed necessary, such coins shall be for the one-hundredth part of 
 a peso ; the amount to be struck not to exceed 30,000 pesos. 
 
 Art. 14. The national nickel coins shall be legal tender in all trans- 
 actions to the amount of 5 cents, except in fiscal payments, in* which 
 they will be admitted to the amount of 5 per cent. 
 
 Art. 15. The expenditure occasioned by carrying out the present 
 law shall be included in the budget of general expenses. 
 
 Given in Panama, the of March, 1904. * 
 
 March 11, 1904. 
 In to-day's session in first debate the preceding project was ap- 
 proved and passed in commission for the term of fifteen days to the 
 honorable deputies Castulo Villamil, Sebastian Sucre J., Julio 
 Tcaza, N. Victoria J., J. Vasquez C, Demetrio H. Brid, and Luis 
 
 Garcia F, 
 Is copy 
 
 Juan Brin, 
 The Secretary of the Convention, ' 
 
 Ladislac Sosa, 
 The Assistant Secretary. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 315 
 
 2. FIRST MEMORANDUM OF THE AMERICAN COMMISSION. 
 Memorandum Regarding the Currency of Panama. 
 
 It is of great importance from the standpoint of economy in letting 
 contracts for the construction of the Panama Canal and in securing 
 justice between contractors and their employees that a sound cur- 
 rency system should be in operation on the Isthmus of Panama. It 
 is important not only that the system should be sound in itself, but 
 that it should give sufficient assurance of stability and permanence 
 to permit contractors to calculate with certainty the cost of labor and 
 materials on the Isthmus. Whether such a system exists or not will 
 have much to do with determining the terms on which contractors 
 will be willing to enter into engagements with the Canal Commission. 
 
 In order to secure stability it is desirable that the new system 
 should repose upon the gold standard and that any coins or notes 
 issued under such a system should represent fixed values in gold. 
 This result may be attained in a variety of ways, as wUl be set forth 
 hereafter. The contracts made by the Canal Commission will un- 
 doubtedly be made chiefly with citizens of the United States and in 
 United States money. In determining, however, what charges to 
 m^ke to the Government for any given work to be performed on the 
 Isthmus, contractors will necessarily be compelled to consider the 
 state of the currency in which they must pay for labor. If they are 
 left in uncertainty as to the currency with which they will be com- 
 pelled to pay wages and buy materials, they will naturally insure 
 themselves against loss by basing their estimates on the highest pos- 
 sible labor cost under any probable currency system. If after so 
 doing they are able to pay wages in a depreciated or fluctuating cur- 
 rency, they will make the entire profit of the variations in such cur- 
 rency at the expense of the Government. 
 
 Aside from the loss to the Government which will grow out of 
 uncertainty, the final employment of a fluctuating or depreciated cur- 
 rency on tte Isthmus will inflict more or less injustice upon laborers 
 and clerical employees, and the dissatisfaction felt by them may, by 
 driving away the most competent men after a short stay, delay the 
 work and deteriorate the character of the service, and thus react upon 
 the Canal Commission itself. 
 
 It is very desirable, therefore, in order to avoid loss to the Govern- 
 ment by paying contractors a premiimi for the risks of uncertainty 
 in the monetary system and to secure economy and efficiency in con- 
 struction that action should be taken at an early date to determine 
 upon a sound system and to see that it is put in operation. 
 
 Another important object to be desired in the currency system in 
 use by the Panama Canal Commision on the Isthmus is uniformity of 
 values and units, if not of names, between the currency used in the 
 Canal Zone and that used in Colon, Panama, and other parts of the 
 Republic of Panama. This consideration is not sufficiently impor- 
 tant to justify the use by the Commisison in the Zone of a defective 
 currency, if such a defective currency is in use in Panama. If agree- 
 ment could be reached, however, upon a sound system, it would con- 
 duce greatly to the convenience of laborers, clerks, and others con- 
 nected with the construction of the canal to receive for their services 
 a form of currency which was current in Colon and Panama and 
 
316 GOLD STANDARD IK INTERNATIONAL TRADE. 
 
 which they could use there without paying for its exchange or sub- 
 mitting to a discount. 
 
 There are three chief policies among which a choice might be made 
 in making disbursements on the Isthmus. There are other possible 
 variations of these three policies, but consideration of these will be 
 sufficient to illustrate the principles involved. These three policies 
 are: 
 
 1. The adoption of United States currency as the sole legal tender 
 in the Canal Zone and in Panama. 
 
 2. The adoption by the Government of Panama of a currency con- 
 forming in all respects to that of the United States, except its issue 
 with special devices setting forth the sovereignty of the Government 
 of Panama. 
 
 3. The adoption of a distinctive currency, intended to conform to 
 the existing scale of wages and customs of the people of the Canal 
 Zone. 
 
 I. The first suggestion — the adoption of United States currency 
 as the sole legal tender in the transactions of the Commission and in 
 the territory under its jurisdiction — would undoubtedly be acceptable 
 to the American clerical force and to those dealing directly with the 
 United States. It has the great merit also of conforming to the 
 grand conception of the present Secretary of the Treasury, that the 
 American dollar should everywhere be made the money of trade, 
 carrying with it the prestige and power of the American name. Un- 
 less the United States money were also made sole legal tender in the 
 Republic of Panama, however, the difficulties would be felt of lack 
 of uniformity between the money used in the Canal Zone and that 
 used in Colon and Panama, where much of it would undoubtedly 
 be expended by those who received it, or exchanged for money which 
 they could use. If the Government of Panama should adopt Ameri- 
 can currency as its national money, this difficulty would be overcome. 
 
 It would be necessary under this policy for the Panama Canal 
 Commisison to transport to the Isthmus a sufficient quantity of 
 United States currency to meet the demand for a circulating medium. 
 It is probable that a much larger proportion of the money thus 
 brought to the country would require to be in subsidiary silver than 
 would be the case for an equal population in the United States. Sani- 
 tary reasons would argue against the general use of paper money, 
 in spite of the vogue which it has had in the Republic of Colombia, 
 outside Panama, in recent years. If, as reported, the average wages 
 of labor in Panama are now 40 cents per day in depreciated silver, 
 representing less than 20 cents in American gold coin, it is obvious 
 that the transactions carried on by those who receive these wages 
 must be chiefly in very small amounts. Where a laborer in the 
 United States might find use for a $5 gold piece, representing the 
 wages of one or two days, it would be less suitable to the requirements 
 of a laborer whose daily wages were 20 cents, because for him a $5 
 gold piece would represent the earnings of twenty-five days of coil- 
 tinuous labor, or practically a full calendar month. If American 
 money were used, the silver pieces of 10 cents, 25 cents, and 50 cents 
 would probably be in much greater demand than notes for $1 or gold 
 coins of $5 or higher amounts. It is a question whether the present 
 stock of subsidiary silver in the United States would not be unduly 
 depleted by the shipment of a large amount to the Canal Zone. There 
 
GOLD STANDAKD IN INTERNATIONAL TRADE. 317 
 
 might then arise a demand for additional silver coinage by the United 
 States, which many advocates of a sound currency there seriously 
 deplore. 
 
 II. The second method suggested — the adoption of a currency by 
 the Government of Panama based upon the same unit and standard of 
 value as the currency of the United States — would create a harmony 
 between the moneys of the Republic and of the Canal Zone which 
 would in many respects be very convenient. It would involve, how- 
 ever, the issue by the Government of Panama of a considerable 
 quantity of subsidiary silver to meet the demand for the payment of 
 wages and other small transactions, unless notes for small amounts 
 were issued. Either policy — the issue of large quantities of sub- 
 sidiary silver or of small paper — would involve some risks to the 
 stability of the currency unless carefully supervised. The coinage of 
 silver pieces at the ratio of 16 to 1 when the bullion value of the pieces 
 was less than half their face value would involve some danger of 
 counterfeiting, s More serious, perhaps, would be the danger of over- 
 issues and of the lack of faith in some quarters that the silver would 
 be maintained by the Government of Panama at par with gold. 
 
 It would probably be advisable to suggest to the Government of 
 Panama, if such a measure is to be carried out, as reported in recent 
 dispatches from there, that the silver coin issued should be protected 
 by setting aside a gold reserve. This reserve might be derived from the 
 payment about to be made by the Government of the United States to 
 the Government of Panama. It is difficult to estimate the amount of 
 currency which would be readily absorbed by the requirements of 
 labor and business during the construction of the canal. Putting it, 
 however, at the rather liberal figure of $10 per capita in United States 
 currency for a population of 250,000, the amount required would be 
 $2,500,000. If this were all issued in subsidiary silver, it should be 
 protected by a reserve of not less than 25 per cent in gold, and perhaps 
 more safely by a reserve of 35 to 40 per cent. The Government of 
 Panama would indeed be able to set aside such a reserve without 
 drawing upon the payment for the canal privilege by simply appro- 
 priating for the purpose the seigniorage upon the coinage issued. If, 
 for instance,, silver were purchased at 60 cents an ounce, and an 
 ounce coined into $1.25 in money, the gold cost of the silver required 
 for the coinage of $2,500,000 would be only $1,200,000, and there 
 would be a profit to the Government of $1,300,000. It would be 
 highly desirable that the whole or nearly the whole of this profit 
 should be set aside as a guaranty fund for maintaining the parity of 
 the silver money thus issued; and in order to afford a conspicuous 
 guaranty to contractors and others interested that this fund was to be 
 unimpaired, it would be advisable to deposit it in some bank of high 
 reputation in New York or elsewhere outside the Republic of Panama. 
 
 III. The third suggestion — ^the adoption of a distinctive currency 
 for the Canal Zone — is important in case the adoption of the American 
 unit or standard should result in difficulties in regard to wages and 
 prices There is some reason to fear that if the American gold dollar 
 were introduced where a lower unit had prevailed, whether this were 
 done by the action of the United States in the introduction of their 
 own currency, or by the Republic of Panama, there would be a dis- 
 position on the part of shopkeepers and trades to advance the 
 prices of the articles in which they dealt by putting into dollars prices 
 
318 GOLD STANDARD IN INTBENATIONAL TEADE. 
 
 ft 
 
 previously expressed in depreciated silver pesos. They might make 
 a nominal reduction by putting, for illustration, a price of 75 cents on 
 an article formerly selling for a peso, but as the silver peso is now 
 worth in gold less than half of the dollar, this would be in fact an 
 increase of at least 50 per cent in the gold price of thfe article. The 
 matter of retail prices would indeed adjust itself in time, and while it 
 would cause more or less irritation and misunderstandings, need not 
 perhaps concern seriously the Panama Canal Commission, if its 
 effect went no further. The point at which the matter would deserve 
 their serious consideration would be, whether such a policy would 
 have a sufficient influence upon prices to increase the cost of living 
 and thereby cause a demand for higher wages than those now paid in 
 silver. If, for illustration, wages Avere 40 cents per day in silver, and 
 through an advance in the cost of living it became necessary to put 
 them at 30 cents in gold, this would be m fact an increase of 50 ]3er 
 cent in gold wages. The increase would indeed be somewhat more 
 than 50 per cent, as silver bullion is now less than half its value at the 
 old parity of 16 to 1, but the assumption that it has fallen one-half in 
 gold value is sufficiently near the fact to afford a convenient means of 
 illustration. 
 
 If wages should be advanced 50 per cent as the result of an error in 
 the selection of a form of currency, it woTild mean a very serious 
 enhancement in the cost of the construction of the canal. It is prob- 
 able that an enhancement in the wages of labor will occur in any 
 event, owing to the sudden demand for labor. If this rise in wages 
 should offset the rise in retail prices caused by a change in the cur- 
 rency system, the net result would not be serious ; but if, on the other 
 hand, an advance in prices were caused by the sudden increase in 
 demand for the products required by laborers, and a further increase 
 in prices were superimposed upon this as the result of a change in the 
 currency unit, the calculations based upon present prices for goods or 
 for labor Avould be radically upset. These considerations, and all the 
 uncertainties associated with them, will undoubtedly be weighed by 
 careful contractors in submitting bids and entering upon contracts 
 with the Canal Commission, and any step taken in advance to remove 
 uncertainties will tend toward economy in the making of such con- 
 tracts. 
 
 There is always the danger in introducing a new currency system 
 that the more ignorant part of the population will distrust the new 
 money and will refuse to receive it at its real gold value. This diffi- 
 culty might be materially increased in the case of the people of- the 
 Canal Zone, by attempting to introduce a coin issued at the coinage 
 ratio of 16 to 1 between gold and silver, and having, therefore, a value 
 more than twice as great as the coins of the same size now in circula- 
 tion in depreciated silver. Whether the persons receiving such coins 
 would at once appreciate their real gold value, or would distrust pieces 
 purporting to have a gold value more than twice as high as pieces of 
 the same size in their old monetary system, is a question aboilt which 
 there is a difference of opinion and conflict of historical evidence. In 
 some cases a change of this character has been readily accepted, 
 although the cases are rare Avhere so radical a difference between the 
 face value of two coins of the same weight has been presented to a 
 backward people. In other cases there has been the most stubborn 
 
GOLD STAKDAKD IN INTERNATIONAL TRADE. 319 
 
 conservatism in accepting coins witli new devices, even though of the 
 same weight and value as the old. 
 
 In China the attenijjt at one time to introduce a new mintage of 
 Mexican dollars largely failed through the fact that the average 
 Chinaman was accustomed to the dollar with the old device of the ris- 
 ing sun and would accept no other. In portions of Africa the natives 
 were so long wedded to a form of dollar coined in the time of Maria 
 Theresa, that for many years after the death of this Empress coins 
 of-the same device were struck oil' for their special use. In these cases, 
 moreover, there was not the dift'erence in the value between the old 
 coins and the new of the same size which would arise in Panama if the 
 attempt were to be now made to substitute for the depreciated silver 
 of the Kepublic of Colombia the higher-rated pieces of the Republic of 
 the United States. 
 
 Whether the one system or the other referred to in this memoran- 
 dum would be most acceptable to the people of the Republic of Pan- 
 ama and would result in the greatest economy to the Panama Canal 
 Commission in making contracts depends to a large extent upon the 
 temper of the community, the willingness of the Government of 
 Panama to adopt a monetary system with sufficient guarantees of 
 soundness to afford absolute assurance of its permanence to those who 
 will do business there during the period of the construction of the 
 canal, and to the influence which the United States will be able to 
 exercise through their officials, open the maintenance of a sound and 
 strong monetary policy by the Republic of Panama. If the difficul- 
 ties of transition to the unit of the United States currency have 
 already been surmounted, and wages and prices are becoming adapted 
 to this unit, then the solution of making contracts and paying wages 
 in American currency may prove to be at once the most simple, secure, 
 and satisfactory. 
 
 If the Government of Panama is disposed to take this question up 
 with full appreciation of the importance of introducing a stable cur- 
 rency throughout the Republic and giving adequate guaranties of its 
 maintenance, it might be advisable for the Government of the Repub- 
 lic to appoint a commission of one or more persons familiar with the 
 subject to come to the United States and confer with the officials of 
 the Treasury and members of the Commission on International Ex- 
 change in regard to the adoption of such a system. Such a commis- 
 sion would necessarily be possessed of exact data regarding the pres- 
 ent monetary system, and would have opinions of value in regard to 
 the facility with which a change of unit and of standard could be 
 introduced among the people of the Republic and of the Canal Zone. 
 
 New York, March 26, 1904. 
 
 3. PRESS REPORTS OF NEGOTIATIONS. 
 
 Panama Currency Pkc>blem — Secretary Hay to Urge Adoption of United 
 
 States Gold Standard. 
 
 [Prom the Journal of Commerce and Commercial Bulletin, New York, Monday, June 6, 1904.] 
 
 Washington, June Jf. 
 Admiral Walker, president of the Panama Canal Commission, had a long con- 
 ference to-day at the War Department with Secretary Taft, and Mr. Taft after- 
 wards talked with Secretary Hay about the unsatisfactory financial conditions 
 on the Isthmus. To protect the vast army of laborers who will dig the canal 
 
320 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 and live indiscriminately in tbe Canal Zone and in Panama from the evil effects 
 of a fluctuating and depreciated currency, the United States Government regards 
 it as essential that there shall be a sound money medium employed in Panama, 
 and that it shall correspond as closely as possible with the United States stand- 
 ards. The adoption by the Panamans of a gold standard, therefore, is regarded 
 as necessary. 
 
 The Panama Government has been wrestling with the problem for months, 
 and to-day a cable dispatch was received from Mr. Lee, the United States charge 
 at Panama, stating that the gold-standard bill had been defeated by a deadlock 
 in the legislature. He added that a call had been issued for a national conven- 
 tion, which it is expected will consider and finally pass upon the currency ques- 
 tion, with which, it is now evident, the Panama executive branch, even aided by 
 the legislature, is unable to deal. 
 
 The whole subject was discussed by the Secretary and Admiral Walker in the 
 light of this last action by the Panama autliorities, and Secretary Hay promised 
 that the State Department, through its proper agencies, would undertake to 
 influence the Panamans to adopt a sound currency system. John Barrett, the 
 minister to Panama, will hasten, accordingly, to the Isthmus to aid in solving 
 this problem. 
 
 Panama AIust Keep Reserve — Gold Basis fob Isthmian Cuekency Insisted 
 Upon — Taft Tells the Republic's Commissioners That the Stability of 
 THE Silver Coins Which Will Be Circulated in the Canal Zone Must Be 
 Effectively Maintained. 
 
 [From The Sun, Sunday, June 12, 1904.] 
 
 Washington, June 11. 
 
 Another meeting was held to-day in Secretary Taft's office by the 
 representatives of the United States and the Panama governments, 
 who are endeavoring to reach an agreement on a plan for an inter- 
 changeable monetary system between the Republic of Panama and the 
 Canal Zone. 
 
 Those present were Secretary Taft; Seiiores Arias and Morales, 
 the special commissioners to Panama; John Barrett, United States 
 minister to Panama ; Rear-Admiral Walker, chairman of the Panama 
 Canal Commission; Colonel EdVards and Judge Magoon, of the 
 Bureau of Insular Affairs; Charles A. Conant, treasurer of the 
 Morton Trust Company of New York, and Senor Arosemena, charge 
 d'affaires of Panama in Washington. 
 
 Secretary Taft again emphasized the necessity of the adoption of 
 a stable currency system for the Canal Zone and the Republic, hold- 
 ing that whatever system was adopted must be satisfactory to the 
 United States. In answer to his remarks the special commissioners 
 from Panama produced a bill providing a new currency system for 
 the Republic, which failed through a tie vote to pass its third reading 
 in the Panama Congress. 
 
 In general terms the bill undertook to give the Republic a monetary 
 system somewhat similar to that of the United States. It recognizeii 
 the American gold dollar as legal tender and as standard of values, 
 but provided also for the issue of a large amount of subsidiary silver 
 at the ratio of 32 to 1, the same ratio established in the Philippines. 
 
 Secretay Taft made it clear that no currency system, providing, 
 as was necessary, for a very large use of silver in the Republic and 
 the Canal Zone would be satisfactory to the United States, unless 
 there were an ample gold reserve in the Panama treasury to preserve 
 the parity between gold and silver. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 321 
 
 In answer to questions whether this gold reserve could be furnished 
 by the Panama Government, the commissioners of the Republic 
 explained that $3,000,000 of the bonus paid by the United States to 
 Panama was to be used for running expenses, $4,000,000 for the con- 
 struction of important public works, and the remaining $3,000,000 
 was to be deposited where it would draw interest. 
 
 The commissioners were asked how much subsidiary silver was 
 now in circulation in the Republic, but they were unable to tell, or 
 to say what amount of gold reserve would be necessary to preserve 
 its parity. This silver was coined by the Columbian Government, 
 and under the provisions of the act which failed of passage in the 
 Panama Congress was to be redeemed and recoined, and no more 
 Colombian currency permitted to circulate in Panama. 
 
 Mr. Taft and the other American representatives expressed the 
 hope that Panama would be able and willing to provide a sufficient 
 gold reserve, and showed the Republic's commissioners that the 
 Administration was determined that some such arrangement to insure 
 the stability of silver coinage should be adopted before it would con- 
 sent to allow the circulation of Panama money in the Canal Zone. 
 
 The Republic's commissioners were unable to give any assurance 
 that their Government would provide a gold reserve, but they prom- 
 ised to endeavor to ascertain the wishes and intentions of the Isth- 
 mian authorities in the matter. 
 
 The conferees adjourned until next Saturday in order to give 
 them an opportunity of doing so. The Panama commissioners will 
 also inform the American representatives of the amount of Colombian 
 subsidiary silver in circulation in Panama. 
 
 It is probable that at the meeting a week hence Secretary Taft and 
 his associates will submit a proposition that the Panama Government 
 provide a gold reserve sufficient to insure the stability of the Colom- 
 bian silver money now in circulation on the Isthmus, and make 
 additions to the reserve as rapidly as new coins are issued. 
 
 Plans for Panama Currency Concluded — Will be Submitted to Legislature 
 FOR Ratification — War Department Makes Official Statement — United 
 States Gold Currency to be Legal Tender in Republic op Panama^ 
 Additional Details of Proposed System 
 
 [From the Journal of Commerce and Commercial Bulletin, New York, Tuesday, June 21, 
 
 Washington, June W. 
 
 Secretary Taft and the commissioners for Panama to-day con- 
 cluded arrangements for a currency system for Panama which is to 
 be submitted to the Panama legislature for ratification. The plan 
 already has been outlined in these dispatches. It provides generally 
 for a sufficiently reserved bimetallic system. ^ ,^^ ^ 
 
 The following official statement was given at the War Department 
 
 °" \n agreement was reached to-day at the War Department between 
 Secretary Taft and the Panama commissioners, by which the gold 
 currency of the United States shall be the legal tender in the Republic 
 
 S. Doc. 12S, 58-3 21 
 
322 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 of Panama, and the money of Panama shall be legal tender in the 
 Canal Zone. 
 
 This agreement will be transmitted by the Panama commissioners 
 to their Government, and if adopted by the constitutional convention 
 will settle the question of the currency to be used in the construction 
 of the canal. The substance of the agreement is that a gold dollar of 
 the same value as that of the United States shall be the standard of 
 value in Panama, and that the gold currency of the United States 
 shall be legal- tender there, Avith provision for the issue of fractional 
 silver currency of the Republic of Panama. It is provided that such 
 silver currency shall be coined to an amount in nominal value of 
 $1,500,000 in gold ; the silver to be obtained by the recoinage of Colom- 
 bian coins now in circulation on the Isthmus, and that at the option of 
 the Canal Commission, if the construction of the canal shall show 
 such coinage to be necessary, there shall be an additional coinage of 
 fractional silver to the amount of $1,500,000. The parity of all the 
 silver coined shall be maintained by the deposit in some bank in the 
 United States of 15 per cent of the nominal value of such fractional 
 currency and the net seigniorage on the amount coined at the request 
 of the Canal Commission. In order to prevent the manipulation of 
 exchange at the expense of the public and canal works, the Republic 
 and the Commission agree to cooperate by the sale of drafts at reason- 
 able rates to keep down the exchange on New York and thus prevent 
 a disturbance of the parity." 
 
 4. PROJECT OP THE AMERICAN COMMISSION. 
 
 Suggestions Regarding the System of Currency to be Used in the Panama 
 
 Canal Zone. 
 
 [Submitted by Hugh H. Hanna and Charles A. Conant, of the Commission on Interna- 
 tional Exchani;e ] 
 
 The essential conditions of a sound currency in the Panama Canal 
 Zone are similar to those in the United States — stability of value in 
 the standard, certainty that this stability will be maintained, and con- 
 formity to local needs. A fourth requirement may be added in regard 
 to the Canal Zone — that the currency there used should be the same, if 
 practicable, as that used in the chief cities of the Panama Republic, 
 Panama and Colon. 
 
 Stability of the currency system in its relation to gold is important 
 for several reasons. One is that it may be possible for contracts 
 to be made by the Panama Canal Commission without paying a 
 premium to contractors to cover the risk of fluctuations in the money 
 employed in the Isthmus. Another is, that a stable standard will 
 tend to prevent the injustice to laborers employed on the canal and 
 to clerks in the service of contractors and the Canal Commission 
 which would result from paying them in a money which was liable to 
 fluctuate in gold value. 
 
 The contracts made by the Canal Commission will undoubtedly be 
 made chiefly 'with citizens of the United States and in United States 
 money. In determining, however, what charges to make to the Gov- 
 ernment for any given work to be performed, contractors will neces- 
 sarily be compelled to consider the state of the currency in which they 
 must buy materials and pay for labor. If they are left in uncertainty 
 on this point, they will naturally insure themselves against loss by 
 
GOLD STATSTDARD IN INTERNATIONAL TRADE. 3'23 
 
 basing their estimates on the highest possible labor cost under any 
 probable currency system. If, after so doing, they are able to pay 
 wages in a Qepreciated or fluctuating currency, they will make the 
 entire profit of the variations in such currency at the expense of the 
 Government. 
 
 Aside from the loss to the Government which will grow out of un- 
 certainty, the final employment of a fluctuating or depreciated cur- 
 I'ency on the Isthmus will inflict more or less injustice upon laborers 
 and clerical employees, and the dissatisfaction felt by them may, by 
 driving away the most competent men after a short stay, delay the 
 work and deteriorate the character of the service and thus react upon 
 the Canal Commission itself. It is very desirable, therefore, in order 
 to avoid loss to the Government and to secure economy and efficiency 
 in construction, that action should be taken at an early date to deter- 
 mine, izpon a sound system and to see that it is put in operation. 
 
 CHARACTER OF THE ECONOMIC PROBLEM. 
 
 Before proceeding to discuss details of a plan for maintaining a 
 suitable currency in the Canal Zone, it may be well to point out the 
 character of the economic problem to be dealt with. This problem is 
 primarily the transfer of capital from the United States to Panama. 
 Assuming, for the sake of illustration, that the cost of the canal will 
 be $100,000,000, this amount of capital has to be transferred in some 
 form from the United States to the Canal Zone. The one deduction 
 to be made from the amount to be thus transferred would be the 
 profits of contractors. Contractors who are American citizens will 
 proba,bly desire payment largely in the United States and in United 
 States currency. The proceeds of what they actually expend, how- 
 ever (excepting profits of persons from Avhom they buy materials and 
 machinery in the United States), will be transferred to Panama. 
 This transfer will be made in three forms — machinery, materials of 
 construction, and food and supplies for laborers. 
 
 While the contractors themselves may not directly transfer food 
 and supplies for laborers, but will pay the latter in currency in the 
 Canal Zone, some persons in the United States and in the countries 
 adjacent to Panama will send food, clothing, and other necessaries to 
 the Isthmus and will receive their compensation outside of Panama 
 in currency or in various forms of capital acceptable to themselves. 
 
 The problem in relation to the currency is not a problem of trans- 
 ferring to the Isthmus $150,000,000 in currency, or even so much as a 
 tenth part of that sum. The currency required on the Isthmus will 
 be only such as is necessary to meet the demands of a single week or 
 month, and will be constantly passed from hand to hand to facilitate 
 the movements of other forms of capital. If, for illustration, 50,000 
 laborers were paid 10 pesos per week, the amount required for the 
 weekly pay roll would be 500,000 pesos. A large part of the amount 
 so disbursed would flow through the hands of local shopkeepers into 
 the banks, and would afford a means to the bankers for buying 
 exchange on New York. If there were no hoarding by anyone, so that 
 the entire amount disbursed at the end of one week found its way back 
 into the banks before the end of the following week, then the amount 
 of currency required for paying wages throughout the period of the 
 canal construction would be the amount set forth — 500,000 pesos. 
 
324 aOLD STANDARD IN INTERNATIONAL TRADE. 
 
 In view of the fact, however, that in addition to the existing need 
 for currency in Panama, business generally will be increased in vol- 
 ume, that money will be held by banks, shopkeepers, aild boarding- 
 house keepers, and that some hoarding will undoubtedly take place 
 among the laborers, the amount of currency required will be several 
 times the amount of the pay roll for a single week. It is probable, 
 however, that if the population of Panama and the Canal Zone, now 
 estimated at 250,000, should be increased by the requirements of the 
 canal work to 350,000, a circulation of 20 pesos per capita, or 7,000,- 
 000 pesos (amounting to $3,500,000 gold) would be found sufficient. 
 It is not necessary now to determine the exact amount, for that would 
 be regulated by a process more or less automatic, which will be here- 
 after set forth. It is only necessary to point out that the amount of 
 currency required would, on the one hand, be only a small fraction of 
 the capital to be invested in the canal, and, on the other hand, would 
 require to be several times the amount needed to pay wages at any 
 given moment. 
 
 THE MONETARY PROBLEM TO BE DEALT WITH. 
 
 What, then, is the nature of the monetary problem to be dealt with 
 in providing an acceptable currency in the Canal Zone ? It might be 
 suggested that if the United States currency were made the sole 
 legal tender it would meet requirements. There are, however, several 
 strong objections to this policy. Several of them may be summed 
 up thus: 
 
 (1) Absence of uniformity between -the money of the Canal Zone 
 and that of Panama. 
 
 (2) Lack of adaptability of United States currency to the present 
 standard of wages and prices on the Isthmus. 
 
 (3) Danger of counterfeiting. 
 
 If agreement can be reached between the Panama Canal Commis- 
 sion and the Republic of Panama by which the money emploj'ed in 
 one jurisdiction can be used interchangeably in the other, it will 
 obviate many difficulties on the part of contractors, laborers, and other 
 employees. Much of the money received by clerks and laborers in 
 the Canal Zone will undoubtedly be expended in Colon and Panama. 
 These persons would be subject to a hardship, which should, if pos- 
 sible, be avoided, if they were compelled to pay exchange upon the 
 money used whenever they passed from one jurisdiction to the other. 
 Even if the use of United States money became so common in Panama 
 and Colon as to make it acceptable to shopkeepers, or the money of 
 Panama became equally common in the Canal Zone, without some 
 agreement for the mutual legal tender and a definite ratio between 
 the two forms of money, there would be discrimination made in 
 receiving one money in the jurisdiction of the other which would 
 probably amount in effect, if not in form, to a charge for exchange. 
 It would be inadvisable, even in order to secure uniformity, for fhe 
 United States to consent to the employment of a depreciated and 
 fluctuating money in the Canal Zone. But if an agreement could be 
 made for the use of a stable and convenient form of currency in both 
 jurisdiction, it would contribute greatly to the convenience and con- 
 tentment of those Qngaged in the canal work. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 325 
 
 A HIGH UNIT ILL ADAPTED TO LOCAL CONDITIONS. 
 
 The most important objection perhaps to the employment cf United 
 States currency as the sole legal tender in the Canal Zone is the fact 
 that it would establish a unit of vahie very different from the present 
 unit, and therefore ill a dapted to local conditions. The adoption of such 
 a high unit as the gold dollar where the silver peso has heretofore been 
 the unit, worth in the neighborhood of 45 cents gold, would require a 
 readjustment of prices and wages which would probably tend to raise 
 prices in gold. As a consequence of the rise of prices the real earn- 
 ings of the laborer would be diminished, or the Panama Canal Com- 
 mission would be compelled to pay much higher gold wages than 
 would otherwise be required. If $75,000,000 would be normally 
 required for wages during the construction of the canal and a change 
 of standard should cause an advance of one-third in gold wages, this 
 item alone would add $26,000,000 to the cost of the canal. This 
 enhanced cost, moreover, would not go chiefly to the laborers who 
 received the enhanced gold wages, but would pass through their hands 
 to shopkeepers, boarding-house keepers, and the conductors of various 
 resorts, who had raised their prices to conform to the new monetary 
 standard. 
 
 Still further difficulty would arise in dealing with the wage ques- 
 tion from the peculiar character of the silver coinage of the United 
 States, issued at the ratio of 16 to 1, when the existing commercial 
 value of silver is nearer the ratio of 36 to 1. The present silver coin- 
 age in use in Panama conforms to the value of silver bullion. A 
 monetary system which recognized in some degree the present value of 
 silver, even though the new coins were given a fixed value in gold, 
 would tend to make the transition easy and unobserved from the exist- 
 ing silver standard to a stable gold standard. Under the system of 
 making United States currency the sole legal tender and medium of 
 exchange, if wages and prices remained substantially unchanged, the 
 laborer and shopkeeper would receive for a given gold value a coin 
 only half the size of that which he now receives. There would prob- 
 ably be difficulty in persuading the more ignorant that an American 
 25-cent piece represented a higher exchange value than a piece of 60 
 centavos, twice as large, of the old coinage. 
 
 Even if the intellectual operation were easy, of grasping the unity 
 of value between two coins so different in size, the difficulty would still 
 remain that the new coins would be much less adapted to small trans- 
 actions than a system which permitted the use of larger coins for the 
 same amount. If the wages of labor were a peso a day, it is obvious 
 that many of the expenditures made by the laborers for food and 
 other articles would represent very small amounts. If for a peso 
 were substituted an American half" dollar, the subdivisions Avould be 
 less easy to deal with than the subdivisions of a peso, issued at about 
 the ratio of 32 to 1, with the half-peso, 20-centavo, 10-centavo, 6- 
 centavo, and 1-centavo pieces as subsidiary minor coins. 
 
 Whatever standard is adopted in Panama and on the Canal Zone, 
 even if American money is made the sole legal tender, a low scale of 
 wages will necessarily require that a large proportion of the currency 
 actually in use shall be subsidiary silver. Where a laborer in the 
 United States might find use for a $5 gold piece, representing 
 the wages of one or two days, it would be less suitable to the require- 
 
326 GOLD STANDARD IN INtEBNATIONAL TRADE. 
 
 ments of a laborer whose daily wages were 50 or 60 cents, because for 
 him a $5 gold piece would represent the earnings of ten days 
 of continuous labor, or nearly half of a calendar month. If American 
 money were used, the silver pieces of 10 cents, 25 cents, and 50 cents 
 would probably be in much greater demand than notes for $1 or gold 
 coins of $5 or higher amounts. 
 
 The danger of counterfeiting would be serious under a system 
 which gave silver coin an exchange value more than 100 per cent in 
 excess of their value as bullion. While this danger could be guarded 
 against more or less effectively by careful police regulations, the possi- 
 bility of a profit of more than 100 per cent would hold out a constant 
 temptation for the fraudulent fabrication of coins in all the surround- 
 ing countries, and even in distant countries, for importation into the 
 Republic of Panama and the Canal Zone. It should be borne in mind 
 also that however strict might be the police supervision in the Canal 
 Zone, it could not be extended to the territory of Panama without the 
 consent of the Government of the Republic. 
 
 PKINCIPLES OF A PLAN EECOMMENDED. 
 
 In view of these considerations it is suggested that the following 
 principles of a currency system be recommended by the Government 
 of the United States to the Republic of Panama for mutual adoption 
 in that Republic and in the Canal Zone: 
 
 (1) That United States gold and paper currency be made legal 
 tender in Panama and in the Canal Zone for debts contracted in such 
 currency or the currency herein provided for, but that the importa- 
 tion of American silver and minor coins be prohibited. 
 
 (2) That a standard silver coin be issued by the Government of 
 Panama in accordance with the bill recently pending in the Congress 
 of Panama providing for a peso of the weight of 25 grains and hav- 
 ing the value of 50 cents in American gold coin, with corresponding 
 subsidiary and minor coins. 
 
 (3) That the silver peso herein provided for be legal tender for 
 debts in Panama without limit in amount, unless some other cur- 
 rency is expressly stipulated in the contract. 
 
 (4) That in order to guarantee the parity of the silver coins 
 issued under this plan, the Government of Panama shall set aside a 
 part of the amount paid by the United States for the canal franchise, 
 not less than $1,500,000, which fund shall be deposited in some 
 banking institution in New York or placed in trust in the hands 
 of a syndicate or committee of bankers, with the approval of the 
 Secretary of War of the United States. 
 
 (5) That arrangements shall be made between the Government of 
 Panama and the Panama Canal Commission for selling at reasonable 
 rates and on such terms as will tend to maintain the parity of the 
 silver coins of Panama, drafts upon the reserve fund set aside under 
 the previous paragraph and upon the funds of the Panama Canal 
 Commission in the United States. 
 
 (6) That if the previous suggestions are complied with in a man- 
 ner acceptable to the Secretary of War of the United States the 
 Panama Canal Commission may authorize the employment of the 
 currency of Panama in the Canal Zone, and shall employ it in dis- 
 bursements so far as they find it practicable and convenient, reserv- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 32? 
 
 ing the right to limit the amount for which it may be made legal 
 tender. ^ 
 
 (7) That the Government of Panama shall consult with the Pan- 
 ama Canal Commission in regard to the amount of coinage required 
 in the Canal Zone, with a view to keeping the amount within the 
 requirements of actual transactions. 
 
 (8) That the coinage to be issued under this project shall be exe- 
 cuted for the Government of Panama at the mints of the United 
 States. 
 
 OPERATION OP THE PLAN PBOPOSED. 
 
 This plan corresponds in principle with measures which are now 
 before the Government of Panama.- It is a plan which makes it 
 possible for the Kepublic of Panama to adopt a sound and stable 
 currency based upon the gold standard, but with a subsidiary coinage 
 adapted to local conditions. It places upon the Republic the ulti- 
 mate responsibility for establishing and maintaining the system, but 
 leaves to the Panama Canal Commission the means of escaping any 
 of the evils which might result from failure on the part of the 
 Government of Panama to carry out fully the measures for maintain- 
 ing parity of its currency. 
 
 The plan contemplates that the Republic of Panama shall adopt 
 the gold standard on the model of the United States, either by adopt- 
 ing a gold dollar of its own of the same size and fineness as ours or 
 by making that of the United States legal tender throughout the 
 Republic. In order to avoid confusion between the silver coins of 
 the Republic and of the United States it is suggested that the impor- 
 tation of American silver coin be prohibited, and that those of the 
 Republic of Panama be employed in all disbursements of silver 
 required by the Panama Canal Commission. In case, however, there 
 is any failure on the part of the Government of Panama to maintain 
 the stability of its currency it will then be in the power of the Pan- 
 ama Canal Commission to limit the amount for which the silver 
 coins of Panama shall be legal tender within the Canal Zone. Such 
 a policy might be pursued tentatively if no marked depreciation 
 appeared in the coins of Panama, while if such depreciation became 
 serious it would then be in the power of the Panama Canal Commis- 
 sion to introduce American currency freely for all purposes. 
 
 As all contracts would probably be made in American currency, 
 with the understanding that in small payments the Panama peso 
 was to be equal to one-half of the American dollar, no disturbance 
 of legal obligations would occur if it became necessary to abandon the 
 use of the currency of Panama. If such a contingency should arise, 
 the government of the Canal Zone would be able to consider the ques- 
 tion of issuing its own subsidiary silver upon the same basis as that 
 here recommended for the Republic of Panama. It is probable, 
 however, that by proper consultations between the Canal Commis- 
 sioners and the Government of Panama measures would be taken by 
 that Republic to promote the interests of its own citizens and the 
 commerce of its chief cities by the adoption of a plan acceptable to 
 the United States and by resolute measures to maintain the value of 
 its currency. 
 
 It is important, if the Government of Panama is to give the assur- 
 ance of stability to its currency system, that the quantity of silver 
 
328 GOLD STANDARD IN INTEENATIONAL TBADE. 
 
 coins shall be kept strictly limited to the requirements of actual 
 transactions, and that they shall be protected in some way by a gold 
 reserve or a gold credit, which can be used for the redemption of the 
 coins in case the issues become excessive. The ample resources already 
 at the command of the Government of Panama for constituting a 
 reserve would be further increased to some extent by the seigniorage 
 on the silver coins issued. It would probably be prudent to set aside 
 this seigniorage as a part of the guaranty fund for the maintenance 
 of the stability of the currency. It is probable that the demand for 
 currency will be considerably reduced when the construction of the 
 canal is completed, after an interval of perhaps ten years. The neces- 
 sity of providing for this contingency should be kept in mind in con- 
 stituting a guaranty fund. There is no reason why such a fund 
 should not draw interest while held in the custody of the banks in 
 New York, so that its employment would not involve any material 
 expense to the Government of Panama. 
 
 IMPORTANCE OY THE EXCHANGE PROBLEM. 
 
 The subject of exchange with New York will be a dominating 
 factor of the situation on the Isthmus. This would be the case with 
 any form of currency, because the remittances to and from New York 
 by the Government, by contractors for canal work, and by purchasers 
 of supplies for laborers will bear a proportion to the stock of cur- 
 rency which will be unusually large. If the amount expended on the 
 canal is $15,000,000 per year, this would constitute an average 
 expenditure of $1,250,000 per month. There would be no certainty, 
 however, that the amount would be the same in each month. On the 
 contrary, transactions might easily rise to $3,000,000 or $4,000,000 at 
 some one time and exchange operations with New York be equally 
 large. As this would be equal to 8,000,000 pesos, or more than the 
 entire volume of currency on the isthmus (if the latter were put at 
 7,000,000 pesos) , it is obvious that the fluctuations of exchange might 
 be very radical if the matter were not carefully managed. The pay- 
 ment of local currency into the banks, moreover, for such a large 
 amount of exchange might create sudden and radical changes in the 
 volume of currency in circulation. It would be impossible to avert 
 difficulties from this cause, with either a pure gold currency or a local 
 currency, unless a policy of cooperation should be pursued in dealing 
 with the matter. It will probably be necessary for the civil governor 
 of the Canal Zone to consult with the local bankers and the Panama 
 Government with a view to so distributing the Government operations 
 to avert a famine in exchange and excessive rates at one time, with 
 perhaps an excess of offers and a violent contraction of the local cur- 
 rency at other times. 
 
 As serious work upon the canal can not be begun for perhaps a 
 year, pending the completion of surveys, the making of contracts, and 
 the accumulation of machinery, there is sufficient time for the prepa- 
 ration of dies and the issues of a new coinage by the Kepublic of 
 Panama if the plans for it are promptly perfected. It is highly 
 desirable, however, that the policy to be pursued should be fixed at 
 the earliest possible moment, in order that contractors in bidding for 
 work may know the conditions under which they will have to pay for 
 labor and supplies. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 329 
 
 In view of the fact that a committee of representative citizens of 
 Panama is about to visit the United States in regard to the invest- 
 ment of the money received for the canal franchise, it might be well 
 to have this subject thoroughly discussed with this committee, with a 
 view to an amicable arrangement which would enable the Government 
 of Panama to adopt a monetary system of such a character that the 
 currency issued could be employed with prudence and with satisfac- 
 tory results in the Canal Zone. 
 
 May 19, 1904. 
 
 5. AGREEMENT BETWEEN THE SECRETARY OF WAR AND THE COM- 
 MISSION OF PANAMA. 
 
 Washington, June 20, 190^. 
 
 Gentlemen: I understand that there is now pending in the con- 
 vention of the Republic of Panama, exercising legislative power for 
 the Republic, a bill to establish s> monetary standard and to provide 
 for the coinage necessary in the Republic. The Isthmian Canal Com- 
 mission, whose action, by direction of the President of the United 
 States, I am authorized to supervise and direct, is vitally interested in 
 the maintenance in the Canal Zone of a stable currency, based upon 
 the gold standard. 
 
 I conceive it to be of common benefit to the Republic and to the 
 Isthmian Canal Commission that the currency used in the Republic 
 and in the Canal Zone should be the same. I am informed that the 
 convention of the Republic has under consideration a measure which 
 in substance provides : 
 
 I. That the monetary unit of the Republic shall be a gold peso, of 
 the weight of 1 gram, 672 milligrams, and of nine hundred one-thou- 
 sandth fineness, divisible into 100 cents, to be issued as and when con- 
 sidered by the Republic necessary or convenient for its requirements. 
 
 II. That the present gold dollar of the United States of America, 
 and its multiples, shall also be legal tender in the Republic of Panama 
 for its nominal value, as equivalent to 1 gold peso of the Republic. 
 
 III. That fractional silver coins shall be issued by the Republic, of 
 various denominations, all to be of an alloy composed of nine hundred 
 one-thousandth of pure silver and one hundred one-thousandth of cop- 
 per, the declared value of the same bearing a ratio to the same weight 
 of gold of approximately 1 to 32, and that such fractional silver cur- 
 rency shall be legal tender in all transactions. 
 
 IV. That the silver to be coined shall be in fractional denominations 
 of the gold peso or dollar and, except as hereinafter specifically pro- 
 -\dded, shall be coined only in exchange or conversion of the Colom- 
 bian silver peso and fractional currency now legally in circulation m 
 the Republic, and that the amount thus converted shall not exceed 
 $3,000,000 of such Colombian pesos. ■, , ,, 
 
 V That after July 1, 1905, there shall be corned and issued by the 
 Republic such additional amount of fractional silver currency to the 
 limit in the aggregate in value of 1,500,000 pesos or gold dollars, 
 equivalent to 3,000,000 half-dollar pieces, as may be deemed by the 
 Secretary of War of the United States necessary or advisable in the 
 construction of the Isthmian Canal and as'mav be requested by him 
 of the Executive power of the Republic. 
 
330 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 VI. The Republic of Panama, in order to secure the legal parity 
 and equivalence with the gold standard of such fractional silver coins, 
 shall create a reserve fund by deposit with a responsible banking insti- 
 tution in the United States, of a sum in lawful currency of the United 
 States equivalent to 15 per cent of the nominal value of the silver 
 fractional currency issued by the Republic, and as the same is issued, 
 together with an amount equal to the seigniorage on the silver coins 
 issued at the request of the Secretary of War as aforesaid, less all nec- 
 essary costs of coinage and transportation. 
 
 VII. That after conference with the Isthmian Canal Commission, 
 or its representatives or fiscal agents, the Republic of Panama will 
 take such steps with respect to exchange by drafts upon its reserve 
 fund as will tend to prevent the disturbance of the legal parity of the 
 silver fractional currency of the Republic of Panama with the gold 
 standard. 
 
 VIII. That the Republic of Panama shall cause its coinage to be 
 executed at the mints of the United States. 
 
 Assuming that legislation will be enacted substantially to the fore- 
 going effect, I agree, on behalf of the Isthmian Canal Commission and 
 by direction of the President of the United States : 
 
 First. That the Isthmian Canal Commission will make the gold and 
 silver coin of the Republic of Panama legal tender within the Canal 
 Zone by appropriate legislation. 
 
 Second. That it will employ such gold and silver coin of the 
 Republic in its disbursements in the Canal Zone and in the Republic 
 as the Canal Commission shall find practicable and convenient. 
 
 Third. The Isthmian Canal Commission shall cooperate with the 
 Republic of Panama to maintain the parity of the fractional silver 
 coinage of the Republic of Panama with the gold standard by sale of 
 drafts upon its funds at reasonable rates and on terms which will 
 tend to prevent the disturbance of such parity. 
 
 Fourth. It is mutually agreed that nothing herein contained shall 
 be construed to restrict the right of the Republic to reduce its silver 
 currency after the opening of the canal to commerce to such an 
 amount as it may deem advisable, and thereupon to reduce and with- 
 draw, pro rata, the reserve fund corresponding to the reduction of the 
 amount of silver coinage outstanding. 
 
 Will you please confirm your accord with the foregoing? 
 Very respectfully, 
 
 Wm. TI. Taft, 
 
 Secretary of War. 
 
 Messrs. Ricaedo Arias and Eusebio A. Morales, 
 
 Special Fiscal Commissioners of the Republic of Panama. 
 
 Special Fiscal Commission of Republic op Panama, 
 
 iVeiv York, June 20, 190^. 
 Sir: Pursuant to the powers conferred upon us by the general 
 directions of the Government of the Republic of Panama and sub- 
 ject to the enactment by the Republic of the necessary legislation, we 
 
ftOLD STANDARD IN INTERNATIONAL TRADE. 831 
 
 hereby declare our complete accord with the convention embodied in 
 your communication of this date and agree to the same as therein set 
 forth. 
 
 We are, dear sir, very truly, yours, 
 
 RiCAEDO Arias, 
 EusEBio A. Morales, 
 Special Fiscal Commissioners of the Repuhlic of Panama. 
 Hon. Wm. H. Taft, 
 
 Secretary of War, Washington, D. C. 
 
 6. ACT OF PANAMA IN PURSUANCE OF AGREEMENT. 
 
 Law No. 84—1904 (of June 28) on Cuekency. 
 
 The National Convention of Panama decrees : 
 
 Article 1. The monetary unit of the Republic shall be the balboa; 
 that is, a gold coin of 1 gram six hundred and seventy-two milli- 
 grams (1.672) in weight and of nine hundred thousandths (.0900) 
 fine, divisible into one hundred hundredths (100/100). 
 
 Paragraph. The present gold dollar of the United States of Amer- 
 ica and its multiples shall be legal tender in the Republic at their 
 nominal value equivalent to a balboa. 
 
 Art. 2. "V^'Tien the executive power provides for the coinage of 
 national coins of gold, this coinage may be made in pieces of one, 
 of two and one-half, of five, of ten, or of twenty balboas, choosing the 
 one or more of greatest circulation in trade. 
 
 Art. 3. Silver coins shall have an alloy of nine hundred thou- 
 sandths of pure silver and one hundred thousandths of copper. 
 
 Art. 4. The nomenclature, weight, diameter, and equivalent value 
 of the silver coins shall be the following T 
 
 The peso. — A coin which shall weigh twenty-five (25) grams, 
 which shall have a diameter of thirty-six millimeters, and which 
 shall be equivalent to fifty one-hundredths (50/100) of a balboa. 
 
 The half peso. — A coin which shall weigh twelve and one-half 
 grams (12^ gr.), which shall have a diameter of thirty (30) milli- 
 meters, and which shall be equivalent to twenty-five one-hundredths 
 (25/100) of a balboa. 
 
 The one-fifth peso. — A coin which shall weigh five grams (5 gr.), 
 which shall have a diameter of twenty-four millimeters, and which 
 shall be equivalent to ten one-hundredths of a balboa. 
 
 The one-tenth peso. — A coin which shall weigh two and one-half 
 (2|) grams, which shall have a diameter of eighteen (18) milli- 
 meters, and shall be equivalent to five one-hundredths (5/100) of a 
 
 balboa. . . ' . 
 
 The one-twentieth peso. — A coin which shall weigh one and one- 
 half grains (1^ gr-)) which shall have a diameter of ten (10) milli- 
 meters, and which shall be equivalent to two and one-half one-hun- 
 dredths of a balboa. 
 
 Parao-raph. Consequently, two pesos of silver shall be equivalent to 
 one balboa, which is the monetary unit. The other fractions of a peso 
 shall bear the same equivalent fractional proportion to the said unit. 
 
 Aet. 5. National silver coins shall be legal tender at their nominal 
 value in all transactions. 
 
332 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Art. 6. Colombian silver coins of a standard not inferior to 835 
 thousandths fine and 666 thousandths of the same alloy, which are 
 now in circulation in the Eepublic, shall be exchanged for the new 
 national coins at the rate of $212.50 for each one hundred (100) bal- 
 boas or their equivalent in Panamanian silver coin. But the- con- 
 version of Colombian silver coin of the standard of 666 thousandths 
 shall be limited to pieces of five centavos and to the amount of 20,000 
 pesos only, provided by the first clause of contract No. 36, entered 
 into by the government of the old Department of Panama, in the name 
 of the National Government of the Republic of Colombia, with 
 Messrs. Isaac Brandon & Bros., merchants in this city, for the coining 
 of Colombian silver money, which contract was approved by Gen. 
 Victor M. Salazar, civil and military chief of the then Department of 
 Panama, under date of October 10, 1902, and was published in No. 
 1399 of the Gazette of Panama of October 9 of the same year. 
 
 Paragraph. Obligations contracted before this law goes into effect 
 payable tacitly or expressly in Colombian silver coin of a standard not 
 inferior to (0.0835) eight hundred and thirty-five one- thousandths 
 shall be redeemable in the new national coin at the rate stated in this 
 article. 
 
 Art. 7. The Colombian silver coins of which this law speaks shall 
 continue to be legal tender until the date on which the redemption 
 of them begins to be made, and from that day forth they shall have 
 the value which is herein assign,ed them for redemption. 
 
 The executive power shall begin the conversion of the coin men- 
 tioned in article 6 on the first day of September next. For the pur- 
 pose he shall designate the public offices which, in the capital and 
 provinces of the Republic, are to make the exchange, and shall give 
 notice thereof thirty days before the day fixed. The conversion 
 shall take effct within sixty days following the date mentioned, after 
 which Colombian coin shall cease to be legal tender in the Republic. 
 
 Art. 8. For the purpose of carying out the exchange of the silver 
 money now in circulation in the Republic, the executive power is 
 authorized to have coined and issued not more than the amount of 
 three million (3,000,000) pesos, Panamanian money, as this law pro- 
 vides. 
 
 Art. 9. To guarantee parity of the silver legal-tender money with 
 that of gold the executive power shall deposit with a responsible 
 banking institution of the United States a sum in gold equal to fif- 
 teen per centum of the issue. 
 
 Art. 10. The executive power shall give account by monthly state- 
 ments, published in the Official Gazette, of the amounts which he 
 receives of Colombian and silver coin for the purpose of conversion ; 
 and when this is concluded he is authorized to sell the money which 
 is collected in any of the foreign mercantile markets at the rate 
 which is best for the interests of the treasury. The proceeds of this 
 sale shall be paid into the general treasury of the Republic. 
 
 Art. 11. The stamp of the Panama coins to which this law refers 
 shall be the following r 
 
 For the obverse the bust of Vasco Nunes de Balboa, discoverer of 
 the Panama coast on the Pacific Ocean, in profile, looking to the right, 
 with a head-band on which are engraved the words " Dios," " Ley," 
 " Libertad." Around the head at the edge of the coin the phrase 
 
GOLD STANBARB IN INTERNATIONAL TRABE. 333 
 
 " Republica de Panama ;" on the base of the bust the word " Balboa " 
 in capital letters, but of smaller size than the other inscriptions. 
 
 On the lower part of the coin, below the bust, the year of coining 
 in figures. 
 
 Upon the reverse the coat of arms of the Republic of Panama in 
 the center. 
 
 Around the upper part the value of the coin in words. 
 
 Around the lower part, to the right, the weight of the coin in 
 grams ; on the left the proportion of alloy in thousandths fine. 
 
 Art. 12. The introduction into the territory of the Republic of any 
 sort of silver coin except that which the executive power imports for 
 the fulfillment of this law is absolutely prohibited. 
 
 Art. 13. The executive power is authorized to enter into a mone- 
 tary convention with the Government of the United States of North 
 America, in which the present law and the convention signed at the 
 conference in Washington on the 18th day of the present month of 
 June, between the commissioners of that Government and that of the 
 Republic of Panama, shall be taken as a basis. 
 
 Art. 14. The expense which the execution of this law occasions 
 shall be considered included in the budget of expenses. 
 
 Given at Panama the 27th day of June, one thousand nine hundred 
 and four. 
 
 The President, 
 
 (Signed) Gerardo Ortega. 
 
 The Secretary, 
 
 (Signed) Ladislao Sosa. 
 
 National Executive Power, 
 
 Department of Hacienda. 
 Let it be published and executed. 
 Panama, June 28, 1904. 
 
 (Signed) M. Amador Guerrero. 
 
 The secretary of hacienda, 
 
 (Signed) F. V. de la Espriella. 
 
 A copy. 
 The subsecretary of hacienda, 
 
 F. Martin Feuillet. 
 
Appendix D. 
 
 MEXICO. 
 
 I. FINAL RECOMMENDATIONS AND REPORTS OF THE COMMISSION 
 APPOINTED BY THE GOVERNMENT OF THE REPUBLIC TO 
 INVESTIGATE THE MONETARY PROBLEM. 
 
 MONETARY REFORM IN MEXICO— DEFINITE PLANS ARE FORMED TO 
 PUT THE CURRENCY OF THE COUNTRY ON A STABLE BASIS AND 
 TO SECURE FIXITY IN THE RATES OF INTERNATIONAL EXCHANGE. 
 
 On February 4, 1903, the department of finance appointed a com- 
 mission of bankers, economists, business men, mine owners, and 
 others to study Mexico's monetary problem in all its phases. 
 
 That commission held its first meeting on February 19, 1903, when 
 an address was delivered by Lie. Jose Yves Limantour, minister of 
 finance, outlining the labors that awaited the commission and explain- 
 ing the nature of the assistance which the Government desired from it. 
 
 At the same session the commission organized itself. Lie. Pablo 
 Macedo was appointed chairman; Enrique C. Creel, vice-chairman; 
 Lie. Luis G. Labastida, secretary, and Lie. Jaime Gurza, assistant 
 secretary. 
 
 The commission also divided itself into four subcommittees, each 
 encharged with the studj' of a given phase of the monetary question. 
 The chairmen and secretaries of the subcommittees in question were 
 as follows: 
 
 First subcommittee: Chairman, Lie. Genaro Raigosa; secretary, 
 Everardo Hegewisch. 
 
 Second subcommittee: Chairman, Jose de Landero y Cos; secre- 
 tary, Carlos Sellerier. 
 
 Third subcommittee: Chairman, Manuel Fernandez Leal; secre- 
 tary, Ricardo Garcia Granados. 
 
 Fourth subcommittee: Chairman, Lie. Joaqiiin D. Casasus; secre- 
 tary, Carlos Diaz Dufoo. 
 
 When all the four subcommittees had brought in their reports, the 
 tendency of which was in favor of monetary reform and the stabil- 
 ization of the Mexican dollar, or peso, a fifth subcommittee was ap- 
 pointed to devise definite recommendations and to plan ways and 
 means for carrjdng the monetary reform into execution. 
 
 The fifth subcommittee consists of the chairman and general sec- 
 retary of the monetary commission and the chairman and secretaries 
 of the other four subcommittees above mentioned. 
 
 However, the president of the commission, Mr. Creel, and the 
 assistant secretary of the commission, Mr. Gurza, also attended the 
 sessions and signed some of the reports, 
 
 334 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 335 
 
 The reports of the fifth subcommittee, summing up as they do the 
 labors and results of the monetary commission and embodying defi- 
 nite recommendations for monetary reform, are of great importance 
 and will be read with interest outside of Mexico, showing, as they do, 
 the trend of enlightened thought in this country in regard to the 
 monetary problem. 
 
 The reports in question translated into English are as follows : 
 
 The fifth subcommittee has addressed itself to a careful and mimite 
 study of the manifold questions involved in the formation of a plan 
 of monetary reform on the lines laid down in the fifth point of the 
 interrogatory formulated by the department of finance and public 
 credit, to which the monetary commission has adjusted its labors. 
 
 With a view to systematizing its procedure and following the exam- 
 ple set by the other subcommittees, the fifth subcommittee drew up a 
 programme of its labors, constituting Annex No. 1 attached to this 
 report, and confided the study of the four questions embraced by that 
 programme to the following persons in the order of mention : 
 
 The first question was assigned to Eng. Manuel Fernandez Leal 
 and Lie. Joaquin D. Casasus ; the second to Mr. Eicardo Garcia Gra- 
 uados and Mr. Everardo Hegewisch; the third to Mr. Carlos Diaz 
 Dufoo, Mr. Genaro Raigosa, and Mr. Pablo Macedo, and the fourth 
 and last to Mr. Jose de Landero y Cos and Mr. Carlos Sellerier. 
 
 The partial reports or studies, emanating from the persons men- 
 tioned, are attached to the present report as Annexes 2, 3, 4, and 5, 
 though it is to be noted that No. 3 embraces the opinion enunciated by 
 Lie. Genaro Eaigosa alone in regard to the reserve fund, for Messrs. 
 Diaz Dufoo and Macedo, who did not advocate the immediate for- 
 mation of that fund, did not, during the sitting of the fifth subcom- 
 mittee, present any special contribution in writing in regard to that 
 point. 
 
 After full examination and discussion had been devoted both to the 
 four reports above mentioned as well as to the opinions expressed by 
 Mr. Enrique C. Creel, the vice-president, who (and the same may be 
 said of Mr. Jaime Gurza, the assistant secretary) who was an assid- 
 uous attendant at the sessions of the fifth subcommittee, a plan of 
 monetary reform was finally drawn up by Messrs. Carlos Diaz Dufoo, 
 Ricardo Garcia Granados, Jaime Gurza, Everardo Hegewisch, Luis 
 G. Labastida, Pablo Macedo, and Carlos Sellerier. With the mam 
 outlines of that plan Messrs. Joaquin D. Casasus, Enrique C. Creel, 
 Manuel Fernandez I^eal, Jose de Landero y Cos, and Genaro Eaigosa 
 concurred, though Mr. Landero y Cos made an important reservation 
 to the effect that he does not favor any change in the monetary laws 
 
 of the Republic. _ . n • . xt r^ ■ i • i +i. 
 
 The plan in question is contained in Annex No. 9, m which the 
 reasons for each one of the concrete measures proposed are also set 
 
 °The opinion of Mr. Eaigosa, above alluded to (No. 3), and the 
 documents marked as Annexes 6, 7, and 8 set forth the grounds on 
 which Messrs. Casasus, Creel, Fernandez Leal, Landero y Cos, and 
 Eaiffosa have based their several opinions, and therefore it seems 
 useless in this report to do more than make mention of -those docu- 
 
 ™ We 'will therefore, confine ourselves to stating here that the only 
 points as to which our opinions were divided in no respect impair the 
 
336 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 concurrence accorded by all of us to the fundamental lines of the 
 project formulated by some of the undersigned which, as already 
 stated, forms the closing portion of Annex No. 9. 
 
 Such, in brief, is the result of the labors which the fifth subcommit- 
 tee has the honor of submitting to the honorable members of the 
 monetary commission. 
 Mexico, December 19, 1903. 
 (Signed) 
 
 Pablo Macedo, 
 Mantjbl Fernandez Leal, 
 Genaeo Eaigosa, 
 Joaquin D. Casasus, 
 Jose de Landero t Cos, 
 
 EVEEARDO HeGEWISCH, 
 
 Carlos Diaz Dufoo, 
 Carlos Selleeier, 
 EicAEDo Garcia Granados, 
 Luis G. Labastida. 
 
 Annex No. 1. 
 
 Monetary commission, Mexico, fifth subcommittee consisting of 
 Messrs. Pablo Macedo, chairman; Joaquin D. Casasus, Carlos Diaz 
 Dufoo, Manuel Fernandez Leal, Ricardo Garcia Granados, Everardo 
 Hegewisch, Jose de Landero y Cos, Genaro Raigosa, Carlos Sellerier; 
 and Luis G. Labastida, secretary. 
 
 PROGRAMME OF LABORS. 
 
 First question. — Which is the monetary system whose adoption is to 
 be recommended to the Government? 
 The following points are to be separately studied and solved : 
 
 I. Ought the free coinage of gold to be permitted ? 
 
 II. Ought the mints to be closed to the free coinage of silver on 
 private account? 
 
 III. Ought the Government to be authorized to coin a new peso 
 (dollar) or silver piece destined to constitute, at least temporarily, 
 the basis of the monetary circulation of the Republic ? 
 
 If the answer is in the affirmative : 
 
 (a) Ought that coin to be of the same weight and fineness as the 
 present peso ? 
 
 (&) Ought it to have the same effigy as the present peso? 
 
 (c) What limitation ought to be put upon the quantity of silver 
 money that the Government is to coin ? 
 
 IV. Is it advisable to coin new subsidiary silver money? 
 If the answer is in the affirmative : 
 
 (a) What class of coins are to constitute such subsidiary money? 
 
 (&) What should be their fineness? 
 
 (c) Should the coinage of the present bronze centavo be continued ? 
 
 V. WTiat should be the legal-tender capacity of the new coins, both 
 for private persons and the Government ? 
 
 VI. Is it advisable to lay down that the Government shall be 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 337 
 
 obliged to give hard-silver dollars in exchange for the subsidiary 
 coins presented to it for such exchange? 
 
 If the answer is in the affirmative : 
 
 What are the main conditions that should be adopted for effecting 
 that exchange? 
 
 Second question. — What transitional measures should be adopted 
 with a view to the implantation of the new monetary system? 
 
 The following questions are to be studied and solved: 
 
 I. Can and ought the Mexican Government to prohibit the im- 
 portation into the Eepublic of Mexican dollars that have been shipped 
 abroad ? 
 
 II. What quantity of the new coins ought the Government to have 
 in readiness before beginning to put the new monetary system into 
 execution ? 
 
 III. Ought the present coins to be exchanged for the new coins at 
 par, at a discount, or at a premium ? 
 
 IV. Would it be well to adopt special rules for the exchange of the 
 subsidiary coins ? 
 
 V. Would it be well to expedite as far as possible the exchange of 
 the old coins for the new coins ; and if so, what would be the chief 
 measures that might be adopted to that end ? 
 
 Third question. — What measures ought to be taken to bring about 
 the stability of international exchange on the hypothesis that the 
 ratio in weight to be adopted between gold and silver is to be that 
 of 1 to 32? 
 
 The following questions are to be studied and solved : 
 
 I. Can stability or fixity of exchange and of the ratio between gold 
 and silver be attained without suspending the free coinage of silver 
 on private account? 
 
 II. Can the same objects be attained without the formation of a 
 special fund that shall assure or guarantee the exchange of the silver 
 coin for gold ? . 
 
 III. If the answer be in the affirmative — that is to say, even if the 
 formation of that fund is not considered indispensable — is it neverthe- 
 less to be recommended to the Government, and in what cases ? 
 
 IV. Whether the formation of a special fund, that shall assure or 
 guarantee the exchange of the silver coin for gold, be considered neces- 
 sary or only advisable, the following among other questions as to its 
 accumulation and operation are to be considered : 
 
 (a) Ought the fund to be formed of gold or of sliver ? 
 (&) Ought it to be formed in Mexico or abroad or both in Mexico 
 and abroad ? 
 
 (c) What ought to be its amount, at least approximately? 
 
 (d) Ought it to be administered by the Government exclusively or 
 by a committee or corporation to be appointed by the Government ? 
 
 (e) What should be the chief conditions of its operation? 
 
 V. Independently of the closing of the mints to the free coinage of 
 silver and the formation of a monetary reserve fund, are there any 
 other measures which it would be well to advise the Government to 
 adopt in order to bring about stability or fixity of exchange and of the 
 ratio between gold and silver ? 
 
 If the answer is in the affirmative, said measures should be de- 
 scribed in detail. 
 
 S. Doc. 128, 58-3 22 
 
338 GOLD STANDARD IN INTEKNATIONAL TRADE. 
 
 Fourth question. — Is it advisable to counsel the adoption of special 
 measures, such as the abolition or diminution of taxes and the like, 
 that will save not only the silver-mining industry but export indus- 
 tries in general from the losses that might accrue to them from a 
 change of monetary system in the Kepublic ? 
 
 Annex No. 2. — Repokt of Messes. Fernandez Leal and Joaquin D. Casastjs. 
 
 Sir : The fifth subcommittee appointed to study the various meas- 
 ures to which other nations have resorted to stabilize the rate of their 
 international exchange and to solve their monetary difficulties, drew 
 up a programme to which its work was to be adjusted and commis- 
 sioned the undersigned to frame, and give their reasons for, the bases 
 of the new monetary system which the Government of the Republic is 
 to be counseled to adopt. 
 
 The portion of the programme of the fifth subcommittee's work 
 assigned to us reads as follows : 
 
 First question. — Which is the monetary system whose adoption is 
 to be recommended to the Government ? 
 
 The following points are to be separately studied and solved : 
 
 I. Ought the free coinage of gold to be permitted ? 
 
 II. Ought the mints to be closed to the free coinage of silver on 
 private account ? 
 
 III. Ought the Government to be authorized to coin a new peso 
 (dollar) or silver piece, destined to constitute, at least temporarily, the 
 basis of the monetary circulation of the Eepiiblic ? 
 
 If the answer is in the affirmative : 
 
 (ffl) Ought that coin to be of the same weight and fineness as the 
 present peso ? 
 
 ib) Ought it to have the same effigy as the present peso ? 
 
 (c) What limitation ought to be put upon the quantity of silver 
 money that the Government is to coin ? 
 
 IV. Is it advisable to coin new subsidiary silver money ? 
 If the answer is in the affirmative : 
 
 {a) What class of coins are to constitute such subsidiary money? 
 
 (6) What should be their fineness ? 
 
 (c) Should the coinage of the present bronze centavo be continued ? 
 
 V. What should be the legal-tender capacity of the new coins both 
 for private persons and the Government? 
 
 VI. Is it advisable to lay down that the Government shall be 
 obliged to give hard silver dollars in exchange for the subsidiary 
 coins presented to it for such exchange ? 
 
 If the answer is in the affirmative : 
 
 What are the main conditions that should be adopted for effecting 
 that exchange ? 
 
 The undersigned believe that, whatever measures may be adopted 
 to stabilize the rate of international exchange, it is absolutely neces- 
 sary to modify the present monetary system in such manner and in 
 such form that the value of our silver peso (dollar) shall be rendered 
 wholly independent of the gold price of the metal, silver, so that our 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 339 
 
 money may not continue to suffer the constant and brusque oscillations 
 to which the price of the metal in question is subject. 
 
 In order to attain this end, private persons must be deprived of the 
 right to take their silver bars to the mints of the Kepublic to have 
 them converted into coin; for, though it is true that the unlimited 
 coinage of a metal tends to give greater fixity to its value, seeing that 
 the consumption thereof for monetary purposes is the largest and 
 rnost important of all, it is also true that the value of the metal, con- 
 sidered as a commodity, must control the value of the coins of that 
 metal as long as the holders of the commodity in question are entitled 
 at their pleasure and without limitation to have it converted into 
 monetary units. 
 
 The suspension of the coinage of any money on private account 
 will perforce tend to enhance its value, because it restricts the quan- 
 tity of money in circulation without abating the ever-increasing de- 
 mand which every progressive country experiences for money in 
 order to continue to carry on, without obstacle or hindrance, its 
 commercial transactions of every kind. If the quantity of coins in 
 circulation can not be increased in proportion to the increased neces- 
 sity for their use, and if the utmost rapidity that can be imparted to 
 the circulation does not suffice to meet the necessity of employing a 
 larger quantity of coins, it is unquestioned that, bj- the natural opera- 
 tion of the law of supply and demand, the value of such coins will 
 be enhanced. 
 
 This enhancement of the value of the coins in circulation must have 
 a limit, and if that limit, in countries governed by the same principles 
 that inform monetary laws, is fixed by the international trade in pre- 
 cious metals which attracts them to points where there is most need 
 of them and drains them from those markets where, by reason of 
 their very abundance, their price tends downward, the limit in ques- 
 tion must be artificially fixed in countries where the monetary laws 
 are not based on the fundamental principles that should control them. 
 
 In order to fix said limit it is indispensable to associate the value 
 of the silver unit whose coinage is suspended with a gold coin, 
 whether the latter circulates or not, whether its free coinage is or is 
 not permitted. 
 
 The raison d'etre of the limit consists in the fact that when the 
 enhanced value of the circulating silver coins, due to their scarcity, 
 has once passed that limit gold will be imported, and whether it be 
 coined or not, will regulate prices and will tend to reduce the value of 
 the silver coin and bring it back to its proper level. 
 
 The application of this system is nothing else but the adoption of 
 gold monometalism without gold coins in circulation. Gold, as the 
 ideal standard to measure values, will govern prices; and for circu- 
 lating purposes the money will consist of disks of the metal silver, 
 whose value will not depend on the silver which they contain, but on 
 their scarcity and the possibilty of their conversion into gold coin. 
 The silver coins in circulation, though they may be received as unlim- 
 ited legal tender, will necessarily be based on the principles that regu- 
 late the emission of subsidiary coins, because they can not be used for 
 exportation and by an imperative necessity will remain exclusively 
 confined to the interior circulation of the country in which they are 
 issued. 
 
340 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 In accordance with the foregoing outlines, the new monetary system 
 must repose on the following principles : 
 
 I. The opening of the mints to the free coinage of a new gold piece. 
 
 II. The closing of the mints to the free coinage of silver on private 
 account. 
 
 Without doubt, during the first years in which this system becomes 
 operative, gold will not enter into the circulation; but it is to be 
 hoped, when the parity adopted between the two metals, gold and 
 silver, is attained and the value of the silver money due to its scarcity 
 tends to exceed that parity, that gold will be attracted to our mints. 
 
 The possibility of gold being coined involves the necessity of de- 
 termining the weight and fineness of the new monetary unit of that 
 metal and of the coins which may have to be struck as multiples 
 thereof. 
 
 In order to fix the fineness and weight of our gold coinage we must 
 take into account the following questions : 
 
 I. Is the new gold coin to be based on a ratio of 1 to 32 between 
 gold and silver ? 
 
 II. Is it preferable to make our gold coin a submultiple of the 
 pound sterling or the American dollar or a multiple of the franc, in 
 order to facilitate our commercial transactions with England, the 
 United States, and France? 
 
 III. Ought the new gold coin to be of the same fineness as the. 
 present one, authorized by our monetary laws, or ought we to adjust 
 it to the decimal system ? 
 
 The fifth subcommittee when initiating its labors and taking into 
 account the brusque oscillations which the price of silver on the Lon- 
 don market has passed through of late, did not deem fit to decide 
 whether the ratio between gold and silver which shall serve as the 
 basis for the stabilization of our international exchange, should be 
 comprised between the minimum of 1 to 36 and the maximum of 
 1 to 32. Nevertheless, it saw fit to recommend that the ratio of 
 1 to 32 should be adopted as the hj^pothetical basis of all the studies 
 that were to be undertaken being the ratio that would offer the fewest 
 difficulties in its adoption. 
 
 The ratio of 1 to 32 may, however, occasion a drawback worthy of 
 being taken into consideration in the creation of our new gold cur- 
 ]-ency, for that ratio would mean that said currency would be divorced 
 from all other gold currencies at present in use, which assuredly 
 would not tend to foment the future development of our commercial 
 relations. 
 
 If gold is the monetary metal par excellence and is destined to 
 perform the function of international money wherewith the trade 
 balances among nations are to be settled, it is of the highest impor- 
 tance to bring about or to accentuate a more marked tendency daily 
 toward the unification of gold coins. 
 
 Therefore, to make Mexico's new gold coin a multiple or submulti- 
 ple of the coins already in use among the nations with which we culti- 
 vate the closest commercial relations is to add another factor to the 
 future development of our commerce. 
 
 It seems idle to discuss whether the new coin ought or ought not 
 to conform to the decimal system. In Mexico the decimal system 
 rules and it is necessary to adopt its principles. But, indepentlently 
 of that, it is impossible to conceive the emission of a new coin save in 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 341 
 
 obedience to those principles. Our financiers have been sufficiently 
 strong m their condemnation of the fact that our present gold coin 
 IS 0.875 fine and not 0.900 fine and to justify their condemnation it 
 IS sufficient to state that Mexico is the only civilized nation in which 
 gold coins continue to be struck at the old standard of fineness of 21 
 carats. 
 
 The law of November 28, 1867, directed that the coins should bear 
 an inscription showing the fineness of the metal in thousandths, for- 
 getting that this was not sufficient in order to assure compliance with 
 the metric decimal system. 
 
 The new Mexican dollar, at the ratio of 1 gram of gold to 32 grams 
 of silver, would contain : 
 
 Gram. 
 
 Puregald 0.7038 
 
 Gold 0.900 fine . 84SG 
 
 If the new gold dollar is made the one-tenth part of the pound 
 sterling, it would contain : 
 
 Gram. 
 
 Pure gold 73'^23 
 
 Gold 0.900 fine .8130 
 
 If the new gold dollar is made the one-half of the American dollar, 
 it would contain: 
 
 Gram. 
 
 Pure gold 0.7523 
 
 Gold 0.900 flue .8359 
 
 If the new gold dollar were made equal to 2.50 francs, it would 
 contain : 
 
 Gram. 
 
 Pure gold 0.7258 
 
 Gold 0.900 fine . 8064 
 
 The ratios between gold and silver, according as the submultiple of 
 the English or American coins or the multiple of the French coin 
 are taken as the basis, would be as follows: 
 
 Grams. 
 
 One-tenth part of tlie pound sterling, tbe ratio would be 1 to 33. 37, 
 
 One-balf of the American dollar, the ratio would be 1 to 32. 48 
 
 Multiple of the franc, ratio 1 to 33. 67 
 
 As will be seen, if the ratio of 1 to 32 is adopted, the gold peso will 
 be a new coin different from all others in existence, because it will 
 have to contain — ■ 
 
 In excess over the one- tenth part of the pound sterling, in gold of the fine- Gram. 
 
 ness of 0.900 0.0350 
 
 In excess over the half of tbe American dollar . 0127 
 
 In excess over the multiple of the franc . 0422 
 
 The undersigned think that preferably the American half-dollar 
 ought to be adopted as the new gold peso both because on that basis 
 we ajDproach as much as possible to the ratio of 1 to 32, and because 
 80 per cent of our import and export trade is carried on with the 
 United States, the nation from which we buy most of what we need 
 and to which we sell most of our export products. It is true that the 
 world's center of mercantile transactions is London, and that the 
 pound sterling is the coin that serves for the settlement of interna- 
 tional trade balances; but undoubtedly it is far more important to 
 us that our coin should be a submultiple of the dollar, which itself is 
 a submultiple of the pound sterling, seeing that out commerce with 
 
342 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 England is insignificant in comparison with our commerce with the 
 United States of America. 
 
 The new gold dollar, by reason of its small size, would never be 
 coined ; but for purposes of circulation we could adopt the " escudo " 
 of $5 with 3.7615 grams of pure gold or 4.1795 grams of gold 0.900 
 fine and the $10 ounce with 7.523 grams of pure gold or 8.359 grams 
 of gold 0.900 fine. The $5 " escudo " would be a coin of much use in 
 circulation because it would fill a place corresponding to the 10-franc 
 piece in France and other countries of the Latin Union and the half- 
 severeign in England ; and the $10 ounce would be the coin for large 
 transactions, taking the role of the pound sterling and the piece of 
 20 francs or 20 marks. 
 
 The undersigned have not thought fit to recommend the coinage of 
 the old ounce of $20, for a very long experience demonstrates that it is 
 unsuited for circulation and is only serviceable for hoarding purposes. 
 
 The basis, therefore, of the monetary law would be the gold dollar, 
 and the coins in circulation would be the " escudo " of $5 and the 
 ounce of $10. 
 
 The closing of the mints to the free coinage of silver on private ac- 
 count is the measure which the new monetary system most urgently 
 demands, for on its adoption depends the dissociation that will de- 
 velop between the value of our dollar in the interior circulation and 
 the value of the metal — silver — which it contains. 
 
 The adoption of this measure involves the study of the following 
 questions : 
 
 I. Ought the present dollar, which, whatever else it is, is chiefly one 
 of our oldest historical monuments and the trade coin par excellence 
 of America and the P^ar East, to be retained in circulation ? 
 
 II. Ought a new silver dollar to be adopted for the purpose of dif- 
 ferentiating it from the present one ? 
 
 III. May the coinage of the old dollar, as a trade dollar, destined 
 for exportation, continue to be permitted ? 
 
 The undersigned have no hesitation in this respect, for they con- 
 sider that the coinage of a new dollar is indispensable. 
 Their opinion is based on the following considerations : 
 
 I. The necessity of preventing the importation of the old Mexican 
 dollars. 
 
 II. The expediency of rendering more difficult the counterfeiting 
 of the coin, which is calculated to be greatly stimulated by the differ- 
 ence between the value of the coin and the value of the metal consti- 
 tuting it. 
 
 III. The complete disappearance of all the advantages previously 
 associated with the old Mexican dollar. 
 
 As the Mexican dollar has not merely" been our national coin, but a 
 trade dollar that has circulated and still circulates as unlimited legal 
 tender in China, in the British possessions in the Far East, and in the 
 Philippines, it would be very easy to import it back into the country 
 in large quantities in order to take advantage of the difference in 
 value which the coin may attain as compared with the value of the 
 metal which it contains. As the basis of the monetary reform consists 
 in imparting to the dollar a greater value than belongs to it as silver 
 bullion, it is unquestioned that the reform would not fulfill its object, 
 if the reimportation of the millions of dollars circulating outside of 
 the country were to be permitted. 
 
GOLD 9TANDABD IK INTERKATIONAL TRADE. 343 
 
 The mere prohibition of their importation or the creation of a duty 
 that would be tantamount practically to such a prohibition would not 
 be a sufficuently efficacious measure for the attainment of the Govern- 
 ment's wishes. Speculation glides through doors that can not be 
 shut in its face, and finds a locus standi that can not be withdrawn 
 from under it. 
 
 The cost of coining the new dollar would be more than compen- 
 sated by the guaranty which it would afford to the future circulation 
 of the country. 
 
 But, independently of this circumstance, it must be borne in mind 
 that our present dollar leaves much to be desired as a coin, and read- 
 ily lends itself to the purposes of the counterfeiter. The necessity of 
 conserving the prestige which our dollar had won in the Far East, 
 and of maintaining the higher value which it once attained as a coin 
 over its bullion value, has acted as an insuperable obstacle to the 
 modification of our dollar by the Government in such manner as to 
 render its falsification if not impossible at anj'^ rate extremely diffi- 
 cult. Our dollar is very far from being an artistic model, as every 
 coin ought to be, and the imperfections of its design, the poor finish 
 and indistinctness of its milling invite counterfeiters to imitate it. 
 
 Now if the old dollar is retained, the enhancement of value given to 
 it over its bullion value will still further encourage counterfeiters, for 
 they will be able to counterfeit it without altering either its fineness 
 or its weight, and such counterfeiting -v^dll produce the very effects 
 which it is desired to obviate by prohibiting the reimportation of 
 Mexican dollars. 
 
 On the other hand, what is to be gained by retaining the old 
 dollar? Except that the cost of coining a new dollar would be 
 saved, it can not be said that any advantage would be secured. The 
 value in excess of its bullion value once attained by our dollar on the 
 London market no longer exists, and the new monetary laws which 
 are on the point of being issued for the P"'rench and English posses- 
 sions, for the Philippines, and perhaps for the Chinese Empire, will 
 deprive it of the legal tender character which it has hitherto enjoyed. 
 
 In fact, in a very short time the new dollar which the American 
 Government 'has ordered coined for the Philippines will be put into 
 circulation ; the dollar of Tndo-China already circulates in such quan- 
 tities in the French possessions in the Far East that practically it has 
 almost banished the Mexican dollar ; the British dollar has replaced 
 the Mexican dollar in the Straits Settlements, Hongkong, and 
 Labuan, and the international exchange commission appointed by 
 our Government to approach foreign governments has undertaken to 
 draw the attention of the civilized world to the necessity of the adop- 
 tion by China of a monetary system of its own. 
 
 The old Mexican dollar, when these measures shall have been 
 adopted, will have come to the end of its career as a trade coin, and, 
 like the thaler of Maria Theresa, it will survive only as a memory of 
 what was once a factor of civilization and progress in the ancient 
 nations of the East. 
 
 But if it is necessary to coin a new dollar, ought it to be of the 
 same weight and fineness ds the present dollar? 
 
 In what proportions ought it to be coined? 
 
 An obvious argument of expediency demands that the new coin 
 shall have the same weight and fineness as the present dollar. That 
 
844 GOLD STANDARD IN INO'EKNATlONAL TEACE. 
 
 argument is the desirability of not altering the basis of pending con- 
 tracts throughout the Eepublic. 
 
 As, in accordance with the precepts of civil law all presentations in 
 money must be made in the kind of money agreed upon, and, if this 
 is not possible, in the quantity of current coin that shall coincide with 
 the real value of the money owed, a stipulation has always been intro- 
 duced into contracts to the effect that, in the event of a new money 
 coming into existence, the debtor will only be held to have met his 
 liabilities when he shall have delivered a quantity coinciding in fine- 
 ness and weight with the present coin. 
 
 Now, in order that this stipulation, which is countenanced by the 
 civil law, may be complied with without imposing a sacrifice on the 
 debtor and originating difficulties of every kind in the carrying out 
 of pending contracts, it is necessary that in creating a new coin said 
 coin shall be of the same weight and fineness as that at present in 
 circulation, in order that it may be received without difficulty and 
 that payments made therein may constitute a complete release to 
 debtors. 
 
 On the other hand, in consummating a monetary reform it is the 
 duty of the public administration, as an essential condition of the suc- 
 cess of that reform, to talce such measures as will assure the ready 
 acceptance of the new coin by all. 
 
 Now, to assure its acceptance by the public without difficulty, it is 
 necessary that it shall continue to constitute a complete release from 
 debt to all persons throijgh whose hands it passes and that it shall 
 serve definitely to satisfy and extinguish pending obligations. 
 
 This assuredly does not mean that the new silver dollar will have to 
 contain 27.073 grams of a fineness of 0.90277. We think that the new 
 dollar may be considered equal to the old one if it contains the same 
 quantity of pure silver — that is to say, the 24.441 grams contained by 
 the old Mexican dollar. The fineness may be 0.900, and what may 
 be lost through the difi'erence in fineness will be made up in weight, 
 so that instead of containing 27.073 grams it will contain 27.156 
 grams. 
 
 Thus the new dollar maj^ be equal to the old one and be a decimal 
 coin containing 27.156 grams of silver 0.900 fine. 
 
 In what quantities is the new dollar to be coined ? 
 
 As the object of the reform is to enhance the gold value of silver 
 coin, and to that end it will be necessary to deprive jDrivate persons of 
 the right of having their silver bars converted into coins, it is unques- 
 tionable that the quantity of new dollars to be emitted must be equal 
 to the quantity at present in circulation. 
 
 There is no reason for curtailing the quantity in circulation, and 
 there would be no object in leaving a portion of the old coins, w^hich 
 would be no longer available for use in commercial transactions, in 
 the hands of their present holders instead of exchanging them for the 
 new coins. 
 
 On the other hand, it would not be advisable to authorize the Gov- 
 ernment to put a greater quantity of the new dollars into circulation, 
 for this would tenrl to delay the success of the monetary reform, seeing 
 that the greater the excess of the quantity of coins provided over the 
 requirements of circulation, the greater would be the difficulty of 
 attaining the parity inherent to the ratio at which the two metals, 
 gold and silver, would be coined. 
 
aatD STANDAKC m INTERNATIONAL TRADE. 845 
 
 In accordance with the above considerations the new coin may con- 
 form to the decimal system ; it will be equal in value to the old coin 
 because it will contain the same quantity of pure silver ; it will bear 
 a different effigy in order to distinguish it; and it will be issued in 
 quantities sufficient to be given in exchange for all the old coins at 
 present in circulation. 
 
 No one can question the expedience of taking advantage of the 
 monetary reform that will be carried out to issue new subsidiary or 
 token coins of silver. 
 
 As a matter of fact, the present subsidiary silver coinage, or, in 
 other words, the pipces of 50, 20,-10, and 5 cents at present in circula- 
 tion have been and are subject to the great drawback that the metal 
 from which they are coined is of the same fineness as the metal from 
 which the dollar is coined; that is to say, 0.90277, and that their 
 weight is proportional to that of the monetary unit, so that, in conse- 
 quence, they 'are unlimited legal tender. 
 
 Our subsidiary coins do not conform to the principles that should 
 regulate such coins; for if they are and ought to be exclusively 
 destined to facilitate the small transactions i\'hich the life of a com- 
 munity renders indispensable, their legal-tender capacity ought to 
 be limited and the value of the metal Avhich they contain ought to be 
 less than their value as coins. 
 
 The subsidiary coinage of almost all the nations of Europe is now 
 in conformity with these principles, and owing to that circumstance it 
 is able to remain in circulation and to render the important services 
 for which it is intended. 
 
 When a subsidiary coinage is made of a metal of which the value 
 is equal to its coinage value, it can not easily be kept in circulation, 
 for such coins prove exportable like coins that are unlimited legal 
 tender. 
 
 If a subsidiary coinage has very precise and necessary functions to 
 perform, it must not be exportable ; it must always remain in the 
 interior of the country, and in order that those objects may be attained 
 without any difficulty there must be a difference between the conven- 
 tional value of such a coinage and the value of the metal which it 
 contains. 
 
 In order to obviate the accumulation of this, conventional coinage 
 in the hands of the public, its legal-tender capacity must be restricted 
 to a given quantity. This restriction is the rule that secures an 
 equitable distribution of this class of coin in the circulation, for 
 without detriment to the interests of its holders it renders the services 
 for which it is exclusively intended. 
 
 In accordance with these principles, which are the soundest known 
 in .reference to this question, the undersigned are of the opinion that 
 the new subsidiary coins, though proportional in weight to the mone- 
 tary unit, ought to be 0.800 fine. 
 
 This would be a very opportune occasion to withdraw from circula- 
 tion the silver 5-cent piece, which is too small a coin, and is subject to 
 rapid wear owing to the frequency with which it enters into the daily 
 transactions of the people. All countries which had a coin similar to 
 our silver 5-cent piece, such as the English 3-penny piece and the 
 American coin worth one-twentieth of a dollar, have either with- 
 drawn it from circulation or replaced it with a nickel coin. Perhaps 
 in our case a substitution of this kind would not be opportune, and it 
 
346 GOLD STAKDARD IN INTERNATIONAL TRADE. 
 
 would be better to suppress the coin in question absolutely, without 
 issuing a new one in its stead. 
 
 The half-dollar, the 20-cent piece, and the 10-cent piece will then be 
 of the following weight and fineness: 
 
 Grams. 
 
 The half dollar will contain ii5 pure silver 10.8624 
 
 The half dollar will contain in silver 0.800 fine 13.578 
 
 The 20-cent piece will contain in pure silver 4.3448 
 
 The 20-cent piece will contain in silver 0.800 fine 5.431 
 
 The 10-cent piece will contain in pure silver 2. 172 
 
 The 10-cent piece will contain in silver 0.800 fine 2. 715 
 
 The legal-tender capacity of the 'new subsidiary coinage may be 
 limited to $20, this limit being observed both in the relations of pri- 
 vate persons among one another and of private persons with the Gov- 
 ernment. This limit would be more or less the same as that to which 
 silver money is subject in England, where its legal-tender capacity 
 does not exceed 40 shillings. The limit in question is sufficiently 
 prudent and will suffice for the object had in view. 
 
 The undersigned do not consider that it is necessary to introduce 
 any change in the present bronze centavo. 
 
 Since the emission of the centavo was adjusted to the principles 
 which should regulate the emission of such coins no further difficulty 
 has occurred in its circulation. It is received by the people without 
 hesitation and every day the field of its usefulness grows wider. 
 
 The decimal coinage question, which for so many years was justly 
 a source of anxiety to the public authorities, has been definitely 
 solved, and the mere incorporation of the present laws into the new 
 monetary law would suffice to assure the continuation of the coinage 
 in the future, subject to the same system as at present regulates its 
 emission. 
 
 The diameter and margin as to weight and fineness of the new 
 silver and gold coins may continue to be the same as provided by the 
 decree of November 28, 1867. 
 
 The undersigned beg leave to recommend the fifth subcommittee to 
 draw the Government's attention to the expediency of not collecting 
 any tax on the mintage of gold coins. 
 
 It is probable that during the early years of the prevalence of the 
 new system, gold will not be attracted to the mints ; but, in order to 
 encourage the holders of gold to convert their bars into coin, it would 
 perhaps be a wise step to make the coinage thereof free. The British 
 Empire has in this connection set an example which is particularly 
 worthy of imitation. 
 
 The undersigned have concluded the task assigned to them by the 
 fifth subcommittee. They regret that they have not had time to make 
 a more profound study of the questions involved in the establishment 
 of a new monetary system, but they have endeavored in as short a 
 time as possible to manifest their ideas in order that they may serve 
 as the basis of studies for the final resolutions that are to be adopted. 
 
 Joaquin D. Casasus. 
 M. Fernandez Leal. 
 
 Mexico, September 29, 1903. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 847 
 
 Annex No. 3 — Report of Messrs. Ricardo Gbanados and Everado Hegewisch. 
 
 To the president of the fifth subcommittee 
 
 of the monetary commission, present: 
 
 In the distribution of work adopted by the fifth subcommittee, with 
 a view to the formation of a project of monetary reform, the second 
 question, referring to the transitional measures that shoidd be adopted 
 to place the monetary circulation on a new basis at the hypothetical 
 ratio between gold and silver of 1 to 32, was assigned to us. In the 
 form wherein it was submitted to us the question was as follows : 
 
 What transitional measures should be adopted with a view to the 
 implantation of the new monetary system ? 
 
 The following questions are to be studied and solved : 
 
 I. Can and ought the Mexican Government to prohibit the importa- 
 tion into the Kepublic of Mexican dollars that have been shipped 
 abroad ? 
 
 II. What quantity of the new coins ought the Government to have 
 in readiness before beginning to put the new monetary system into 
 execution ?^ 
 
 III. Ought the present coins to be exchanged for the new coins at 
 par, at a discount, or at a premium ? 
 
 IV. Would it be well to adopt special rules for the exchange of the 
 subsidiary coins? 
 
 V. Would it be well to expedite, as far as possible, the exchange of 
 the old coins for the new coins, and if so, what would be the chief 
 measures that might be adopted to that end ? 
 
 We were certainly not impervious to the difficulties which the solu- 
 tion of the present problem involves, and, fearing that the exclusive 
 application thereto of scientific theories might lead us into serious 
 errors, we thought that the safest course was to look for precedents in 
 other countries whose situation has been similar to that in which we 
 are placed; to draw inferences from the teachings of practice and 
 to fill in or correct, to the best of our ability, the gaps or deficiencies 
 that might seem to us to exist in the methods used in like circumstances 
 by foreign governments when those methods came to be applied to 
 our own case. The present epoch, from a monetary point of view, is 
 characterized by continuous decline and violent fluctuations in the 
 value of silver as compared with gold, and in view of that fact we 
 have given our attention to the study of the monetary reforms intro- 
 duced during the last twelve years in Austria-Hungary, Japan, 
 British India, and Peru. We have refrained from entering into con- 
 siderations in regard to such countries as Chile and Argentina, in 
 which, for various reasons not directly connected with the difficulties 
 that are inherent to the question, the desired reform has so far been 
 frustrated. 
 
 Before the year 1848 the monetary unit of the Austrian Empire was 
 the silver florin, weighing 14.031 grams ; but political events and the 
 war of that year led the Government to authorize the national bank 
 to issue a large quantity of legal-tender paper currency, so that in 
 consequence silver disappeared from circulation. The fluctuations in 
 the premium of the silver florin as compared with paper in the twenty- 
 five years which followed are not of great interest to us. But a fact 
 that is worthy to be taken into consideration is that when the rapid 
 
348 GOLB STANDARD IN INTERNATIONAL TRADE. 
 
 decline of silver in the year 1873 set in, it had very little or no effect on 
 the value of the bank notes as expressed in gold, and, beginning with 
 the year 1878, the apparent anomaly of a paper florin being worth 
 more than the coin for which it stood became a realitj^. This was due, 
 no doubt, to the fact that the Government kept the circulation within 
 certain limits and did not make use of its right to redeem said circula- 
 tion in silver, having already made up its mind to adopt the gold 
 standard. But this fact demonstrates to the point of evidence that 
 the value or purchasing power of the monetarj^ unit depends almost 
 exclusively on the quantity thereof in circulation. Though this 
 phenomenon is instructive and in consequence useful to our studies, it 
 must be acknowledged, on the other hand, that the methods adopted 
 by the Austro-Hungarian Government are inapplicable to our case in 
 Mexico, for in passing from a fiduciary standard to the gold standard 
 that Government was easily able to adjust the value of the new unit 
 with entire exactness to the average value of the old unit in the last 
 ten years, which it would not have been able to do if the old unit had 
 been of silver, as anj' advance in the value of that metal subsequent to 
 the conversion would have produced an exodus of silver in accordance 
 with Gresham's well-known law. Similarity of circumstances, there- 
 fore, does not exist between Mexico's situation at present and the situa- 
 tion of xVustria-Hungary when that country effected its last monetary 
 reform. 
 
 The Government of Japan had declared itself in favor of the gold 
 standard in 1871, but certain errors committed at the time that the 
 measure was adopted, the civil war of 1877, the diversity of silver 
 coins, and the excessive quantity of paper money in circulation 
 hindered the reform for some time, and it was not until the year 1897, 
 after the war with China, that the indemnity paid by the latter coun- 
 try was utilized to introduce the gold standard once for all without 
 restrictions and qualifications. With a view to rendering this meas- 
 ure effective, the 31st day of July, 1898, was fixed as the last date for 
 exchanging the necessary portion of silver in circulation for the new 
 gold coin, and in this way the sum of 45,588,000 yen was exchanged. 
 The silver yen is equivalent to the Mexican dollar, and the ratio in 
 which the new gold yen was coined, with respect to the silver yen, 
 was 1 to 32. 
 
 It would be of considerable interest from our point of view to 
 study this reform more in detail were our Government inclined to fol- 
 low the example of Japan. That example seems to us personally 
 most worthy of imitation, but, seeing that the majority of the mone- 
 tary commission do not share that view and that public opinion is 
 not yet sufficiently prepared, we will confine ourselves to what we have 
 already said and will proceed to examine other examples that are 
 suited to our purpose. 
 
 Refraining, therefore, from pointing out the lessons which the 
 example of Japan might afford us, we proceed to take up the examples 
 of British India and Peru as more suited to be taken into considera- 
 tion under the present circumstances. 
 
 The silver rupee, which before the depreciation of the white metal 
 was worth 2s., or 24d., was proclaimed the legal coin of India in 
 1835. The value of that coin having in the year 1876 fallen to 
 18Jd., certain associations petitioned the Indian government to sup- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 349 
 
 press the free coinage of silver ; but on that occasion the answer given 
 to them was that there was no reason, for the present, to modify the 
 existing standard. As after that declaration the depreciation of 
 silver continued and its fluctuations began seriously to" affect trade, 
 the government in 1878 made up its mmd to consider the adoption 
 of the gold standard, with the proviso that the circulating medium 
 should continue to be composed exclusively of silver, to which the 
 people had become accustomed. Some years elapsed, however, before 
 this idea took concrete shape, owing to the fact that, as in Mexico, 
 there were many persons who believed that the value of silver would 
 again become stable, though not perhaps at the old ratio of 1 to 16, 
 or that an international agreement would be reached. The interna- 
 tional monetary conference which met at Brussels in 1892 terminated 
 without practical results, as previous conferences had done, and then 
 it was that the Indian government resolved to introduce the monetary 
 reform, which consisted in stabilizing the ratio of the silver coin to 
 gold without, for the moment, putting gold into circulation. 
 
 In accordance with this determination a decree was issued on June 
 23, 1893, closing the mints to coinage on private account and laying 
 down that in future rupees would be sold at 16d. gold each. The 
 Government rightly calculated that inasmuch as, other things being 
 the same, the value of a coin depends on the quantity of it in 
 circulation, the value of the rupee would have to increase as a result 
 of its growing scarcity consequent upon the suspension of its coinage. 
 Oh the other hand, the market's highest limit would have to be 16d., 
 seeing that at that price rupees could be bought from the government. 
 The rupee, which had been worth 14|d. in 1893, first underwent a 
 depreciation on account of the large quantities which speculators 
 threw upon the market in expectation of the reform. But afterwards 
 the rupee gradually rose until in 1898 it was worth 16d. The contrac- 
 tion did not fail, however, to cause some crises which, du reste, were 
 not more acute than those which had previously been occasioned by 
 the decline of silver with its concomitant fluctuations. Since 1898 
 the rupee has been maintained, save for slight variations, at the legal 
 parity of 16d. The slowness of the rise in the value of the rupee may 
 be ascribed to the slow expansion of public wealth,the years 1896-1898 
 having been years of famine and bad crops, as well as to the fact that 
 in those years gold was scoring a higher purchasing power as com- 
 pared with the principal articles of consumption, as proved by the 
 tables of the noted economist Sauerbeck. 
 
 A method similar to that of India was adopted by Peru to estab- 
 lish the gold standard with an actual circulation of that metal. The 
 Government of that Republic having become convinced of the neces- 
 sity of a reform issued on April 9, 1897, a decree closing the mints 
 to the free coinage of silver. In regard to the " soles " that were 
 circulating abroad, principally in Central America, it was decreed 
 that " inasmuch as they had become converted into a commodity by 
 the mere fact of their exportation from the national territory they 
 could only return thereto as a commodity." In the following article 
 of the same decree it was ordered that the " soles," which might be 
 imported, should be melted down and returned to their owner in the 
 form of bars. The growing scarcity of silver coins has, in fact, 
 caused the value of the "soles" to rise to legal parity, attracting 
 
350 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 gold in fair quantities, so that at present gold and silver circulate at 
 par at the legal ratio of 10 " soles " for 1 Peruvian pound, vrhich is 
 equal to the pound sterling. 
 
 The present situation of Mexico possesses considerable similarity 
 to the situation in Peru, before the latter nation effected its monetary 
 reform, for Peru also had the silver standard, and a large quantity 
 of its coins were in circulation abroad. We consider Peru's methods 
 worthy of imitation with some modifications, especially with respect 
 to the coins circulating abroad. The Government of Peru confined 
 itself to prohibiting their reimportation, which, in our case, does 
 not seem a sufficiently efficacious measure for the future, for we 
 deem it necesary to strike a new coin which will be given in exchange 
 for that at present circulating in the Republic and which, after the 
 consummation of the reform, will alone be legal tender. 
 
 In view of what we have said and of other considerations which we 
 will offer later on, we would recommend the following transitional 
 measures : 
 
 1. Upon the publication of the decree of reform the mints will be 
 immediately closed to the free coinage of silver and the reimportation 
 of Mexican dollars of the present legal issues will be prohibited under 
 the severest penalties. 
 
 2. The Government will proceed to coin as soon as possible a silver 
 dollar containing the same quantity of pure metal as the present dol- 
 lar, of a new design, which shall be as perfect as possible, and said 
 dollar will be exchanged at par within fifteen months for the dollar at 
 present circulating in the Republic. 
 
 3. The new subsidiary silver coins will also be given in exchange 
 for the present ones at par within the same period of time, but the 
 Government may extend that period if it deems fit. 
 
 4. In order to consummate the coinage of new money, the Govern- 
 ment will have to provide itself with the sum of 18 million dollars, 
 either by means of a public loan, or by taking it from the reserves, or 
 through advancements to be made by the banks in return for special 
 certificates, which they may compute as part of their reserves. 
 
 5. In view of the fact that Mexico's mints would not be equal to the 
 Avork of new coinage within the stipulated period, recourse will be had 
 to such foreign mints as the Government may deem fit. To that end 
 a commission of two persons will be sent to each of those mints prop- 
 erly to supervise the work. 
 
 6. As soon as the Government secures the necessary dies the mints 
 will be thrown open to the free coinage of gold at the ratio of 1 to 
 32.48. The gold coins will be unlimited legal tender. 
 
 7. During the fifteen months allowed lor the exchange of coins, 
 the coins both of the present and the new issues will be legal tender ; 
 but after the expiration of that period the coins of the new issue will 
 alone be legal tender, with the exception of the subsidiary coins, for 
 which the period of conversion may be extended. 
 
 8. The Government will sell to any applicant the new silver dollar 
 at the rate of 0.752 of a gram of pure gold, provided that its intrinsic 
 value is not greater. 
 
 9. In all engagements to pay that may be contracted in the future, 
 it will be stipulated that said payments will be made in Mexican 
 coin according to the law in force and mentioning its date. But if 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 351 
 
 the parties insist upon fixing the quality and weight of the coin, the 
 debtor shall be entitled to pay in legal money, at the market price 
 on the day when the debt becomes due, a quantity of metal corre- 
 sponding to the amount which he owes, if he can not pay in the stipu- 
 lated coin. 
 
 10. In the case of engagements to pay, contracted prior to the 
 publication of the decree of conversion and becoming due subsequently 
 to that decree, the debtor will be entitled, in case a rise in the value of 
 silver brings about the replacement of a considerable quantity of 
 silver coins by gold coins, to effect payment in the latter, in which 
 case article 1453 of the civil code of the federal district will be without 
 effect. 
 
 11. If an advance in the value of silver should enhance the value of 
 the silver dollar above the ratio mentioned in the foregoing clauses, 
 and the mints should be unable to meet the demand for gold coins 
 with the necessary promptitude, the government may invest American 
 goId_ coins with a legal tender character until they can be replaced by 
 Mexican gold coins. The American gold coins will, in such an event, 
 be received at the rate of 2 pesos per dollar. If such an advance occur 
 before the Government has provided itself with the necessary dies, the 
 exportation of subsidiary coins will be prohibited. 
 
 12. Two years after the date of the decree the coinage and importa- 
 tion of dollars of the present issue will be permitted in the capacity of 
 a commodity. 
 
 For the better comprehension of the ideas that have guided us in 
 presenting the foregoing programme of conversion we beg leave to 
 make some complementar}'^ observations. 
 
 Starting from the principle already laid down that the appreciation 
 and stabilization of our dollar can only be brought about by restrict- 
 ing its circulation, it has seemed to us indispensable that the closing 
 of the mints be supplemented by the strict prohibition to reimport 
 Mexican dollars of the present legal issues in order to prevent the 
 return of the dollars that are held abroad, principally in Asia, causing 
 the depreciation of the dollars circulating here. 
 
 In order to provide a new monetary circulation we have estimated 
 that three months would be necessary to make the new dies and a year 
 for the actual work of coinage, giving a total of fifteen months. By 
 coining 10 million dollars per month, which will be given in exchange 
 immediately for dollars of the present issue, we think that a loan of 
 $18,000,000 would be sufficient for the Government's purposes. 
 
 According to our tenth proposition persons who may have con- 
 tracted engagements to pay, prior to the decree of conversion, are 
 entitled to pay in gold, if the latter metal shall have replaced silver 
 by reason of an extraordinary appreciation thereof. In view of the 
 fact that our projected law in general favors the creditor, it seemed to 
 us just to make in this case an exception in favor of the debtor. 
 
 Our eleventh proposition also contemplates the contingency of an 
 appreciation of silver resulting in the exodus of that metal and its 
 replacement by gold. In such an event there would be a risk of a 
 depletion of cash, which, we think, would make it desirable to invest 
 American gold coins provisionally with a legal tender character, and 
 if the new subsidiary coins, which on account of their lesser value 
 would not leave the country, shall not as yet be in circulation, we think 
 
352 GOLD STANDARD IK INTERNATIONAL TRADE. 
 
 that the exportation of the present subsidiary coins should be pro- 
 hibited in order that there may not be a scarcity of such coins for 
 small transactions. 
 
 The above is what we have the honor of proposing to the fifth sub- 
 committee that it may reach a suitable decision. 
 
 E. G. Geanados. 
 E. Hegewisch. 
 Mexico, October 7, 1903. 
 
 Annex No 4. — Necessity of a Reserve Fund — Opinion of Delegate Genabo 
 
 Raigosa. 
 
 Third question. — "V^Hiat measures are to be adopted to bring about 
 the stability of international exchange on the hypothetical basis that 
 the values of the new coins of gold and silver that are to be struck are 
 to be in the ratio of 1 to 32 of the weight of pure metal that 'each 
 contains ? 
 
 This question, which I do not hesitate to consider as the basic ques- 
 tion of the whole monetary problem, has given rise to such differences 
 of opinion among the members of the special section of the fifth sub- 
 committee- — differences which it has been impossible to overcome by 
 verbal debates — that it has become necessary to state them in writing, 
 with a view to the methodical condensation of the considerations in- 
 fluencing each of the persons maintaining, opposite views, and with 
 the further object of complying with the suggestion of the minister of 
 finance that each member of the monetary commission should express 
 his ideas in this momentous question. The views, therefore, that I 
 shall express in this brief essay are purely personal, the product of my 
 own studies, and not polemical resources to win adherents or corrobo- 
 rative votes that might give authority and jDrestige to my opinions. 
 
 I. In order to get rid of silver monometallism there is no course 
 but to adopt the gold standard, with or without a gold circulation. 
 In the case of the latter alternative, which is the one adopted by the 
 monetary commission, the silver coin tends to divest itself of all rela- 
 tionship with the metal of which it is composed, to emancipate itself 
 from the fluctuations of the price of that metal in bars, and to become 
 dependent, as far as its exchange value is concerned, on gold alone as 
 the unit whereby all values are measured or estimated. 
 
 II. The adoption of the gold standard without a gold circulation 
 is a transient system, a preparation for the gold standard with gold 
 in circulation, which is the monetary ideal of the present age. That 
 preparatory system is indispensable to the avoidance of the crises or 
 upheavals of a brusque change of monetary regime, providing for the 
 gradual entrance of gold into circulation and for an ever increasing 
 degree of proximity to a stable and permanent parity in the legal 
 relationship of values. 
 
 III. In consequence the system adopted by the monetary commis- 
 sion is simply a prologue to the establishment of the gold standard 
 with gold in circulation. 
 
 IV. From this point of view the inquiry as to the measures neces- 
 sary to bring about legal parity, and when once attained to conserve 
 it permanently between the new silver coins and the gold unit, reduces 
 itself to the following points : (1) What is the most efficacious method 
 
GOLD STANDAED IN INTEENATIONAL TRADE. 353 
 
 to elevate artificially the gold value of the new silver coins to the 
 legal parity ? And secondly, what is the most efficacious method of 
 assuring the permanent fixity of international exchange when the 
 parity shall once have been realized? 
 
 y. In order to elevate artificially the gold value of the new silver 
 coins to legal parity there are two fundamental methods which sup- 
 plement one another : 
 
 (a) Limitation of the quantity of the inferior metal coined. 
 
 (i) The convertibility of the new coins of the inferior metal into 
 the superior metal at the rate fixed by law. 
 
 VI. The former method brings into play the law of monopoly or 
 the enhancement of value caused by scarcity. The closing of the 
 mints to the free coinage of silver thus figures a condition sine qua 
 non of the monetary reform. The commission has been unanimous 
 in the adoption of this feature. The mints will turn out the new 
 silver coin merely in the amount necessary to replace the old coin. 
 When the old coins shall once have been called in or melted the mints 
 will only coin silver dollars in exchange for gold. If gold is not 
 offered at the mints in quest of silver dollars, the quantity of silver 
 dollars circulating in the country at the date of the coming into opera- 
 tion of the new monetary law can not be added to. The stock of silver 
 dollars will therefore be restricted to the supply thereof in the coun- 
 try at the time when the exchange of the old coins into the new coins 
 shall have been completed. If commercial or other necessities cause 
 the exportation, or reduction in other ways, of the circulating supply 
 of silver dollars, the law of scarcity or limitation of supply will come 
 into play and will manifest itself in the appreciation of the remain- 
 der. Even without exportation or the withdrawal of dollars for 
 hoarding purposes the mere expansion of business and the increase of 
 the population will produce the same results by reason of an increas- 
 ing demand in the face of a supply which the absence of additions to 
 the stock of silver dollars causes to remain stationary. 
 
 VII. But will the normal operation of the law of scarcity, will the 
 closing of the mints to the free coinage of silver suffice to bring about 
 the legal parity of the new silver coins with gold and the stabiliza- 
 tion of international exchange without entailing difficulties and 
 periods of monetary crisis which, owing to their intensity and dura- 
 tion, will cause evils that will perhaps outweigh the benefits that 
 may legitimately be expected from the monetary reform? This is 
 where the difference of opinion begins. Mine is strongly negative; 
 the opinion of my honorable colleagues on the subcommittee is 
 affirmative. From their point of view there is no necessity of a 
 reserve fund which, cooperating with the law of scarcity, shall abridge 
 the period of transition, mitigate or obviate crises, regulate the cir- 
 culation, inspire confidence and certainty in the efficacy of the reform 
 and afford in one form or another a possible guarantee as to the 
 solidity of the new monetary system. They consider that the reserve 
 fund can never be necessary, and that at the most it may be desirable 
 after but not before, the practical attainment of legal parity. " Let 
 the monetary law be issued," say they, " let the mints be closed to the 
 free coinage of silver and await the results. If, after the lapse of a 
 reasonable period, the legal parity and the stabilization of exchange 
 are not attained, it will then be time to thmk of a reserve fund. 
 
 S. Doc. 128, 58-3 23 
 
354 GOLD 8TAWDAED IN INTERNATIONAL TRADE. 
 
 VIII. Experimentally this opinion seems to have strong support 
 in the result of the methods adopted by the Indian government to 
 elevate artificially the gold value of the silver rupee to 16d (legal 
 parity) without the aid of a reserve fund, as well as in the official" 
 opinion expressed by that government in 1898, to the effect that the 
 rise in the value of the rupee subsequently to 1894-95 " was due to 
 the contraction of the currency, and that the same cause would con- 
 tinue to act in the same direction so long as the mints were closed to 
 silver." Thus it would seem that it might be inferred from that 
 example and that opinion that the mere effect of the law of scarcity 
 or currency contraction would have been sufficient to raise the gold 
 value of the silver rupee to legal parity without the need of a reserve 
 fund. 
 
 IX. Nevertheless, the committee appointed by the British Govern- 
 ment under the chairmanship of Sir Henry Fowler to study the cur- 
 rency questions of India affirms in its report of July 1, 1899, that " it 
 has not been proved that the rise in the value of the rupee since 
 1894^95 is due solely to relative contraction of the Indian currency; 
 and it may be that it is not due mainly to this cause. It is not cer- 
 tain that there has been any contraction of the Indian currency which 
 has materially affected the exchange, though it may not unreasonably 
 be inferred that there must have been some contraction and that such 
 contraction has had some influence on the exchange value of the rupee. 
 On the other hand, there are causes other than contraction of the cur- 
 rency which affect the value of the rupee and the exchange with 
 London. Large borrowing in London on account of India, reduc- 
 tion of the drawings of the secretary of state, an increase in the 
 exports from India unaccompanied by an equivalent increase in 
 imports, as well as a general rise in gold prices, would all affect the 
 rate of exchange with India, though it is quite impossible to estimate 
 the relative importance of these factors among themselves, or the 
 amount of their influence on exchange, as compared with the effect 
 of a contraction of the currency, or to state the precise degree of 
 influence which any or all of them have had on any particular altera- 
 tion in the exchange. Nor, on the other hand, is it certain that the 
 imusually low rate of exchange that prevailed in 1894-95 was due 
 solely to a relative redimdancy of the Indian currency. The closing 
 of the Indian mints necessarily brought into play many disturbing 
 influences which may have affected 1894-95. Since the mints were 
 closed, there has also been large borrowing on Indian account, and 
 there have been in some years large reductions below the normal 
 amount in the public remittances from India, while fluctuations have 
 been experienced in the foreign trade of India, due to famine and 
 plague, as well as to other causes. 
 
 "All these causes must at different times have affected the exchange 
 either favorably or unfavorably. Another influence which must have 
 had a favorable effect on the Indian exchange is the reduction in the 
 imports of silver due to the closing of the mints. In face of the facts 
 we have just stated, we are unable to accept, without qualification, the 
 opinion that the rise in the value of the rupee since 1894-95 has been 
 due, wholly or mainly to a relative contraction of the Indian currency, 
 and though we accept in principle the proposition that a reduction in 
 the number of rupees tends to increase the value of the rupee, we are 
 not prepared to admit that such effect must necessarily be direct and 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 355 
 
 immediate ; nor are we satisfied that such reduction, carried out on a 
 large scale and within a limited period, might not aggravate, if it did 
 not ^produce, a period of stringency in the Indian money market." 
 I _X. India's example does not, therefore, prove, as at first sight it 
 might seem to, that the closing of the mints and the contraction of 
 the currency, due to the indefinite withholding of new supplies of 
 silver dollars, will suffice to raise the new coin to a legal parity with 
 gold and to stabilize exchange. On the contrary in regard to India 
 itself, in addition to the other causes pointed out by the Fowler com- 
 mittee as factors in the rise of the value of the rupee, we have to take 
 into account the considerable issue of paper money made by the In- 
 dian Government, after having deprived the banks of the right to 
 issue notes, the system of drafts on India established by the British 
 Government, on the basis of a gold fund deposited in London and the 
 constant increase in the output of gold from the mines of India, for 
 all these causes which, in the aggregate, tended to curtail the expor- 
 tation of gold or to increase the country's stock of gold, also tended to 
 augment the gold value of the rupee. Consequently India's example 
 does not seem conclusive in favor of venturing the entire success of 
 monetary reform on nothing but the closing of the mints to the free 
 coinage of silver, especially since that same example has, on the other 
 hand, demonstrated the dangers and inconvenience which that country 
 has passed through during the long transitional period of five years 
 that the rupee required to reach the desired parity, as stated in an 
 official document of the same Government quoted by Fowler as fol- 
 lows : " The government of India is anxious ' both in the interests of 
 the State and of the mercantile community,' to terminate the period of 
 transition without further delay- — in the interests of the State, because 
 it would be cheaper in the end to acquire a reserve of gold by borrow- 
 ing, and thus keep the exchange value of the rupee at a steady level 
 of 16 pence than to bear, for years the burden of expenditure entailed 
 by the lower level of the rupee; in the interests of the commercial 
 community because it was not desirable that their legitimate business 
 should be "hampered and embarrassed by^ the uncertainty of exchange, 
 while the want of confidence in the stability of the rupee discouraged 
 the investment of capital in India and available capital was remitted 
 to England whenever the exchange value of the rupee rose to a high 
 level." 
 
 XI. It is not easy in official language to lament more eloquently 
 the error committed in trusting to nothing but the influence of the 
 closing of the mints and the scarcity or contraction of the currency to 
 bring about an artificial rise of the silver coins to the legal parity nor 
 more clearly to state the drawbacks and the inconveniences incidental 
 to the lack of an instrumentality for the regulation of the currency, 
 which would have assured confidence in the solidity of the new mone- 
 tary system and have encouraged the investment of foreign capital. 
 " The creation of a reserve fund," said Professor Conant in his report 
 to the Secretary of War of the American Government on November 25, 
 1901, " is the most essential of the provisions to maintain confidence in 
 the new silver coins. Whatever may be the burden imposed upon the 
 Government for interest payments in order to form the reserve fund 
 it would be a small price to pay for the security afforded to commerce 
 and the invitation extended by a sound monetary system to the invest- 
 ment of capital with the resulting increase in the taxable property and 
 
356 GOLD STATSTDARD IN INTERNATIONAL TRADE. 
 
 the revenues of the islands." And in another part of the same report 
 he says : " The limitation of the quantity of silver coined and the 
 interchangeability of the cheaper metal with the standard metal at the 
 ratio fixed by law are the influences that have operated in the United 
 States to keep at par with gold a mass of silver currency of which the 
 bullion value is far below its face value." 
 
 XII. The government of India itself in its dispatch of March 3, 
 1898, when proposing the withdrawal of 24 million rupees in order to 
 steady the gold value of the rupee at the legal parity, dwelt on the 
 necessity of melting down that sum in bar silver, but " having first 
 provided a reserve of gold both for the practical purpose of taking the 
 place of the silver and in order to establish confidence in the issue of 
 our measures, the first step was to take powers to borrow sums not 
 exceeding in the whole 20 million pounds sterling and at once to remit 
 5 million pounds sterling in sovereigns to India as a first installment. 
 If exchange remained at or above 16d. there would be no further step. 
 But if, and so long as, the exchange fell below 16d. the government of 
 India would take rupees from its balances, melt them down, sell the 
 bullion for other rupees in India, pay these other rupees into its bal- 
 ances, and finally make good thereto the balance of loss with part of 
 the borrowed gold." These energetic measures will give an idea of the 
 terrible situation through which the country had passed and from 
 which it had not emerged in spite of the fact that since January of 
 that year the rupee had at last attained the parity so tenaciously 
 sought for five years, and though the Indian currency committee did 
 not indorse the proposal of the Indian government, that fact was 
 principally because the large and unlooked-for receipts of gold 
 during the remainder of that year and in 1899 led the committee to 
 prefer the definite establishment of the gold standard with a gold cir- 
 culation. This project was at once approved by the British Govern- 
 ment; the sovereign became unlimited legal tender in India and the 
 mints were thrown open to the free coinage of gold. 
 
 XIII. From all these precedents I infer that the closing of the 
 mints to the free coinage of silver and the influence of scarcity value 
 or currency contraction which that closing must occasion can not, if 
 unaccompanied and uncombined with the regulating action of a 
 reserve fund in one form or another, show a satisfactory indorsement 
 in the methods recently adopted by other countries under conditions 
 that may have been similar to our conditions at present, and there- 
 fore, in principle and as a general proposition, a reserve fund is an 
 essential requisite in the adoption of monetary reform. 
 
 XIV. "V\'1iat would be the object of the reserve fund and what its 
 chief functions ? 
 
 My opinion is that the reserve fund, in addition to serving as a 
 guaranty for the objects of the law and consolidating public confi- 
 dence in its results, aims at imparting to the interior circulation the 
 elasticity which it needs and to international exchange a gradual and 
 progressive degree of stability to the end that, during the transition 
 period, the country may not suffer violent monetary contractions and 
 that the market may not be exposed to sudden ebbs and flows owing to 
 the necessity of securing gold to settle its indebtedness to foreign 
 countries. To moderate, to regulate, to abridge the period of transi- 
 tion during which the new coins will be attaining their legal parity, 
 on the one hand, and, on the other hand, to facilitate the remittance 
 
GOLD 9TAJSDA.RD IN INTERNATIONAL TRADE. 357 
 
 of funds abroad in the money that is the standard of the commercial 
 world, on better terms than would be offered by private interests, are, 
 in brief, what I consider the chief functions of the reserve fund. 
 . XV. It is unnecessary to say that the functions mentioned must 
 lundamentally have for their aim the maintenance of a most impor- 
 tant condition for the country's progress, viz., its ability to attract 
 foreign capital through the security offered that further investments 
 effected can at any time be realized in the world's monetary standard. 
 If the studies of the first subcommittee prove anything, it is that in 
 Mexico, as in every hew country with large resources awaiting develop- 
 ments, foreign capital enters, and will continue to enter, chiefly in the 
 form of machinery for industrial enterprises, mining, and agriculture, 
 in the form of railway equipment, or in specie for material improve- 
 ments and for purchases of the public debt, etc., seeing that the sums 
 of money which corporations collect among their shareholders or 
 which are directly invested by private persons are devoted to the 
 acquisition of those instrumentalities of labor necessary for the con- 
 duct of their undertakings or to the purchase of securities by means 
 of said capital. As long as these investments continue active there 
 will be an excess of imports for which it will not be necessary to pay 
 by means of a compensating outflow of gold or commodities, save to 
 the extent of a small proportion of the country's production due to 
 importations of this nature; that is to say, in the form of interest 
 or profits, which will always be much less than the sums brought in, 
 so that the country is constantly receiving a great deal more than it 
 pays out. The only danger, or the greatest danger, of this situation 
 lies in the possibility that the current of investment may be suspended 
 or arrested and that the trade balance may suddenly have to be 
 settled in gold, but this danger can only arise as long as the monetary 
 system continues subject to unforeseen fluctuations and possibilities 
 of loss in the transformation into gold of the coin in which returns 
 or interest are paid ; that is to say, until such time as the reserve fund 
 shall begin to impart the promised stability to exchange and a pro- 
 gressive and steady approximation to the new legal parity. 
 
 XVI. It is not desirable and no one would suggest that the reserve 
 fund should be at once used to exchange the new silver coins into 
 gold at the legal parity, for such a use of the reserve would simply 
 amount to the suppression of the transition period and the implanta- 
 tion of the gold standard with a gold circulation. But the tendency 
 and immediate object of the creation of the fund would be to enable 
 us to advance with firm and ever accelerated steps to the earliest 
 possible attainment of that parity; and therfore all that may con- 
 duce, directly or indirectly, to diminish the fluctuations of exchange 
 and the pressure on the stock of metallic money; all that may con- 
 tribute to render the internal currency more flexible and to secure 
 a supply of the precious metals ; all that may tend to defeat surprises 
 or speculative combines inimical to the normal development of the 
 new monetary system should enter into the programme of the reserve 
 fund. 
 
 XVII. There is no doubt, as has been pointed out by noted con- 
 temporaneous financiers, that a great bank or combination of banks, 
 acting under suitable monetary arangements, would be able to manage 
 such a reserve fund much more effectively and much more in harmony 
 with the commercial necessities of the country concerned than any 
 
358 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 official institution however well administered. " If the country's 
 gold reserves," says Professor Andrew, of Harvard University, " were 
 to be concentrated in a great national bank, as they are in Germany, 
 France, and England, the fluctuations of exchange and the ebb and 
 flow of specie might 'be more easily regulated. In abnormal times 
 such an institution would serve to give stability to the value of silver 
 money by means of borrowings on the London money market or by 
 the sale of letters of exchange on its agents in other countries at lower 
 prices than those which are simply determined by considerations of 
 private gain. It might also put a brake on the tendencies that make 
 for unfavorable exchange conditions by raising the rate of discount, 
 or might limit the exodus of gold, like the Bank of France, by charg- 
 ing a premium on gold bullion or coin destined for shipment abroad." 
 The conditions surrounding the legal status of our banks in Mexico 
 render impracticable the idea of Professor Andrew save through a 
 radical reform in the organization of those institutions. Their life 
 is purely individual, aiming only at the private gain of their share- 
 holders and the attainment of the highest dividends possible, and 
 they are under no direct obligation to safeguard the public interests. 
 The banks of Mexico are private institutions, operating independently 
 and even antagonistically, actuated by the spirit of competition, 
 and without any thought of the clairns of solidarity. They do not 
 constitute an organic entity capable of combined action for any pur- 
 pose, even for common defense. Each seeks its own safety, its own 
 aggrandizement, by means of its own resources, without concerning 
 itself with the growth and prosperity of the others. Under such cir- 
 cumstances a satisfactory combination of the banks for the purpose 
 of taking charge of the delicate duty of administering the reserve 
 fund is for the present out of the question. Nor would it be wise 
 to confide functions so momentous to a single bank. So the adminis- 
 tration of the reserve fund must, in my opinion, be vested in an official 
 institution until such time as the desideratum of banking cooperation 
 shall be attained by means of a new form of organization. 
 
 XVIII. Thus the reserve fund, administered by an official insti- 
 tution, would consist of a deposit in gold situated abroad and an- 
 other deposit, originally in silver, situated within the country, and 
 its modus operandi, or powers, would substantially be as follows : 
 
 1. To sell and buy drafts payable in gold abroad. 
 
 2. To sell drafts payable in silver in Mexico. 
 
 3. To issue in Mexico temporary certificates of indebtedness, con- 
 stituting a charge upon the fund, payable in silver or gold at short 
 periods from the date of issue, either at a moderate rate of interest or 
 without interest. 
 
 4. To receive temporarily surplus funds of the treasury. 
 
 6. To buy gold coins or gold bullion at prices not exceeding the 
 cost of their importation from abroad. 
 
 XIX. The purchase and sale of drafts payable in gold is one of 
 the most efficacious and useful methods to assure the solidity of the 
 monetary system. Through that power the bank of Java is able to 
 maintain the silver coinage at the old ratio of 15^ to 1. " The bank," 
 says Professor Conant, " never carried more than a trifling amount 
 of gold, but the sale of gold bills on Holland at the usual rate of 
 exchange has for many years maintained the parity of the coins with 
 the gold standard of the Netherlands." 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 359 
 
 XX. The other methods or powers spealc for themselves, as they 
 are the same as those used by the Treasury of the United States to 
 maintain parity between the varied forms of its currency, and they 
 have also been incorporated into the new currency law of the Philip- 
 pine islands promulgated on March 2 of the present year and of which 
 sections 6 and 8 are as follows : 
 
 " Sec. 6. The government of the Philippine Islands may adopt such 
 measures as it may deem proper to mamtain the value of the silver 
 Philippine peso at the rate of one gold peso, and in order to main- 
 tain such parity between said silver Philippine pesos and the gold 
 pesos herein provided for, and for no other purpose, may issue 
 temporary certificates of indebtedness bearing not more than four 
 per cent interest, payable at periods of three months or more but 
 not later than one year from the date of issue, which shall be in the 
 denominations of twenty-five dollars or fifty pesos or some multiple 
 of such sum, and shall be redeemable in gold coin of the United States 
 or in lawful money of said islands, according to the terms of issue pre- 
 scribed by the government of said islands, but the amount of such cer- 
 tificates outstanding at any one time shall not exceed ten million dol- 
 lars or twenty million pesos: Provided, That said certificates shall be 
 exempt from the payment of taxes to the government of the Philip- 
 pine Islands or to any local authority or to the Government of the 
 United States: And provided, That all the proceeds of said certifi- 
 cates shall be used exclusively for the maintenance of said parity, as 
 herein provided, and for no other purpose, except that a sum not 
 exceeding three million dollars at any one time may be used as a con- 
 tinuing a credit for the purchase of silver bullion in execution of the 
 provisions of this act." 
 
 " Sec. 8. That the treasurer of the Philippine Islands is hereby au- 
 thorized, in his discretion, to receive deposits of the new silver coins 
 at the treasury of the government of said islands or any of its 
 branches in sums of not less than twenty pesos and to issue silver cer- 
 tificates therefor in denominations of not less than two nor more than 
 ten pesos, and coin so deposited shall be retained in the treasury and 
 held for the payment of such certificates on demand and used for no 
 other purpose. Such certificates shall be receivable for customs taxes 
 and for all public dues in the Philippine Islands, and when so 
 received may be reissued, and when held by any banking association 
 in said islands may be counted as part of its lawful service." 
 
 XXI. The portion of the reserve fund in gold, deposited abroad, 
 would, through the sale of drafts against it, serve to prevent conges- 
 tion in the periodical demand and supply of drafts which at present 
 enables private bankers to speculate in the rise or decline of the 
 exchange rates in anticipation of requirements. The studies of the 
 third subcommittee show that the drafts of the majority of exporters 
 become plethoric in the second half of each fiscal year and grow scarce 
 again in the first half ; whereas the remittances of funds for the pay- 
 ment of the coupons of the public debt are characterized by a regu- 
 larity with which all are familiar. Thus it is noticed in the market 
 that, during certain months of the year, the purchase price of com- 
 mercial drafts is several j)oints below actual parity, while in other 
 months it is above said parity, occasioning and stimulating the expor- 
 tation of coin. A careful and far-sighted administration of the 
 reserve fund will correct these irregularities with advantage to the 
 
360 GOLD STANDAED IN IKTEBNATIONAL TRADE. 
 
 community; for as its operations will not be actuated by profit it 
 will aim at distributing the demand for the transfer of values on an 
 economical basis and preventing the periodicity of congestion in the 
 supply or the demand in future. 
 
 XXII. As will have been observed in the course of this succinct 
 exposition, which the very brief time allowed me, in relation to the 
 importance of the question, has not permitted me to carry into detail 
 or even to complete, the functions of the reserve fund only apply to 
 the period of transition or to the initial period of the monetary 
 reform, the period during which the new coin will gradually be 
 approximating legal parity. When that parity shall have been once 
 attained, the importance of the fund will cease to exist, for then the 
 gold standard with gold in circulation will have been ushered in and 
 the system will operate automatically and with entire stability. 
 
 Such are my opinions and I respectfully submit them to my honor- 
 able colleagues on the fifth subcommittee. 
 
 G. Raigosa. 
 
 Mexico, November 5, 1903. 
 
 Annex No. 5. — Rbpobt op Messes. Josfi de Landebo t Cos and Carlos 
 
 Sellerier. 
 
 Fourth question. — Is it advisable to counsel the adoption of special 
 measures such as the abolition or diminution of taxes and the like, that 
 will save not only the silver-mining industry but export industries in 
 general from the losses that might accrue to them from a change of 
 monetary system in the Republic ? 
 
 In compliance with the task assigned to us by the fifth subcom- 
 mittee we hereby report as to the points submitted to us : 
 
 The mining industry and export industries will suffer a loss equal to 
 the difference between the rate of foreign exchange in force before the 
 projected monetary reform becomes operative and the rate to which 
 exchange will fall as a consequence of that reform, which will be in 
 the neighborhood of 200 per cent on New York, accepting the hypo- 
 thetical basis of 1 to 32 as the relation between the new gold and silver 
 coins. Supposing that the present rate of exchange, 219 per cent on 
 New York, were to j)revail just prior to the monetary reform, the loss 
 would be 19 in 219 or 8.68 per cent minus one-fourth part in the case 
 of mines, owing to the consumption of foreign and native articles 
 therein, according to the calculations of the second subcommittee, 
 leaving 6.51 per cent. This percentage Avould be liable to increase or 
 diminution according to the subsequent decline or rise of the price of 
 silver in foreign markets. 
 
 In order to afford some relief to mine, owners and the growers of 
 exportable agricultural products for this loss, we beg leave to suggest 
 that the fifth subcommittee, in submitting to the finance department 
 the project of monetary reform, should entreat that department to 
 ask the Federal Congress to approve the suppressions and reductions 
 of taxation set forth in the accompanying memorandum. 
 
 As the fifth subcommittee well knows, one of the undersigned is not 
 in favor of monetary reform; but being a. member of the fifth sub- 
 committee he considered himself in duty bound, when discussing the 
 
GOLD STANDARD IN INTEENATIONAL TRADE. 361 
 
 bases of said reform, to express his opinion with sincerity and frank- 
 ness in regard to each of those bases. 
 
 We renew to you the assurances of our courteous consideration. 
 
 JoSE DE LaNDEEO Y CoS. 
 
 Carlos Selleeier. 
 
 Mexico, Octoher 26, 1903. 
 
 MEMORANDUM OF THE StTPPRESSIONS AND EEDtTCTIONS OF TAXATION SUGGESTED ON 
 BEHALF OF THE MINING AND EXPORT INDUSTRIES TO SYNCHRONIZE WITH THE 
 REALIZATION OF THE PROJECT OF MONETARY REFORM. 
 
 Reduction of the annual tax on mines of silver, gold, and platinum, 
 established by article 4 of the law of June 6, 1892, from $10 to $5 per 
 claim (pertenencia). 
 
 Suppression of the 3 per cent stamp tax on the value of silver and 
 gold, established by the budget law and by Section I, article 1, of the 
 decree of March 27, 1897. 
 
 Reduction from 2 to 1 per cent of the coinagetax on the value of 
 silver, established by the budget law and bv Section II, article 1, of 
 the decree of March 27, 1897. 
 
 Reduction from 2 per cent to one-quarter per cent of the coinage 
 tax on the value of gold, established by the budget law and by Section 
 II, article 1, of the decree of March 27, 1897. 
 
 Reduction from $1.25, $2, $2.50, and $3 per kilogram to $1 per kilo- 
 gram of silver separated, of the dues on the separation of gold fixed 
 by the tariff of March, 1897, attached to the rules of practice of the 
 decree of the same date. 
 
 Exemption for ten years from all Federal, State, and municipal tax- 
 ation, with the exception of the stamp tax, for the owners of mines 
 producing mineral substances not hitherto exploited in the Republic 
 and of which the minimum output shall be 1,000 tons of ore per 
 annum. 
 
 Exemption from import duties on the following articles largely 
 used in mines and metallurgical works and of which some already 
 enjoy such exemption under the existing custom-house tariff : 
 
 Sulphuric acid ; quicksilver ; sulphur in the rough, smelted, or sub- 
 limated; hard coal; alkaline cyanides; coke; hyposulphite of soda; 
 soft coal; machinery and apparatuses for mines and metallurgical 
 works; nitrate of potash or soda; sulphate of copper; zinc in pigs, 
 filings, grains, or in the filiform state. 
 
 Removal of export duties on the agricultural products at present 
 subject to those duties. 
 
 Annex No. 6. — Observations of Lie. Joaquin D. Casasus in Regard to the 
 Opinion of Lie. Genaro Raiqosa. 
 
 Mexico, Novemler 12, 1903. 
 To Sr. Lie. Don. Pablo Macedo, 
 
 Chairman of the Fifth Subcommittee, City. 
 My Dear Friend : It has caused me the deepest regret not to be able 
 to share the opinions which you have been maintaining in the deliber- 
 ations of the fifth subcommittee, and I have formed the resolve not to 
 
362 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 attend any of the forthcoming sessions that may be held for the pur- 
 pose of discussing the report presented by our colleague and friend, , 
 Sr. Lie. Genaro Raigosa. ' 
 
 The regret which I experience at not being able to share your 
 opinions is easily explicable. From the time when you were my 
 master until now I have been wont to bow respectfully to your opin- 
 ions and hardly ever has there been any divergence of convictions 
 between us ; on the contrary, each day has brought forth new ties that 
 have more closely united and identified us. 
 
 It has, therefore, been extremely grievous to me not to concur in 
 the ideas which you have been championing in the discussions of the 
 fifth subcommittee and to have been constrained to combat them at 
 each of the sessions which I have attended, and, what is worst of all, 
 to combat them with tlie perhaps excessive vehemence which I am in 
 the habit of putting into the defense of my personal convictions. 
 
 The decision which I have reached is, however, no reason why I 
 should not acquaint the fifth subcommittee in a written form with 
 the ideas which I hold in regard to the problem that is absorbing the 
 attention of all of us, and if my avocations leave me time I will frame 
 a brief and simple report and will send it to you, that it may be added 
 to the records of the subcommittee. i 
 
 Nor will my resolution prevent me from formulating some observa- 
 tions as to the report of Lie. Genaro Raigosa, for it seems to me that 
 in doing so I am giving him a proof of the great interest which I 
 feel in the very important document presented by him to the fifth 
 subcommittee. 
 
 My observations will be very brief and are as follows : 
 
 I. The reserve fund ought preferably to be created in Mexico and 
 ought to consist exclusively of gold, and instead of issuing drafts on 
 foreign points it ought rather to confine itself to supplying gold for 
 exportation. 
 
 It would seem to be the opinion of all of our colleagues that the 
 reserve fund should not be so administered as to convert it into an 
 exchange bank, properly so called, destined to compete with the bank- 
 ing institutions of the country. It has been maintained, and, as I 
 think, rightly maintained, that the reserve fund should only be 
 brought into action in extreme cases and should not be operated so 
 as to interfere with commercial transactions. This object can only be 
 attained if the body controlling the fund confines itself to supplying 
 gold for exportation, for without doubt gold will only leave the 
 country if, after offsetting our debit and credit abroad, it shall be 
 found necessarj^ to pay a balance to our foreign creditors. 
 
 If the fund is to serve exclusively as a guaranty for the currency 
 and is destined to afford elasticity to that currency, it will be found of 
 the utmost importance to confine the primary object of its existence 
 to the function I have just mentioned. Exchange operations will con- 
 tinue to be effected in the same way as hitherto, the banks will 
 continue to be the intermediaries between foreign and native mer- 
 chants, and the fund will only come into play by supplying gold for 
 circulation when the necessity therefor arises. 
 
 If the object sought by the fifth subcommittee is what I think it is, 
 it will be easy to regulate the service of the fund and lay down the 
 rule that bars of gold or Mexican coins of the new issue will only be 
 supplied upon payment, in any event, of a commission of 1 per cent 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 363 
 
 and that gold -will only be paid out in return for an equivalent quan- 
 tity of dollars of the new issue. 
 
 II. It seems to me dangerous to invest the body controlling the fund 
 with powers to issue certificates of indebtedness on time, payable in 
 silver or gold, with or without interest. 
 
 If we desire to impart to the reserve fund a character of real 
 solidity, it must in no case be made the basis of credit operations. 
 The fund should consist of gold alone and should only part with it in 
 exchange for silver coins of the new issue. 
 
 We can not have recourse to systems employed by the United States, 
 for, on the one hand, our Government does not unfortunately enjoy 
 the same degree of credit as the American Government, nor, on the 
 other, is it possible for us to offer as a guaranty for the success of the 
 monetary reform any confidence chat our Government may be capable 
 of inspiring for a long period of time. 
 
 The American Government in the law dealing with the Philip- 
 pines' cuiTency instead of issuing a loan and setting up the reserve 
 fund with the proceeds thereof, empowered the corporation control- 
 ling the fund to secure gold by means of certificates of indebtedness. 
 My belief is that our Government would prefer to issue a loan and set 
 up the fund with its proceeds rather than authorize the body control- 
 ling the fund to make use of its credit. 
 
 On the other hand, short-time gold securities could not be issued in 
 the interior of the country, and if they were to be issued abroad it 
 were better, on every account, that the Government should undertake 
 a direct emission of long-time securities. 
 
 I see no reason why the management of the fund should be empow- 
 ered to issue certificates of indebtedness in exchange for silver, for 
 the only silver entering the fund will be that which is withdrawn 
 from the circulation in exchange for gold. Save and except for that 
 purpose there would be no object in adding a stock of silver to the 
 fund. 
 
 Among the measures to be put in practice during the period of 
 transition, mention has been made of the emission of certificates for 
 dollars of the new issue ; but my view of the matter is that these cer- 
 tificates will only be issued in exchange for dollars of the old issue, 
 a,nd that the exclusive object of the measure is to make provision for 
 the insufficient capacity of our mints, which assuredly could not in a 
 short period of time coin the quantity of dollars that will be neces- 
 sary to replace the dollars at present in circulation. 
 
 These are the only observations which I should have to formulate 
 with respect to the report of Mr. Raigosa. 
 
 I avail myself of this opportunity to offer you a renewed assur- 
 ance of my high and unvarying regard. 
 
 Joaquin D. Casasus. 
 
 Annex No. 7 — Eeport of Lio. Joaquin D. Casasus. 
 
 Sir: The discussions that have taken place at the sessions of the 
 fifth subcommittee have impressed upon me the conviction that some 
 of its members do not share my opinions in regard to the means that 
 should be put in practice in order to afford a correct solution for the 
 monetary problem that is absorbing our attention. 
 
364 GOLD STANDARD IN INTERNATIONAL TRADE.. 
 
 Inasmuch as each of the various members of the fifth subcommittee 
 had in advance made a serious study of the monetary question and 
 had found in such study the ground for his opinions, it can not be ex- 
 pected that those opinions should now be modified and become uni- 
 form or that a given project should command unanimity of assent. 
 
 It is therefore the duty of each and every one of the persons, to 
 whom the consideration of the monetary problem was referred by the 
 department of finance, to formulate his opinion and give his reasons 
 for it. 
 
 Moreover, this was the specific desire of the department of finance 
 and public credit in appointing the monetary commission, for the 
 circular of February 4, of the current year, explicitly stated that the 
 Government did not expect the monetary commission to give an 
 opinion in the form of an unanimous or majority vote, but that it 
 merely sought to learn the individual views of the various persons 
 whose cooperation had been invited, so that it might be in a position , 
 better to solve the grave economic questions which it had before it. 
 
 The necessity of formulating my opinion and the expedience of 
 stating my reasons therefor impel me to besijeak for a few brief 
 moments the attention of the members of the fifth subcommittee, 
 whose duty it is to lay before the commission in full session the bases 
 for a new monetary system in the Eepublic and the measures that 
 should be adopted to secure fixity of international exchange. 
 
 The report which I presented, together with Eng. Manuel Fernan- 
 dez Leal, director of the mints, contains my views in regard to the 
 new monetary system which it behooves us to adopt. In conse- 
 quence I must only address myself now to the consideration of the 
 questions that are more directly connected with the stabilization of 
 international exchange. 
 
 The aim of the Government of the Eepublic, in modifying its 
 monetary system, is to impart fixity to foreign exchange, and it de- 
 sires to attain that end in order that the varied forms of our public 
 wealth may not again be affected by a new and still heavier deprecia- 
 tion of silver in the future, and that the evils and dangers inherent to 
 constant oscillations in exchange may hereafter be obviated. 
 
 The measures on which, in my opinion, the monetary reform must 
 be based are threefold : 
 
 I. The suspension of the coinage of unlimited legal tender silver on 
 private account. 
 
 II. The creation of a gold guaranty fund of which the object shall 
 he to regulate the volume of coin in circulation and maintain the 
 parity of international exchange at the ratio provided by law. 
 
 III. The opening of the mints to the free coinage of gold. 
 
 I hold that the mere suspension of the coinage of our ]p resent silver 
 dollar, though it would tend here, as it has in other countries, to dis- 
 associate the value of the silver coin from the value of silver bullion 
 as a commodity oh the London market, would not at once raise the 
 value of that coin to legal parity with gold, and thus the success of 
 the monetary reform and the desired stabilization of international 
 exchange would be compromised. 
 
 The inefficacy of the measure would be due not so much to the 
 special circumstances of our country as to the natural effects which 
 the suspension of silver coinage has produced in every country, de- 
 
GOLD STANDAED IN INTERNATIONAL TEADE. 365 
 
 pending on the greater or less amount of gold held by the banks or 
 used for circulation. 
 
 The scarcity of coin, which would be the only effect due to suspen- 
 sion of coinage, would, it is true, tend of itself to enhance its value; 
 but as that enhancement would have to be the work of time and the 
 enlargement of currency requirements, unaccompanied by an in- 
 creased coefficient in the rapidity of its circulation, the result would 
 be that the stabilization of exchange would not at once be attained, 
 and the lack of immediate success would disqualify the country from 
 attracting a large volume of foreign capital, without which it would 
 have no other recourse for the settlement of its trade balance than to 
 use for that purpose a coin Avhich could only become exportable by 
 reconversion into a commodity, subject to all the fluctuations to 
 which the price of that commodity is exposed in the world's markets. 
 The possession of a greater or less amount of gold is, therefore, an 
 indispensable condition if the suspension of the coinage of silver is 
 to produce automatically all its effects; and seeing that there is no 
 gold in circulation here, it becomes necessary to establish a gold fund 
 whose functions shall be identical to those which gold would perform 
 if it circulated in the country, and whose aim will, therefore, be to 
 
 ; compensate the lack of a gold circulation. 
 
 ■ If the object of the gold guaranty fund is to assure at once the 
 fixity of exchange, there can be no objection to opening the mints to 
 
 , the free coinage of gold, for if currency requirements shall demand 
 a larger supply of monetary units, commercial interests will intro- 
 duce gold into the country, and as soon as it begins to be coined 
 absolute certainty will exist that the nation, in the long run, will pass 
 with ease from silver monometallism to gold monometallism. 
 
 In order to prove the truth of my assertions I proceed to study as 
 briefly as possible the history of the suspension of silver coinage, the 
 results obtained thereby in countries which have had recourse to that 
 measure, and the various causes to which their success is to be 
 
 , ascribed. 
 
 ' All the nations which, since 1873, have sought to ward off the 
 
 ' effects which the depreciation of silver was liable to produce in their 
 silver currencies have had recourse to the suspension of the coinage 
 of silver on private account in case the open and resolute adoption of 
 gold monometallism did not seem to them to be possible nor conducive 
 to their interests. 
 
 Gold was adopted as the standard, perhaps as a result of the resolu- 
 tions adopted by the international conference of Paris in 1867; by 
 the German Empire, under the laws of December 4, 1871, and July 9, 
 1873; by the United States by act of February 12, 1873; by the Scan- 
 dinavian states imder the monetary convention of May 27, 1873, 
 which was the basis of Norway's currency law of June 4, 1873, and by 
 Japan under the law of March 26, 1897. , , , „ . „ 
 
 The following nations successively suspended the free coinage of 
 silver on private account: Holland, provisionally, on May 28, 1873, 
 and definitelv on December 9, 1877; France, which by laws of Jan- 
 uary 31 1874, and April 26, 1875, first limited that coinage and 
 afterwards by decree of February 26, 1876, suspended it; the other 
 nations of the Latin Union, in 1875 and 1876 ; Austria, in 1879 ; India, 
 by act of June 26, 1893, and Eussia, by ukase of July 16, m the same 
 vear. 
 
366 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 The fundamental difference between these two classes of measures 
 lies in the fact that whereas the countries which adopted the gold 
 standard demonetized silver and proceeded to withdraw immediately 
 all the coins of that metal in circulation, the nations which suspended 
 the coinage of the white metal on private account retained all their 
 existing silver coins in circulation, investing them artificially with a 
 value equal to the gold coins at the parity provided by their monetary 
 legislation. 
 
 As the results achieved by countries which have suspended the free 
 c;oinage of silver on private account are said to have been due exclu- 
 sively to the nature and scope of that measure, it becomes necessary to 
 study it closely, for it constitutes a most admirable device whereby 
 nations without foregoing the services which their silver coins in cir- 
 culation are capable of rendering to them have, nevertheless, suc- 
 ceeded in attaining fixity of international exchange. 
 
 The suspension of silver coinage is a measure only recently adopted 
 by civilized nations, and for that reason it has not hitherto been 
 studied as closely as it deserves to be, and no endeavor has been made 
 to determine its scope and importance from the standpoint of eco- 
 nomical principles. 
 
 Prior to the depreciation which the yellow metal underwent as a 
 consequence of the discovery of the rich gold fields of California and 
 Australia, the European nations either coined simultaneously the two 
 precious metals, gold and silver, at a predetermined ratio or, accord- 
 ing to their preferences, adopted one or the other of the metals as the 
 basis of their monetary systems. 
 
 The monetary systems of that date were either monometallic or 
 bimetallic, but in either case the metal or metals chosen to do duty as 
 money operated automatically, were coined freely on private account 
 and always circulated as unlimited legal tender. 
 
 Thus the scientific foundation on which all monetary systems rested 
 was the free coinage of the metal or metals selected to act as money 
 and the unlimited legal-tender capacity with which said metal or 
 metals were invested. 
 
 In the last third of the nineteenth century there appeared what 
 many persons have called the " third system," whereby nations that 
 were previously under the bimetallic regime have retained their sil- 
 ver money as unlimited legal tender, though depriving private per- 
 sons of the right to have it coined on their own account at the mints. 
 
 This third system has in consequence repudiated a fundamental 
 principle to which every sound currency ought to conform. 
 
 In point of fact every sound currency ought to be coined freely on 
 private account and to be legal tender. It must be unlimited legal ten- 
 der, for if it is not it can not be received in payments nor extinguish 
 the obligations which men reciprocally contract. And its mintage on 
 private account must be free, tor thus alone can the quantity of cur- 
 rency that should circulate be fixed ; thus alone can that quantity be 
 augmented in proportion as the nation's progress enlarges the field 
 for its use; and thus alone, in fine, can the currency always be an 
 exportable article, destined to act as the regulator of internal and for- 
 eign commerce and be coined or melted according to the exigencies of 
 international trade relations. 
 
 If this third system, which has been picturesquely called the " limp- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 367 
 
 ing standard," repudiates one of the economical principles that has 
 ever been the foundation of a good currency, it affords, on the other 
 hand, a device which has enabled silver coins to continue circulating 
 as unlimited legal tender, despite the enormous and ever-widening 
 disparity between the commercial values of the two precious metals, 
 gold and silver. 
 
 But does this third system deserve to be called a " system ?" Could 
 it be adopted by nations permanently on the same footing as other 
 systems based on the principles of economical science? 
 
 The niere fact that a legislative measure, which any nation may 
 adopt, violates the basic principles of a good currency suffices to de- 
 prive that currency of any claim to be considered as a monetary sys- 
 tem properly so called. It can only rank as a transitional measure, 
 destined not to serve as the basis of a permanent system, but as a link 
 between silver monometallism and gold monometallism, or between 
 bimetallism and monometallism. 
 
 The origin of the suspension of silver coinage gives us an insight 
 into the object had in view thereby. 
 
 The depreciation which gold underwent in the decade from 1854 
 to 1864 impelled the nations to demonetize it; and when the depre- 
 ciation of silver in relation to gold set in, the same nations experi- 
 enced the necessity of eliminating silver from their monetary circu- 
 lations. 
 
 However, as it was not possible for the nations to continue chang- 
 ing their monetary systems backward and forward so as always to 
 have the dearer metal as their standard, whenever a change in the 
 commercial value of the precious metals occurred, certain powers de- 
 cided to suspend the coinage of the white metal for the twofold object 
 of protecting their commercial future and securing time to see 
 whether the depreciation of silver would prove temporary, as the de- 
 preciation of gold had been, or would be permanent and of such pro- 
 portions as to rob silver of its usefulness for monetary purposes. 
 
 Thus the idea that the depreciation of silver, due to Germany's 
 monetary reform, might prove transient rather than lasting, origi- 
 nated the legislation which in Holland, France, and other nations of 
 the Latin Union suspended the coinage of silver on private account. 
 
 Unfortunately the depreciation of silver, instead of being transient, 
 proved permanent and became more and more accentuated, until the 
 disparity between the legal value of the circulating silver coins in 
 nations which had suspended the free coinage of silver and the com- 
 mercial value of silver bullion on the London market became enor- 
 mous. 
 
 Hence the nations, especially those nations which had a large quan- 
 tity of silver coins in circulation, have either been unable to bear the 
 loss that would have been entailed by exchanging those coins for gold 
 at the legal parity or they have found it impossible to secure the gold 
 on account of the heavy demand of the civilized world for that metal 
 during the last thirty years. Owing to this fact, what ought only to 
 have been a transitional measure of a more or less brief duration has 
 become the basis of a regular system ; but though in the case of some 
 nations it shows outward signs of permanence, it will in the end 
 prove to have been only a natural step toward the monetary regime 
 of which gold is the sole and exclusive basis. 
 
368 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 All that has been said goes to establish the fact that the suspension 
 of the coinage of a metal on private account, while retaining the 
 coins made of that metal in circulation as unlimited legal tender, is 
 not a monetary system at all, but a transitional measure in the evolu- 
 tion from silver monometallism or bimetallism to a currency chiefly 
 composed of coins made of the metal adopted as the new standard. 
 
 But although this measure can not be permanently embraced as if 
 it were in reality a monetary system, it has not failed to produce the 
 results which the nations set before themselves when they adopted it. 
 
 What are those results ? 
 
 The suspension of the coinage of a metal differs from its demone- 
 tization in that under the latter regime all coins made of the demone- 
 tized metal are withdrawn and in the other case the coins continue to 
 circulate as before as unlimited legal tender. 
 
 From this it will be understood that the effects of a change of 
 standard and the effects of the suspension of a metal's coinage on 
 private account must be distinct. 
 
 The mere change of monetary standard only affects the commer- 
 cial value of the metal demonetized, whereas the suspension of coin- 
 age, independently of its influence on the value of the metal, brings 
 about a divorce between the value of that metal as bullion and the 
 value of the coins of that metal which remain in circulation. 
 
 The change of standard affects the value of the discarded metal 
 both because it diminishes the demand therefor (seeing that it is no 
 longer required for monetary uses) and because it increases the sup- 
 ply, seeing that, as a general rule, the old coins thereof, which are 
 withdrawn, are sold as buUioij by the government making the change. 
 
 The suspension of coinage, though also affecting the value of the 
 metal as a commodity, affects it only through limitation of the de- 
 mand, which perforce will be more restricted than formerly. 
 
 But the difference does not lie in the influence exercised on the 
 value of the metal but in the disassociation established between the 
 value of the metal as a commodity and the value of the metal as a 
 coin, a disassociation due to the fact that while the value of the metal 
 as a commodity tends downward, the value of the metal as a coin 
 experiences a necessary enhancement. 
 
 How does that disassociation take place? 
 
 The phenomenon is easily explained. The value of the metal on 
 the market ceases to affect the value of the metal from which are 
 made the coins remaining in circulation; while the former declines, 
 on account of its greater plentifulness or the curtailed demand, the 
 latter rises on account of its greater scarcity in relation to constantly 
 increasing currency requirements. 
 
 As every progressive country needs constant additions to its cur- 
 rency and as when free coinage has been suspended those additions 
 are not forthcoming, the result is that the enlarged demand is met by 
 an unaltered supply, and by virtue of the law of supply and demand 
 the coins in circulation will appreciate daily, their value increasing 
 in proportion as the want of them becomes more pressing. 
 
 There is, however, a factor that tends to counteract this natural 
 operation of the law of supply and demand. As the coins in circu- 
 lation enter daily into a successive series of transactions, currency 
 requirements do not depend exclusively on the progress of nations 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 369 
 
 and the volume of their business, but also on the greater or less de- 
 gree of rapidity with which the currency can be made to do duty for 
 the purposes of trade. 
 
 The coefficient of rapidity of the monetary circulation is, therefore, 
 an element that must be taken into account when studying the effects 
 of the scarcity value of a currency. 
 
 If the restriction of the quantity of coins in circulation through 
 the suspension of coinage on private account is compensated by a 
 higher coefficient of rapidity in circulation, it is unquestioned that 
 the effects of scarcity value will not be felt and that the value of the 
 coins in circulation will not be raised. 
 
 Thus when an endeavor is to be made to raise the value of the coins 
 in circulation merely through the suspension of free coinage, it is 
 necessary first to be sure that an acceleration of the circulation will 
 not counteract the natural operation of the law of scarcity. 
 
 In consequence, the disassociation between the price of a metal as 
 a commodity on the markets of the world and the value of the same 
 metal as a coin in the internal circulation of a country will only be 
 attained when it is possible to enhance the value of the metal as a coin 
 through scarcity, and that enhancement will only take place when 
 the increase in the rapidity of circulation is not sufficient to neutralize 
 the ever-increasing expansion of currency requirements. 
 
 Furthermore, the disassociation that may be brought about between 
 the value of a metal as a commodity and the value of the same metal 
 as a coin in a country's internal circulation, may be stable or unstable. 
 Its attainment does not assure its permanence ; on the contrary, it may 
 easily disappear if the normal conditions of the internal circulation 
 are interfered with. 
 
 Now, when Avill it be stable and when will it be unstable ? 
 
 Stability of the effects that flow from the mere suspension of 
 silver coinage on private account can only be secured when the trade 
 balance is favorable, and it will disappear as soon as the trade balance 
 compels the nation to pay the debt of its international transactions 
 in the circulating medium. 
 
 These facts are so easily comprehensible that they do not require 
 explanation. Coine made of a metal whose free coinage has been 
 suspended are not coins of full value, but of an artificially raised 
 value, and, consequently, they are not exportable. They rather resem- 
 ble the subsidiary coins which, being of less fineness than the unlim- 
 ited legal-tender coins, are resfricted to the internal circulation from 
 which they should never part; or, rather, they are more like bank 
 notes which can only circulate in the localities where they can at 
 pleasure be converted into coin. . . » i ^u -^ 
 
 If a coin has greater value in the interior of a country than it pos- 
 sesses as bullion abroad, it can never be exported save as a commodity 
 and when exported it will lose the higher value with which it had 
 been invested in the internal circulation, and thus the barrier between 
 the value of the metal as a commodity and the value of the metal as a 
 
 coin will break down. „ ., , • j. • ii,„ 
 
 The suspension of the free coinage of silver can only maintain the 
 enhanced Value of a coin in internal markets if the balance of trade 
 does not constrain the nation to export its circulating coins. 
 
 S. Doc. 128, 58-3 24 
 
370 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 When the necessity of settling an international trade balance in 
 coin forces the exportation of the precious metals, the effects of the 
 mere suspension of the free coinage of silver will be nullified and all 
 the results attained thereby will disappear. 
 
 The history of the suspension of the free coinage of silver in the last 
 quarter of the nineteenth century proves the truth of these assertions 
 and shows the causes to which the results obtained in Europe, Amer- 
 ica, or British India are due. 
 
 The suspension of the free coinage of .silver has occurred under 
 two different conditions : 
 
 I. With a stock of gold coins, large or small, either in circulation 
 or held by governments or banks. 
 
 II. Without a stock of gold coins. 
 
 The results that have been secured under these two different con- 
 ditions may be studied either in the light of normal circumstances 
 and a favorable trade balance or in the light of circumstances that 
 necessitate the settlement of a trade balance in the precious metals. 
 
 When there is a stock of gold coins, either in circulation or held 
 by the banks or public authorities, whether that stock be great or 
 small, the effects of the suspension of free coinage become operative 
 immediately; the value of the silver coins in the country's internal 
 circulation becomes at once equal to that of the gold coins, at the ratio 
 provided by the monetary laws; international exchange settles near 
 parity and stays there with relative stability. 
 
 These phenomena are easily explainable. The value of the silver 
 coins, in spite of the decline of silver bullion on the market for 
 the precious metals, stands at an equality with the value of the gold 
 coins at the ratio fixed by law : 
 
 1. Because, owing to their scarcity, the value of the silver coins 
 tends to rise; 
 
 2. Because the silver coins may easily be exchanged at par for gold ; 
 and 
 
 3. Because currency requirements, not satisfied with the quantity of 
 silver coins on hand, tend to retain gold in circulation, notwithstand- 
 ing the higher commercial value of the latter metal abroad. 
 
 The fixity of exchange at the nearest possible approach to legal 
 parity is assured: 
 
 1. Because, inasmuch as gold is available for shipment abroad, 
 there exists in reality an exportable coin for the contingency of an 
 adverse trade balance; and 
 
 2. Because, by means of various artificial devices, such as coin- 
 age dues or premiums charged on gold for exportation, it is possible 
 to hold gold back, so that it may be exported on the smallest scale 
 possible, which' aids the natural tendency which nations feel to main- 
 tain the equilibrium of their foreign trade. 
 
 When there are no gold coins in circulation and none held by the 
 banks or by the government, it is possible, sooner or later, by means 
 of currenc^r contraction, to raise the value of the silver coins to legal 
 parity with gold; but the fixity of exchange can not be maintained 
 in the event of an adverse trade balance, for as there are no gold 
 coins to export and as it thus becomes necessary to settle the balance 
 with silver coins, the latter will again become a commodity, subject, 
 as formerly, to the fluctuations of silver bullion on the world's 
 markets, 
 
GOLD STANDARD IN INTEEN ATIONAL TRADE. 371 
 
 As will be seen, there are various fundamental differences between 
 the effects which the suspension of silver coinage produces according 
 as there is or is not a stock of gold coins either in circulation or in 
 reserve. 
 
 In the first place, when there is a stock of gold, the value of the 
 silver coins will rise automatically to legal parity, due rather to the 
 interchangibility of the two metals than to the scarcity value of the 
 silver coins. 
 
 When there is no stock of gold coins, the appreciation of the silver 
 coins must be the work of time and the gradual enhancement of the 
 currency through contraction. 
 
 In the second place, when there is a stock of gold coins, exchange 
 is maintained as near as possible to parity because there is always 
 an available supply of exportable coins wherewith to settle an adverse 
 trade balance; whereas, if such coins are lacking, the system breaks 
 down and the currency suffers inevitable derangement. 
 
 Two instances may be cited as the best proof of these assertions — 
 viz., the currency reform carried out by Holland between the yeai- 
 1873 and the year 1877, and the currency reform effected in India 
 by virtue of the law of June 26, 1893. The reform in Holland, 
 whereby the free coinage of silver was suspended, was effected con- 
 currently with the holding of a supply of gold, though a very scant 
 one, by the Bank of the Netherlands, while in the case of India there 
 was an absolute lack of gold coins. 
 
 Holland suspended the coinage of silver on private account, first 
 provisionally and afterward definitely. 
 
 When that country initiated the currency reform the stock of gold 
 florins in the Bank of the Netherlands was 27,833,079, and exchange 
 on London, based on the value of silver in the London market, 
 showed a difference of almost 6 per cent above legal parity. 
 
 We may divide the period in which the currency reform was effected 
 into three periods: From January to September, 1874; from April, 
 1875, to May, 1876, and fi?om October, 1876, to October, 1877. 
 
 In the first period silver fell on the London market from 59d., 
 at which the ratio between gold and silver is 1 to 15.98, to 57fd., 
 showing a ratio of 1 to 16.36. 
 
 The exchange at Amsterdam on London at that time was 11.86 
 florins as a minimum, rising to 11.93. 
 
 In the second period the price of silver fell from 57id., equivalent 
 to a ratio between gold and silver of 1 to 16.47, to 52id., at which 
 the ratio is 1 to 17.96 ; and yet the rate of exchange at Amsterdam 
 on London oscillated between 11.72 florins, minimum, and 12.11, 
 maximum. ^ 
 
 In the third period the price of silver rose from 51f d. to a maxnnum 
 price of b7^d., thereafter receding to 54f d., and the exchange between 
 Amsterdam and London was maintained between 12.1^ as a mmimum 
 and 12.12 as a maximum. ^ , •, ^ • j ■ 
 
 The divorce effected between the value of the silver contained in 
 the Dutch florin and the value of silver bullion on the London market 
 coupled with the small gold stock of the Netherlands Bank, sufficed 
 to maintain relative parity of exchange between Amsterdam and Lon- 
 don, more or less at a ratio, between the gold of the English sovereign 
 and' the silver of the florin, of 1 to 15.55. 
 
372 
 
 GOLD STANDARD IN INTERNATIONAL TRADE, 
 
 The stock of gold and silver in the Bank of the Netherlands in 
 the period from December, 1871, to June, 1877, showed the following 
 oscillations : 
 
 Date, 
 
 Gold. 
 
 Silver. 
 
 December, 1871 
 
 Florins. 
 5,522,513 
 27,969,273 
 27,969,273 
 27,833,079 
 39,972,292 
 56,297,559 
 55,297,886 
 61,180,968 
 69,250,690 
 64,457,302 
 64,257,952 
 74,792,866 
 
 Florins. 
 138,301,458 
 
 Junel872 .-. --- - 
 
 125,946,177 
 
 December, 1872 
 
 92,863,525 
 
 June, 1873 
 
 78,078,371 
 
 
 68,521,280 
 
 June, 1874 . . .- 
 
 76,958,547 
 
 December, 1874- - 
 
 82,216,088 
 
 
 80,180,888 
 
 December, 1875 - 
 
 89,517,731 
 
 June. 1876 ., 
 
 97,527,588 
 
 December, 1876 --. 
 
 89,261,289 
 
 June,1877 --- 
 
 76,841,035 
 
 
 
 The foregoing table illustrates the success of the currency reform ; 
 "for not only did the stock of silver steadily diminish in proportion to 
 the increase in the stock of gold, but starting with a sum which, pro- 
 portionately, was almost insignificant, the stock of gold rose until 
 it amounted to 95 per cent of the stock of silver. 
 
 The suspension of the coinage of silver and the free coinage of gold 
 had not only disassociated the value of silver coins from the value of 
 silver bullion, but had attracted gold into circulation and the favor- 
 able rates of exchange had retained it there, assuring to the fullest 
 extent the legal parity between gold and silver. 
 
 Nevertheless, currency conditions underwent a perturbation and 
 the rate of exchange became unfavorable to Holland ; and had it not 
 been for the considerable stock of gold accumulated by the Bank of the 
 Netherlands the success of the monetary reform would have been con- 
 verted into failure. When Holland's turn came to export the precious 
 metals she had recourse to gold, and the, stock of that metal in the 
 Bank of the Netherlands was drained to the lowest limit. 
 
 The following table shows the stocks of gold and silver held by the 
 banks in question in the months of June and December from 1877 to 
 1882 : 
 
 Date. 
 
 Gold. 
 
 Silver. 
 
 December, 1877. 
 
 June, 1878 
 
 December, 1878. 
 
 June, 1879 
 
 December, 1879. 
 
 June, 1880 
 
 December, 1880. 
 
 June, 1881 
 
 December, 1881 
 
 June, 1882 
 
 December, 1882. 
 
 Florins. 
 50,509,237 
 44,298,531 
 44,634,172 
 68,887,689 
 73,425,259 
 80,378,866 
 56,861,791 
 50,440,142 
 18,158,479 
 21,868,007 
 5,272,728 
 
 Florins. 
 
 76,867,697 
 
 70,639,252 
 
 77,217,843 
 
 77,260 300 
 
 80,901,513 
 
 81,350,905 
 
 84,844,426 
 
 89,646,566 
 
 89,035,713 
 
 92,043,530 
 
 92,347,767 
 
 The foregoing table shows that between June, 1880, and December, 
 1882, the stock of gold dwindled from a little more than 80,000,000 
 florins to 5,272,728 florins. 
 
 Holland's monetary reform, therefore, achieved the desired object, 
 thanks to the stock of gold held by the Bank of the Netherlands, 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 373 
 
 which facilitated the maintenance of exchange not only under normal 
 conditions, but also in the presence of an adverse trade balance. The 
 J hitch merchants were always able to obtain gold readily for purposes 
 of exportation, and the natural operation of the phenomena of 
 exchange has enabled that country to accumulate gold when exchange 
 was favorable to her and to settle her balance therewith when 
 exchange became adverse. 
 
 The system is pronounced by Dutch economists not to be exempt 
 from danger, because, as it has been impossible to withdraw all the sil- 
 ver coins from circulation and to exchange them for gold, it rests upon 
 a fiction ; but it is unquestioned that if its dangers have been reduced 
 to a minimum and Holland has been enabled to maintain stability of 
 exchange for a period of thirty years, those facts are due to the stock 
 of gold, inconsiderable though it has been, and to the facility with 
 which gold has been furnished for exportation by the Bank of the 
 Netherlands. 
 
 India's monetary reform was accomplished by virtue of the law of 
 June 26, 1893, which closed the Indian mints to the free coinage both 
 of gold and silver, while authorizing the mints to receive gold in 
 exchange for silver at the rate of 16d. per rupee or 15 rupees per 
 pound sterling. 
 
 The monetary reform in India was not at once attended with the 
 results which its authors had anticipated, and the rate of exchange 
 provided by law was not in reality attained until the year 1898-99. 
 
 The following table shows a series of years, with the mean rate of 
 exchange and the value of the standard ounce of silver in pence in 
 each of those years : 
 
 Years. 
 
 Exchange. 
 
 ■ Standard 
 
 ounces of 
 
 silver. 
 
 1887-88 - -- 
 
 Pence. 
 16.898 
 16.379 
 16.566 
 18.089 
 16.733 
 14.985 
 14.647 
 13.101 
 13.638 
 14.451 
 15.354 
 15.978 
 
 Pence. 
 
 44} 
 
 1888-89 
 
 m 
 
 1889 90 - - 
 
 ^H 
 
 1890-91 - 
 
 47 1 
 
 189192 --- 
 
 i&^ 
 
 1892-93 
 
 
 
 39ii 
 
 1893 94 
 
 35A 
 
 1894^95 - 
 
 388 
 
 1895 96 - 
 
 29 
 
 1896-97 - - - - - - 
 
 30 
 
 
 27^ 
 
 IflOfi-flQ - 
 
 261 
 
 
 
 The aim of the government of India was not only to disassociate the 
 value of the rupee and the value of silver bullion, but to raise the 
 value of the rupee to 16d. 
 
 The primary object, viz., to disassociate the price of the rupee from 
 the price of silver bullion, was attained at once, for undoubtedly the 
 price of exchange did not follow the fluctuations of the price of silver 
 bullion ; but the contraction which the currency was to have under- 
 o-one to raise the value of the.coins in circulation did not occur, or, if 
 il- did occur, it was incapable unaided of bringing about the desired 
 
 consummation. - t t i u* 
 
 What prevented the failure of monetary reform in India was doubt- 
 less the favorable and ever-increasing balance of its foreign trade, a 
 balance due partly to the increased value of the exportations, partly 
 
374 GOIB STANDARD IN INTERNATIONAL TRADE. 
 
 to the loans negotiated in England on India's account, and partly to 
 the steady investment of foreign capital which did not altogether 
 shnn the Indian field. Had it not been for those special circum- 
 stances, which could only occur in the case of India, the mere suspen- 
 sion of the coinage of silver, without gold coins, either in circulation 
 or in the coffers of the banks, would have left the price of the rupee 
 once more at the mercy of the price of silver bullion in the event of an 
 unfavorable trade balance, and would have compelled India to settle 
 in silver the balance in its commercial relations with foreign countries. 
 
 The instances cited prove the principles previously enunciated and 
 illustrate the natural scope of the mere suspension of silver coinage. 
 
 Summing up what has been said, we may lay down : 
 
 I. That the suspension of silver coinage merely tends to establish 
 a disassociation between the value of the metal and the value of the 
 coins made therefrom. 
 
 II. That the suspension of the coinage of silver tends to raise the 
 value of the silver coins in circulation on account of their scarcity. 
 
 III. That the operation of the law of scarcity may be neutralized 
 by an increased coefficient of rapidity in monetary circulation. 
 
 IV. That the disassociation which the suspension of free coinage 
 establishes between the value of the coin and the value of the metal 
 of which that coin is made is only stable when unfavorable exchange 
 conditions do not necessitate the exportation of the coin which has 
 been invested with an enhanced value in the internal circulation. 
 
 V. That even though the silver coins are not exportable the dis- 
 association may be lasting and may impart fixity to exchange, pro- 
 vided there is a stock of gold either in circulation or in the coffers 
 of the banks. 
 
 Applying these principles to Mexico, it will be easy to show that 
 though the suspension of the coinage of unlimited legal-tender silver 
 on private account is the first and basic measure of currency reform, 
 it must, in order to produce the beneficial results expected from it, 
 be supplemented by the creation of a gold guaranty fund whose 
 object will be to regulate the volume of coin in circulation and main- 
 tain the parity of international exchange at the ratio established 
 by law. 
 
 The suspension of the free coinage of silver would not suffice to 
 stabilize international exchange : 
 
 1. Because Mexico, despite the progress which it has achieved, 
 absorbs annually a very slight quantity of coin, and therefore the 
 enhancement of the value of the circulating medium would have to 
 be the work of a great many years. 
 
 2. Because in Mexico a scarcity of currency would be more than 
 compensated by an increased coefficient of the rapiditj^ of its cir- 
 culation. 
 
 3. Because, although Mexico produces gold, there is no gold in 
 circulation and no stocks of 'that metal accumulated in the banks; 
 
 4. Because Mexico has an adverse trade balance and only settles 
 same by means of the foreign capital that seeks investment in the 
 country. 
 
 Mexico really absorbs a very small quantity of coin annually. 
 
 As the Mexican dollar, besides acting as currency at home, is also 
 an international trade coin, it is exported as a commodity. From 
 the total quantity of silver coined it is therefore necessary to deduct 
 
GOLD STANDAKD IN INTEBNATIONAL TRADE. 
 
 375 
 
 the quantity of Mexican dollars exported in order to get an idea of 
 the amount absorbed for purposes of circulation. 
 
 Among the statistical tables published by the secretary of the 
 commission is one that relates to the coinage of silver and the exporta- 
 tion of Mexican dollars, and the facts derivable from said table are 
 conclusive. 
 
 The table is as follows: 
 
 Years. 
 
 Coinage ot 
 silver. 
 
 Exportation 
 
 of coined 
 
 silver. 
 
 Difference 
 between ex- 
 portation of 
 coined silver 
 and total 
 coinage. 
 
 1877-78 
 
 $22,084,203 
 22,162,988 
 24,018,529 
 24,617,395 
 25,14fi,260 
 24,083,922 
 25,377,379 
 25,840,728 
 26,991,805 
 26,844,031 
 25,862,977 
 26,031,223 
 24,328,326 
 24,237,449 
 25,527,018 
 27,169,876 
 30,185,612 
 27,628,981 
 22,634,788 
 19,296,009 
 21,427,057 
 20,184,117 
 18,102,630 
 18,290,390 
 24,509,850 
 
 $18,120,296 
 16,366,877 
 16,783,317 
 13,183,954 
 11,607,888 
 22,969,583 
 25,999,875 
 25,394,262 
 21,969,957 
 21,955,759 
 16,841,117 
 22,686,337 
 23,084,489 
 
 .17,622,171 
 26,478,376 
 27,170,865 
 17,386,338 
 17,077,119 
 20,377,663 
 14,578,958 
 18,214,989 
 14,116,935 
 10,872,874 
 16.132,879 
 11,351,765 
 
 $3,963,907 
 
 1878-79 
 
 5,596,111 
 
 1879-80 
 
 7,235,212 
 
 1880-81 
 
 11,433,441 
 
 1881-82 - 
 
 13,538,372 
 
 1882-83 ---- 
 
 1,113,339 
 
 1883-84 
 
 622,496 
 
 1884-85 --- 
 
 446,466 
 
 1885-86 - . 
 
 5,021,848 
 
 1886-87 --- 
 
 4,888,272 
 
 1887 88 - 
 
 9,021,860 
 
 1888-89 
 
 3,344,886 
 
 1889-90 
 
 1,243,837 
 
 1890-91 --- 
 
 6,615,278 
 
 1891 92 
 
 951,358 
 
 1892-93 
 
 989 
 
 1893-94 - 
 
 12,799,274 
 
 1894-95 - 
 
 10,551,862 
 
 1895-96 - 
 
 2,257,125 
 
 1896-97 - 
 
 4,717,051 
 
 1897 98 
 
 3,212,068 
 
 1898-99 - 
 
 6,067,182 
 
 1899-1900 --- 
 
 7,229,256 
 
 1900-1901 - 
 
 2,151,511 
 
 1901-2 - 
 
 13,158,085 
 
 
 602,283,543 
 
 468,344,443 
 
 137,389,056 
 
 Translator's Note.— It will be noticed that in some of the years exportation exceeded 
 coinage. • 
 
 Before drawing conclusions from the figures contained in the 
 foregoing table, I must observe, as the third subcommittee had pre- 
 viously done in its report, that the returns for the quinquennial period 
 1877-78 to 1881-82 can not be exact, owing to the tax then collected 
 on the exportation of coined silver. 
 
 In spite of this circumstance the total amount of the coinage in 
 the twenty-five years to which the foregoing table refers is $602,283,- 
 543: the exportation totals $468,344,443, and the difference between 
 exportation and coinage is $137,389,056. The average may therefore 
 be given at $5,495,562, or $5,000,000 in round numbers. ^ ^ , „ 
 
 If as has been calculated by the third . subcommittee, the stock ot 
 coin in the country is $130,000,000, the total increase that coinage 
 is capable of producing is 3^. per cent. . . ., . -4= „„ <,ttomr.t 
 
 From the foregoing data it is easy to conclude that if an attempt 
 is made to bring Ibout a rise in the value of silver coins m .circulation 
 through the law of scarcity, a great number ^of years will W to 
 elapse before the lack of currency, demanded by the country s 
 Slopment, can cause an appreciation m the value of the coins 
 
 ""Tuf^SiSmL^T^l^ioo to a greater, extent perhaps than in 
 any other country, the effects of the scarcity of the monetary unit 
 
376 GOLB STANDARD IN iNTERlfATlONAL lEADE. 
 
 would be more than compensated by an increased coefficient of 
 rapidity of circulation. 
 
 It is a fact that no one can question that Mexico in the last decade 
 has achieved enormous progress ; her production and her commercial 
 transactions of every kind have been increased tenfold. 
 
 If every country that is progressing needs a larger volume of 
 currency, Mexico ought to have absorbed an enormous quantity 
 thereof in the last decade ; and yet since 1895-96 the excess of coinage 
 above exports has in most of the years been considerably below the 
 average of $5,000,000, which is the quantity absorbed annually by 
 curi'ency requirements. 
 
 The instrumentalities of credit of every kind contribute power- 
 fully to stimulate the rapidity of the monetary circulation, and as 
 we are still in the infancy of credit there can be no doubt that the 
 recent employment of those instrumentalities is what has contrib- 
 uted to satisfy currency requirements without corresponding addi- 
 tions to the stock of coin. 
 
 For many years to come in Mexico the coefficient of rapidity of 
 circulation is destined to increase without the necessity of any special 
 stimulus, and if this is true in any case it follows that if the cur- 
 rency were to be contracted through the suspension of the free coinage 
 of silver, the use of credit facilities, which dispense with coin, would 
 play a still larger role in meeting the requirements of the nation in 
 this respect, however great the annual increase of those requirements 
 might be. 
 
 Thus if the monetary reform in Mexico is to be restricted to the sus- 
 pension of the free coinage of silver, the parity of international ex- 
 change will only be attained after the lapse of many years, and its 
 attainment will perhaps produce greater evils than those which it is 
 sought to remedy. 
 
 The danger would lie in the lack of gold coins in circulation and in 
 the possibility that an adverse trade balance might oblige the country 
 to settle that balance with silver dollars taken from the interior circu- 
 lation. 
 
 No one questions that since the years 1891-92 Mexico has been 
 enabled to meet the balance of her international trade, thanks to the 
 heavy volume of capital that has come from abroad to be invested in 
 undertakings of every kind. Now, if that influx of capital should be 
 checked, owing to the slender confidence inspired by the success of the 
 monetary reform, the country's absolute lack of gold coins would 
 oblige it to export the circulating silver coins, which would cause the 
 collapse of the monetary reform and the loss of all the advantages 
 sought thereby, including the disassociation between the value of sil- 
 ver as a coin and the value of silver as a commodity. 
 
 The phenomenon is not only possible but probable. When a coun- 
 try like Mexico undertakes a reform of such momentousness as the 
 stabilization of foreign exchange, many persons cavil as to the success 
 of the reform, and if this alone is sufficient to alienate the confidence 
 which the country may inspire, it will not be surprising if capitalists, 
 instead of hastening to invest their money in Mexico, will postpone 
 any operation of that nature until a more propitious occasion and 
 prospects become more encouraging. 
 
 If the parity of exchange is not attained in a relatively short period 
 of time, if the obstacles of the medium prove sufficient to counteract 
 
GOLD STANDAED IN INTERN4TIONAL TEADE. 377 
 
 the effects of currency contraction, and if the value of the Mexican 
 dollar IS not completely disassociated from the value of silver on the 
 London market, it is unquestioned that, if in order to settle our indebt- 
 edness abroad it becomes necessary to have recourse to silver in circu- 
 lation, our coin will again be converted into a commodity and all the 
 advantages incidental to the monetary reform will entirely disappear. 
 
 Stability of exchange, the prime object of the reform, can only be 
 assured by having gold in circulation or in the banks as had Holland, 
 and seeing that there is no gold either in circulation or in the banks 
 it is absolutely indispensable to create a reserve fund in gold that it 
 may perform exactly the same duties as the gold stock of the Bank of 
 the Netherlands. 
 
 A very superficial study of the laws governing foreign exchange is 
 sufficient to demonstrate the dangers incidental to the exclusive circu- 
 lation of silver coins and the remedies which the gold-reserve fund 
 could afford. 
 
 The supply and demand of drafts in a country vary incessantly, 
 owing to an infinitude of causes and with them varies the rate of 
 exchange. 
 
 When a country possesses a stable monetary regime, the rate of 
 exchange with countries which have the same coin in circulation is 
 subject to fluctuations, but those fluctuations can not in general wan- 
 der far from the parity of the coins, plus the cost of transportation 
 from one country to the other and the coinage dues. 
 
 If the rate of exchange falls to a point at which the metal can be 
 imported, the importation tends precisely, directly or indirectly, to 
 cause a new rise in the rate of exchange. 
 
 The direct action in this respect is due to the fact that until the 
 competition of the precious metals imported ceases the supply of 
 drafts will be less or the demand greater than would have been the 
 case if the importation in question had not occurred, and the indirect 
 tendency flows from the fact that the country's stock of the precious 
 metals increases and an increase in the quantity of coins in circula- 
 tion tends to raise the course of exchange, or at any rate to check its 
 descent. 
 
 But if the course of exchange rises to a point at which the precious 
 metals can be exported, the same factors come into operation, but in 
 an opposite direction. 
 
 Thus the rate of exchange, under a firm and stable monetary regime, 
 constantly fluctuates between two extremes, though the latter do not 
 depart far from the parity of the metal's price. 
 
 Nevertheless, there are moments of heavy decline or rise in the rates 
 of exchange, depending necessarily in part on the variable amount of 
 the precious metals which countries need for their international com- 
 merce and on the variable amount of drafts that are offered for sale. 
 A heavy rise or fall of this nature is specially liable to occur between 
 countries whose currencies are not based on the same metal. 
 
 When this heavy rise or fall occurs, the margin between the price 
 of exchange and the price of the metal exceeds the limit that prevails 
 under normal conditions — that is to say, it exceeds the expenses of 
 transportation and the cost of coinage. 
 
 Now at such moments, independently of the flnal balance of trade 
 between the countries that carry on commercial exchanges, heavy 
 importations or heavy exportations of the precious metals may occur. 
 
378 GOLD STANDAEP IN INTERNATIONAL TRADE. 
 
 • 
 
 Now if Mexico carries out her monetary reform without having 
 a stock of gold in circulation, she will not be able to meet a sudden 
 demand for the precious metals without having recourse to silver, or, 
 in other words, without selling her silver coin as a commodity, and 
 thus forfeiting all the benefits of the monetary reform. 
 
 The creation of a gold reserve fund would constitute an admirable 
 provisions for the oscillations of exchange and would enable the coun- 
 try to export gold instead of silver, thus maintaining the elasticity of 
 the currency and the parity of foreign exchange. 
 
 If, as I hiave already shown, a prerequisite for securing stability of 
 international exchange consists in holding a greater or less stock of 
 gold to provide against the contingency of an adverse trade balance, 
 and if the effects of such a balance are liable to be felt at given seasons 
 of the year, owing to the shocks affecting exchange on account of the 
 abundance or scarcity of drafts in the market — shocks that will be 
 much more severe with an artificially enhanced currency — it is un- 
 questioned that the reserve fund in gold is absolutely essential, for it 
 will perform the same functions as gold in circulation does in the 
 countries where a stock thereof is held either by the banks or private 
 persons. 
 
 Other reasons also militate in favor of the creation of the gold- 
 reserve fund. 
 
 It is a fact that, independently of the dangers incidental to the 
 contingency of an adverse trade balance, the effects of the mere sus- 
 pension of silver coinage require a great many years to make them- 
 selves felt, the period depending upon the greater or less currency 
 requirements of the nation. 
 
 Now, with a reserve fund in gold the effects of the reform are 
 almost immediate, the parity of exchange is attained ahnost auto- 
 matically, and this, besides abridging the period of transition, which 
 is fraught with dangers of every kind, offers the advantage of inspir- 
 ing full and immediate confidence in the success of the reform. 
 
 If the conditions of our trade balance are such that it can only be 
 settled through the introduction of foreign capital and if that intro- 
 duction depends on the stability of our currency, every measure that 
 tends to inspire full and absolute confidence in the success of the 
 monetary reform, and thus to encourage the investment of foreign 
 capital, is earnestly to be recommended. 
 
 Those who have combatted the creation of the reserve fund see in 
 the fact that stability of exchange maj"^ thereby be secured automatic- 
 ally an argument in support of their point of view, for they fear that 
 the rapid transition from present monetary conditions to the parity 
 that will be established by virtue of the ratio to be adopted between 
 gold and silver, will occasion a crisis that will disturb not only com- 
 merce but the national activities in general. 
 
 Without disputing the truth that may be contained in such asser- 
 tions, it must be borne in mind that the argument loses all its force 
 when applied to a silver monometallist country which for so many 
 years has been exposed to the sudden and enormous fluctuations in the 
 price of silver on the London market. Seeing that, by reason of the 
 rise ^ or fall of silver bullion, Mexico's exchange rates have suffered 
 oscillations of more than 30 per cent, upward or downward, within a 
 brief space of time, can the repetition of the phenomenon, destined 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 379 
 
 probably to occur for the last time, be used as an argument against the 
 creation of the reserve fund ? 
 
 The advantages inherent to the curtailment of the period of transi- 
 tion are so substantial that, in order to attain them, it would be well 
 worth while to run all the risks, real or imaginary, that could pos- 
 sibly be involved in the fall of exchange simultaneously with the reali- 
 zation of monetary reform to the parity adopted between gold and 
 silver. 
 
 The gold-reserve fund is without doubt the keystone of the stability 
 of foreign exchange in Mexico, and the success which will be attained 
 through that fund will be due to the functions with which it is to be 
 invested and which are to be identical with the functions performed 
 by a stock of gold in countries wherein that metal circulates. 
 
 Gold may either be supplied freely for exportation, as in Holland, 
 or at a premium of so much per cent, as in France, always provided 
 that it may be procured at the legal parity in exchange for the circu- 
 lating silver coins as soon as its exportation becomes necessary. The 
 fund will thus be the regulator of the internal circulation, destined 
 to impart to it the necessary elasticity and to be the agency for the 
 settlement of our foreign trade. 
 
 If the monetary reform is to be based to an equal extent on the 
 suspension of the free coinage of silver and on the creation of a reserve 
 fund in gold, the opening of the mints to the free coinage of gold 
 follows as a necessary consequence of those measures. 
 
 When a country suspends the coinage of a metal it must adopt one 
 of the following measures : It must either coin no new money or it 
 must coin money of the depreciated metal, receiving gold as a deposit, 
 as in India, or it must coin gold money as all other nations in the 
 world have done. 
 
 In the first case the evils occasioned by currency contraction are 
 greater than any possible benefits therefrom. 
 
 No country tJhat is progressing and whose domestic and foreign 
 trade is constantly increasing can exist under such a regime. Scar- 
 city value has no assignable limit; and a constantly increasing 
 currency contraction, coupled with the inability of available currency 
 to meet the requirements of trade, would depress all prices and occa- 
 sidn an unparalleled crisis. 
 
 It is therefore necessary to strike new coins and to take gold as 
 the basis, for undoubtedly there can be no better proof that cur- 
 rency requirements demand additions to the stock of coin than that 
 gold should be offered for conversion into coin, in spite of its excess 
 of value as bullion over legal parity. 
 
 Nevertheless some persons prefer that silver should be coined, the 
 gold being received in deposit, so as to form a special reserve fund, 
 while others would throw open the mints to the free coinage of gold. 
 
 The two measures in reality produce the same result; but I will 
 review the arguments adduced against the free coinage of gold in 
 order to demonstrate that it is preferable to the coinage of new silver 
 coins guaranteed by gold in deposit. • ^r, . 
 
 When the coinage of a metal is automatic and tree the coins that 
 may be struck from that metal will only enter circulation when the 
 requirements thereof necessitate them. . 
 
 It is this and this alone that renders possible the concurrent use in 
 
380 &OtD STAND AED IN INTERNATIONAL TRADE. 
 
 circulation of two kinds of coin, the value of one of which has been 
 enhanced by scarcity while the value of the other is fixed by the 
 market for the precious metals. 
 
 If both coins, the old and the new, are to enter jointly into circula- 
 tion, it matters not whether the new coin is struck from a metal other 
 than the demonetized metal or from that demonetized metal, pro- 
 vided it can be exchanged at the legal parity for the metal constitut- 
 ing the deposit. 
 
 As the new coin to be put into circulation will be exportable and 
 the exportation will take place when it becomes necessary, to settle 
 abroad the balance of international trade, it will be the same whether 
 the coins sent abroad are withdrawn directly from circulation for 
 that end or whether the coins in circulation are first exchanged for 
 the metal held in deposit and that metal is actually exported. 
 
 From the point of view of the mechanism of exchange it is there- 
 fore absolutely the same whether gold is coined or silver is coined 
 and gold deposited to be used for exportation when the necessities 
 of exchange require the reduction of the volume of coins in circulation. 
 
 Yet, from the point of view of the internal market, exclusively, it is 
 not the same. 
 
 The opponents of the free coinage of gold argue that if gold coins 
 enter into circulation they run the risk of being withdrawn there- 
 from for hoarding purposes and that, on the other hand, any metal 
 held as a deposit can defend itself more efficaciously against the 
 exigencies of exportation. 
 
 These reasons afford no solid argument against the free coinage of 
 gold, both because the person who is determined to hoard it can just 
 as easily exchange the circulating coins for the coins held in deposit 
 as he can directly withdraw coins from circulation, and because, if the 
 object is to protect gold from exportation, the protection is more 
 efiicacious when the gold is held bj^ private persons than when it 
 is held in deposit. 
 
 It is plain that if a new coin, by reason of the metal of which it is 
 made, is liable to be hoarded, it can with equal ease be withdrawn 
 from circulation as from a fund whose object is no other than to 
 supply gold in exchange for silver coins. 
 
 On the other hand, coins constituting a deposit, if their object is 
 to guarantee other coins put into circulation, will be more easily 
 liable to exportation, for when the necessity of exporting them arises, 
 there will be a general rush to the fund to secure them for shipment 
 .abroad. 
 
 The deposit will stand in respect to the circulation in the same 
 relation as the stock of cash of a bank does to the notes issued by that 
 bank; and just as those notes, seeing that they are not exportable, 
 are, when the necessity arises for making payments abroad, converted 
 into specie and that specie is exported, in like manner the circulating 
 coins, made of the demonetized metal, will be presented for conver- 
 sion into gold, which, as the only exportable metal, will be sent 
 abroad for the settlement of the trade balance. 
 
 But if these reasons suffice to show that the free coinage of gold is 
 to be preferred, on the other hand, the coinage of silver guaranteed 
 by gold is liable to the serious drawback that the capital represented 
 by the deposit becomes an accumulation which is idle and unpro- 
 ductive to the nation. 
 
GOLD 8TANDAED IN INTERKATIONAL TEADE. 381 
 
 One can understand why a bank of issue should put into circulation 
 notes payable on sight to bearer or certificates of deposit in silver and 
 gold, for they are either issued on a larger scale than the stock of cash, 
 in which case they afford substantial profits, or they are issued on an 
 even scale, so that the engraved note or certificate at least implies a 
 saving. But there is no object in the issuance of coins made of one 
 metal and the holding in deposit, as a guaranty therefor, of a like sum 
 in coins made of another metal. The capital which that deposit rep- 
 resents is a capital withdrawn from the country's general wealth and 
 which fails to perform the proper functions of capital. 
 
 Unless, therefore, it is desired to burden the country with an idle 
 accumulation equal to the increase of the currency, it is indispensable 
 to throw open the mints to the free coinage of gold. 
 
 The free coinage of gold offers, moreover, the advantage that in a 
 gradual and progressive manner it will attract gold into circulation, 
 thereby strengthening the currency and assuring the evolution from 
 silver monometallism to gold monometallism. It is true that gold will 
 only enter into circulation when currency requirements irresistibly 
 attract it, but its presentation for coinage will afford the assurance 
 that it will be retained in the country as long as the circulation con- 
 tinues in a normal state. 
 
 I have completed the exposition of the reasons for the opinions 
 which I have maintained at the sessions of the fifth subcommittee. I 
 regret that I have not had time to outline the functions which from 
 my point of view the gold-reserve fund ought to perform. But I 
 was unable to find time, and my only object in drawing up the fore- 
 going memoir was to demonstrate the imperative necessity for the 
 adoption of the three measures that must constitute the foundation 
 of monetary reform. 
 
 Joaquin D. Casasus. 
 
 Mexico, November 16^ 1903. 
 
 Annex No. 8. — Opinion of the Commissioners TjIC. Joaquin D. Casasus, 
 Eneique O. Creel, Manuel Fernandez Leal, Josfi de Landero y Cos and 
 Genaro Raigosa. 
 
 The. undersigned regret that they have been unable to reach an 
 agreement with the majority of the members of the fifth subcom- 
 mittee in regard to the necessity of the immediate formation of a 
 reserve fund in gold and in regard to the method of organizing that 
 fund. They would have been satisfied with a special mention in the 
 report of the fifth subcommittee of the different opinions which each 
 one of its members has expressed; but having been invited to present 
 the o-round of their views and to expound in a concrete manner the 
 principles which they consider ought to serve as the basis for the 
 monetary reform, they could not withhold compliance with that invi- 
 tation, were it only as a token of the profound respect which they 
 entertain and have always entertained for the opposite opinions held 
 and maintained by the naajority of the fifth subcommittee. 
 
 The undersigned have held that the formation of a reserve fund 
 in gold is the Indispensable basis of the monetary reform and that 
 the fund in question ought to be established immediately. They 
 have defended their view with scientific reasons and with reasons of 
 public expediency. 
 
382 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 The scientific reasons are as follows : 
 
 I. If the parity established by law between gold and silver is to 
 be brought about by the mere suspension of the free coinage of the 
 white metal, it can only be attained by the rarefaction of the mone- 
 tary circulation; and that rarefaction, besides being difficult of 
 realization, engenders evils greater than those which it is intended 
 to remedy. 
 
 II. Though the parity established by law between gold and silver 
 can in the long run be attained by the rarefaction of the monetary 
 circulation, it affords no guaranty of stability in case an unfavorable 
 commercial balance necessitates the exportation of metallic specie. 
 
 III. A stock of gold, whether in circulation or held in deposit, 
 owing to the fact that it consists of exportable coins, is the only 
 guaranty for the stability and safe operation of a monetary regime 
 based on the artificial elevation of the value of a coin due to the 
 suspension of free coinage. 
 
 The reasons of public expediency are as follows: 
 
 I. The success of any monetary reform depends on the confidence 
 with which the public receives the new coins and the certitude which 
 it entertains as to the stability of their value. 
 
 II. The adojption of successive measures, intended to be applied 
 in turn, in case each proves insufficient for the attainment of the 
 desired object, destroys in advance the confidence that is indispensable 
 to the success of the reform. 
 
 III. If faith is entertained in the efficacy of the various measures 
 that aim at assuring the success of the monetary reform, the most 
 elementary prudence counsels their simultaneous adoption in order 
 to increase the probabilities of that success. 
 
 As the object of any monetary reform based on the suspension 
 of the free coinage of silver is to disassociate the value of the coins 
 made of that metal from the price which it commands in the world's 
 markets, it is unquestioned that the fundamental object is to advance 
 the gold value of silver money. 
 
 The suspension of the free coinage of silver money is in principle 
 destined to realize that object, for as all nations, in proportion as the 
 volume of their commercial transactions expand, stand in need of 
 greater quantities of cash, it is plain that if the additional supply is 
 not forthcoming the value of the coins in circulation will be enhanced. 
 
 Such a result, however, can not be attained save through the lapse 
 of time, and the period will be more or less long, depending on the 
 greater or less intensity with which the country experiences the need 
 of an increased volume of monetary circulation and on the degree 
 in which a higher coefficient of rapidity in circulation may neutra- 
 lize the effects of the rarefaction of the currency. 
 
 Nations which are on the full tide of progress and development 
 need daily an increasing quantity of cash for their transactions; 
 but the volume of the cash additions will depend on the total volume 
 of their commerce and on the importance of the role, for the purposes 
 of circulation, played by the instrumentalities of credit, which render 
 more and more unnecessary the emploj^ment of coin. 
 
 In countries like Mexico, in spite of the enormous progress which 
 it has achieved and is achieving day by day, the necessity of increased 
 quantities of coin in circulation is but little felt, and owing to the 
 fact that the country is only just beginning to make an intelligent 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 383 
 
 use of the instrumentalities of credit the increased demand is likely 
 to be oftset for a considerable time to come by a higher coefficient 
 ot rapidity in the movements of the monetary circulation. 
 
 The suspension of the free coinage of silver would encounter diffi- 
 culties in producing its natural effects in Mexico, and even if it pro- 
 duced them it would only be after the lapse of a great many years. 
 
 Granting, however, that the rarefaction or contraction of the cir- 
 culation could be brought about in a relatively brief period of time, 
 what would have to be the importance of that contraction to enable 
 it alone to maintain the price of silver coins at a margin of from 30 
 to 50 per cent above their buUion value? "What would be the effects 
 of that contraction? 
 
 It would be difficult to lay down a law which should establish a 
 connection between the increase in value of a circulating medium 
 and the quantity of that medium ; but it may be said, with a fair prob- 
 ability of accuracy, that if the increased value of the medium is due 
 to the curtailment of the quantity the decrease in the stock of coin 
 will be proportionate to the enhancement in its value. 
 
 In order, therefore, to make silver coins worth from 30 to 50 per 
 cent above their bullion value;, it would be approximately necessary 
 in order to attain that enhancement to curtail the circulation in pro- 
 portion to the total volume of business by from 30 to 50 per cent. 
 
 Now the disastrous effect of so considerable a contraction of the 
 monetary circulation are well known to everyone. 
 
 As prices do not depend only on the quantity of commodities 
 offered, but on the quantity of coin that can be given in exchange for 
 those commodities, on the hypothesis that production continues 
 unchanged and that the quantity of coin is reduced by one-half, 
 prices would undergo a like reduction and in their decline would 
 occasion the ruin of producers. The transactions which render indis- 
 pensable the circulation of wealth would also be paralyzed, for, inas- 
 much as the rate of interest on money is intimately bound up with 
 and dependent upon the quantity of coin in circulation, it follows that 
 that rate rises in proportion as the circulation of coin decreases. A 
 high rate of interest on capital is an invincible obstacle to the natural 
 development of wealth, for while it permits the investment of capital 
 in businesses that are exceptionally remunerative, it destroys capital 
 already invested in productive enterprises and arrests the progressive 
 march of nations. 
 
 If the parity between gold and silver, created by law, has to be 
 attained at such a price, it would be better to go without it, for the 
 benefits Avhich the fixity of exchange might bring along with it would 
 be more than offset by the evils that would flow from the decline of 
 prices, which would be proportional to the curtailment of the circu- 
 lating medium, and from the stiffening of the rate of interest which 
 would be commensurate with the effects of the contraction of the 
 monetary circulation. 
 
 The disastrous effects of the curtailment of the quantity of coin in 
 circulation might be borne by a prosperous country and there are 
 persons who believe that they would be compensated by the benefits 
 which the stabilization of exchange Avould bring in its train. 
 
 Granting th6 truth of this assertion, it is nevertheless demonstrable 
 that the benefits of fixity of exchange can not be stable and lasting 
 if as a consequence of the monetary reform itself, the foreign capital 
 
384 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 that comes to the country in quest of investment is diverted to other 
 lands or ceases to be sufficient to make good the adverse balance of 
 our foreign trade. 
 
 It is a fact that no one will dispute that in recent years Mexico 
 has had to rely on the foreign capital coming to the country for 
 investment to compensate the adverse balance of her trade. 
 
 It follows that if, as a consequence of the monetary reform and 
 until such time as success shall crown the efforts of our Government, 
 foreign capital refrains from entering Mexico for investment, it will 
 be necessary to settle the trade balance by means of the circulating 
 medium. 
 
 Now, will it be possible to maintain the disassociation between the 
 value of the silver coins and the price of silver bullion on the London 
 market in case said coins have to be exported to foreign countries ? 
 
 It is undoubted that nations can not continue indefinitely to pro- 
 duce less than they consume, and that the necessity of exporting the 
 circulating medium is the only brake capable of checking the ten- 
 dency of nations to buy more than they can sell. But until that pro- 
 pensity is corrected, until that evil is restricted, until international 
 commerce is reduced to its just and proper jjroportions, it is necessary 
 to pay foreign nations for the articles bought from them, and there 
 is no other way to pay them than to part with the circulating medium. 
 
 The country which seeks to effect its monetary reform merely by 
 suspending the free coinage of silver will not succeed in the attempt 
 and the failure will be hopeless if, during the period in which the 
 value of the silver coins is being artificially enhanced, it should prove 
 necessary, in order to settle an adverse trade balance, to export the 
 circulating medium. 
 
 A stock of gold, either in circulation, in the coffers of the banks, or in 
 the form of reserved funds specially constituted, is the only guar- 
 antee for the easy operation of a monetary system based on the suspen- 
 sion of the free coinage of silver. 
 
 In point of fact, in the event of an adverse trade balance, when 
 necessity obliges a nation to export a portion of its circulating 
 medium, a stock or reserve of gold obviates the exportation of the coin 
 whose value has been artificiallj^ raised, by furnishing in its stead a 
 metal of full value and unrestricted international acceptance. 
 
 In the natural and normal operation of economic phenomena, it may 
 be said that any country, when it has realized all its transactions at 
 home and abroad, has thereby paid all its debts and has added to its 
 wealth by increasing proportionately its monetary circulation. 
 
 As the development of wealth does not always conform to the laws 
 that should control it, it often happens that some countries accumulate 
 wealth more rapidly than others, always securing a favorable trade 
 balance, while other nations can not produce enough to pay for what 
 they consume, and settle their trade balances either through increased 
 investments of foreign capital or hj sending their coin abroad, thus 
 curtailing the circulating medium. 
 
 This phenomenon can not go on indefinitely. The requirements of 
 the circulation are so pressing that they lead to the restoration of the 
 balance of international trade. 
 
 Under a perfect monetary regime these effects are of relatively short 
 duration, for the precious metals, like liquids, always seek their own 
 
GOLD STANDARD IN INTEENATIONAL TRADE. 385 
 
 level and flow to points where they find the most remunerative 
 employment. But when monetarv svstems are based on more or less 
 ingenious artificial devices that law does not apply, and the duration 
 ot the eflects m question is liable to be unduly prolonged. 
 
 A stock of gold, or a reserve fund in gold, not onlv enables a nation 
 to settle Its trade balance m an exportable coin, but. inasmuch as it 
 obviates the impairment of the basis of the monetary system, places a 
 nation on the same footing as if it were under a perfect monetarv 
 regnne. 
 
 Inasmuch as gold, when constituting a reserve fund, can only be 
 exported by the withdrawal of an equivalent quantity of silver 'coin 
 from circulation, its exportation produces the natural effects of a con- 
 traction of the monetary circulation, and therefore tends to prevent 
 the recurrence of adverse balances in international trade; and, as 
 concurrently with the exportation the monetarv svstem continues to 
 operate freely, without impairment of the artificial device whereby 
 the higher value ascribed to the silver coins in circulation is main- 
 tained, the requirements of that circulation will cause gold to return 
 to the country, restoring the disturbed equilibrium of prices, and pro- 
 ducing the necessary elasticity which every currency, in order to be 
 thoroughly efficacious, ought always to possess. 
 
 Under this regime inhere can be but one danger, viz., that the adverse 
 trade balance might exceed the amount of the reserve fund in gold. 
 The danger would in any case exist. But it would be r(>mote if the 
 reserve fund were to attain 30 per cent of the monetary circulation, 
 for a trade balance could not exceed that proportion without causing 
 not merely tlie collapse of a monetary system, but the country's ruin. 
 
 In point of fact it is hard to conceive how a nation could be imder 
 the necessity of exporting 30 per cent of the total amount of its coin 
 in circulation in order to settle the balance of its international indebt- 
 edness, and if such a contingency, which is possible though not proba- 
 ble, were to arise, it would reveal a situation so critical that it could 
 only with extreme difficulty be modified or remedied. 
 
 A gold reserve would, therefore, practically constitute not only a 
 guaranty fund, which would assure the fixity of international ex- 
 change and the stable operation of the monetary system, but would 
 also provide for the payment, in exportable coin, of the maximum 
 margin which an international trade balance is capable of occasioning. 
 
 To sum up, it may be said that it is absolutely indispensable for the 
 success of a monetary reform based on the suspension of the free coin- 
 age of silver that a reserve fund in gold lie created, for though the 
 parity established between gold and silver may be attained by the con- 
 traction of the monetary circulation, that contraction would be rather 
 hurtful than beneficial ; and because, even though at a great sacrifice, 
 the parity were brought about, the new regime would afford no guar- 
 anty of stability in case an adverse trade balance were to necessitate 
 the exportation'^of the circulating silver coins. 
 
 Independently of the scientific reasons that have just been set forth, 
 it is indispensable to take into consideration other reasons based on 
 public expediency. 
 
 The success of any monetary reform must necessarily be based on 
 the confidence which the public may accord to the new currency and 
 the certitude which it may entertain as to the stability of its value, 
 S. Doc. 128, 58-3 25 
 
386 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 It is impossible to understand how these conditions could be met by 
 the measures which the majority of the fifth subcommittee have 
 sought to recommend to the Government, seeing that the possibility 
 that the parity, established by law between gold and silver, will not be 
 secured, is clearly hinted at and the subsidiary steps that will have to 
 be taken in such an event are outlined. If the majority of the fifth 
 subcommittee declare that in case the legal parity between gold and 
 silver proves slow of realization, the surest method to bring about that 
 parity will be to add a sufficient sum to the gold reserve to influence 
 the home market in the direction of imparting the desired stability to 
 the rate of'exchange, undoubtedly that majority apprehend, and with 
 reason, that the mere suspension of the free coinage of silver will not 
 suffice for the desired object. 
 
 Now, is this declaration not calculated to destroy in advance the con- 
 fidence with which the public ought to be inspired as to the probable 
 success of the monetary reform ? 
 
 Public confidence, though often acting under the influence of the 
 unreflecting impulses of the multitude, demands, in this case, actual 
 facts that will at least guarantee the probability of success. 
 
 Now, that confidence can not be felt b}' the nation if the persons 
 invited to advise the Government as to the best policy to be pursued in 
 this matter not only express the fear that the attainment of stability 
 and fixity of international exchange may be unduly delayed, but 
 declare that in, the event of such a contingency there are other meas- 
 ures in store of undoubted efficacy which will have the result of 
 assuring the success of the monetary reform. 
 
 Precisely for these reasons the undersigned believe that if absolute 
 and complete faith is placed in the efficacy of the projected measures 
 to bring about, if applied successively, the legal parity between gold 
 and silver, then those measures ought to be adopted simultaneously, in 
 order that the period of transition may be as short as possible and that 
 the results may at once be satisfactory and definite. 
 
 The difference of opinion between the majority and the minority of 
 the fifth subcommittee is insignificant. The majority hold that a 
 reserve fund in gold is not an indispensable factor in bringing about 
 the parity which the law may establish between gold and silver. 
 They are indeed convinced that it affords the best and most appropri- 
 ate way to assure the success of the monetary reform. But they 
 desire experimentally to see whether it is possible to attain the same 
 results by the mere suspension of the free coinage of silver and they 
 recommend that recourse be had to the gold reserve in the event of the 
 non-realization of the cherished hopes of success. 
 
 These tactics, which in any other case and in regard to measures of 
 any other nature would be expedient and even commendable, do not 
 deserve to be taken into consideration when monetary reform is the 
 stake; because the fundamental object to be kept in view is to con- 
 vince the public that the new coin, destined to replace the old one, 
 will in a very brief period possess the gold value which the law as- 
 cribes to it, and that that value will constitute the sole and indestruc- 
 tible basis of the stability of international exLchange. 
 
 Thus the majority oi the fifth subcommittee do not question the 
 efficacy of the gold reserve. They merely differ as to the opportune 
 moment for its creation ; and as in this respect all the reasons that go 
 to prove the necessity of its immediate formation have been adduced. 
 
GOLD STANDARD IN INTEKNATIONAL TRADE. 387 
 
 it may be held to have been proved beyond the possibility of doubt 
 that the reserve fund is as indispensable a feature of monetary reform 
 as the suspension of the free coinage of silver itself. 
 
 The necessity of the immediate creation of the gold reserve fund 
 being thus established, it is necessary to describe, even though sum- 
 marily, the functions which the fund in question is to perform. 
 
 The members of the minority of the fifth subcommittee held in this 
 respect opinions which, though essentially similar, differed as to cer- 
 tain relatively important details. Some of the minority members 
 thought that, to avoid interference with operations of exchange, 
 which are and ought to be a specialty of the banks, the functions °of 
 the fund should be confined to supplying gold for export, when, after 
 offsetting the nation's credit and debit, it should prove necessary to 
 make gold payments abroad. 
 
 This system was calculated to simplify greatly the functions of the 
 reserve fund and to render its administration most easy; but inas- 
 much as, from a strictly scientific point of vieAv, to supply gold for 
 exportation is exactly the same as to issue a draft payable abroad in 
 gold receiving silver money in exchange, all the members were con- 
 strained to admit that the preferential object of the administration 
 of the reserve fund might be the sale of letters of exchange against 
 the fund itself, payable abroad if part of the fund is to be deposited 
 abroad, and another part, though a much smaller one, at home. 
 
 On the other hand, the sale of exchange may be restricted to abso- 
 lute cases of necessity, and for this purpose it would be sufficient to 
 authorize the collection of a commission of 2 per cent above the 
 market price. 
 
 The undersigned therefore think that the reserve fund might, dur- 
 ing the period of transition, sell foreign exchange at rates that would 
 aid the gradual rise in the gold value of the silver currency, until 
 
 attaining the legal parity plus 2 per cent, or an exchange rate of 
 
 on New York and equivalent rates on other foreign markets, and, 
 after the lapse of the transitional period, maintain the stability of 
 international exchange, with a margin of 2 per cent, by selling drafts 
 on foreign countries whenever it should prove necessary to restore 
 the legal parity. 
 
 The functions of the reserve fund thus defined would be directed 
 to facilitating the attainment of the legal parity between ^old and sil- 
 ver and to maintaining that parity after the transitional period, 
 whenever the transactions in international exchange might cause a 
 divergence between the value of the circulating medium and the gold 
 value ascribed to it by law. 
 
 Considering the functions which the minority of the fifth subcom- 
 mittee have in view for the reserve fund, it was to be expected that 
 they would not share the opinions held by the majority of said sub- 
 committee as to the minimum amount with which it is to be started 
 and the resources that are to be devoted to its formation. 
 
 If the prime object of the reserve fund is to be able to settle trade 
 balances in gold, in order to assure the perfect operation of the mone- 
 tary system, it is indispensable that the fund in question should 
 amount to 30 per cent of the value of the new coins to be issued or 
 their equivalent in gold. 
 
 In point of fact, seeing that the fear of the occurrence of an adverse 
 trade balance may be realized at any time after the promulgation of 
 
388 GOLD STANDAEB IN INTBENATIONAL TRADE. 
 
 the monetary reform, it is necessary that the Government should be 
 3-eady to ward off the harm which the phenomenon in question might 
 occasion, and that to that end- the fund should be of sufficient magni- 
 tude to enable the balance of our international trade to be settled in 
 gold by means of drafts on foreign countries. 
 
 It is undoubted that there arc lao reasons which directly justify the 
 choice of 30 per cent rather than of 25 per cent of the total coin in 
 circulation as the amount of the reserve fund; but, as has been 
 already said, the undersigned sought to fix a margin, an excessive 
 margin, beyond which the curtailment of the circulating medium 
 could not go without occasioning, at least in all probability, a crisis 
 so profound as to compromise the economic future of the nation. 
 
 In view of the proportions Avhich we think the reserve fund ought 
 to have, it Avill be necessary, with a view to its formation, to have 
 recourse to extraordinary resources and to other resources that may 
 be characterized as normal and indefinitely collectible. 
 
 The reserve fund will therefore be formed : 
 
 I. From extraordinary resources, whether they be the nation's 
 treasury reserves or the proceeds of a loan of a provisional nature. 
 
 II. P^rom the profits that may be secured from the mintage of the 
 new silver coin. 
 
 III. From the interest on funds deposited in banks either in the 
 country or abroad. 
 
 IV. From 3 per cent of the import duties which will have to be 
 paid in gold at the parity to be determined by law, said 3 per cent 
 being utilized for the redemption of the debt contracted in case it be 
 necessary to have recourse to a loan for the formation of the reserve 
 fund. 
 
 The only point in regard to the reserve fund as to which the major- 
 ity and the minority of the fifth subcommittee do not differ is that 
 which concerns its administration, for all are agreed that it should be 
 kept separate from all the properties that constitute the federal assets 
 and that it should be administered by a commission which, though 
 presided over by the minister of finance and public credit, will be com- 
 posed of private individuals to be selected by the Government from 
 among persons of prominence in the commercial and banking world. 
 
 With a view to presenting in a concrete form all the opinions held 
 by the undersigned in regard to the reserve fund, its functions, forma- 
 tion, administration, etc., the following propositions have been drawn 
 
 I. The creation of a reserve fimd is considered by the minority of 
 the fifth subcommittee as necessary and indispensable for the realiza- 
 tion of the monetary reform with probabilities of success. 
 
 II. The reserve fund will perform the following functions : 
 
 (a) It will, during the period of transition, aid the gradual rise of 
 the gold value of the silver coins through the sale of drafts on foreign 
 ]>ails at rates that shall be conducive to that end, until the attainment 
 
 of the parity plus 2 per cent, or an exchange rate of on New 
 
 York and equivalent exchange rates on other foreign countries. 
 
 {!>) When the period of transition shall have passed, it will aid the 
 maintenance of stable international exchange rates at a margin of 2 
 per cent. As long as drafts are being sold in the City of Mexico on 
 New York at rates that are under 2 jjer cent, foreign exchange will 
 not be sold out of the reserve fund; but when that rate has been 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 389 
 
 passed, such quantity of foreign exchange will be sold as shall, in the 
 opinion of the managing committee of the fund, suffice to reestablish 
 the legal parity. 
 
 III. The amount of the reserve fund is fixed at 30 per cent of the 
 A-alue of the new coins to be issued or their equivalent in gold. 
 
 IV. The reserve fund is to be created partly in the country and 
 partly abroad. 
 
 V. The reserve fund will be formed : 
 
 (a) From extraordinary resources, whether they be the nation's 
 treasury reserves or the proceeds of a loan of a provisional nature. 
 
 (i) From the profits that may be secured from the mintage of the 
 new silver coin. 
 
 (c) From the interest on funds deposited in banks either in the 
 country or abroad. 
 
 {d)_ From 3 per cent of the import duties, which will have to be 
 paid m gold, at the parity to be determined by law, said 3 per cent 
 being utilized for the redemption of the debt contracted, in case it be 
 necessary to have recourse to a loan for the formation of the reserve 
 fund. 
 
 VI. The reserve fund will be completely disassociated from all 
 other funds of the national treasury ; it will be devoted solely and 
 exclusively to its object, and in no case may. the Government make 
 use of it for other liabilities of the national treasury, whether ordinary 
 or extraordinary. 
 
 VII. The reserve fund will be administered by a commission 
 appointed oy the Government and presided over by the minister of 
 finance and public credit. 
 
 VIII. The amount necessary for the formation of the reserve fund 
 Avill be gradually accumulated during the period of transition and 
 will be completed when that period shall have terminated and the nor- 
 mal functions of the reserve fund in the maintenance of legal parity 
 shall commence. 
 
 IX. In no case shall the period of transition exceed three years, and 
 during that period the reserve fund will be operated so as to impart in 
 a stable manner to the silver coins a fixed value in gold according to 
 the ratio adopted. 
 
 Before concluding, the undersigned would draw attention to an 
 important point as to which they differ from the majority of the 
 fifth subcommittee, viz., as to the free coinage of gold. 
 
 In view of the principles maintained by the majority of the fifth 
 subcommittee, according to which the legal parity between gold and 
 silver is not to be attained immediately, even though it should prove 
 possible so to attain it, it can be readily understood that they do not 
 consider the opening of the mints to the free coinage of gold as con- 
 ducive to the country's interests. 
 
 In point of fact, if the parity between gold and silver, according to 
 the ratio to be established by law, is to be attained by a contraction of 
 the monetary circulation, it is undoubted that the new gold coin 
 which would meet the pressing needs of that circulation would ham- 
 per or defer the effects sought to be brought about by such contraction 
 of the circulating medium. 
 
 It can be readily understood that the undersigned hold a diametric- 
 ally opposite opinion, seeing that according to their point of view 
 every effort should be made to bring about parity between the new sil- 
 
390 GOLD STANDAED IN INTERNATIONAL TRADE. 
 
 ver and gold coins at the earliest possible moment ; and, further, seeing 
 that they do not build their hopes of the success of the monetary 
 reform on the contraction of the circulation, but on the efficacy of the 
 functions of the reserve fund, it is natural that they should champion 
 the expediency of throwing open the mints to the coinage of gold. 
 
 It is probable that gold woTild not at once be offered for conversion 
 into national coin, even though its coinage were free ; but not on that 
 account ought its coinage to be prohibited when trade, the supreme 
 arbiter, causes its presentation at the mints of the Republic. 
 
 The undersigned have observed a lacuna in the report of the major- 
 ity of the fifth subcommittee in regard to the measures which should 
 be adopted during the period of transition. 
 
 It is certain that the mints of the Republic will not be able soon to 
 turn out the entire quantity of new coins necessary to be given in 
 exchange for the coins at present circulating; and in order to provide 
 for this situation and to assure the earliest possible disappearance of 
 the present circulating medium, thus preventing the concurrent use of 
 two different kinds of coin by the public, it would seem advisable to 
 authorize the mints to issue certificates of deposit to bearer for 
 amounts of $500 and $1,000, which will be exchanged for the new coins 
 as fast as they are turned out within a specified period of time. These 
 certificates could form part, just as if they were coin, of the metallic 
 reserves, which, according to the law governing institutions of credit, 
 the banks must hold as a gxiaranty for their note circulation. This 
 measure would abridge more effectively than any other the period of 
 transition, and would enable the Government to retire within a very 
 short period of time a large portion of the present dollars that are in 
 circulation. 
 
 Enkiqxje C. Creel. 
 M. Fernandez Leal. 
 G. Raigosa. 
 Joaquin D. Casastjs. 
 
 Mexico, December 5, 1903. 
 
 My opinions are opposed to the monetary change, but if said change 
 is to be made I am in accord with the general features of the fore- 
 going project. 
 
 J. DB Landero y Cos. 
 
 Annex No. 9. — Opinion of Commissioners Carlos Diaz Dufoo, Ricabdo Garcia 
 Granados, Jaime Gijrza, Everardo Heoewisch, Luis G. Labastida, Pablo 
 Macedo, and Carlos Selleeier. 
 
 The imdersigned regret that they have been unable to secure the 
 indorsement of all of their esteemed colleagues of the fifth subcommit- 
 tee for the plan of monetary reform which, after careful study, they 
 have felt themselves in duty bound to submit to the enlightened con- 
 sideration of the Government of the Republic as a remedy for the 
 currency difficulties which beset the country and which in so grave 
 and serious a manner jeopardize its future. 
 
 The differences that have arisen in the fifth subcommittee, in whose 
 labors Mr. Enrique C. Creel, the vice-president, and Mr. Jaime Gurza, 
 the assistant secretary, have taken a constant and active part, fortu- 
 
GOLD 8TAKDAED IN INTERNATIONAL TRADE. 391 
 
 nately do not refer either to the measures which constitute the f un- 
 damcmtal basis of the plan which wc took leave to recommend to the 
 consideration of our distinguished colleagues or to many of its details 
 even of a secondary nature. Those differences are confined to three 
 concrete questions: First, the expediencv of creating immediately a 
 reserve fund in gold to guarantee the conversion into that metal of 
 the silver money whose coinage is proposed; second,. the opportune 
 ™?™ent for commencing the coinage of the new gold currency, and, 
 third, a mere detail as to the form and circulation of certain special 
 certificates of the mints, in regard to the creation of which we are all 
 agreed. In regard to these three points, whose importance, in spite 
 ot the considerable time absorbed by their discussion, ought not to be 
 unduly exaggerated, we, the undersigned, hold views that differ from " 
 those held by Messrs. Jaoquin D. Casasus, Enrique C. Creel, Manuel 
 Fernandez Leal, Jose de Landero y Cos, and Genaro Eaigosa. 
 
 Such being the case, the present report ought, strictly speaking, to 
 be confined to the points which have given rise to the diversity of 
 opinion ; but they are so intimately bound up with the rest of the plan 
 of monetary reform which we have framed and which figures at the 
 end of this report, that it would be very difficult for us, and perhaps 
 impossible, clearly to expound and defend our views in regard to those 
 special points without having reference to the body of our plan and 
 without considering it in the aggregate. We have therefore pre- 
 ferred to give a full exposition of the reasons on which we have 
 based our plan of reform, setting forth in the proper place the argu- 
 ments that are adducible for those views of ours that have not been 
 fortunate enough to command the unanimous approval of our col- 
 leagues, whom we have also entreated to set forth their views in writ- 
 ing at such length as they may deem fit. 
 
 In accordance with the method in question we proceed to our task 
 without further delay. 
 
 ANTECEDENT EACTS. 
 
 1. After having investigated the matter with the fullness which it- 
 considered incumbent upon it, the fourth subcommittee, in an exten- 
 sive and laborious report, dated August 13, 1903, came to the follow- 
 ing conclusion: " It is unquestioned that it is to Mexico's interest to 
 impart the greatest possible stability to its international exchange 
 rates." 
 
 2. This report, which, according to custom, was distributed in 
 printed form among the commissioners several days in advance, was 
 submitted to the monetary commission on September 3 last, and of 
 the twenty-five commissioners who were present at the session only 
 one, Mr. Jose de- Landero y Cos, expressed dissent from the conclu- 
 sion above named. Subsequently three other commissioners expressed 
 their acquiescence in the same conclusion. So that, altogether, the 
 opportune moment seemed to have arrived for the appointment of 
 another subcommittee, which, as indicated by the fifth point of the 
 interrogatory of the department of finance, should study " the various 
 measures put in practice by other nations to stabilize their rates of 
 international exchange and in general to solve their monetary diffi- 
 culties," and, in conclusion, to give the Government its opinion " as to 
 the most efficacious and opportune measures to improve the present 
 monetary situation of the Eepublic." 
 
3^2 GOLD STANDARD IN INTERNATIONAL TRADB. 
 
 PROBLEMS WHICH HAVE BEEN STUDIED AND WHICH IT IS DESIEED TO 
 
 SOLVE. 
 
 3. In view of the foregoing antecedents we have considered that it 
 was our duty — 
 
 (a) To suggest the means which we considered most opportune and 
 efficacious to bring about the stabilization of our international ex- 
 change rates, and 
 
 (b) To draw up a plan of reform as complete as possible, with a 
 view to improving the present monetary situation of the Republic. 
 
 MEANS TO STABILIZE OUR INTERNATIONAL EXCHANGE RATES. 
 
 4. The problem of stabilizing the rate of international exchange 
 may assuredly be solved in difierent ways, according to the circum- 
 stances ; but if, on the other hand, it be considered that the chief civil- 
 ized nations have deemed it to be their interest to adopt, and one after 
 another have, de facto, adopted, the gold standard, turning their backs 
 with or without reason, on the gold and silver bimetallic regime; on 
 the other hand, that all the attempts which have been made to return 
 to the bimetallic regime in question by means of international conven- 
 tions, have failed; that the gold price of silver, due to these causes 
 alone or to these causes coupled with others, has fallen considerably 
 in the world's markets, also fluctuating through a very wide range; 
 and, finally, that our financial relations of every kind are with gold 
 monometallist nations, it has seemed to us that the only efficacious 
 and practical method to impart fixity to oiu- international exchange 
 rates lay in the adoption of the same metal as the basis or measure of 
 values in the Republic. 
 
 The reasoning that has led us to this conclusion is, in our opinion, de- 
 cisive, and setting aside theoretical disquisitions which would be out of 
 place here, may be summed up as follows : The phenomenon of inter- 
 national exchange is, in reality, only the result of ojoerations of a like 
 nature to those which take place between a country's internal markets 
 and just as the latter, for purposes of rapidity and simplicity, require 
 a value to act as common denominator and that value is found in coin, 
 so the former, if they are to be conducted under equally favorable 
 conditions, necessitate the existence of a value on which they may be 
 based and which will be accepted by the parties to international com- 
 merce. Now, in the present economical state of the world, that value 
 can he nothing but a single monetary metal, if, as we have said, the 
 desire is to establisli a basis of exchange that shall work easily and 
 expeditiously; for, otherwise, what in one nation is money is in 
 another nothing but a commodity, and the rates of international ex- 
 change vary with the prices commanded by that commodity. 
 
 THE GOLD STANDABD WITH COLD IN OIECULATION. 
 
 5. Having reached the above conclusion our next step was to under- 
 take an examination in detail of the various monetary systems of the 
 nations which have adopted the gold standard. We will not here set 
 forth the results of that examination, save to the extent that is abso- 
 lutely necessary, for in the two volumes published by the commission 
 imder the title of Data for the Study of the Monetary Question in 
 
GOLD STANDARD m INTERNATIONAL TRADE. 393 
 
 ■^®?^^<''/"ll particulars, which we here omit for the sake of brevity, 
 will be found. 
 
 ti^^'j;'^^®,'^"^* important of those results was the demonstration of 
 !?• u^^ that, among the systems in question, the best seems to be that 
 which IS based on the free coinage of gold and the actual circulation 
 of gold coins, because it renders a country's currency elastic and self- 
 regulating and protects it from artificial interferences which often 
 interrupt the natural operation of the complex, varied, and manifold 
 causes that influence the economic life of nations. Dn the other hand, 
 the dictates of, science, which stigmatizes as dangerous the interfer- 
 ence of the state in the free and spontaneous operation of economic 
 laws, whether that interference is exercised directly or indirectly 
 through privileged institutions, corroborate the conclusion to which 
 we have alluded, and, in accordance therewith, we firmly believe that 
 the best monetary system that can be recommended to a country 
 which desires to realize the conditions that are at present most con- 
 ducive to economic prosperity and progress, is the gold standard, with 
 free coinage of gold and an actual circulation of that metal. 
 
 7. Now can the Republic adopt at once a monetary system based 
 on those conditions, or, in other words, can it at once adopt the gold 
 standard with the free coinage of gold and gold in circulation? In 
 our opinion it can not for many reasons, of which the two follow- 
 ing sum to us the chief and, therefore, the decisive ones : 
 
 (a) Though the production of gold in the Republic has kept pace 
 with its general progress and last year (1902-3) amounted to 21.921.- 
 268 kilograms, worth $14,805,975.27 gold at the legal rate of $675,416 
 per kilogram, the whole of that production is exported and there is 
 absolutely no gold here either in circulation or (as it seems fair also 
 to affirm) hoarded up, for in the reserves of our numerous banks of 
 issue the stock of gold is insignificant and there is no ground to be- 
 lieve that it is held in appreciable amounts by xorivate persons. Thus 
 in order to get gold for purposes of monetary circulation, the nation 
 would have to buy it in the open market, which, in one form or 
 another, would impose a heavy sacrifice on the country which neither 
 the exchequer nor private parties could carry without serious loss. 
 
 (b) The Republic, on the other hand, is one of the largest silver 
 producers in the world and is, therefore, interested in staying the de- 
 cline of the white metal and maintaining the consumption thereof for 
 monetary purposes. So great do we consider this interest to be that, 
 in all probability, we must look to an unconscious, somewhat unrea- 
 soning, but yet efficacious realization thereof, for the foundation of 
 the belief, generally entertained until quite recently, that Mexico 
 could not change her monetary system until her exports other than 
 silver shall suffice at least to pay for her imports of foreign merchan- 
 dise. Be that as it may, it is evident that our interests as silver pro- 
 ducers can not be subserved by the decline in the gold price of silver, 
 and there can be no question that if we were to adopt outright the 
 gold standard, demonetizing silver, we should accentuate that decline 
 for two substantial reasons. One of those reasons, and perhaps the 
 more important one, would be the moral effect that would be produced 
 in the world's markets, which are already weak, we might even say 
 nervous, through the adoption of the gold standard on the part of a 
 nation which had been faithful to the cause of silver and which, by at 
 last relinquishing it, would give it, so to speak, the coup de grace. The 
 
394 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 other reason would be more effective and not less important and -would 
 consist in the fact that in adopting the gold standard we should have 
 to withdraw from circulation within a brief period of time substantial 
 sums of silver and should cease to require in future the appreciable 
 quantities of that metal which we use for monetary purposes. For this 
 twofold reason, and because undoubtedly we should have to sell the 
 demonetized silver, there would be a larger quantity of that metal 
 available on the market and it is well known that the inevitable effect 
 of an increased supply of a commodity is the lowering of its price. 
 
 A SILVER CIRCULATION BASED ON GOLD. 
 
 8. Another fact that is established by a close study of the monetary 
 systems of nations which have adopted the gold standard is that all 
 of them have retained silver in circulation, in some cases as subsidiary 
 coinage, in others as full and unlimited legal tender, but in either case 
 in very substantial quantities. This fact, coupled with the circum- 
 stance that this mass of silver coin has been maintained at the same 
 parity with gold coin, as prevailed when the two metals stood in the 
 ratio of 1 to 15^ or 1 to 16, can not but strike the observer as ex- 
 tremely remarkable, when, as is well known, that ratio ceased to exist 
 years ago and has given place to a ratio at times approximating 1 to 
 40 on the basis of the market prices of the precious metals. 
 
 9. On the other hand, some nations, foremost among them being 
 British India, have succeeded in passing from silver monometallism 
 to gold monometallism, while retaining in circulation a very consider- 
 able quantity of silver coins, which at first were as depreciated as the 
 metal itself, but which in time attained a gold valuation considerably 
 in excess of the value of the silver which they contained. Hence it 
 has seemed to us fair to conclude that though the best monetary 
 regime consists in the adoption of the gold standard with gold in 
 circulation, it is possible under given conditions to establish a system 
 under which silver is the actual circulating medium and is unlimited 
 legal tender, while at the same time it stands in a fixed and stable 
 ratio to gold and is, in consequence, based upon gold. 
 
 10. When silver is only used for subsidiary coinage and the only 
 money that is unlimited legal tender is gold, as is the case in Ger- 
 many, England, and other nations, the system is elastic in its nature 
 and, as we have pointed out, operates automatically. On the other 
 hand, if silver, either alone or in combination Avith gold, is unlimited 
 legal tender, as is the case, for example, in France and Holland, the 
 system does not conform altogether to the conditions, which scientific- 
 ally speaking, a currency ought to possess, and therefore it consti- 
 tutes, or ought to constitute, merely a transcient regime, and this 
 because it necessitates the constant action and vigilance of the public 
 authorities, whose intervention in such matters, according to sound 
 principles of government, ought to be restricted to absolutely indis- 
 pensable limits and ought to cease altogether as soon as circum- 
 stances render that possible. 
 
 11. Such are the principles, as set forth in the first two articles of 
 the resolutions with which this opinion terminates, that have in- 
 formed the plan of monetary reform which is expanded in the thir- 
 teen clauses or jaropositions contained in the third article and con- 
 stituting, in our humble opinion, the general measures which the 
 
GOLD aTANDAED IN INTERNATIONAL TEADE. 395 
 
 Government of the Eepnblic ought to adopt. We now proceed to give 
 our reasons for them, merely premising that some of those proposi- 
 tions are not basic nor indispensable, but merelv aim at correcting 
 the imperfections of our existing monetary regime, in so far as it 
 affects the subsidiary coinage, and that if we have embodied them in 
 our plan we have done so because it seemed to us that the realization of 
 a reform in regard to more important points afforded an opportunity 
 that ought not to be missed to adjust the new system to scientific prin- 
 ciples, even in points of detail, none of which lack importance though 
 at first sight they may seem to. 
 
 BASES OF THE PLAN OF MONETABY RKFOEM. 
 
 A. Closing of the mints to the free coinage of silver. — 12. When 
 one examines the monetary systems in which silver plays a more or 
 less important role (and we have already stated that such are the 
 monetary systems of all civilized nations, not excluding those which 
 have a gold standard with gold in circulation) it is easy to observe 
 that there is one characteristic feature which is common to all of 
 them, and it is that silver is not coined freely at the request of private 
 individuals, but that the right of issuing it appertains exclusively to 
 the state, which adjusts the quantity of silver coin in circulation 
 either to settled rules or to the dictates of a wise and enlightened 
 solicitude for the public interests. This fundamental fact has led us 
 to examine in detail its cause and its effects; and though both have 
 been already fully elucidated by economists, so that it would perhaps 
 be sufficient merely to refer to their works, we have decided to recapit- 
 ulate them here, without laying any claim to novelty, in order to 
 make clear the importance which we attach to the first of the bases of 
 our plan of monetary reform, viz., the closing of the mints to the free 
 coinage of silver. 
 
 13. It is a fact well known to political economy that money, though 
 its object is to act as a measure of values, is subject to the law of sup- 
 ply and demand like any other article or commodity that can become 
 the basis of mercantile transactions between man and man ; and this 
 fully explains why it is that a metallic coin, of which the coinage is 
 free, is, for purposes of international exchange — the aspect under 
 which we are considering the question — inevitably and fatally linked 
 to the price of the metal of which it is made, as is the case with the 
 Mexican dollar, and will always be the case as long as we continue 
 under our present monetary regime. 
 
 14. As a matter of fact the phenomenon of international exchange 
 between countries whose currencies are based on different metals 
 resembles in reality any other commercial transaction in which each 
 party tries to get the best of the bargain, securing as much as he can 
 and giving as little as possible in return. Now, let us consider what 
 happens, for example, between a person who possesses Mexican dol- 
 lars and who wishes to obtain gold and a person who possesses gold 
 or foreign gold coin and who wishes to- obtain Mexican dollars. If 
 the latter is asked to pay for the Mexican dollars which he needs a 
 higher price than the silver which they contain is worth, he can avoid 
 paying that price either by buying dollars abroad, where large quanti- 
 ties of them are to be had, or by securing silver in the open market 
 and having it coined. It is true that, theoretically, the cost of either 
 
396 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 of those operations ought to constitute a limit to the depreciation of 
 our dollars, preventing them from sinking to exactly the same price 
 as the silver which they contain; but in practice, owing to causes 
 which it would take us too long to explain, that limit disappears and 
 is of no avail, and in any event it constitutes so small a margin as to be 
 hardly of any use to the holder of dollars. The situation will not be 
 the same if the coinage of dollars ceases to be free, for then it will only 
 be possible to obtain silver dollars from the holders thereof, who will 
 thus find themselves in possession of an article of which the supply 
 will be limited and which will, therefore, be susceptible of apprecia- 
 tion in proportion to the demand. This situation, if carefully exam- 
 ined, is found to be in no manner essentially unjust, for, as in practice, 
 the quantity of gold is not unlimited (seeing that of the total stock 
 of that metal in the world we need onlj'^ take into account that portion 
 which is in the hands of persons who desire or who have to contribute 
 the value which it represents to our markets) ; the only thing done in 
 reality is to create conditions of equality between the interests that 
 are pitted against one another. Such being the case, if gold exists 
 only in a limited quantity there is no injustice in also limiting the 
 quantity of the silver coins that may have to be given in exchange for 
 gold. 
 
 15. By means of the principle of the limitation of the supply of 
 coin, which, in our opinion, is borne out by the experience of all 
 nations and is sanctioned by the teachings of economists, it is possible 
 to disassociate the value of a coin from its mere bullion value and 
 even to raise it to such parity with gold as the law may establish, 
 provided only that the quantity of coin in circulation be proportion- 
 ate to the demand therefor, or, in other Avords, that the quantity of 
 coin be not excessive in relation to the requirements which it is 
 destined to meet. 
 
 But what are those requirements in any given nation or people? 
 We think that, theoretically, it is almost impossible to ascertain 
 them, for they depend on causes which are extremely complex and 
 variable, such as the number and character of the operations into 
 which coined money enters; the coefficient of rapidity of its circula- 
 tion, which in turn depends on the greater or less use that is made of 
 the instrumentalities of credit in their manifold forms; the degree of 
 wealth and enlightenment of the mercantile community and of the 
 people in general ; and even the inclinations and preferences of the 
 people, which are often unknown and for which, even wlien known 
 in part, it is not always easy to assign a satisfactory and rational 
 explanation. Experience, therefore, seems to be the only safe guide 
 in so delicate a matter, and this is especially true in the case of Mex- 
 ico, seeing that wc are without information as to the most elementary 
 factors of the problem, as is clearly demonstrated by the single fact 
 that the third subcommittee, in spite of its patient and laborious 
 investigations, was unable to determine the quantity of coin held in 
 the Republic. 
 
 16, We will return to this' question later on. For the time being it 
 is desirable to state that another very important consequence of the 
 operation of the law of supply and demand, as applied to coin, is that, 
 in the case before us, it can be affirmed tliat everj'thing that tends to 
 curtail the demand for gold or to increase the supply thereof, in the 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 397 
 
 home markets, will help the establishment and maintenance of the 
 legal parity between gold and silver coins and hence of the stability 
 of international exchange. In the former respect it seems evident, 
 for example, that the expansion of our industrial production, curtail- 
 ing, as it will, the importation of similar foreign articles which have 
 to be paid for in gold ; the use, as far as possible, for the service of 
 our national gold debt, of the reserves owned by our Ciovernment 
 abroad, inasmuch as that use will diminish, at least temporarilv, the 
 purchases of drafts on foreign cities; and other similar measures will 
 contribute to the maintenance of the parity. Equally evident is the 
 influence that might be exerted in the same direction by all agencies 
 tending to stimulate our exports of merchandise as well as of securi- 
 ties, involving the introduction of foreign capital, which plays so 
 important a part in equalizing our trade balances, as has been proved 
 to the point of evidence by the interesting investigations of the first 
 subcommittee. 
 
 17. In spite of all this, could we and ought we to recommend the 
 adoption of measures of a general character, such as those mentioned, 
 of which the aim should be to bring about and maintain the stability 
 of international exchange? Prudence counsels us to refrain from 
 doing so, for, in addition to the fact that we lack a good deal of infor- 
 mation that would be indispensable to enable us to argue with proba- 
 )>ilities of accuracy and that the Government's financial policy is 
 already clearly directed to the aims in question, as is proved by tlie 
 uninterrupted material progress of the Republic, it seemed to us that 
 the scope of our labors was confined to the questions that are directly 
 and intimately connected with the monetary problem as to which we 
 were honored by being consulted. For these reasons we have confined 
 ourselves to the general suggestion contained in the opening sentence 
 of the eighth base of our plan of reform. 
 
 CBEATION OF A BESEEVE FUND IN GOLD. 
 
 18. But among the questions that are intimately connected with the 
 monetary problem is that which involves the expedience of creating a 
 special reserve fund in gold, destined to exercise a very direct 
 influence on the home marltet for foreign exchange, in the direction of 
 establishing and maintaining the legal parity between gold and silver 
 coins, either by freely furnishing gold for exportation or selling 
 drafts on foreign parts, whenever, owing to the scarcity of drafts on 
 the market, there shall arise a stiffening of the rates of exchange cal- 
 culated to jeopardize the maintenance of the legal parity. This was 
 a question which had to be, and has, in effect, been the object of our 
 (ilosest study. . . 
 
 19. Unfortunately in this respect the opinions ot the persons form- 
 ing the fifth subcommittee and of Messrs. Enrique C. Creel and Jaime 
 Gurza, who have taken an assiduous part in the labors of that sub- 
 committee, have not been unanimous. 
 
 Messrs. Joaquin D. Casasus, Enrique C. Creel, Manuel Fernandez 
 Leal Jose de Landero y Cos, and Genaro Raigosa advocate the imme- 
 diate creation of this special reserve fund in gold for the reasons set 
 forth by them in separate documents. The undersigned have come 
 to the opposite conclusion for the reasons which* they will proceed to 
 expound, after placing on record an important reservation. 
 
398 GOLD STAWDAED IN INTEENATIONAL TRADE. 
 
 20. We acknowledge that the creation of a reserve fund in gold, 
 l^rovided its amount be considerable, is, without doubt, the most effica- 
 cious measure that can be adopted to secure at once a given rate of 
 exchange and even to bring about the legal parity aimed at, seeing 
 that it brings into play both of tlae influences which we have men- 
 tioned as best adapted for the realization of those objects. On the 
 one hand it increases the supplies of gold offered in the home markets 
 and on the other it withdraws silver coin from circulation, so that its 
 action will be twofold and, in consequence, rapid, nay, immediate. 
 
 21. But this fact, from our standpoint, constitutes one of the great- 
 est drawbacks to the creation of the fund upon the first introduction 
 of the monetary reform, for it is not to be forgotten that that reform, 
 though destined greatly to benefit the general interests of the Repub- 
 lic, will at first occasion some inconvenience and loss to the export 
 industries and the silver-mining industry. The silver-mining indus- 
 try, under the present system, which enables it to turn its output into 
 coin, is, joaradoxical as it may seem, the industry that is least affected 
 by the decline in the gold price of silver ; and the other export indus- 
 tries which, in proportion as silver has declined, have secured larger 
 and larger amounts of the national coin for the gold in which they 
 have sold their products, will cease to enjoy that privileged position 
 when the monetary reform shall have been consummated, as they will 
 no longer reap the profits which they now secure at the expense, in 
 reality, of the generality of the Republic's inhabitants. This fact 
 has been demonstrated by the labors and investigations of all the 
 subcommittees, especiallj^ the fourth ; and though such a condition of 
 affairs is detrimental to the national interests, though the new mone- 
 tary arrangements, Avhich it is sought to establish on sound and just 
 lines, will redound later on to the advantage even of the silver-mining 
 industry and the other export industries, the fact remains that both 
 the former and the latter Avill suffer a temporary curtailment of their 
 present profits, so that, in our humble opinion, the change ought not to 
 be made brusquely, from one day to another, but gradually and pro- 
 gressively, so that the interests affected may have time to adjust them- 
 selves to the new conditions. This object would, in our opinion, be 
 achieved bj'' the mere closing of the mints to the free coinage of silver, 
 which would naturally produce a gradual rise in the value of our sil- 
 ver coins and a corresponding gradual decline in the rate of interna- 
 tional exchange. 
 
 Perhaps the rise in question might suffice to bring about legal par- 
 ity either at once or very soon. If this were to occur, certainly we 
 would not be in favor of preventing or checking that rise by artificial 
 means, for the mere fact of the rise being the result of the natural con- 
 ditions of the exchange market would afford ground for inferring 
 that the interests affected had been able to adjiist themselves to the 
 altered circumstances; otherwise silver mining and the export indus- 
 ti'ies would have been paralyzed to a greater or less extent, and as 
 that paralyzation would have entailed a curtailment of the supply of 
 gold in the home markets it would have materially hampered the 
 attainment of the legal parity which we are now supposing to have 
 been realized. 
 
 22. In rebuttal of our argument based on the danger that would be 
 incidental to the brusque and artificial establishment of the legal 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 399 
 
 parity, it has been urged that the country is accustomed to violent 
 fluctuations in the rate of exchange and it is inferred that one more 
 fluctuation would not produce disastrous consequences, principally 
 because it would be the last and would lead the way once for all to 
 the wished-for stability. Frankly, we must say that'this argument is 
 far from reassuring us; for, though it is true that the country has 
 passed through brusque and unexpected variations in the rates of 
 exchange, those variations are none the less an evil which, as a matter 
 of principle, it is not permissible voluntarily and deliberately to 
 court, and, moreover, there is a difference between putting up with 
 alternations of rise and descent and confronting a definite and lasting 
 fall of exchange rates. 
 
 23. The immediate creation of the gold reserve fund might be 
 recommended, as it has been at some of the debates of the fifth sub- 
 committee, as a means not of at once attaining the legal parity, but of 
 bringing about, with a certain degree of prearranged regularity, 
 a gradual and progressive improvement in the rate of exchange. In 
 our opinion this system would also be very dangerous, for it would 
 vest exclusively either in the authorities or in a special body to be 
 appointed by the authorities the absolute control of the exchange 
 market, without allowing any scope to the natural causes which 
 ought to govern it and to have free play, unless, indeed, it should 
 appear that other artificial causes are at work to impede the success 
 of the reform, in which case measures for the removal of those causes 
 would be wari'anted. * 
 
 On the other hand it would appear very difficult, not to say impos- 
 sible, to map out in advance a programme that should embrace a 
 period perhaps of years for the gradual realization of the stability 
 of international exchange rates, and in any event it is certain that the 
 gradations, however prudently they might be calculated, would afford 
 a wide margin to speculation, of which the basis would be all the more 
 secure in proportion to the confidence felt in the Government's ability 
 to carry out its prearranged programme. Its modus operandi would 
 consist in the introduction, in the first instance, of a gold capital 
 which would be exchanged for a given quantity of pesos, and with 
 these pesos more and more gold would be bought as the rate of 
 exchange continued to fall. It may be said that in this way the intro- 
 duction of foreign capital would be encouraged. True; but its object 
 would not be to promote the Avelf are of the country, but deliberately 
 and hurtfully to exhaust its resources by speculating with them and 
 this, far from deserving encouragement, ought to be prevented as 
 much as possible. 
 
 24. Another drawback which we find in the immediate creation of 
 the gold reserve fund lies in the sacrifice which it would in one form 
 or another impose on the country by augmenting its public debt in 
 o-old a contingency which, were it only on account of the disfavor 
 with' which it would be received by the public, might be attended with 
 dangers of another sort on which we need not dwell, but to which the 
 Government will assuredly give due weight, without any necessity on 
 our part of pointing them out. ,•,-,. ^- ^i 
 
 25 Moreover, the reasons that have been invoked for creating the 
 fund are, it seems to us, far from being conclusive 
 
 It was stated during some of the discussions of the fifth subcommit- 
 
400 GOLD STANDAED IN INTERNATIONAL TRADE. 
 
 tee that there might be reason to fear the organization of a combine, 
 for the purpose of maintaining the high rates of international 
 exchange, for the benefit of the silver-mining interests and the export 
 interests in general — interests represented bjr communities which, 
 though not numerous, wield considerable financial power. We believe 
 that the Government Avould not remain inactive in the new situation 
 and that its moral influence, supported as it would be by the banks, 
 by importers, and, above all, by all the legitimate interests of the 
 country, would suffice to baffle a monopolistic combine of this nature 
 in the event of its coming into existence. 
 
 26. It has also been said that the country's trade balance is always 
 adverse and that it has only been settled hitherto through the invest- 
 ment, on a large scale, of foreign capital. The fact is unquestioned 
 and we have no thought of controverting it ; but the monetary reform 
 will in no way discourage further investments, rather it will stimulate 
 them, however slender its immediate effects may be, for in any event 
 it will constitute a moral and material improvement over present 
 conditions. 
 
 Moreover, the more adverse our trade balance is made out to be 
 the greater the danger of creating a reserve fund in gold, for the 
 greater will be the risk of its being exhausted rapidly and to no pur 
 pose; for, inasmuch as the stability of international exchange depends, 
 as we believe we have demonstrated, on the equilibrium between 
 the demand for gold and the demand for silver coin, it would seem 
 natural, in order to bring about that equilibrium, to place reliance 
 on the economic forces of the country ratlier than on the mere 
 existence of a fund necessarily limited in amount and of which the 
 utility, if it exists at all, may consist in meeting temporary, or acci- 
 dental wants, but never the wants that are permanent. In other 
 words, if our trade balance is chronically on the wrong side, the live 
 forces of the country alone can modify that condition; and if the 
 lack of equilibrium is onW temporary or accidental, it is desirable in 
 any case to know the efficacy of those forces and, if necessary, to 
 impart to them such stimulus as to enable them alone either to cur- 
 tail our gold requirements or to augment the amount due to us in that 
 metal. To act otherwise is to take a leap in the dark or to blunt 
 individual initiative, which is more powerful than that of the best 
 and wisest government. 
 
 27. The immediate creation of the gold-reserve fund is attended 
 with another very serious danger which we can not pass over in 
 silence. Tliqugh it might inspire some capitalists with confidence in 
 the material success of the reform, it might be viewed in a different 
 light by otlier capitalists either because thej^ might consider its 
 amount insufficient or for any other reason. If this were to occur, 
 and it must be allowed that the contingency is, to say the least, not 
 impossible, the existence of tlie gold-reserve fund might produce tlie 
 very opposite effect to that intended, as it might occasion, if only tem- 
 porarily, an exodus of foreign, nay of native capital, eager to seize 
 the opportunity for conversion into gold at a favorable rate. If, in 
 addition, one takes into account the fact that speculation might taJre a 
 hand either in starting or accentuating a sudden withdrawal of capi- 
 tal of this nature (for, as one of our distinguished colleagues who 
 is a partisan of the fund has well said, speculation always succeeds 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 401 
 
 in finding an open door and a locus standi) it will be owned that our 
 apprehensions can not be regarded as excessive. 
 
 28. It has been argued, as against our point of view, that the sys- 
 teni whose adoption we recommend is based on currency contraction, 
 which, if considerable, may occasion most hurtful results, and in 
 support of this argument we have been invited to contemplate the 
 example of British India, whose government lamented with all the 
 emphasis permissible in official documents the evils accruing to the 
 people of India in consequence of the currency contraction, which it 
 is affirmed had to be resorted to in order to raise the rupee to the 
 level which the British legislator had fixed. 
 
 We might say much as to what happened in British India in this 
 connection, for there are not lacking solid grounds, also sanctioned 
 by official documents, to believe, on the one hand, that the improve- 
 ment which occurred there in international exchange rates was not 
 due exclusively to the contraction or rarefaction of the currency, but 
 also, in no small degree, to other general circumstances which led to 
 increased offers of gold and which fully and clearly bear out the eco- 
 nomical principles expounded by us in the foregoing paragraphs; 
 and, on the other hand, that the high rates of bank discount which 
 were especially noticeable in 1898 and which the Indian government 
 attributed solely to a scarcity of the circulating medium, had oc- 
 curred in previous years and were probably due to famine and pes- 
 tilence, which in that country constitute a periodical calamity 
 deranging all conditions. 
 
 We will not make these assertions without proof, and we take 
 leave here to copy the passages bearing on the point from the very 
 noteworthy and important report rendered in 1898 by the celebrated 
 committee of which the chairman was Sir Henry H. Fowler. The 
 passages in question are as follows : 
 
 " In the first place we desire to point out that it has not been 
 proved that the rise in the value of the rupee since 1894-95 is due 
 solely to relative contraction of the Indian currency, and it may be 
 that it is not due mainly to this cause. It is not certain that there 
 has been any contraction of the Indian currency which has mate- 
 rially affected the exchange, though it may not unreasonably be 
 inferred that there must have been some contraction and that such 
 contraction has had some influence on the exchange value of the 
 rupee. On the other hand, there are causes other than contraction 
 of the currency which affect the value of the rupee and the exchange 
 with London. Large borrowing in London on account of India, 
 reduction of the drawings of the secretary of state, an increase m the 
 
 the relative importance of these factors among themselves or the 
 amount of their influence on exchange as compared with the effect^of 
 a contraction of the currency or to state the precise degree of influ- 
 ence which anv or all of them have had on any particular alteration 
 in the exchaiio-e Nor, on the other hand, is it certain that the 
 unusually low "rate of exchange that prevailed in 1894-95 was due 
 «olely to a relative redundancy of the Indian currency, The closing 
 
 S. Doc. 128, 58-3 26 
 
402 GOLD STANDARD IN INTEHNATIONAL TRADE. 
 
 of the Indian mints necessarily brought into play many disturbing 
 influences which may have affected 1894-96. 
 
 " Since the mints were closed there has also been large borrowing 
 on Indian account, and there have been in some years large reductions 
 below the normal amount in the public remittances from India, while 
 fluctuations have been experienced in the foreign trade of India due 
 to famine and plague as well as to other causes. All these causes 
 must at different times have affected the exchange either favorably 
 or unfavorably. 
 
 " Another influence Avhich must hsLve had a favorable effect on the 
 Indian exchange is the reduction in the imports of silver due to the 
 closing of the mints. The average yearly net import in the three 
 years preceding the closing of the mints was 43,133,678 ounces of the 
 value of Ex. 12,020,296 ; and for the three years ending 1898-99 the 
 average net import was 31,126,376 ounces of the value of Ex. 6,103,431. 
 
 " In the face of the facts we have just stated, we are imable to 
 accept without qualification the opinion that the rise in the value of 
 the rupee since 1894-95 has been due wholly or mainly to a relative 
 contraction of -the Indian currency. AVe are not prepared to say 
 that the contraction of the Indian currency has not been an impor- 
 tant factor in the rise of the Indian exchange, but so long as the facts 
 of the case are surrounded by so much obscurity we consider that it 
 would be unsafe to base action of so drastic a character on this 
 assumption. 
 
 " If it be the case that the rise in the value of the rupee since 
 1894-95 is not due wholly or mainly to the relative contraction of the 
 Indian currency, it follows that an additional contraction of that 
 currency, jDroduced artificially by the withdrawal of rupees in the 
 way proposed by the government of India, might not have so much 
 effect in strengthening exchange as the government of India be- 
 lieved; and though we accept in principfe the proposition that a 
 reduction in the number of rupees tends to increase the value of the 
 rupee, we are not prepared to admit that such effect must necessarily 
 be direct and immediate; nor are we satisfied that such reduction, 
 carried out on a large scale and within a limited period, might not 
 aggravate, if it did not produce, a period of stringency in the Indian 
 money market. 
 
 " Dealing first with the question of discount rates, it will be suffi- 
 cient to remark that the anticipations of increasing stringency have 
 not been verified during the recent busy season. Whereas the mini- 
 mum rate of the Bank of Bengal was 10 per cent on 6th of January, 
 1898, rising on 24th of February to 12 per cent (at which figure it 
 stood until the 27th of April, 1898) and did not fall below 10 per 
 cent until the 16th of June, 1898, the rate for the busy season of 
 1898-99 has never exceeded 7 per cent, and this though the total 
 volume of India's sea-borne foreign trade exceeded Ex. 210,000,000 in 
 1898-99, as against (under) Ex. 199,000,000 in 1897-98. 
 
 " While it may be questioned whether banking arrangements in 
 India might not with advantage be strengthened and adjusted to the 
 growing requirements of Indian trade, we can not doubt that one of 
 the main causes of the stringency of 1897-98 was the reversal (neces- 
 sitated by the exceptional circumstances of India at the time) of the 
 relations of the government of India and the money market in the 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 403 
 
 tuitumii of 1897. In ordinary years the government is able, through 
 the sale of council bills and telegraphic transfers, to place large sums 
 at the disposal of the money market throughout the autumn and 
 winter. Thus, during the last four months of 1894, the bills and 
 transfers sold by the secretary of state amounted to Ex. 8,052,000: in 
 1895, for the same period of the year, the amount was Rx. 9,888,000 ; 
 in 1896 the amount was Ex. 6,056,900. But in 1897, owing to the 
 depletion of the balances of the government of India, brought about 
 by expenditure on famine relief and military operations and by fail- 
 ing revenue, the secretary of state was unable, from the 1st of Sep- 
 tember to the 15th of November, to offer bills or transfers for sale 
 and was compelled to purchase drafts on India for Ex. 1,000,000. 
 Thus, during the last four months of 1897, the amount placed at the 
 disposal of the Indian money market in the presidency towns in con- 
 sequence of the remittance transactions of the government was only 
 Rx. 332,700, or Rx. 5,724,200 less than the year before. 
 
 " It must not be forgotten that high discount rates were not 
 unknown in India under the system of open mints. For example, 
 the bank rate reached 12 per cent in April, 1890 (in which year the 
 rate did not fall below 10 per cent from the 10th of February to the 
 24th of April), while in 1889 12 per cent was quoted continuously 
 from the 21st of February to the 28th of March, the rate not falling 
 below 10 per cent from the I7th of January to the 11th of April of 
 that year."" 
 
 29. There is therefore good ground for not accepting as axiomatic 
 the twofold statement that the enhancement of the value of the rupee 
 in British India was due exclusively to currency contraction, and 
 that the contraction in question was exclusively responsible for the 
 very high rates of bank discount. In any case, we may be allowed to 
 observe that the circumstances under which India's currency reform 
 was affected were exceptionally adverse ; for, though the conventional 
 gold value which it was sought to give to the rupee was not far 
 removed from its bullion value at the time when the reform was 
 decreed, the effect on the silver market of the closing of the Indian 
 mints, coinciding as it did with the repeal of the Sherman act in the 
 United States, was truly disastrous, causing a decline of the white 
 metal without precedent until then. In the first volume published bj 
 the monetary commission under the heading of " Data for the Study 
 of the Monetary Question in Mexico " may be found a very interest- 
 ing paper by the American economist, Mr. Piatt Andrew, on India's 
 currency reform, accompanied by a table and diagram which illus- 
 trates very strikingly the point which we are considering. We 
 would for the sake of brevity refer the reader thereto. We are far 
 from advising such high aspirations here, as will be seen later on; 
 and it is therefore fair to hope that our difficulties will be considerably 
 less. Nevertheless, inasmuch as it is impossible to forecast with any 
 hope of certainty the future course of events, especially in regard to 
 that all-important point— the future gold price of silver— we can not 
 deny the possibility of conditions arising which would necessitate a 
 resort to special measures which were not adopted in India. We may 
 be- permitted to repeat that what we desiderate is that the interests 
 
 o Report iu questions Nos. 21, 22, 23, 45, and 4U. 
 
404 GOLD STAWDAED IN INTERNATIONAL TRADE. 
 
 involved shall be allowed free scope, and shall not be disturbed nor 
 interfered Avith unless adverse agencies arise which it may be neces- 
 sary to remove or counteract. 
 
 30. In the respectable and erudite opinion given by one of our 
 enlightened colleagues, Lie. Joaquin D. Casasus, it is affirmed that 
 currency contraction will require a long time to make itself felt here, 
 and will even prove inefficacious to stabilize exchange in the Republic ; 
 or, in other words, to enhance the gold value of our coinage, for four 
 reasons, which it becomes necessary to examine were it only for the 
 weight which the mere name of Mr. Casasus gives to any opinion 
 expressed by him. Mr. Casasus says in this respect: 
 
 " The suspension of the free coinage of silver would not suffice to 
 stabilize international exchange : 
 
 " 1. Because Mexico, despite the progress which it has achieved, 
 absorbs annually a very slight quantity of coin, and therefore the 
 enhancement of the value of the circulating medium would have to 
 be the work of a great many years. 
 
 " 2. Because in Mexico a scarcity of currency would be more than 
 compensated by an increased coefficient of the rapidity of its 
 circulation. 
 
 " 3. Because, although Mexico jaroduces gold, there is no gold in 
 circulation and no stocks of that metal accumulated in the banks. 
 
 " 4. Because IVIexico has an ad\'erse trade balance and only settles 
 same by means of the foreign capital that seeks investment in the 
 country." 
 
 The first proposition is based on monetary statistics,- which seem 
 to prove that between the years 1877-78 and 1901-2 the additions 
 to the circulating medium of Mexico only averaged about $5,000,000 
 per annum. Granting that these figures are accurate (though it 
 would not be impossible to question them), and granting also that 
 those additions are less than the normal additions in other countries 
 in proportion to the population (which is a point that, owing to lack 
 of time, we have been unable to determine by the examination of for 
 eign statistics) , the phenomenon is still, in our opinion, far from being 
 conclusive, for it fails to take into account the fact that since 1882 
 the use of bank notes, Avhich formerly circulated on an extremely 
 limited scale and that only in the City of Mexico, has sprung uji 
 among xis. That year witnessed the foundation of our foremost insti- 
 tution of credit — the National Bank, and of the Mercantile Bank, 
 which was consolidated with the former in 1884. The old London 
 Bank of Mexico and South America, transformed into the present 
 Bank of London and Mexico, has expanded considerably. Under 
 the law of March 19, 1896, the small local banks which previously 
 existed have acquired a legal status, and, above all, the State banks 
 have multiplied to such an extent that it may be said that there is 
 now no State in the Federation that has not its bank, not to speak of 
 the numerous branches Avhich the National Bank of Mexico and the 
 Bank of London and Mexico have established. As was natural, espe- 
 cially in view of the fact that hitherto the banks of issue, of the 
 Republic lia\'e been fortunate enough to avoid all stumbling blocks 
 in their path, the use of bank notes has become very general, replac- 
 ing to a large extent the use of silver coin. The very full banking 
 statistics prepared by the executive board of the monetary commis- 
 sion, and which will be issued in a few days (perhaps simultaneously 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 405 
 
 with this report) , demonstrate this fact in all its interesting details. 
 Here we only give the figures in reijard to the stock of metallic 
 money held by the banlcs on December 31 of each of the years men- 
 tioned, the note circulation on same date, and the difference between 
 the two: 
 
 Year. 
 
 1883.. 
 1883.. 
 1884.. 
 1885.. 
 1886.. 
 188T.. 
 1888- - 
 1889.. 
 1890- - 
 1891- . 
 1892.. 
 1893.. 
 1894- - 
 1895 -- 
 1896- 
 1897.. 
 1898.. 
 1899.. 
 1900.. 
 1901.. 
 1902.. 
 1903 a 
 
 Cash hold- 
 ings. 
 
 $1,850, 
 
 2,251. 
 
 4,495! 
 
 5,615! 
 
 8,753 
 13,479! 
 17,865, 
 15,188, 
 17,291, 
 17,315, 
 17,873, 
 20,120, 
 30,721, 
 38,554, 
 42,947, 
 34,275, 
 38,654, 
 61,357. 
 49,394! 
 56,213, 
 54,663! 
 55,404, 
 
 722, 
 534. 
 003. 
 663. 
 022, 
 066. 
 146. 
 148. 
 660. 
 
 Note circula- 
 tion. 
 
 194,419.00 
 236,897.00 
 174,069.00 
 275,559.00 
 245,491.00 
 981,539.00 
 979,529.00 
 403,919.25 
 973,902.50 
 628,728.99 
 298,760.85 
 581,966.97 
 969,682.78 
 439,315.57 
 967,105.00 
 808,252.75 
 375,769.-25 
 196,832.50 
 012,464.75 
 257,626.50 
 li5,227.00 
 ,272,796.25 
 
 Differences. 
 
 $1^343,696.72 
 
 EU,637.50 
 
 679,065.72 
 
 659,895.65 
 
 2,492,468.25 
 
 1,502,472.25 
 
 1,114,382.79 
 
 5,215,770.97 
 
 5,682,242.36 
 
 6,312,806.62 
 
 7,424,893.20 
 
 4,461,678.79 
 
 El, 751, 460. 00 
 
 E5, 1.15, 122. 21 
 
 E4, 980, 243. 07 
 
 10,532,862.03 
 
 15,720,955.68 
 
 11,839,101.74 
 
 14, 617,703. 72 
 
 15,044,217.77 
 
 31,482,197,18 
 
 28,867,930.44 
 
 a The figures for this year are only up the end of October. 
 E means excess of cash holdings over note circulation. 
 
 The table shows, as was theoretically to be expected, that both the 
 note circulation and the difference between that circulation and the 
 stock of silver have increased substantially, and if the matter be 
 rightly regarded, that increase constitutes in reality as effective an 
 addition to our circulating medium as if it had consisted of hard 
 silver coin. 
 
 To a certain extent this same fact affords solid ground for combat- 
 ing the second of the propositions which we are considering. It is 
 indeed just possible that greater rapidity might be imparted to our 
 circulation. But if we consider the increased use that is made of 
 bank notes ; that the note issues of most of the local banks have for 
 months past almost reached their authorized limit and are still close 
 thereto ; " that finally the use of checks and other mstrumentahties 
 of credit, formerly almost unknown, has become very general owing 
 to the growing familiarity of the people with banking methods, it 
 must be owned that our circulation, considering the volume of our 
 industrial and mercantile transactions, has already attained a consid- 
 erable degree of celerity and that it is not likely that it can be quick- 
 ened in future in the same proportion as in the past. Nay, it might 
 even be considered wise to advise the Government to look into the 
 question of note circulation, owing to the influence which it may exer- 
 cise upon the solution of the monetary problem if left m its present 
 
 ^ We certainly will not offer any such suggestion, though only for the 
 fundamental reason that this phase of the banking question was not 
 amonff the points about which we were consulted. We do however, 
 think it fair to state that, in view of the proportions whic h the note 
 
 a See bank statements for October 31, 1903. 
 
406 &OLD STANDARD IN INTERNATIONAL TRADE. 
 
 circulation has reached, it is not likely to expand further nor to cur- 
 tail the country's capacity to absorb a larger quantity of silver coin 
 than it already holds. 
 
 The third reason adduced by Mr. Casasus does not seem to us to have 
 any bearing on the point at issue. It is quite true (and we have 
 already stated the fact in our No. 7.) that " although Mexico produces 
 gold, there is no gold in circulation and no stocks of that metal accu- 
 mulated in the banks;" but this fact does not seem to us to constitute 
 the least warrant for the proposition that the limitation of the quan- 
 tity of silver coin in circulation is incapable of bringing about an 
 enhancement of its value in gold, which is the contention of Mr. 
 Casasus. On the contrary, if there is no gold in circulation- that fact 
 will contribute to strengthen the silver coinage, which thus will not 
 have to overcome a powerful rival. This is precisely the reason why 
 we recommend that gold should not be coined at once, as will be seen 
 shortly. 
 
 In regard to the fourth reason, which involves our trade balance, we 
 have dealt with it in our No. 26, and we do not thinlc it necessary here 
 to repeat what we have said. 
 
 31. Our esteemed colleagues who favor the immediate creation of 
 the gold reserve fund have dwelt at such length on the dangers of 
 currency contraction that we can not refrain from returning to the 
 subject to the extent of making two simple observations. 
 
 The first is that the currency contractions which we now suffer are 
 irremediable, both because the free coinage regime occasions tempo- 
 rary and unnecessary inflations of our circulation, followed by an 
 exodus of the surplus of coined silver, and because the brusque and 
 wide fluctuations in the price of that metal actually shut off our banks 
 from the temporary introduction of gold capital ; but, under the new 
 regime, such capital will be able to enter safely on the same footing, 
 as in all other civilized nations, either directly or in the form of 
 credits to our banks, in quest of the profits accruing from a high dis- 
 count rate, as soon as a tendency thereto becomes apparent. If this is 
 to occur, and we see no reason why it should not occur, as soon as the 
 monetary situation of the Republic shall afford an assurance that such 
 capital may be withdrawn or refunded without fear of serious losses 
 due to the oscillations of exchange, it would seem that there is no 
 ground to suppose that the scarcity of the circulating medium will go 
 to dangerous lengths. 
 
 Finally, the operation of the gold reserve fund, which we are now 
 considering, would also involve the withdrawal from circulation of a. 
 volume of silver coin, varying according to the amount of the fund. 
 So that if currency contraction constitutes an evil, that evil will be 
 rather aggravated than eliminated by the creation of the reserve fund. 
 
 32. It has also been argued that, since the desideratum is to impart 
 a fixed value in gold to the currency, the Government ought actually 
 to guarantee that value by making the silver coins interchangeable 
 for gold at the legal parity and at the will of their possessor. In our 
 opinion this reasoning is wholly erroneous. The Government's guar- 
 anty in the matter of coinage is, first, that each coin really contains 
 the quantity of metal provided by law, and secondly, that the Gov- 
 ernment, which issued it, will in turn receive it in payments made to 
 it on the same terms as attended its issuance. Moreover, if, in accord- 
 ance with the plan which we propose, a silver coin shall be issued in 
 
GOLD STANDARD IN INXEKNATIONAL TRADE. 407 
 
 exchange for a qu'^ntity of gold of greater value than the silver con- 
 tained m such com, it will be a moral obligation on the part of the 
 CjTOvernment not to convert the difference accumulating in its coffers 
 into a source of fiscal profit, but to lieep it in order to uphold the 
 enhanced value of the coin which it has issued, for otherwise public 
 confidence would easily be lost. Until such time as this contingency 
 arises, that is to say, until such time as private persons shall deliver 
 gold m exchange for silver coin, the creation of an obligation on the 
 part of the State to pay out gold in exchange for circulating silver 
 coins would constitute a privilege in favor of the holders thereof for 
 which the rest of the nation would have to pay ; it would, in fact, be 
 equivalent to a simple and unadulterated introduction of the gold 
 standard with gold m circulation, for assuredly no holder of silver 
 coin would fail to change same for gold if the matter depended merely 
 on his own will and pleasure. 
 
 33. We also think that the basis of facts which have been available 
 to us for studying the monetary problem, though sufficient to enable 
 us conscientiously to advise a change from the present regime, which 
 is sapping the strength of the nation and sacrificing all its legitimate 
 interests for the benefit of the persons who control tlie silver mining 
 industry and the export industries, do not enable us to forecast the 
 exact point which the effects of the closing of the mints will reach, for 
 many of the data necessary for an accurate forecast of this nature are 
 unknown to us. In the first place we are ignorant, as we have already 
 said, of the quantity of coin in circulation; we are also ignorant of 
 the exact degree of elasticity which our circulation has acquired or is 
 capable of acquiring as a consequence of the growing expansion of 
 institutions of credit, and especially of the already very considerable 
 use of bank notes. And the worst is that under the present regime of 
 free silver coinage, of which the first result is to determine brusque 
 and continual fluctuations in the quantity of coin in circulation, it is 
 impossible to arrive at even a reasonable approximation to the facts in 
 regard to this and other important factors of the monetary problem. 
 
 34. It is, therefore, necessary in our opinion to modify existing con- 
 ditions by closing the mints ; but to go beyond that point, to endeavor 
 all at once to stabilize exchange by methods so costly and so fraught 
 with serious dangers as is the immediate creation of a considerable 
 reserve fund in gold, seems to us hardly wise or prudent. 
 
 For these reasons our plan of reform only suggests the immediate 
 cessation of the free coinage of silver. If after the lapse of a certain 
 period of time the measure in question, supplemented by other indi- 
 rect measures tending in a natural manner to the attainment and 
 maintenance of stability of exchange, does not suffice to bring about 
 the enhancement of our coin, it will be time for the Government to 
 consider whether it ought to ask the country to bear the sacrifice neces- 
 sary for the creation of a gold reserve fund, in order to bring a deci- 
 sive influence to bear on the internal market. To act otherwise, 
 would, if we may be excused the frankness of our expression, be to 
 yield to an impatience that is incompatible with the delicate reserve 
 and the natural caution that ought to be exercised in acts that affect 
 the vital interests of the social organism. 
 
 35. The fear has been expressed that, unless the gold reserve fund 
 is created, the necessity of settling our trade balances will lead us to 
 the extreme of having to export our silver coins under the new regime 
 
408 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 at their bullion value, as is the case at present. "We regard these fears 
 as simply fantastic, unless it be held that economic laws, which else- 
 where have produced and continue to produce given results, will not 
 produce those results here, and that " Mexico is still the land of anom- 
 alies," as used to be said in times when, owing to a very imperfect 
 observation of facts and social phenomena, many persons failed to 
 understand that the premature and hasty adoption of principles and 
 laws, embraced and proclaimed by nations far more advanced than we 
 were and also very differently situated, could not be followed by the 
 same consequences here as in those other nations. Wherever the free 
 coinage of silver has been suspended or abolished without a single 
 exception, as far as we know, the silver coinage has been enhanced 
 above its bullion value, and in this respect we consider worthy of 
 special mention the unique instance of the paper currency of Austria- 
 Hungary, which, though redeemable only m silver, attained a higher 
 valuation than the bullion value of the coin for which it stood, due 
 solely to the principle of limitation (not contraction or scarcity) in 
 the issues of the paper in question. 
 
 The experience of Spain is also, in our opinion, singularly sugges- 
 tive. The only coin in circulation in that country is unlimited legal 
 tender silver, for gold, of which a relatively small quantity is held by 
 the Bank of Spain, is beyond the reach of the public and constitutes 
 no sort of guaranty for the circulating coin. On the other hand, the 
 Government of the Peninsula, in the distressing days of the late war, 
 coined positively enormous quantities of silver in order to avail itself, 
 for revenue purpose, of the difference between its bullion value and the 
 value ascribed to it by law after coinage; and this fact has made 
 exchange adverse to Spain, as was to be expected and is now officially 
 affirmed by the most conspicuous statesmen of that country. Never- 
 theless exchange has not touched nor even approached the level of the 
 coinage's bullion value, and this, in the opinion of the economists and 
 statesmen of Spain, is due wholly and exclusively to the fact that the 
 Government reserves to itself the right of coining silver. 
 
 36. There is, therefore, in our opinion no room for doubt that when 
 the new regime shall once have been introduced our coinage will 
 acquire in internal markets a value in excess of its bidlion value ; that, 
 in consequence, its holders will have a definite interest in not export- 
 ing it, for they will understand that they would have to lose the bene- 
 fit of that extra value abroad ; and that, in a word, the mere closing 
 of the mints to the free coinage of silver will, to a greater or less 
 extent, cause a disassociation between the coinage value and the bul- 
 lion value of the new peso which will prevent that peso's exportation. 
 Only one circumstance could produce a different result, viz., an 
 extreme superabundance of coin, and though there is every reason to 
 believe that there is no such superabundance, still, if the contrarj' 
 were the case, that is to say, if it should be found that the country was 
 possessed of a much larger quantity of coin than is needed for internal 
 exchanges, then it would be highly advantageous were the excess to 
 leave the country and go to the melting pot at its bullion Ai'alue, with- 
 out loss to its holders and without imposing on the Republic the sacri- 
 fice of redeeming it in gold at the legal parity. There would soon 
 become manifest a tendency to the ratio so often alluded to by us 
 between the silver coinage and gold, giving rise to an enhancement in 
 the value of that coinage and then individual interests, which are 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 409 
 
 more active iind vigilant than the best and most zealous government 
 and which would ha\'e nmch at stake in the success of the reform, 
 would not be long in rendering it effective witliout perturbations and 
 without shocks." 
 
 37. To sum up, in concluding this perhaps already too lengthy por- 
 tion of our report, we will say : That primarily we trust to the closing 
 of the mints to the free coinage of silver to bring about the success of 
 the plan of reform which we have taken leave to propose. If that 
 measure suffices immediately to insure the legal parity, which we 
 doubt, well and good. If it does not, we at least feel sure that it will 
 at once occasion an enhancement of the gold value of the new silver 
 coin; that that enhancement will, to the country's advantage, be 
 gradual and progressive, but that if, owing to causes which we can 
 not foresee, the event proves otherwise, then the moment will have 
 arrived for creating a gold-reserve fund in order to hasten the attain- 
 ment of parity. 
 
 If the matter be rightly considered, this Was the course of the Gov- 
 ernment of the United States in providing for monetary reform in the 
 Philippines, for Congress did not at once ordain the immediate 
 creation of the fund, but simply authorized the government of the 
 islands to institute a special fund for the maintenance of the parity 
 between silver money and gold, and we, for our part, suggest that the 
 legislative measures to be passed for the execution of monetary reform 
 in the Republic should include powers to the Executive to create the 
 gold-reserve fund which has occasioned so much discussion. We do 
 not think, as will be readily understood, that this is like counseling the 
 Government of the Republic to experiment with a reform of doubtful 
 results. On the contrary, we firmly believe in the practical efficacy 
 of our suggestion, but recommended a prudent course, like that of a 
 commander in chief who, considering victory sure by only using a 
 portion of his forces, should decide not to bring the whole of his army 
 into action, but rather to hold in reserve the other portion, perhaps 
 the best portion thereof, to be ready for unlooked-for contingencies, 
 not arrogantly imagining that those contingencies may not arise 
 simply because he can not foresee them. 
 
 B. Ratio between gold and silver money. — 38. Before decreeing 
 monetary reforms similar to that which we are contemplating, other 
 nations have carefully considered whether, in closing their mints to 
 the free coinage of silver, with a view to the adoption of the gold 
 standard, it was expedient to fix at once the rate or ratio which was 
 sought to be attained between the silver coins and gold. In the two 
 instances that are known to us, Peru and British India, the ques- 
 tion was in reality answered in the affirmative. If this is not done 
 in our case the entire aim of the monetary reform will be enveloped 
 in perilous vagueness, more calculated to arouse distrust and paralyze 
 the economic activities of the country than to inspire confidence in the 
 
 oin connection with this point, viz., the danger that the new coin may be 
 exported, it has been suggested that it would be well to prohibit that exportation 
 by law. This idea, which has not been expressed liy any member of the fifth 
 subcommittee, was no doubt suggested by the fact that at various times the 
 exportation of coin has been prohibited ; but it does not seem necessary to 
 refute the idea in question specifically, for it is now generally recognized that a 
 measure of this nature, besides being vexatious and tyrannical, would constitute 
 a grave economical error, which, in view of the culture we have attained, it 
 would not be permissible for us to repeat. 
 
410 GOLD STANDAKD IN INTERNATIONAL TRADE. 
 
 new regime, not to speak of the necessity of establishing^ a clear basis 
 whereon new issues of silver coin may and ought to be made in order 
 to meet the requirements of expanding transactions. These reasons 
 have appeared to us to be conclusive, and, consequently, they have 
 moved us to lay down as the second of the fundamental bases of the 
 plan of monetary reform, that, Avhen it is enacted, a ratio between 
 gold and the new silver dollar shall be fixed. 
 
 39. What is that ratio to be ? The fourth subcommittee, taking as 
 a base the average gold price of the white metal from 1893 to 1902, 
 has urged, with abundance of sound reasons, the expedience of adopt- 
 ing a ratio that shall be not less that 1 to 36 nor more than 1 to 32. 
 This view was combated by no one except Mr. Jose de Landero y 
 Cos, who expressed the belief that even the latter of the two ratios did 
 not leave a sufficient margin to insure the maintenance of the new coin 
 at a higher value than its mere bullion value, because the rise of silver 
 during the closing months of the present year, a rise characterized 
 by unaccustomed firmness, showed indications not only of being sus- 
 tained, but even of being accentuated, until the relationship between 
 gold and silver should approach, or perhaps even attain, the ratio of 
 1 to 32. 
 
 40. For the reasons above stated, which facts have continued to 
 sanction down to the present time, it was decided in order that the 
 labors of the fifth subcommittee might have a concrete base, to adopt 
 hypothetically the ratio between gold and silver of 1 to 32. Subse- 
 quently the undersigned have thought that, it was expedient to take 
 into account the average gold price of silver even during the current 
 year and in general for ten years preceding the monetary reform, and 
 "this for several reasons, of which the chief is that it seems neither fair 
 nor politic not to take into consideration, as far as possible, the con- 
 ditions which bear upon the present moment, for in a question so 
 grave as is the determination of the precise point at which exchange 
 is to be stabilized great care must be taken not to wrong existing inter- 
 ests and not to aggravate the situation of debtors. Interests which 
 came into existence in times past, even in times long past, are also 
 entitled to great consideration ; but inasmuch as it would be impos- 
 sible to mete out to all the satisfaction that they might desire, it must 
 be borne in mind that interests of long standing must, if they con- 
 tinue to exist, have adjusted themselves to new conditions and are, 
 therefore, to be treated in the same manner as interests of more recent 
 creation. 
 
 41. On the other hand, considering, as did the fourth subcommittee, 
 in its report of September 13 last, that the enhanced value ascribed to 
 the new coin ought not greatly to exceed the bullion value of that coin, 
 based on the average of the last ten years, we have sought- to impart 
 to our suggestion a greater degree of precision than is implied in a 
 mere numerical ratio, which is not always clear to all, and thus we 
 resolved to adopt the formula contained in the second base of the 
 accompanying plan of reform, by virtue of which the gold value of 
 the new dollar will be fixed on the basis of the average gold price of 
 the Mexican dollar in the last ten years plus an addition not to exceed 
 10 per cent. The result will, we believe, be approximately identical 
 with that suggested by the fourth subcommittee and perchance pos- 
 sesses the advantage of greater clearness and precision. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 411 
 
 OTHER BASES OF THE PLAN OF MONETARY REFORM. 
 
 i2. The two bases of the plan of monetary reform, the adoption of 
 which we have taken leave to recommend and for which we have 
 endeavored to give our reasons in the foregoing numbers. 12 to 41, 
 are, in our opinion, fundamental and indispensable. There are other 
 bases, however, which we consider of importance and for which tlie 
 reasons deserve to be given. We, therefore, now take up this portion 
 of our task. 
 
 A. Coinage of gold. — 43. Messrs. Manuel Fernandez Leal and 
 Joaquin D. Casasus who, as members of the fifth subcommittee, 
 undertook to study the question of the expediency of the immediate 
 coinage of gold on the hypothetical basis above mentioned, viz., that 
 the ratio to be adopted between gold and silver would be that of 1 to 
 32, have, in a special report which forms part of the present collection 
 of documents, recommended that gold be coined at once, unrestrict- 
 edly, and without charge, in pieces of five and ten dollars. 
 
 We must in the first place state that we have adopted almost all 
 the conclusions of the important report in question, and have embod- 
 ied them in the plan of reform which we have the honor to j^ropose. 
 Nevertheless, we have been unable to adopt two of them, viz., the 
 immediate opening of the mints to the free coinage of gold, and the 
 provision that the coinage shall be free of charge. 
 
 44. The reasons for our dissent from the former conclusion are 
 largely cognate with those which we have expounded at length when 
 discussing the closing of the mints to the free coinage of silver and 
 the immediate creation of a gold-reserve fund. If the principal 
 agency to be employed in the establishment of parity between silver 
 coins and gold consists in supplying silver when gold is offered there- 
 for, it seems to us absolutely essential that the actual circulating 
 medium should, during the initial or transition period, consist solely 
 of silver coins, and that no gold be coined. For, until parity is 
 attained, the following dilemma seems to us unavoidable : Either gold 
 will not be coined for circulation, in which case the facilities which 
 it is proposed to provide will be useless, or it will be coined for circu- 
 lation and will actually circulate, in which case it will materially 
 interfere with the attainment of legal parity, for no person holding- 
 gold will be willing to part with it for silver currency at the rate 
 provided by law while having at his disposal the Government's coin- 
 ing machines to supply him with, a coin of unlimited legal tender, 
 which he will not give up save at a premium such as is ingrained 
 in our commercial habits owing to the depreciation of the present 
 silver currency. 
 
 45. Our situation is not identical nor even similar to that of the 
 nations Avhich, being under the regime of the free coinage of gold and 
 silver, only closed their mints to the latter, so that gold might not be 
 dislodged from circulation by virtue of the well-known economic law 
 enunciated by Gresham, viz., that a bad or inferior money drives out 
 a good or superior money. Unfortunately, circumstances did not per- 
 mft the Eepublic to imitate the example of those other nations at a 
 time when gold used to circulate here conjointly with silver. At the 
 present time all the gold whicli we produce, whether coined or not, 
 quickly goes abroad without performing here any function as money. 
 
412 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 In order to retain it here and to bring it back into circulation it will 
 be necessary, in our opinion, to adopt special measures, so that it m^y 
 not impede tlie appreciation of the silver coinage, and that when that 
 appreciation has been brought about the yellow metal needed for the 
 internal circulation may not again emigrate. 
 
 For these reasons we have decided to propose that the coinage of 
 gold be postponed until the legal parity to be established between 
 that metal and the silver coinage shall have been attained, or until 
 the Government shall deem that gold may be coined without com- 
 promising that parity. 
 
 46. In regard to the other point of difference, it seems to us that 
 the question as to whether the coinage of gold ought or ought not to 
 be free, of charge is rather fiscal than monetary, and therefore outside 
 of our province. We will say, however, that we can not indorse the 
 proposal of Messrs. Fernandez Leal and Casasus. 
 
 B. Change of our present silver dollar.- — 47. We consider that it is 
 sincerely regrettable that the monetary reform can not be accom- 
 plished by the mere closing of the mints to free coinage, for the 
 necessity of striking a hew coin to take the place of the old traditional 
 Mexican dollar will be attended with difficulties. Those difficulties 
 are liable to be of various kinds, and shortly we will show how we 
 think that they can be overcome. Just now we will confine ourselves 
 to demonstrating the impossibility of allowing the present dollar to 
 remain in circulation if our plan of reform is to be adopted. 
 
 48. The case stands thus : Based, as that plan is, on the limitation 
 of the quantity of coin to be used in internal transactions, it is 
 indispensable to change the design of our dollar unless we want to 
 have on our hands a more or less substantial portion of the many 
 millions (hundreds of millions, perchance) of Mexican dollars scat- 
 tered over the world, particularly in the countries of the Orient, 
 which, as is known, have for centuries used them and continue to use 
 them for currency purposes. Perhaps the whole of that incalculable 
 quantity of dollars which circulate abroad at their bullion value 
 would, when it became known that we were here endeavoring to give 
 an enhanced value in gold to our silver coinage, be returned to us, 
 and this would constitute an insuperable obstacle to the reform by 
 destroying a part, unquestionably the most important part,' of its 
 foundation. This, therefore, must be prevented, and no measure 
 seems more conducive thereto than the adoption of a new design for 
 the neAV coin, although this will assuredly entail an expenditure of 
 which, owing to lack of data, we have been unable to estimate the 
 amount, but which will perhaps be from two to three million dollars. 
 
 C. T emforary prohiMtion against importing the present Mexican 
 dollar. — 49. Nevertheless, the tune that the operation in question will 
 consume, however expeditiously the work may be handled, will 
 involve a serious danger, the danger that during the period of transi- 
 tion a greater or less quantity of dollars may return to the Republic, 
 as already explained. In order to ward off this danger we would 
 offer the suggestion that a decree be issued a suitable time in advance 
 prohibiting the reimportation of Mexican dollars, subject to the pen- 
 alties provided for smuggling, which are sufficientlj^ severe, and go 
 in some cases to the length of imprisonment, or subject to such other 
 penalties as may be considered adequate to the requirements of the 
 case. 
 
• GOLD STANDARD IN INTERNATIONAL TRADE. 413 
 
 A measure of this nature, the eiBcacy of which we have no reason to 
 doubt, in view of the carefulness and present high morale of our 
 custom-house administration, can not be regarded in any way as 
 unjust or arbitrary. Our dollars have ever been exported as merchan- 
 dise at their bullion value, the lack of commercial relations between 
 ourselves and the Orient precluding the possibility of our having 
 sent them thither as currency. Nothing, therefore, obliges us to take 
 them back as currency, for they only possess that capacity and consti- 
 tute a claim on the faith of the nation when circulating within the 
 borders of the Republic. 
 
 D. Duration of the period of transition. — 50. Nevertheless, a pro- 
 hibition of this nature ought not to be, and can not be, maintained 
 indefinitely, and much less forever, without losing its efficacy. It will 
 always be attended with danger, a danger which will have to be mini- 
 mized, and for this reason it is necessary, as already said, to change 
 the design of our coin and also to abridge the period of transition as 
 much as possible. 
 
 51. In order to achieve this object recourse may be had to various 
 measures of an administrative nature, ^vhich it has not seemed neces- 
 sary to us to point out, including the coinage of money abroad, accord- 
 ing to the example set by other nations which regularly and habitually 
 procure their supply of coin in this manner. We have also taken 
 leave to suggest that a portion of the metallic reserves of the banks 
 might temporarily be used, if the banks are willing, and it is to be 
 assumed they will be, for the same object, the banks receiving special 
 certificates for such portion of their reserves from the mints; but a 
 special law would have to be passed, modifying in this respect the 
 present banking law, in order to authorize institutions of credit to 
 compute the certificates in question as metallic money for the purpose 
 of compliance with the iDrecept Avhich fixes the minimum proportion- 
 ate amount in coin or bullion which they must have on hand in 
 comparison with their outstanding notes. 
 
 52. This temporary use of the metallic reserves of the banks, 
 besides helping to abridge the period of transition, will be attended 
 with the additional advantage that it Avill save the Government from 
 being obliged, as probably would otherwise be the case, to buy silver 
 in order to start coining the new money. But we have no idea of 
 suggesting that these mint certificates should leave the vaults of the 
 banks, both because we consider that there is no call for such issuance 
 and because that issuance would mean the addition, not for a very 
 long period, of another form of fiduciary circulation to the many 
 already in existence. 
 
 On this point, which relatively is of minor importance, the under- 
 sio-ned differ from the views sustained at the sessions of the fifth 
 subcommittee by Mr. Enrique C. Creel, views also shared by Lie. 
 Joaquin D. Casasus, Eng. Manuel, Fernandez Leal, Jose de Landero 
 y Cos, and Lie. Genaro Eaigosa. 
 
 E. Rate at which the new coin is to he given in exchange for that 
 which is now legal tender — Quantity of silver that the new dollar is 
 to contain. — 53. Sundry persons, not indeed including any of our 
 esteemed colleagues, either on the fifth subcommittee or on the mone- 
 tary commission, have expressed to us the opinion that the present 
 coin ouglrt not to be exchanged for the new coin proposed by us at 
 
414 GOLD STANDAED IN INTERNATIONAL TRADE. 
 
 par, but that the coin which is now legal tender ought to be subject 
 to a certain rebate or discount. 
 
 54. This opinion is based on the assumption that the new coin, 
 which is destined to be worth in gold more than its bullion value, 
 ought to be estimated by the legislator at a higher rate than the 
 present coin from the very moment of its being put into circulation ; 
 and it is maintained that this would not be an injustice to creditors 
 under prior contracts, seeing that they would be paid in a superior 
 coin, but that, on the contrary, it would be the way to do the fullest 
 justice both to creditors and debtors, seeing that otherwise the liabil- 
 ities of the latter would be augmented through their having to pay 
 old debts contracted in coinage of variable value in a coin worth a 
 fixed or nearly fixed amount in gold, and therefore more highly 
 esteemed. 
 
 55. That this point of view is entitled to careful consideration is 
 proved by the recent example of the Philippines, where it has been 
 provided that the present silver dollar will be exchanged for the new 
 one at rates which the governor of the islands shall from time to time 
 fix by jDroclamation, and inasmuch as this question is intimately 
 bound up with another question, viz., whether the new coin is to con- 
 tain the same quantity of pure silver as the present coin, our argu- 
 ments will refer to both points jointly. 
 
 56. If the Government in issuing the new coins were only to accept 
 the old ones at a discount approximating or actually equivalent to 
 their bullion value, it would contract at least a moral obligation to 
 guarantee the conversion of said new coins into gold, for only thus 
 could the discount be justified. Now, we have already seen the serious 
 drawbacks to such a guaranty and the grave responsibilities which 
 the Government would be assximing for the entire nation. Perhaps 
 it would be preferable — it would certainly be safer — to introduce the 
 gold standard with gold in circulation. If, on the contrary, the 
 authorities confine themselves to giving in exchange for the present 
 coin at par another coin containing the same quantity of pure silver, 
 though of a different design, they impose on the nation no effective 
 liability, or any other kind of liability, excepting the cost of recoin- 
 age and the loss from wear, which do not constitute a sacrifice out 
 of proportion with the improvement in general monetary conditions 
 which is sought to be brought about, nor involve the country in risks 
 of unknown, or almost unknown, import. At the worst a not very 
 considerable disbursement will have been, incurred, but no opposition 
 will be aroused, and the holders of the present Mexican dollar will 
 not be able to say that the quantity of silver owned by them is being 
 reduced. 
 
 57. The point of view of fairness both to creditors and debtors is 
 also important. It is true that debtors, by paying old debts in the 
 new dollar, which will be worth more in gold for purposes of inter- 
 national exchange, will be giving a superior coin and therefore a 
 coin more highly prized or esteemed than the old one, and that thus 
 creditors will be benefited; but it must not be forgotten that to the 
 great majority of debtors and creditors the superior quality of the 
 new coin will not be, so to speak, tangible or perceptible, seeing that 
 they have no direct concern in international commerce and exchange. 
 They would with difficulty understand, if they understood at all^ 
 
GOLD STANDAED IN INTERTSTATIOKAL TRADE. 415 
 
 the reason for the discount on the old coin, and in the meantime the 
 creditor class (and who does not belong thereto to the extent of a 
 small salary or petty wage?) would complain of an apparent injus- 
 tice, irritating on account of its very inexplicability. 
 
 The important point in this matter, which is a most delicate one 
 seeing that it concerns all persons without exception, is, according to 
 the_ weightiest opinions, that the existing ability of debtors to pay 
 their debts should not be curtailed, and that ability depends on their 
 status as creditors. If, therefore, in this sense, care is taken to con- 
 serve the ability of everyone to acq^uilre the wherewith to pay his 
 debts no one can justly complain in his capacity as a debtor. 
 
 The enlightened and cultured portion of the nation will not fail 
 to perceive that in the long run there will come about a reduction in 
 the cost of living, and therefore in prices generally ; but at first there 
 will be no reduction, as is proved by the unvarying experience of 
 other countries, in small salaries or wages, a fact which it may be 
 remarked incidentally will better the situation of the needy. More- 
 over, the reduction in question, which will be the result of competition 
 and not of impoverishment, will operate slowly, and will take place 
 in such manner as not to cause inconvenience to anyone, for all old 
 debts will gradually have been liquidated. 
 
 58. The question of the quantity of pure silver which the new 
 dollar is to contain is subject in our case to special considerations, 
 which we proceed to explain. 
 
 The Civil Code of the Federal District and, in imitation thereof, the 
 civil codes of ail the States of the Eepublic provide that payments or 
 " prestations in money must be made in the kind of money agreed 
 upon, and if this is not possible in that which shall coincide with 
 the real value of the money owed." (Art. 1463 of the Civil Code.) 
 This precept, in spite of its vagueness, economically considered, has 
 doubtless given rise to the engagement which has become almost a 
 matter of course in all written undertakings to pay, viz., that said 
 payment shall be effected in hard dollars of the current Mexican coin- 
 age and of the weight and fineness provided by the present monetary 
 law, with the proviso that if said law is modified the creditor shall 
 choose the kind of money in which he shall be paid, the above article 
 of the Civil Code being to that end renounced. 
 
 The binding force of such an agreement might be contested on the 
 strength of solid arguments furnished by article 2690 of the Civil 
 Code and article 359 of the Code of Commerce, which are as follows : 
 
 "Art. 2690. When the loan is made in money and in a given class 
 of coin the borrower shall pay in the same kind of coin as was 
 received by him, no matter what may be the value of said coin at 
 the time of effecting payment. If he can not pay in said kind he 
 must deliver a quantity of current coin coinciding with the real value 
 of the coin received." 
 
 "Art. 359. If the loan consists of money the debtor will pay by 
 returning a quantity equivalent to that received by him, in accordance 
 with the monetary legislation in force in the Republic at the time of 
 effecting payment, and this provision may not be renounced." 
 
 Notwithstanding, merchants in general and even the banks intro- 
 duce in contracts executed in their behalf the old clause mentioned 
 above and to interfere with the apphcation thereof, regardless of its 
 
416 GOLD STANDABD IN INTERNATIONAL TRADE. 
 
 inveteracy and the confidence felt by all in its efficacy, would be to 
 create an interminable source of controversies. Moreover, liabilities, 
 which, like debts secured by mortgage, are not commercial, and in 
 respect to which, according to the practice consecrated by usage, 
 article 2690 of the Civil Code has been renounced, are probably gov- 
 erned only by the jDrovision of article 1453 of the same code, above 
 alluded to, and it must be borne in mind that if the new dollar were 
 to contain a smaller quantity of pure silver than the present one cred- 
 itors might feel entitled to exact from debtors a larger amount in the 
 new coin than that which was promised them in the present one. 
 AVhether such a claim Avould hold good or not (and we will not enter 
 into the question at length here, seeing that we are not competent to 
 pass up®n it) , the fact remains that it would give rise to many con- 
 troversies which would be a drag on the monetary reform by making 
 it in all probability very unpopular. 
 
 For these reasons we have decided to propose that the new dollar, 
 though conforming to the metric and decimal system, as provided by 
 the general monetary law, shall contain the same quantity of pure 
 silver as the present one, and shall be exchanged for it at par. 
 
 F. Subsidiary coinage — Other pohits of minor importance. — 59. 
 The reasons that influenced us in favor of the fineness and weight of 
 the subsidiary coinage Avhose adoption we recommend are almost 
 AvhoUy the same as those set forth in the comprehensive and con- 
 scientious report which Messrs. Fernandez, Leal, and Casasus pre- 
 sented to the fifth subcommittee, with certain modifications accepted 
 unanimously by all of us, the most important of which is the recom- 
 mendation that the Government retain the 5-cent piece, owing to its 
 unquestioned practical utility, though without specifying the metal 
 of which it is to be coined, for fear that if nickel, which is the most 
 suitable metal, were mentioned the suggestion would cause a bad im- 
 pression in public, owing to the unfortunate events which occurred in 
 i883 at the capital of the Kepublic in consequence of an imprudent 
 emission of nickel coins. 
 
 60. The limitation of the legal-tender capacity of the subsidiary 
 coinage seemed to us a necessity, counseled alike by science and the 
 example of other nations, especially if its fineness is curtailed accord- 
 ing to our recommendation, which is based on the saving thereby to 
 the treasury and other reasons of public expediency which we do not 
 need to expound on account of their obviousness. 
 
 61. Nor does it seem necessary to give any lengthy reasons for the 
 suggestion that in effecting the exchange of the present subsidiary- 
 coinage its holders be allowed freedom of choice as to whether they 
 will receive the new monej' in hard dollars or coins of lesser denomi- 
 nations, especially in view of the fact that we recommend the diminu- 
 tion of the fineness of the latter. There might be persons who would 
 want to receive the same quantity of pure silver as that turned in by 
 them, and in any event it would be well to avoid anything resembling 
 injustice or coercion that might tend to bring the monetary reform 
 into disfavor. 
 
 62. The measure which we propose to prevent any excess in the 
 quantity of subsidiary coinage in circulation requires a slightly fuller 
 explanation. Our recommendation is that offices be established in 
 all the chief cities of the Kepublic at which subsidiary coins presented 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 417 
 
 in quantities of $100 or multiples thereof shall be changed easily and 
 freely for hard dollars. This is the method successfully adopted by 
 the monetary laws of the United States. But, strictly speaking, any 
 of the other measures which in other nations have been found to pro- 
 duce automatically the desired result would serve our purpose as well. 
 In Great Britain, for example, the token coins are only issued when 
 demanded from the Bank of England, and their nominal value in 
 gold is paid in to that institution. The important point is to pre- 
 vent any excess in the token coinage that would bring about its depre- 
 ciation. 
 
 63. One of the essential features of any monetary reform such as 
 that which we are now recommending consists in inspiring our own 
 people and outsiders with the necessary confidence that the measures 
 adopted will be carried out inflexibly and with the utmost scrupulous- 
 ness. In order to achieve this important result it has seemed to us 
 that the execution of the law that may be passed should not be 
 intrusted to Government employees alone, and this not because those 
 employees are incapable of inspiring the desired confidence, but 
 because that confidence will be still stronger if private persons of high 
 standing in the community, under the chairmanship of the citizen 
 who may be at the head of the finance department, are invested with 
 this honorable trust. 
 
 Such is the ground for the eleventh base of the plan. 
 
 MEASURES TO PROVIDE FOR A RISE IN THE PRICE OF SILVER. 
 
 64. The fifth subcommittee discussed a point raised by Mr. Ricardo 
 Garcia Granados, viz., what ought to be done in case, subsequently to 
 the adoption of the monetary reform, the gold price of silver were to 
 rise to a point at which the bullion value of the new dollar should 
 become equal to, or even exceed, legal parity. Such a contingency 
 can not be regarded as impossible if one considers the surprises which 
 the constant fluctuations of silver have had in store even for the most 
 farseeing and well informed persons. To meet such a contingency 
 there would only be two courses : Either to alter the relationship or 
 legal parity adopted when the reform was enacted, or to go, fully and 
 openly, on the gold basis with gold in circulation ; and inasmuch as 
 the drawbacks and disastrous consequences of the former course were 
 obvious, the latter was adopted without hesitation or difference of 
 opinion, and in consequence was embodied in the twelfth base of the 
 plan of reform. 
 
 MEASURES CALCULATED TO OBVIATE OR DIMINISH THE TEMPORARY INJURY THAT MAY 
 ACCRUE TO EXPORT INDUSTRIES. 
 
 65 Messrs. Jose de Landero y Cos and Carlos Sellerier, as members 
 of the fifth subcommittee, were encharged with the task of making a 
 special studv of the measures that might be adopted to obviate or 
 mitigate the"" evil effects, of a temporary nature, that may accrue to 
 the silver-mining industry and export industries in general from the 
 stabilization of international exchange. The gentlemen in question 
 proposed the abolition of export duties on all domestic products and 
 Substantial reductions in other taxes, direct and indirect, on niining, 
 and especially on silver mining. None of us questioned m principle 
 
 S. Doc. 128, 58-3 27 
 
418 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 the expedience of these or similar measures, but the balance of opinion 
 was in favor of not recommending them in a concrete form, inasmuch 
 as they are strongly fiscal in character and, therefore, outside of the 
 commission's province. In this spirit the thirteenth and last base of 
 the plan of monetary reform was framed. 
 
 CONCLUSION. 
 
 66. Such are the grounds that have decided us to form the plan or 
 project appended hereto and to lay it before the monetary commission 
 and through that commission to the consideration and examination of 
 the minister of finance and the President of the Republic, who will 
 doubtless elect the course that is most conducive to the welfare of the 
 nation with the wisdom which, in so many ways and on so many 
 occasions, they have demonstrated. 
 
 67. We do not think that the plan in question contains any novelty 
 or that the monetary question, which it is intended to solve, is as 
 difficult as it has been repeatedly declared to be by the press and in 
 some circles of the mercantile community. In our humble opinion the 
 only difficulty which the question involves consists in carefully ascer- 
 taining the facts or phenomena of our economic life, in examining 
 them without prejudice, and then calmly and impartially applying to 
 them principles on which economic science has set its seal of approval 
 and which the experience of all civilized nations has jnost fully and 
 satisfactorily tested. The former task, that is to say, the ascertain- 
 ment of facts, has been accomplished by the four subcommittees into 
 which the monetary commission was from the start divided, and they 
 have acquitted themselves thereof with such scrupulousness and com- 
 prehensiveness that no one, in or out of the commission, can question 
 the conclusions at which they have arrived. The latter task, i. e., the 
 application to those facts of established scientific principles, is rela- 
 tively easy and simple, for if, by virtue of individual opinions which 
 can never be completely identical, differences may arise as to matters 
 of secondary importance, the fundamental point of view must be 
 the same. 
 
 In thus expressing ourselves we have no thought of depreciating 
 our personal labors with false modesty in order to incite others benev- 
 olently to extol them, but simply to reduce them to their proper pro- 
 portions, claiming for ourselves credit for nothing but the patriotic 
 zeal and absolute sincerity with which we have discharged the task 
 assigned to us when we received the honorable summons to the coun- 
 cils of our enlightened Government. 
 
 68. In one respect we do believe that our plan possesses advantages 
 over others, viz., in that its adoption will never and in no case entail 
 serious inconveniences or detriments, nor any such that could not be 
 remedied by a simple legislative enactment of which the action would 
 be immediate and efficacious. If the closing of the mints which, 
 after all, if the matter be rightly considered, is the only measure in 
 our plan that could be characterized as radical, fails to realize the 
 hopes built upon it, and occasions evils instead of the inestimable 
 blessing of fixity of international exchange, with all its incalculably 
 beneficient consequences, it Avill be very easy to fall back on the 
 present system by reopening the mints to the free coinage of silver. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 419 
 
 This does not mean, we repeat in conclusion, that we harbor doubt 
 and distrust or that we are recommending reforms of problematical 
 success. We are simply offering to the most conservative, nay, the 
 most timorous, spirits a consideration that is calculated to reassure 
 them to the fullest extent. 
 
 Pablo Macedo. 
 
 EvEEAKDO HeGEWISCH. 
 
 Carlos Selleeier. 
 EiCARDO Garcia Granados. 
 Carlos Diaz Dufoo. 
 Luis G. Labastida. 
 Jaime Gueza. 
 Mexico, December 11, 1903. 
 
 Project of Monetaet Refobm. 
 first article. 
 
 In order to obtain stability or fixity of international exchange the 
 Government should be advised to adopt a monetary system based on 
 the gold standard. 
 
 SECOND article. 
 
 I. The immediate adoption of the gold standard with gold in cir- 
 culation is not to be recommended. 
 
 II. On the contrary, as the most adequate means of bringing about 
 a regime under which gold coins will constitute the chief circulating 
 medium of the Republic, it is advisable to adopt, for the time being, a 
 system that will keep silver coins in circulation in quantities as con- 
 siderable as possible without impairing the practical maintenance of 
 their parity with gold at the ratio that may be adopted. 
 
 THIRD article. 
 
 In order to realize this purpose the national Government is to be 
 recommended to adopt a plan of monetary reform based on the fol- 
 lowing clauses : 
 
 First. — The mints of the Republic will be closed to the free coinage 
 of silver and the reimportation of the silver dollars that hitherto have 
 been, and still are, legal tender in the Republic, will, with suitable 
 anticipation, be prohibited under the penalties provided for smug- 
 gling or such other penalties as may be deemed sufficient. 
 
 Second: — I. As the fundamental basis for the new monetary regime 
 a fixed ratio between gold and the silver dollar hereinafter referred to 
 will be adopted, and the Government is to be advised that the ratio 
 in question be determined on the basis of the average gold price of 
 the Mexican dollar on foreign markets during the last ten years, with 
 an increase not exceeding 10 per cent. 
 
 II. Gold coins will not at once be minted either on Government or 
 private account; said mintage should be deferred until such time as 
 the silver dollar shall have attained parity with gold and when the 
 circulation of gold coin will not, in the opinion of the Government, 
 impair the maintenance of that parity. 
 
420 C40LD STANDARD I]\ INTEENATIOKAL TRADE. 
 
 III. The gold coins, when minted, will be 900 thousandths fine ; an 
 effort will be made to assimilate them- preferably with the American 
 dollar and there will be pieces of $5 and $10 only. 
 
 Third. — The Government will proceed to coin on behalf of the 
 nation : 
 
 I. A new silver dollar, 900 thousandths fine, containing the same 
 quantity of pure silver as the dollar now in circulation, but with a 
 different design or effigy. In other words, the new dollar will weigh 
 27.1550 grams and will contain 24.4395 grams of pure silver. 
 
 II. Subsidiary silver coins, 800 thousandths fine and of the follow- 
 ing denominations, value, and weight : 
 
 («) A toston or half dollar, worth 50 cents, weighing 12.5 grams 
 and containing 10 grams of pure silver. 
 
 (i) A quinto, worth 20 cents, weighing o grams and containing 4 
 grams of pure silver. 
 
 (c) A dime, worth 10 cents, weighing 2.5 grams and containing 2 
 grams of pure silver. 
 
 III. A 5-cent piece of such metal and other qualities as the Govern- 
 ment may deem expedient. 
 
 IV. A centavo of bronze of the same weight and other qualities as 
 laid down by the laws at present in force for the existing centavo. 
 
 Fourth. — The new coin will be legal tender in the offices of the Fed- 
 eration, the States, and the municipalities, as well as for private per- 
 sons, in payment of taxes and other pecuniary transactions of every 
 kind originating in law, contract, or anj^ other source, subject to the 
 following rules : 
 
 I. The new gold piece (when coined) and the silver dollar without 
 any limitation as to amount. 
 
 II. Subsidiary coins, in pieces of from 10 to 50 cents, up to $10 in 
 each payment. 
 
 III. The 5-cent piece and the bronze centavo up to 25 cents in each 
 payment. 
 
 Fifth. — As soon as the Government shall have in readiness a quan- 
 tity of the new coins which it considers sufficient wherewith to begin 
 putting them into circulation, it will give directions that they be 
 given out in exchange for the silver dollars, subsidiary silver coins, 
 and the copper centavos which are at present legal tender in the 
 Republic, subject to the following rules : 
 
 I. The exchange will be effected at par. 
 
 II. As large a number as possible of public and private establish- 
 ments will have charge of the exchange, so as to accomplish it as 
 speedily as may be and to obviate expenses and trouble to the public. 
 
 III. The Government may make arrangements with the banks 
 whereby they will deliver to the mint or mints a part of their metallic 
 cash holdings, receiving in return special certificates from said mints, 
 which will be counted as part of their obligatory reserves. 
 
 Sixth. — I. The Government shall only put into circulation silver 
 dollars in such quantity as shall be necessary to effect the exchange of 
 the coins that are now legal tender in the Republic. 
 
 II. When that exchange shall have been effected the Government 
 may not put in circulation any additional amount of silver dollars, 
 except upon the receipt in Mexico or abroad of the equivalent amount 
 in bars or coins of gold, according to the ratio established by law, plus 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 421 
 
 expenses of transportation, insurance, and others, if the delivery takes 
 place outside of the Eepublic. 
 
 Seventh. — I. The GoA'ernment, in view of the public demand, will 
 decide as to the quantity of subsidiary pieces that are to be coined; 
 but in order that the circulation of these coins may be automatically 
 regulated and may never be excessive, there ought to exist, at least in 
 all the ports and frontier cities where there is a custom-house empow- 
 ered to handle foreign trade, at the capital of the Republic, and at 
 the capitals of the States and Federal territories, offices where per- 
 sons may freely and easily obtain hard dollars for subsidiary coins 
 presented by them in amounts of $100 and multiples thereof. 
 
 II. If circumstances so demand, an amount of silver dollars, to be 
 kept apart from other resources and holdings of the Federal exchequer 
 and even from the reserve fund to be hereinafter mentioned, may be 
 devoted specially to effecting the exchange. 
 
 Eighth. — Without detriment to the adoption of such legislative 
 and administrative measures as the Government may deem expe- 
 dient, and which shall tend to increase the stock or supply of gold in 
 the home market, aiid to diminish the gold charges against the nation, 
 or, in other words, to diminish the demand for gold in the home 
 market, or to effect both objects, a reserve fund in gold or in silver 
 will be created, and will be maintained in the Eepublic or abroad, but 
 wholly independent of the other resources and holdings of the Fed- 
 eral exchequer. Said reserve fund will be formed out of : 
 
 I. The surpluses of Federal budget appropriations for the expenses 
 of the mint or mints of the Republic and of the mintage and emission 
 of the new coins. 
 
 II. The suras derived from profits or gains of all kinds connected 
 with said mintage. 
 
 Ninth. — I. In principle, no attempt ought to be made, brusquely 
 and untransitionally, to bring about by direct Government action the 
 legal parity between gold and the silver dollar, so that the interests 
 of private persons which necessarily, even though temporarily, will 
 be affected by the change of monetary regime, may adjust themselves 
 thereto gradual! v and s]3ontaneously. 
 
 II. Nevertheless, if by the mere fact of the closing of the niints to 
 the free coinage of silver and the other general measures which the 
 Government may adopt in the direction outlined in the foregoing 
 clause, the legal parity between gold and the silver dollar shall take 
 a Ion O'er time in materializing than the Government deems advisable 
 in view of the circumstances, then the surest means for bringing about 
 that parity will consist in adding to the reserve fund a sufficient 
 amount to influence the home market for foreign exchange, and by 
 puttino- into practice the operations described in the following clause : 
 
 Tenth. I. Neither the creation of the reserve fund nor the aug- 
 mentation of its volume will entail any obligation on the Government 
 to give gold bars or gold coins in exchange for silver dollars. 
 
 II The object of the reserve fund is the sale, when deemed advis- 
 able ' of gold drafts on foreign parts to satisfy the needs of interna- 
 tional exchange, at rates that will improve the rates of the country s 
 home market, with the constant aim of establishing gradually the 
 legal parity between gold and silver dollars, or to maintain that 
 parity when once secured. 
 
422 GOLD STANDABD IN INTERNATIONAL TEABE. 
 
 III. The sale of drafts will be effected upon payment of their price 
 cash down, in silver dollars, which will enter the reserve fund, and 
 may not be reissued, save in accordance with the rules contained in 
 Section II of clause sixth. 
 
 Eleventh.- — In the absence of an adequate banking association, 
 Avhich does not exist in our countrjr, a special board or committee will 
 be created, to be appointed and presided over by the minister of 
 finance and public credit, and said board or committee, subject to tlie 
 terms of the law and administrative regulations, will have charge of 
 the following matters : 
 
 I. The superior direction of the mint or mints of the Republic and 
 of all the operations connected with the mintage of the new coins, 
 with their distribution in exchange for the coins that are now legal 
 tender, and the withdrawal of the latter. 
 
 II. The direct administration of the reserve fund mentioned in the 
 foregoing clauses with the necessary powers, especially with the 
 power to issue additional amounts of silver dollars and to sell gold 
 drafts on foreign parts, as provided by clauses sixth and tenth. 
 
 Twelfth. — if the gold price of silver in foreign markets shall rise 
 so that the silver dollars shall come to possess, with a certain degree 
 of stability, a metallic A'alue equal or greater than that ascribed to 
 them by the legal ratio adopted when the new regime goes into effect, 
 steps will be taken to demonetize the silver dollar and to introduce 
 the gold standard, with the free coinage and use of the yellow metal 
 as a medium of circulation. 
 
 Thirteenth. — The National Government will adopt such measures 
 as it may deem expedient which, without impairing the equilibrium 
 of the budget, shall tend to obviate or at least to mitigate, the tem- 
 porary loss or harm that may accrue to some of the interests con- 
 nected with silver mining and the industries that produce articles for 
 exportation, as a consequence of the stabilization of exchange. 
 
 Pablo Macedo. 
 
 EVEEADO HeGEWISCH. 
 
 Carlos Selleier. 
 RiCARDo Garcia Granados. 
 Carlos Diaz Dueoo. 
 Luis G. Labastida. 
 Jaime Gurza. 
 Mexico, December 11, 1903. 
 
GOLD STAND AED IN INTERNATIONAL TRADE. 423 
 
 a. MONETARY REFORM IN MEXICO-EXPLANATORY STATEMENT 
 AND BILL SENT TO CONGRESS BY THE MINISTER OF FINANCE 
 Lie. DON JOSt YVES LIMANTOUR. 
 
 MEXICO'S MONETARY REFORM— PROPOSED LEGISLATION SUBMIT- 
 TED BY THE MEXICAN DEPARTMENT OP FINANCE TO CONGRESS 
 LOOKING TO THE STABILIZATION OF THE VALUE OF THE MEXI- 
 CAN SILVER DOLLAR AS EXPRESSED IN GOLD. 
 
 On the afternoon of Friday, November 18, 1904,. an epoch-making 
 bill was presented by the finance department to the Mexican Congress. 
 
 The bill in question related to measures of monetary reform, its 
 aim being to impart to the Mexican silver pesos, or dollar, a fixed 
 value in gold. 
 
 In the preamble or expose de motifs, the minister of finance of 
 Mexico, Lie. Jose Yves Limantour, explains the scope and nature of 
 the proposed legislation. The preamble is followed by the bill. 
 
 The following is a full translation of both preamble and bill : 
 
 Object of the Bill. 
 
 In taking, by means of the present bill, the first step designed to 
 solve in practice some of the most serious difficulties involved in the 
 problem of international exchange, the Executive does not propose 
 to set forth all the considerations which a study of the numerous 
 aspects of that problem have suggested to it, still less does it claim to 
 have found a panacea for ills so varied as are those which flow from the 
 monetary situation of the Republic. The former would be a lengthy 
 task and its utility would not be commensurate with its magnitude. 
 It would be necessary to reproduce much that has alreadj' been said 
 in the numberless treatises that have been published on the subject, 
 and there would be no object in entering into considerations not 
 directly connected with the points which the Executive has resolved to 
 submit to the enlightened judgment of Congress. And as to remedy- 
 ing all the evils under which our community labors, owing to the 
 deficiencies of our monetary system, the attempt would be presump- 
 tuous and absurd, for the remedy is out of the reach of the public 
 powers in a country whose customs and economic conditions do not 
 admit of a radical solution — the only sort of solution susceptible of 
 producing thoroughly satisfactory results. 
 
 The object of the Executive is less ambitious but more practical. 
 Instead of enlarging on the views which it entertains on the points 
 which form the subject-matter of public discussion and of proposing 
 a complete plan for the reorganization of our monetary system, it 
 prefers to confine itself to submitting a certain number of concrete 
 measures of which the adoption will suffice to impart a sufficient 
 degree of fixity to the gold value of our currency, and touching only 
 those questions which are intimately connected with the measures 
 suggested. 
 
 Dilemma which Confronted the Goveenment. 
 
 It would be of no" use to give a history of the precious metals or 
 even of the vicissitudes which our national coin has undergone since 
 
424 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 the disparity between the vahie of gold and the value of silver set 
 in and became accentuated. Nor would it conduce to any practical 
 object to speak of the manifold causes which have depressed the white 
 metal or of the many other questions which publicists have discussed 
 in connection with the depreciation of silver. Studies of this nature 
 (which are of undubitable utility when an endeavor is being made to 
 elucidate the fundamental problem and to refute preconceived ideas) 
 have already — seeing that numerous treatises, both official and pri- 
 vate, have been published — shed sufficient light on the subject to 
 enable opinions to take definite form. 
 
 But it was no easy matter to awaken public interest without running 
 the risk of seriously unsettling people's minds, and of working harm 
 to important and sacred interests, without any countervailing advan- 
 tage. The fact of the public's being suddenly appraised, one need not 
 say, of the probability of a change in monetary legislation, but of the 
 mere purpose of undertaking a conscientious study of the subject, 
 would have sufficed to occasion a panic in the silver market and to 
 derange the rates of foreign exchange more seriously than ever. 
 The negotiations with the American Government initiated by this 
 department at the beginning of last year, and, subsequently, the note- 
 worthy work done both by the Mexican Commission on International 
 Exchange and by the Monetary Commission which met at this capi- 
 tal, served to prepare public opinion, contributing powerfully to 
 arouse at home an interest in the investigation of the questions con- 
 nected with currency and exchange, without impairment of confi- 
 dence, and to familiarize both our own people and foreigners with 
 the capital problem to be solved — that is to say, whether it is desir- 
 able to introduce certain modifications in the laws and practices 
 hitherto observed in monetary matters, or whether, on the con- 
 trary, the status quo should be maintained, notwithstanding the 
 obvious disadvantages that have accrued to our jjublic wealth, con- 
 sidered in the aggregate, through the depreciation of silver, but more 
 especially through the fluctuations of its value in gold. 
 
 This dilemma, having the character ' of an antecedent question, 
 demanded solution at the hands of the Government, and before 
 accepting either of the two extremes it became indispensable to 
 strike a balance of the advantages and disadvantages that flow, and 
 may in future flow, from the present monetary situation of the Repub- 
 lic, and to determine how probable it is that reforms in our monetary 
 system, well matured and carefully put into practice, may enhance 
 the general welfare. 
 
 Advantages and Disadvantages of the Present Monetaby Situation. 
 
 The advantages and disadvantages in question trace their cause to 
 the common fate which in Mexico has for centuries linked the value 
 of bar silver and the purchasing power of the national coin, and this, 
 their identification, is due to the fact that rarely did the time-honored 
 ratio of 1 to 15 or 16 between the values of the two precious metals 
 undergo any variation, as well as to the fact that, inasmuch as, 
 according to law, the mints of the Republic coin all the silver which 
 the holders thereof offer for that purpose, it has been possible to settle 
 our trade balance either in silver bars or silver dollars. It is unques- 
 tioned, therefore, that any opinion formed as to the influence of our 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 425 
 
 monetary system on the development of public wealth, hitherto 
 accomplished, will depend on the view held m regard to the advan- 
 tageous or disadvantageous effect which the depreciation of silver 
 and the oscillations in its value may have exercised, or may in future 
 exercise, on the prosperity of the country. 
 
 The intimate connection that exists between the variations in the 
 value of the white metal and the oscillations in the rate of foreign 
 exchange, in which the purchasing power of the Mexican dollar is 
 most perceptible, is the essence of the problem, for, inasmuch as the 
 relative fixity that had subsisted for centuries in the ratio between 
 the two precious metals has disappeared, perhaps forever, we can 
 not expect that our dollar will be able of itself to recover in interna- 
 tional markets its former price or any other price that will be stable. 
 Can that stability in the rate of foreign exchange be brought about 
 by means coming within the scope of the Government's action, what- 
 ever may be the variations in the price of the white metal ? This is 
 a question which I will endeavor to answer further on. 
 
 Influence of the Depreciation of Silver on the Development of Public 
 
 Wealth. 
 
 The development of export industries and of all industries that 
 have benefited by the natural protection arising from the enhanced 
 price of foreign articles ; the extraordinary appreciation of rural and 
 city real estate in the greater portion of the Eepublic, and, in general, 
 the rapid multiplication of the country's wealth, are the arguments 
 adduced by those who advocate the retention of the present monetary 
 legislation. A reason put forth, as being decisive against all plans 
 of monetary reform, is that the country has never been so prosperous 
 and so well off as when the depreciation of the white metal was most 
 pronounced. This observation, based indeed on facts which leave no 
 doubt as to the prosperous condition of the Republic during the past 
 decade, has given rise to a belief which has prevailed in Mexico until 
 within recent times, that high rates of exchange are beneficial to the 
 country. " Though it may seem paradoxical (thus to this day argue 
 some advocates of the status quo) the fact is that the period of the 
 country's greatest prosperity has been precisely that during whicb 
 the price of silver was lowest." 
 
 A rapid, albeit serene and rational examination of the facts, will 
 suffice to show the value of the conclusions which it has been sought 
 to deduce from them. 
 
 A high rate of exchange doubtless constitutes a powerful incentive 
 to the exporter of native products as well as to the manufacturer, 
 who, if he is to compete on advantageous terms and control the 
 interior market, stands in; need of an enhancement in the price of the 
 foreign articles similar to his own line of production. But the incen- 
 tive in question is far from having produced all the results expected 
 
 Agricultural products have been diversely affected according to the 
 nature of the several crops. No one can question that the production 
 of fibers, particularly heniquen, has received a vigorous impetus and 
 that that impetus is due largely to the rise in the rate of exchange. 
 The same may be said of certain cereals, such as beans and chick 
 pease and of dried fruits, as well as of untanned skins, though extra- 
 
426 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 neous causes have also influenced the upward movement. With regard 
 to stock raising, it is difficult to determine the amount of influence 
 due to the depreciation of silver in the development of the industry, 
 for it has been shown that fortuitous conditions in certain foreign 
 markets did much to aid oar stock raisers, and certain other branches 
 of agriculture of some importance have been similarly situated. 
 Finally, coffee, tobacco, vanilla, and a number of articles which are 
 exported on a small scale do not seem to have been benefited to a 
 marked extent by the economical phenomenon under consideration. 
 
 Among mineral products, of which the exportation has increased, 
 silver itself, whose vicissitudes give rise to so many discussions, 
 occupies a foremost place, and yet it can not be said that the pros- 
 perity of silver mines is due to a curtailment in the value of the 
 output. In regard to gold, lead, and copper, which are the other 
 metals produced in Mexico in considerable quantities, it is evident 
 that, if the rise in exchange influenced their extraction, that influence 
 can not have been very great, for as concerns gold there are few mines 
 which are worked exclusively oh account of the value which that 
 metal has attained in relation to silver, and as concerns lead and 
 copper, it is well known that the bulk of the production is due chiefly 
 to the treatment of the precious metals by the smelting process and 
 the exploitation of extensive argentiferous deposits, in which the 
 value of the copper or the lead is a factor of relatively small impor- 
 tance. In fine, the expansion of the mining industry, though facili- 
 tated by the rise in exchange, can not be attributed principally 
 thereto, but rather to different causes, foremost among which assuredly 
 are the construction of railways in entirely new regions, the cheapen- 
 ing of transportation rates, and modern methods of ore treatment. 
 
 In all other lines of export products, whether they be raw materials 
 or manufastured articles, the depreciation of silver has not had very 
 perceptible effects, as is proved by the relatively small volume of the 
 production of those articles, when considered in connection with the 
 time that has elapsed since the depreciation of silver became accentu- 
 ated. The statistical tables prepared by the monetary commission, 
 which met at this capital, and by the bureaus of this department, as 
 to the value in gold of the exports during the twenty fiscal years 
 from 1881 to 1901, are conclusive on this point. 
 
 In the ten years from 1881-82 to 1890-91, during which the depre- 
 ciation was slight and the fluctuation in the gold value of our dollar 
 was relatively inconsiderable, seeing that the coin in question ranged 
 in value between 0.89 and 0.84 of the American dollar, our total 
 exports rose from $26,000,000 to $53,000,000 gold, or in other words, 
 they doubled in value, whereas in the next ten years, from 1891-92 to 
 1900-1901, during which the value of our dollar fell from 0.84 to 0.48 
 of the gold dollar, after touching prices even lower than the latter, 
 the gold value of our exports, which in 1891-92 was $63,000,000, arose 
 only to $77,000,000 in 1900-1901, the increase being barely from 20 to 
 22 per cent. 
 
 It may readily be understood that to get nearer to the truth it 
 would be necessary to take other circumstances into consideration, 
 especiallj' the variations that have taken place in the gold prices of 
 our exportable articles during the periods in question, but even so, 
 if it be considered that it is in these latter years, during which our 
 exports have evinced the slowest progressive rate of growth, that 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 427 
 
 the price of heniqiien has scored its highest rise— heniquen, the chief 
 """"I'lieral article that vfn send abroad— it is necessary to admit that 
 the depreciation of the currency can not have exercised a very decisive 
 influence in the encouragement of export industries. 
 
 The same may be said of native articles consumed in the interior of 
 the Republic, in regard to which the lack of statistical data and relia- 
 ble information precludes the possibility of determining, with a near 
 approach to certainty, the share due to the rise in exchange in the 
 development of our industries, for which reason all arguments based 
 on data and figures not entitled to thorough confidence should be 
 eliminated from the discussion, so that the sole argument to which 
 \veight must be attached will continue to be the factor of which men- 
 tion has been made, viz., the theoretical argument based on the pro- 
 tection afforded by high rates of exchange to home industries. 
 
 Principal Causes of the Present Prosperity. 
 
 The influence of the high rates of exchange on the development of 
 some of our chief elements of wealth being thus reduced to its true 
 proportions, it becomes proper to say a few words in regard to the state 
 of positive and solid prosperity enjoyed not only bv the industries to 
 which allusion has just been made but also by all the national activi- 
 ties. The coincidence of this prosperity with the vicissitudes which 
 the value of the Mexican dollar has undergone does not in the least 
 prove that there exists an exclusive and determinate relation of cause 
 and effect between them, for, without denying that such relation may 
 have existed between the two phenomena in question to some extent, 
 it is also true that other important factors have been at work, some of 
 them purely casual and others due to the Government's action. 
 
 The influence of the former is not confined to the higher scale of 
 exchange and prices, but includes climatogical conditions, rendering 
 possible the harvesting of good crops for many years in succession, 
 beginning in 1895. In regard to the second group of factors, all who 
 have gone at all deeply into the study of our economical situation are 
 well aware that the chief influences that have brought about the 
 nation's present condition of prosperity are the absolute safeguards 
 which peace has thrown around life and property; the creation of 
 numerous, rapid, convenient, and cheap routes of communication; 
 and finally the complete suppression of fiscal trammels to the circula- 
 tion of merchandise in the interior of the Republic. 
 
 Influence of the Suppression of the Alcabalas. 
 
 Much is continually said about the benefits of peace and the crea- 
 tion of railways and other means of communication ; but in investiga- 
 ting the causes of our prosperity sufficient prominence has not been 
 o-iven to the immense economic transformation wrought by the aboli- 
 tion of the very ancient system of " alcabalas " which had been the 
 source of all the trammels and obstacles that could be devised by the 
 States of the Federation, or even by the municipalities thereof, m their 
 efforts to exclude from local consumption, or to saddle with a crush- 
 ing load of taxes all native products coming from other points of the 
 Republic. Some considerations based on figures, and designed to 
 demonstrate the importance, as a factor of our prosperity, of the con- 
 
428 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 stitutional reform which extinguished the " alcabalas," will not be 
 superfluous. 
 
 The ordinary revenue of the Federal exchequer for the year 
 1893-94, which was the last year of the severe crisis through which 
 the country then passed, amounted to $40,211,000 and the gains 
 secured in the next two years, viz., $3,700,000 and $6,500,000, re- 
 spectively, were due principally to one of those favorable reactions 
 which generally occur on a vigorous scale after acute and prolonged 
 periods of crisis as well as to the exceptional volume of the added 
 burden of fiscal taxes in most lines of revenue decreed for the purpose 
 of accomplishing budgetary equilibrium. 
 
 The influence of the former of the causes mentioned on the improve- 
 ment in revenue in 1894—95 and 1895-96 is proved by the yield of the 
 import duties which, by reason of the rise in exchange, ought logically 
 to have shrunk, and which, nevertheless, exceeded those of the last 
 year of the crisis by several millions of dollars, notwithstanding the 
 fact that the modifications of the tariff were of no scant importance. 
 
 In regard to new taxes it was natural that they should yield abun- 
 dantly in view of the vigor with which the work of rehabilitating 
 our finances was undertaken at that time. In the budget bill for the 
 fiscal year 1894—95, in which the various enactments having new taxes 
 in view were enumerated, the annual jdeld of said taxes was estimated 
 at $5,675,000. It may, therefore, be unhesitatingly affirmed that, up 
 to the year 1896, the depreciation of silver, which had suddenly com- 
 menced three years previously, had not as yet produced perceptible 
 advantages and that the marked improvement which began to be 
 observable in the voliune of the revenue was due to causes that were 
 extraneous to said phenomenon. 
 
 In the middle of the year 1896 the constitutional amendment abol- 
 ishing the interior custom-houses was promulgated, and when the new 
 taxes, which replaced the " portazgo " schedules, were made operative 
 in all parts of the Republic, many sources of revenue, as was natural, 
 were affected, though not on such a scale as might have been appre- 
 hended when one considers the profound perturbation which a change 
 in financial legislation so far-reaching and so sweeping was calcu- 
 lated to occasion throughout the country. But, beginning with the 
 year 1897-98, the Federal revenue resumed its upward course until 
 attaining in 1902-1903 the sum of $76,000,000, thus showing an in- 
 crease of $24,000,000 in five years, a result that was not aided, as was 
 the case in the period preceding the suppression of the " alcabalas," 
 by any increase of existing taxes or creation of new ones. So far was 
 this noteworthy expansion of Federal revenue from being due to new 
 sacrifices on the part of the taxpayers, so much is it to be ascribed to 
 other causes that shortly after the amendment had been made opera- 
 tive some taxes were diminished and others were repealed, until fiscal 
 burdens became less than they had been prior to their augmentation. 
 Does not the coincidence of a vigorous expansiveness in the Federal 
 revenue with the new regime of libertj^, created by the constitutional 
 amendment of 1896, speak for itself? Could any comparison of fig- 
 ures and dates be more eloquent in demonstrating the influence of the 
 amendment in question as an important factor in our growing 
 rosperity ? 
 
 AVhether, however, the advantages which certain branches of native 
 
GOLD STANDABD IN INTERNATIONAL TEADE. 429 
 
 industry have derived from the rise in foreign exchange be great or 
 small, there is no doubt as to their reality, and all that has hitherto 
 been stated does not tend to the denial of those advantages or to the 
 minimization of their results, but merely aims at combating the pro- 
 pensity that has prevailed in our country to exaggerate the influence 
 of the factor in question. 
 
 Drawbacks of the High Rates of Exchange. 
 
 It is time now to consider briefly the other aspect of the question. 
 
 In the first place, the temporary character of the stimulus to native 
 production is obvious. In point of fact the enhancement of the prices 
 of foreign articles encourages not only the production of similar 
 native articles, but also of those articles that might be called suc- 
 cedaneous, and thereafter gradually extends to ail other articles 
 which apparently have nothing in common with the first named. 
 The reason of this phenomenon lies in the fact that, inasmuch as all 
 native producers are also consumers, the enhancement in the price of 
 certain articles of general consumption naturally entails successive 
 augmentations in the cost of production of other articles by virtiie of 
 a species of contagion. The upward movement, which begins with 
 articles that are directly influenced by the rise in exchange, spreads 
 imperceptibly through all the ramifications of national production, 
 until finally the prices of commodities and services settle at a higher 
 level which is proportionate to the depreciation of the currency. 
 
 This has occurred in Mexico since the sudden rise in foreign ex- 
 change, and the enhancement that began at that time in the prices of 
 commodities and of personal service has only developed exceptions 
 where influences of a special character predominate — as, for example, 
 in the case of very active interior competition, or in cases wherein, 
 through the introduction of machinery or the opening up of new 
 routes of communication, products have been cheapened ; and, in the 
 matter of wages, such an exception is observable in those sections of 
 the country where labor is abundant, for then the law of supply and 
 demand exercises, as happens in regard to all transactions, an in- 
 fluence which frequently proves more powerful than the contrary 
 influence of a depreciated currency. 
 
 The propitious results of a high scale of exchange are, therefore, 
 purely transient, being due to the unequal conditions in which cur- 
 rency depreciation suddenly places native products in comparison 
 with similar foreign products to the advantage of the former. When, 
 therefore, cost prices rise to the level of the barrier created by the en- 
 hancement of exchange rates, the protection afforded by that barrier 
 naturally disappears, and with it the chief advantages that have been 
 enjoyed. 
 
 The production of silver itself has not been able to escape the opera- 
 tion of this phenomenon, though, owing to the facilities that have 
 always been afforded in our country for the conversion of the white 
 metal into coined dollars, it might have been supposed that the de- 
 preciation of the metal in question would not affect it. It is an ascer-- 
 tained fact that the enhancement in the price of imported articles and 
 of similar or succedaneous native articles, as well as in the salaries of 
 the higher foreign employees engaged in the operation of mines, cur- 
 tails the profits of silver-producing mining concerns, and that this 
 
430 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 curtailment is proportional to the volume of such expenses as com- 
 pared with those that are totally independent of the value of silver 
 abroad. Now, expenses of. the latter class, which some years ago were 
 the more considerable, are continually dwindling, owing to the pro- 
 gressive and transcendent influence of the depreciation of silver on all 
 phases of national activity ; and of late the increase in freight rates on 
 ore, and above all, the increased tariffs of the metallurgical establish- 
 ments for the treatment of ore, both of which facts are natural conse- 
 quences of the phenomena which we have been discussing, have at last 
 deprived the white metal of the chief advantages that still belonged 
 to it by reason of the relation between its cost of production and its 
 selling price. 
 
 Nevertheless this drawback is not the most serious one, for a benefit, 
 however short its duration, is still a benefit. The most serious argu- 
 ment against high exchange rates is the direct and for long irre- 
 mediable harm which a high scale of prices causes to a considerable 
 portion of the population. Such is the testimony that might, be 
 borne by thousands of inhabitants, who have not found in the en- 
 hanced prices of the commodities which they sell or of the services 
 which they render a suitable compensation for their extra outlay for 
 the things which they consume. 
 
 The poorer classes in those regions of the country where there is no 
 great demand for labor, clerks and employees earning a fixed salary 
 and not possessing brilliant qualifications, persons producing articles 
 which are already plentiful, those who can not work, and in general 
 all who have a fixed income, are thus affected, and certainly they con- 
 stitute a numerous section of the community entitled to every consid- 
 eration. They are not to be forgotten amidst the chorus of praise 
 which some extremists still intone in honor of a high level of exchange 
 rates. 
 
 Pebnicious Effects of the Fluctuations of Exchange. 
 
 Whatever opinion may be held as to the balance resulting from 
 the compensation between benefits and evils occasioned by the de- 
 preciation of our currency, the fact remains that a new economic 
 situation has come into being in which interests, perturbed for years, 
 have finally adjusted themselves to the new value of our monetary 
 standard. Moreover, many other interests of recent creation have 
 been added to the old ones, thus augmenting considerably the national 
 assets. Let us not, therefore, look back with longing to the times 
 when the Mexican dollar was worth more than 5 francs and even more 
 than an American dollar; rather let us resign ourselves to the great 
 depreciation which it has undergone, and content ourselves with in- 
 quiring as to the new value with which it behooves us to invest it for 
 the sake of the general interests of the Republic. 
 
 The delicate features of the situation, that which involves most 
 difficulties and dangers, is not the depreciation of our currency in 
 itself, but the constant fluctuations in the price of the white metal 
 which are reflected in the rates of exchange. 
 
 ■ The element of uncertainty in calculations can suit no one. It 
 strikes at the basis of all forms of commerce and industry and con- 
 verts business transactions into hazardous speculations. All are 
 agreed as to the evils and dangers of oscillating exchange rates ; those 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 431 
 
 who desire the depreciation of the currency fear that silver may 
 recover its quotations of former times, and those who lament the 
 shrinkage of the white metal can not welcome gains that are destined 
 to prove ephemeral. 
 
 This is precisely the reason why, as has been seen, all the producers 
 of exportable articles have not reaped the benefits which might have 
 been expected to accrue to them through the rise in exchange. This 
 is also the reason why, after all these years during which we have been 
 enjoying a natural protection that has doubled the price of almost 
 everything, only a portion, perhaps, it is true, the greater portion, of 
 our industrie^have progressed. 
 
 More than enough time has elapsed since silver dropped to one 
 half of its former value for men of enterprise and capitalists to have 
 endeavored to reap the fullest possible fruit from the new economic 
 situation and yet they have not done it, save on a relatively moderate 
 scale, owing to the uncertainty as to the continuance of the margin of 
 prices affording protection to national industries. For this reason 
 prosperity has come only to undertakings requiring a modest amount 
 of capital; to those which, being susceptible of establishment in a 
 short period of time, engage in a line of production for which the 
 market is extensive and safeguarded by inveterate usage; to those 
 which have been specially protected by the Government, and to those 
 which have been initiated by persons who have had faith in our 
 future and whose hopes as to the continuance of high rates of ex- 
 change have been realized. 
 
 Are we to remain indefinitel}' in this situation and not seek to do 
 away with the constant menace involved in the oscillations of ex- 
 change ? Assuredly not. Whether the depreciation of silver is good 
 or evil in itself, it is not that feature that need concern us so much 
 as the uncertainty of the value of our instrument of exchange in terms 
 of the gold currency of the nations with which we trade. There is, 
 therefore, no room' for vacillation as to the fundamental problem 
 which we are called on to solve, and the sole point to which we have 
 to direct our endeavors is that the means employed to accomplish the 
 desideratum of stability of exchange shall be at once efficacious and 
 expose the country as little as possible to unnecessary expenses and 
 grave upheavals of vested interests. 
 
 Necessity and Means fob Stabilizing the Gold Value of Oub Cttbeency. 
 
 Stability in the value of the currency would assuredly be attained 
 in a simple and thorough fashion by the adoption of the gold stand- 
 ard, that is to say, by the free coinage of that metal and by depriving 
 coins of any other metal of unlimited legal-tender capacity; but the 
 reasons why we can not have recourse in Mexico to that radical solu- 
 tion are well known. The excessive expense that would be entailed 
 by the substitution of gold coins, or coins convertible into gold, for 
 the silver dollar; the obvious expediency of retaining in circulation 
 the coin which the people have been accustomed to regard as the 
 monetary unit for centuries past; the severe perturbation that would 
 be incidental to the demonetization of the white metal, of which the 
 production constitutes one of the chief sources of national wealth; 
 and various other reasons equally cogent militate against an absolute 
 
432 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 change of standard brusquely effected without regard for momentous 
 interests and time-honored traditions. 
 
 The only method that can be adopted to bring about stability in 
 foreign exchange is the one pointed out by the official commissioners 
 who have studied the question and by numerous publicists, viz., the 
 adoption of the gold standard with silver coins in circulation, reserv- 
 ing the use of gold coins also for a later date. By this course several 
 million kilograms of silver bearing the Mexican mint stamp will be 
 kept in circulation, larger quantities of the same metal will be used 
 later on for new coinage purposes, and the disappointments, opposi- 
 tion, and conflicts to which a complete change of currencies would 
 give rise will be obviated. 
 
 Now there are only two ways for bringing about fixity in the value 
 of silver coins as measured by gold, without having recourse to uni- 
 versal bimetallism, which, aside from the fact that it is not a very 
 sure system, is at present absolutely impracticable. Those two ways 
 are either the artificial maintenance of the reciprocal relation of the 
 price of the two precious metals in the world's chief markets or the 
 limitation of the volume of coin in the Republic to the quantity 
 strictly necessary for the requirements of circulation, thus emanci- 
 pating the value of that coin from the value of the metal of which it 
 is composed. 
 
 To regulate the prices of substances which, like silver and gold, are 
 produced in abundance in various parts of the world, and for which 
 there is an universal demand, would be an impracticable undertaking 
 especially since the disruption of the agreement, existing de facto 
 among almost all the chief powers, to coin unrestrictedly unlimited 
 legal- tender money from both metals. At one time, it is true, there 
 was some talk of curtailing the output of silver in order to increase 
 the demand ; but Mexico would have been the last country to counten- 
 ance such an idea, for the reason, among others, that she is the largest 
 producer of silver and that the winning of that metal from her soil 
 is intimately bound up with the winning of other metals which con- 
 stitute a source of great wealth to the nation. 
 
 Certain negotiations conducted last year by the Commission on 
 International Exchange, which the Government sent to Europe, must 
 not be confused with the project just alluded to. It may be paren- 
 thetically observed that among other instructions given to that Com- 
 mission, which are already known to the public, was one that enjoined 
 upon its members to confer with the representatives of certain for- 
 eign governments as to ways and means for lessening the fluctuations 
 of silver due to governmental acts and to endeavor to bring about the 
 suppression of certain trammels which hinder a larger consumption 
 of that metal. With this end in view stress was laid on the manifest 
 injury sustained, both by silver-standard countries and other coun- 
 tries trading with them, by reason of the continued oscillations in 
 exchange occasioned by untimely purchases of bar silver by the chief 
 governments of the world — purchases that can be easily regulated 
 when their purpose is to meet the normal requirements of monetary 
 circulation. Moreover, the Commission conducted an active propa- 
 ganda in behalf of silver, on the one hand removing the prejudices, 
 antipathies, and errors that prevailed in regard to the production and 
 use of that metal, and, on the other, indirectly encouraging its con- 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 433 
 
 nnF'i??"''^*!^'"''"- *.%*'' *^°"Sh fruitful in certain respects, haVt 
 not as tar as the points ]ust alluded to are concerned, been attended 
 with any other appreciable effect than that of toning up to some 
 extent the bar silver market and ushering in an era less somber for 
 tne white metal than the very critical circumstances through which it 
 was passing when the Government took the first steps toward inter- 
 national consideration of the question. 
 
 It is therefore necessary to adopt resolutely the second of the 
 courses mentioned, with a view to achieving stability in international 
 exchange— VIZ., to impart to our monetary unit a value based not on 
 silver but on gold. This is the course recommended alike by the prin- 
 ciples of science and the teachings of experience, and it offers, more- 
 over, the immense advantage of being controllable by the public 
 powers. 
 
 In order to impart to coins a value which shall be independent of 
 the value of the metal composing them, it is indispensable to appreci- 
 ate them, and no other ways are known of doing this, than either to 
 make them convertible, at the pleasure of the holder, for other coins 
 of greater value, or to bring about, through relative scarcity of sup- 
 ply, a demand such as will lead those who need coin to submit to 
 greater sacrifices than before in order to procure it. 
 
 The reasons why we can not yet have a silver coin convertible at 
 any monient into gold coin have already been stated, and therefore the 
 solution is to be sought in the appreciation of the silver coin by means 
 that will be attended with the minimum of detriment to vested rights 
 and interests, as well as to future transactions. 
 
 For this object, the first step to be taken in the path of monetary 
 reform is the adoption of the principle whereby just that amount of 
 coin which is necessary to realize the desired result, and no more, is 
 to be struck. This principle is opposed to that which hitherto has 
 been the fundamental rule of our whole system of legislation in 
 regard to the coinage of the precious metals, which was that the Gov- 
 ernment undertook to convert into coin all the gold and silver offered 
 by holders thereof at the various establishments provided for the 
 mintage of money. 
 
 Since the sudden disruption of the immemorial ratio of value that 
 had existed between the two metals, unlimited coinage could only be 
 explicable in countries where the gold standard exists in all its pleni- 
 tude and in countries which retain the silver standard; but in no 
 manner is it explicable in countries that desire to have a monetary 
 system based on both metals. If, in order to secure stability of for- 
 eign exchange, we are constrained to part with the silver standard, . 
 there is no objection that can be urged against the repeal of the sys- 
 tem of free coinage or against the adoption, as the immutable basis of 
 our future monetary regime, of the principle that coinage must be 
 subordinated to the demand arising from the activity of the internal 
 and external transactions of the Republic. 
 
 Few measures have been or will be so much discussed and contro- 
 verted as the suppression of the right of having silver converted into 
 coined dollars. There are two equally important causes for these 
 objections. One is the loss and trouble which the reform might occa- 
 S. Doc. 128, 58-3 28 
 
434 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 sion directly to mining men, who would have to look elsewhere than 
 to the mints for a customer for their silver, and the other is the real 
 losses that would accrue to many through the disappearance of the 
 profit arising from the difference in value between the silver coin and 
 the metal contained in it. 
 
 Objections of Silver Producers. 
 
 Deferring examination into the former kind of losses to which allu- 
 sion has just been made, it is most desirable to take up the latter, for 
 their consideration is the consideration of the weightiest objections 
 which have been made to the projected reform, and, therefore, when 
 they are once disposed of, it will be extremely easy to answer other 
 objections. 
 
 The disassociation between the value of our silver coins and the 
 value of bar silver will entail loss to those who derive advantage from 
 the identification of the two. And who are the persons who will suf- 
 fer this loss? They are the owners of silver-producing mines and 
 persons who look for advantages, even if only temporary, from new 
 and still more pronounced depreciation of our currency. In regard 
 to these latter little need be said, for, as has been shown elsewhere, the 
 benefits of a depreciated currency must, by their very nature, be of 
 short duration and can not continue indefinitely, for it would be 
 absurd to suppose that greater and still greater advantages can accrue 
 to a community in proportion as the instrument of its payments 
 dwindles in value. 
 
 In regard to the owners of silver mines, there can be no doubt that 
 the appreciation of our silver coins, as compared with silver, will 
 cause them loss. The reason is very simple, for instead of being able 
 to obtain, as they have been hitherto, as many dollars as can be coined 
 from the silver bars which they win from their mines, they will have 
 to sell those bars in the open market for a smaller quantity of dollars. 
 Perhaps, latter on, owing to an advance in the price of the white 
 metal, the loss to silver producers may give place to a gain, but what- 
 ever may be the future of the metal in question, the fact remains that 
 when our coins are invested with a higher value than their intrinsic 
 value, those producers will suffer. It is, therefore, not to be wondered 
 at that they have striven so vigorously to preserve the privileged 
 position in which our monetary legislation has placed them, and 
 thanks to which they have been shielded from the hurtful effects of 
 . the oscillations in exchange. 
 
 A Condition that is Detbimental to the Interests op the Majority is not 
 
 TO BE Maintained. 
 
 Under the new order of things to which we are aspiring, the pro- 
 ducers of silver will be placed on the same footing, as regards the 
 currency, as the producers of any other substance or commodity. The 
 white metal will then, as far as its estimation in coin is concerned, be 
 subject to the same fate as all other articles and all services. Both 
 theory and practice prove that the prices of commodities fall or rise, 
 respectively, when the value of the currency rises or falls. The sin- 
 gle exception that has existed and still exists in our country is the 
 white metal whose value has been identified with that of our currency. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 435 
 
 and m truth there is no argument of expediency that can justify this 
 
 One can understand how, at a certain period of our history, the 
 opinion should have prevailed that mining deserved to be favored in 
 every possible way, not only by franchises and facilities, but by dif- 
 ferentiating the economic condition of mine owners from that of all 
 other members of the community. But at the present time, however 
 important the silver-raining industry may still be, the old-fashioned 
 ideas on this subject are untenable. It is well that the mining frater- 
 nity should enjoy all the economic circumstances that are to its 
 advantage, and no objection would be raised to its continuing to be 
 protected by monetary legislation against the risks and drawbacks 
 incidental to oscillations in exchange, were it not that that protection 
 is hurtful to all the other interests of the community with which the 
 interests of the mining fraternity are not only not identical but openly 
 antagonistic, for a condition, which to the mining class is an incentive 
 and a guaranty, is to others fraught with uncertainty and loss, and 
 what constitutes a privilege in favor of the producers of a given 
 article is a stumbling block to the rest of the country's inhabitants. 
 Is this equitable? The answer is obvious. If fixity in the value 
 of the currency is the desideratum of the community, and if that fix- 
 ity can not be attained as long as the value of the currency is depend- 
 ent on the price of the white metal, there is no consideration that 
 ought to influence the Government to maintain a condition that is 
 detrimental to the interests of the great majority of the nation's 
 inhabitants. 
 
 The Cessation or Identity in Value between the Curbenct and Bab Silver 
 WILL not be so Hurtful to Mining Interests as is Thought. 
 
 Moreover, if we examine carefully the relations existing between 
 the production of silver and foreign exchange, we must arrive at this 
 conclusion: That the stabilization of exchange, even though accom- 
 plished at the expense of the identity in value that has always existed 
 between our currency and silver bullion, will not be as hurtful to the 
 to the exploitation of silver mines as might at first sight be supposed. 
 
 In the first place, the labors of the monetary commission have 
 demonstrated that not all mining concerns will suffer to the same 
 extent through the suspension of coinage, but that in many cases the 
 loss will be so slight as not to affect the fortunes of the concerns in 
 question at all. It has also been proved that an enhancement in the 
 prices of certain articles which are indispensable to mining; the 
 increase in freight rates which so largely affect the price of ore ; and, 
 finally, the advance in salaries and wages which, if not yet very 
 marked in some mining districts, has in others reached a very high 
 percentage and which before long will become general in proportion 
 as labor grows scarce, will in the end cause silver mining to forfeit 
 the greater part of the advantages which it enjoys. 
 
 In corroboration of this view the experience of mining concerns sit- 
 uated in the States along the northern border may be cited. The 
 persons interested in those concerns, accustomed as they are to pay 
 salaries and wages and the cost of almost everything that they need 
 in a silver price, which is the equivalent of the gold price of the sanie 
 commodities and services in American territory, are, among mine 
 
436 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 owners, those who raise fewest objections to the project of stabilizing 
 exchange, and it may even be said, without exaggeration, that in gen- 
 eral they are in favor of that project. 
 
 It is true that the foregoing considerations refer principally to the 
 effects of the rise in exchange, whereas the privileged situation of the 
 mining man is due to unrestricted coinage; but the continual oscilla- 
 tions in exchange influence to such an extent the prices of all com- 
 modities that, however great may be the advantages which the 
 mine owner reaps by being able to have his silver converted into 
 dollars, the day is bound to come when those advantages will be 
 eclipsed by the benefits which he will derive from stability in the 
 value of the national currency. 
 
 A pertinent reflection, which may be made in order to determine 
 the real scope of the effects that will flow from the suspension of free 
 coinage, is supplied by the situation in which the mining industry 
 has periodically been placed in recent years. It is a well-known fact 
 that during the first six months of each year payments, which for any 
 reason have to be made abroad, are effected wholly by means of 
 drafts, and that metallic money is not brought into requisition in any 
 way, whereas in the months from July to December it becomes neces- 
 sary, in order to complete those payments, to ship coined dollars. 
 This phenomenon is due to the fact that, inasmuch as our exporta- 
 tions are larger in the first part of the year, there is a more plentiful 
 offer of drafts made out against them. The difference between the 
 price that is paid for a draft and the cost of the exportation of an 
 equivalent amount of coined dollars is sometimes as high as 8 per 
 cent, and it creates, as far as the vendors and exporters of silver are 
 concerned, a situation analogous to that which will result from the 
 suspension of coinage. 
 
 A recent and very striking example of this situation is afforded by 
 the exchange market during the ten months that have elapsed of the 
 present year, for not only did the rates of foreign exchange deviate 
 from the price of bar silver during the customary period, which, as 
 has been said, is from January to June, but the condition in question 
 has endured to date, thanks to the abundance of drafts on the mar- 
 ket due to the exceptional influx of capital, an influx which, under 
 proper direction, has kept the rate of exchange for several months 
 past in the neighborhood of 215 on New York, when parity, on the 
 basis of silver values, has ranged from 217 to 235. 
 
 It is true that not all the silver mined in the country is subject to 
 the loss in question, but only that which can not forthwith be coined ; 
 but that loss, which as has been seen is wont to be somewhat heavy, 
 affects more than three-fourths of the output of the white metal, con- 
 sisting of the exjDorts thereof in the form of ore, sulphides, cyanides, 
 impure bars, pigs of argentiferous lead, copper mattes, etc. The 
 owners of bars which come up to the standard exacted by the mints, 
 alone escape the effects occasioned by the divergence between the 
 rates of exchange and the price of bar silver. 
 
 The situation of the mining interest will not, therefore, change 
 greatly for the worse when a passing condition, which has recurred 
 for years past during the months when there is an abundant supply 
 of drafts on foreign points, becomes permanent and common to all 
 the months of the year. The drawback in the case of those who 
 already feel it will probably be intensified, but its effects are already 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 437 
 
 known, and therefore capable of being gauged and combated. In 
 any event it is not too much to say that the loss arising from the 
 appreciation of the currency will not be as great as some persons 
 claim and certainly not irremediable. 
 
 exadberations in the pictuke drawn by the partisans oe unrestricted 
 Coinage — Compensations That Will Come to the Mine Owners Through 
 THE Change in System. 
 
 It must be owned that the picture painted by the partisans of free 
 coinage, in order to emphasize the mischievous effects of the reform 
 under consideration, is exaggerated. One-half of the mining con- 
 cerns in the country ruined ; hundreds of thousands of people reduced 
 to want ; the consumption of agricultural and manufactured products 
 curtailed ; a contraction in the volume of commercial transactions and 
 railway traifics, and many other calamities are the features of that 
 picture. Those who thus argue do not assuredly reflect that, if it is 
 true as said, that a great number of mining concerns operate at a loss, 
 their closing down, far froni being a misfortune, will in reality be an 
 advantage, obviating an useless employment of capital and energy. 
 Nor do they reflect that if it should become impossible to keep up 
 work in certain mines there will not be lacking others producing dif- 
 ferent metals, which will either begin to be exploited or will be 
 exploited on a larger scale than at present, owing to the influx of cap- 
 ital attracted by stability of exchange; or that, if unfortunately 
 employment becomes scarce in certain mining districts, the mine 
 hands will be able to emigrate to other districts as the same class has 
 frequently done before in our mining annals; or that, in fine, some 
 of the losses that will be sustained by our silver-mining industry are 
 susceptible of being completely remedied or at least of being miti- 
 gated by means of sundry compensations which eventually may more 
 than counterbalance the damage suffered. 
 
 Moreover, it is unquestioned that the real losses which the curtail- 
 ment of the value of silver, as compared with the value of our cur- 
 rency, may occasion, will only be felt in proportion as that curtail- 
 ment of value becomes accentuated. In consequence, if those losses 
 seem likely to prove irremediable in the case of some concerns, they 
 will not come about all at once. This will enable the natural opera- 
 tion of other factors which have largely contributed to the develop- 
 ment of mining to continue their beneficent work and to arrest in 
 time the disastrous consequences which in theory might be expected. 
 Much is yet to be expected from the extension of railwaj^s and the 
 multiplication of metallurgical establishments tending to allay the 
 fear that our production of silver will suffer an alarming contrac- 
 tion, especially seeing that the public powers will assuredly be dis- 
 posed to encourage that production in other ways, enabling it to 
 retain the high position which it has achieved among the nation's 
 industries. 
 
 Plans fob the Reduction of Taxes on Mining. 
 
 In this connection this department has given particular attention 
 to the taxes which directly or indirectly weigh on the production of 
 silver in order to single out those which, owing either to their magni- 
 tude or nature, may lend themselves to modifications favorable to the 
 
438 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 mining interest. A revision of this nature became imperative as soon 
 as the Government's opinionbegan to lean toward the discontinuance 
 of free coinage, for, in addition to reasons of equity which recommend 
 the affording of compensations when losses and difficulties are occa- 
 sioned, there is the cogent argument that when the economic privi- 
 lege which has so powerfully aided the mining industry shall have 
 disappeared, the reasons of justice existing for a portion of the taxes 
 borne by that industry will also disappear. 
 
 In comparing Federal and local taxes on mining with those on 
 other forms of national production, one is struck by the difference in 
 character between them. It may be said, as a general proposition, 
 that mining contributes on a less scale than any other branch of the 
 national wealth to the local revenue of the States and that, per contra, 
 it supplies to the Federal exchequer a larger sum than almost any 
 other industry. The truth is that the 2 per cent which the States are 
 empowered to collect by the present law as the total amount of their 
 local taxes on the yield of mines producing the precious metals is 
 obviously less than the tax which they collect on real estate, copimerce, 
 and industries in general. But the same observation can not be made 
 in regard to the taxes payable to the federation, which are of a special 
 character and which aim at remunerating given public services, as 
 is the case in regard to the dues for assay, melting, separation, refin- 
 ing, and mintage, or at marking the recognition due for the benefits 
 which the nation extends to its favorite industry, as, for example, the 
 tax on mining claims and the so-called 3 per cent stamp tax on the 
 extraction of silver and gold. 
 
 The Executive would be glad, in point of tax reduction, to go to 
 the lengths advocated by some honorable members of the monetary 
 commission, for if, as a general rule, it seizes all opportunities for 
 reducing fiscal burdens, there are in the present case specially power- 
 ful reasons for such a course. However, it will not be possible on this 
 occasion to accede to those wishes to the fullest extent, owing to the 
 magnitude of the resources which the taxes in question contribute 
 toward the annual expenses of the federation, and it will be neces- 
 sary to maintain, though on a lesser scale, those taxes which represent 
 the price of certain direct services enumerated in one of the foregoing 
 paragraphs or compensation for the right to exploit mines, for the 
 granting of franchises for the erection of metallurgical establish- 
 ments, and for the facilities which mine owners will continue to 
 enjoy, some of which are of considerable magnitude, as, for example, 
 the free importation of certain articles. 
 
 Otheb Drawbacks Which the Restbiction of Coinage Might Occasion. 
 
 A few words may be said in regard to other kinds of drawbacks 
 which may supervene upon the suspension of coinage. These other 
 drawbacks do not involve the shrinkage in value which the white 
 metal will undergo when estimated in our currency but the loss of the 
 facilities which the present regime affords to the owners of silver bars 
 in enabling them to receive the value thereof within three days after 
 the presentation of the bars at the mints. Notice has already been 
 taken of the fact that the owners of silver bars are differently situated 
 as compared with the producers of other forms of the same metal, and 
 this difference is emphasized if one considers the facility with which 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 439 
 
 the former obtain, at once and almost without loss, the price of their 
 commodity, for, according to monetary laws and the regulations of 
 the mints, the bars need only to possess certain qualifications in order 
 to be forthwith accepted for coinage. 
 
 Now, in the regime which is proposed, the situation of the owners 
 of silver bars will hardly undergo variation, and in reality the mining 
 community will, in the long, run, be rather benefited than the reverse. 
 It would be a source of satisfaction if all the difficulties arising from 
 the monetary reform were as easily remediable as the one just men- 
 tioned. By providing arrangements according to which, when bars 
 are not minted into dollars for direct exportation or into subsidiary 
 coins, funds will be advanced to the owners of bars and the same will 
 be sold for them on the best possible terms, the problem will have 
 been solved, and this Department is pleased to announce that prepara- 
 tions have been made and arrangements consummated which, when the 
 time comes, will enable this object to be accomplished at the minimum 
 of expense to those concerned. 
 
 The Eeimpobtation op Doixabb must be Pbohibited. 
 
 Inasmuch as the expediency of imparting to our currency a fixed 
 value in relation to gold has been recognized in principle and it has 
 been demonstrated that that fixity can not be attained while the free 
 coinage of silver, which prevents the appreciation of said currency, 
 is maintained, a natural consequence of those premises is that, in 
 addition to restricting coinage, the reimportation of dollar pieces, 
 which constitute our monetary unit, must be prohibited. It is impos- 
 sible, in effect, to conceive of a currency being invested with a higher 
 value than its intrinsic value as long as the coinage thereof depends 
 exclusively on the pleasure of persons owning silver bars; but it is 
 equally impossible to conceive of that result being brought about 
 unless the reimportation of dollars, which circulate in profusion 
 abroad, particularly in the countries of the Far East, is prevented. 
 
 It might be objected that this latter course, or, in other words, the 
 rejection by a nation of its own coin when said coin has once left the 
 territory of that nation, is not quite proper ; but this view, which as 
 a general proposition seems reasonable, is not applicable to our special 
 case, altogether aside from the weighty considerations which amply 
 justify the course in question. 
 
 It may be stated at once, with entire truth, that the coined dollars 
 which are shipped to the United States and Europe are not remitted 
 as money (as are the specie shipments made by other nations for the 
 settlement of their trade balances) , but are exported as merchandise 
 pure and simple, subject like other merchandise, as far as their price 
 is concerned, to the demand existing therefor. Mexico exports dol- 
 lars in the same way as she exports silver bullion or any other com- 
 modity for which there is a market abroad, whereas other nations 
 only export specie in order to liquidate their bills in various markets. 
 It is no argument to say that the Mexican dollar circulates as cur- 
 rency in certain portions of Asia, for it is not legal tender there nor 
 can the fact in question plead any international sanction in its behalf. 
 If our dollar circulates in those countries, it is because their inhab- 
 itants are accustomed to its design and know that the coins which 
 bear it contain a given quantity of silver. They care for no other 
 
440 GOLD STAITDARD OT INTERNATIONAL TRADE. 
 
 aspect of the case and certainly never give a thought to the legal 
 value of the coin in the country of its origin. 
 
 On the other hand, if the appreciation of the dollar over the 
 silver which it contains is to be the fruit of the efforts and sacrifices 
 of the Mexican nation, it would be by no means just that the profit 
 involved in that operation should be enjoyed by persons in foreign 
 countries who have accepted the dollar merely for its intrinsic value, 
 without ever entertaining the remotest intention of utilizing it as 
 currency in dealings with Mexico. 
 
 Thus no one will be injured by the prohibition to reimport Mexican 
 dollars, and in order that the country may not become liable to even 
 a shadow of reproach in this respect, a period of time may be allowed 
 within which persons desiring to reimport dollars may do so. 
 
 EXPEDIENCT OF RETAINING THE FINENESS AND DESIGN OF THE PbESENT DoLLAE. 
 
 It seems timely to say here a few words on the advisability, while 
 effecting the reform, of retaining the monetary unit which has been 
 in use to this date, viz., the silver dollar weighing 27.073 grams and 
 having a fineness of 0.9027. 
 
 This Department does not propose to discuss the arguments offered 
 by publicists in favor of the reduction of the quantity of silver con- 
 tained in the Mexican dollar, for those arguments are outweighed by 
 the urgency of respecting the traditional custom of the inhabitants of 
 this country, causing them to accept as the basis of their transactions 
 the old. coin of 10 " dineros " 20 grains, which, with almost inappreci- 
 able differences, is the same as continues to be coined to this day. 
 Great as might be the advantages obtained through a diminution of 
 the degree of fineness or the metallic contents of the dollar piece, they 
 assuredly would afford no compensation for the immense perturba- 
 tions that would arise from the suspicion with which the public would 
 regard a coin of lessened intrinsic value. In giving up the profit that 
 would be derived from coining a dollar of lower intrinsic value than 
 its legal value, and in foregoing an advantage more important still, 
 viz., that such diminution in value would render still more remote the 
 probability that the intrinsic value of the dollar might some day, 
 through an advance in the price of silver bullion, exceed its legal 
 value, the Government will hold its sacrifice light, if thereby it is 
 possible to ward off the dangers and troubles that would be occasioned 
 by the disfavor with which the public would receive a dollar of less 
 weight and fineness than the old one. 
 
 This desire to give no cause for alarm or distrust has moved the 
 Executive to propose the retention of the present Mexican dollar not 
 only with the same quantity of silver as it now has, but with the same 
 design and subject to the same methods of mintage, at least for some 
 time to come until the consequences of the new system can be observed. 
 
 Indeed, a change in the design of the dollar, without any change in 
 its fineness or its weight, could only be explained by the desire to pre- 
 vent frauds which might be committed through the reimportation, in 
 spite of the legal prohibition, of dollars circulating abroad. Now 
 this precaution would be costly and useless — costly, because it would 
 involve the recoinage of all the dollars held by the inhabitants of the 
 Eepublic and useless for the reasons which may be briefly explained : 
 
 There is a fact which, however deficient may be the explanations 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 441 
 
 offered in regard to it, has all the force of an incontrovertible truth, 
 and that fact is the constant absorption of silver, and particularly 
 of Mexican dollars, by the countries of eastern Asia. The white metal 
 that penetrates those regions never comes forth again; it might be 
 lost, or annihilated or transformed, for all the trace which it leaves 
 behind it. The current which carries silver along to a final destiny 
 which is unknown, but which exists in some form, is too strong to per- 
 mit of apprehension that any considerable portion of our dollars will 
 turn back and penetrate anew, in the form of contraband, into 
 Mexican territory. 
 
 Again, what incentive is there for such contraband operations? 
 The sole inducement would be the premium which the coined dollar 
 would enjoy in Mexico over the commercial value of its silver con- 
 tents. From this premium it would be necessary to deduct the 
 freight rates from the markets of the Far East, commissions, minor 
 expenses, and the very heavy disbursements that are always incidental 
 to any dangerous enterprise, such as the passing of contraband goods 
 which are difficult to hide, when also the penalties are severe. 
 
 Iri case the views of the Executive in regard to the gold value with 
 which our dollar is to be invested are accepted, the appreciation of 
 that dollar over the price of bar silver will not, even assuming a 
 heavy decline in the latter metal, exceed 20 per cent, and therefore it 
 is quite certain that, for the sake of a profit relatively so inconsider- 
 iible no one will venture to run the gauntlet of the laws which are to 
 prohibit the reimportation of dollars, any more than counterfeiters 
 have ventured to imitate the coins of those countries in which silver 
 circulates as unlimited or almost unlimited legal tender, though this 
 operation would be attended with a profit three, four, five, and even 
 more times as great. There is no doubt that an explicit and severe 
 body of laws will afford an insurmountable barrier to any attempt at 
 fraud. It must also be borne in mind, as a further reason for dismiss- 
 ing all fears of the clandestine reimportation of dollars, that, owing 
 to the innate suspicion of oriental races, by whom our dollars are 
 used, the bankers circulating them have been accustonied for cen- 
 turies past to stamp them with a special mark and, according to infor- 
 mation received from banking establishments in the Far East, almost 
 all the Mexican dollars in circulation bear this stamp, and therefore 
 they could not be reintroduced into this country without revealing 
 their contraband character and without also enlisting our own people 
 in the prevention of their importation through their refusal to receive 
 disfigured coins debarred from legal circulation. 
 
 'HE Value of the Cubbency is to Be Enhanced Within Petjdent Limits. 
 
 Up to what point is it desirable that the value in gold of the Mexi- 
 can dollar should be made to rise? Or, in other words, wha,t is the 
 equivalent in grams of fine gold at which the present silver dollar is 
 to be valued in order best to conciliate the manifold national inter- 
 ests « This question calls for explanations, as does also another ques- 
 ti^bn'of mere procedure which is intimately bound up with the former, 
 and that other question is the following: Ought an endeavor to be 
 made to attain the new legal parity rapidly, or ought its attainment 
 to be accomplished in a more or less lengthy period, through the 
 action of time and the gradual development of public wealth < 
 
442 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 An appreciation of the currency is indispensable, as has been seen, 
 in order to disassociate its value from the value of the metal compos- 
 ing it ; but this enhancement in value is susceptible, in proportion to 
 its magnitude, of causing evils of a different kind. In the first place, 
 the inverse ratio effect which it produces on the prices of all commodi- 
 ties brings up the serious problem of protection to native industries. 
 A contraction of the currency, or, what is the same, a decline in for- 
 eign exchange, constitutes a menace to those native industries which 
 can only thrive on a high scale of prices for the products of consump- 
 tion ; and the export industries and most of the manufacturing indus- 
 tries are thus situated. Care must, therefore, be taken not to exag- 
 gerate the gold value of our currency, owing to the fatal effect which 
 such a course would have on numerous sources of wealth. Other 
 arguments against a marked enhancement of the currency may be 
 derived from considerations based on the relations between debtor and 
 creditor, as well as on the inconvenience that would be occasioned in 
 the case of long-time transactions already concerted. 
 
 On the other hand, if the margin between the intrinsic value of the 
 currency and its exchange value is made too narrow, there exists the 
 danger that, during one of the many spells of fluctuation to which the 
 silver market is exposed, the value of the metal might go above the 
 legal parity of the coined dollar, occasioning an economic perturba- 
 tion of which the intensity would be proportionate to the lack of 
 efficacy and timeliness in the measures employed to restore monetary 
 equilibrium. 
 
 Immediate Determination of the Legal Paritt. 
 
 Before determining the ratio with gold which is to be the goal of 
 our silver currency, this department deliberated as to whether prefer- 
 ence was to be given to the system recommended by some economists 
 and men of affairs and which has been adopted by some nations, as, 
 for example, England in the Straits Settlements, the system, namely, 
 that consists in gradually enhancing the value of the currency without 
 determining beforehand the parity which it is desired to attain. The 
 arguments that are adducible for this method seem of no small 
 weight, appealing as they do to the safety afforded by the possibility 
 of observing events as they succeed one another and of arriving Avith 
 certainty at the ratio that is most adaptable to the economic condi- 
 tions of the country ; but if it be considered that that ratio between a 
 silver currency and gold, varying as it does from day to day, accord- 
 ing to the operation of the factors influencing it, is not accompanied 
 by clear and unmistakable signs to indicate when the end of the jour- 
 ney, as distinguished from a temporary halting point, has been 
 reached, it will be realized that there is much that is illusory in the 
 advantages of this method of arriving at a definite parity. 
 
 The Government has made up its mind in favor of the opposite sys- 
 tem, for it believes that the advantages that attend the immediate 
 determination of the value to which it is to be sought to raise the dollar 
 outweigh the disadvantages of that course. It is also proper to state 
 that its decision in this respect has been powerfully influenced by the 
 special reasons that militate in favor of the ratio chosen, as well as by 
 the particularly propitious fact that the ratio in question is the one 
 that has been singled out by public opinion with equal persistence and 
 generality. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 443 
 
 Parity Recommended fob the Present Silver Dollar. 
 
 The parity proposed for the present silver dollar is that of 75 centi- 
 grams of fine gold, a parity equal to that of the Japanese yen and 
 which has the advantage of making our dollar equal (the diflference 
 being very slight) to the American half-dollar, which has been its 
 average value since 1893. If during the last two years its value has 
 been at times considerably less, the difference is not so great .that, even 
 on the hypothesis of the low quotations being maintained, it will offer 
 any difficulty to the attainment of the new legal parity by the simple 
 methods which the government purposes to employ to that end. 
 
 The parity in question represents a ratio of 32.5855 to 1, which is 
 the ratio existing between the 24.4391 grams of pure silver which the 
 dollar contains and the 0.75 centigrams of fine gold which will consti- 
 tute the new unit of our monetary system. At one time the idea was 
 to accept as a unit the exact half of the American dollar, but inasmuch 
 as it can not be expressed in the decimal system in few figures and the 
 difference only consists In a small fraction of a centigram of gold, it 
 was decided to forego exact equivalence in order to secure the advan- 
 tages, for purposes of calculation, afforded by the adoption of the 
 figure of 0.75 or three-fourths of a gram. 
 
 For months past the exchange valuQ of our dollar on New York has 
 been 46 cents to 47 cents gold, in spite of the fact that the price of 
 silver in bars has been relatively lower. As, however, the tendency of 
 the white metal does not afford any prospect of considerable improve- 
 ment (for neither is production likely to be curtailed nor the demand 
 suddenly to increase to any great extent) it would seem, as far as fore- 
 sight can go in these difficult and obscure problems, that the margin 
 between the commercial value of the metal contained in the dollar and 
 the gold value which it is intended to give to our monetary unit, is 
 sufficiently broad to dispel any fear, at any rate for some time to come, 
 of the serious inconvenience that would be occasioned by the rise in 
 the price of silver above legal parity, and yet is not so broad as to 
 inspire doubt as to the ability of the silver dollar to attain parity with 
 gold without serious difficulty. 
 
 Finally the parity of 75 centigrams of fine gold per dollar will 
 give an exchange rate on New York of 200 per cent approximately, 
 and it is undoubted that exchange even thus reduced will still 
 afford sufficient protection to the industries which have grown up 
 under the stimulus of the decline in silver. To reduce that exchange 
 rate further would be dangerous; thus the legal ratio chosen by the 
 Government may be considered as the golden mean amidst the many 
 conflicting interests involved in this question. And certainly it 
 must be gratifying to the partisans of monetary reform that in this 
 respect, viz., the rate of exchange which conciliates the interests of 
 the greatest number, almost all the opponents of the reform are at 
 one with them. 
 
 No Effort is to be Made to Being About Legal Paritt all at Once.' 
 
 There remains to be considered the question whether it is desir- 
 able to endeavor to bring about the legal parity all at once. In order 
 to solve this question, it is necessary to' realize as nearly as possible 
 how the various factors thnt will come into play in the new economic 
 situation of the country will operate. 
 
444 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 When the mints shall have been closed to the free coinage of silver 
 and the importation of Mexican dollars shall have been prohibited, 
 the quantity of the circulating medium, or, in other words, the total 
 of tokens of exchange, within the national territory will be limited 
 to the stock on hand when those measures become operative. Now, 
 according to a principle which seems to be well established, there is 
 a relation or proportion, though it is almost impossible to state it 
 arithmetically, between the number of tokens of exchange or the 
 quantity of coin in circulation and the number and volume of trans- 
 actions that have to be effected therewith, so that if the latter increase 
 and the former remains stationary the currency is enhanced. 
 
 In accordance with this principle, and inasmuch as the uninter- 
 rupted progress of the Republic is an undeniable fact, the prospect is 
 that that progress will not be arrested, but that the volume of transac- 
 tions and business will continue to increase, necessitating a greater 
 quantity of coin, on which account the latter will appreciate until 
 attaining legal parity with gold,- but will not go beyond, for when 
 once the limit in question is reached the yellow metal will be offered 
 to the Government in exchange for silver coins, which will then be 
 struck to augment the circulation. 
 
 Statistics prove that between 1882-83 and 1901-2 the country 
 retained in metallic money — that is to say, in Mexican silver dollars — 
 an annual sum of five millions thereof, approximately, representing 
 the indispensable supply to meet the increased requirements of cir- 
 culation, and this in spite of the fact that during the period in ques- 
 tion the use of bank notes, checks, and other instrumentalities of 
 credit, previously almost unknown, have come into general use in 
 our midst, contributing greatly to stimulate the functions of the cur- 
 rency. Is it not, therefore, permissible to hope that in future cur- 
 rency requirements will continue to increase at least in the same pro- 
 portion? Everything warrants an affirmative answer, and that the 
 development of public wealth, new facilities for communication, and 
 many other circumstances will add to those requirements on a pro- 
 gressive scale. And in proportion as there is a greater demand for 
 currency, that currency will appreciate in gold value if its volume 
 remains stationary, as will be the case when coinage ceases to be free. 
 There will be, in the case of this, as of all other social phenomena, 
 factors operating in a contrary direction, as, for example a still 
 further possible increase in the amount of fiduciary circulation which 
 performs the functions of metallic money and a more common use 
 of the instruments of credit and banking methods, obviating the use 
 of coin and augumenting the mobility of circulation, but there will 
 also be favoring factors not the least of which will be the daily 
 increasing output of gold. And in this way the appreciation of the 
 currency must inevitably in the long run take place, for it will be 
 governed by the law of supply and demand, one of the most solidly 
 established and most universal principles in the domain of political 
 economy. 
 
 The foregoing considerations seem sufficient to demonstrate that 
 legal parity will come about of its own accord through the gradual 
 operation of entirely natural causes, of which the action must not 
 be precipitated, especially in view of the fact that any other course 
 would involve the risk of provoking any day, and perhaps simul- 
 taneously, a decline in prices and a rise in the rate of interest which 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 445 
 
 would ocQasion a crisis and would suddenly paralyze the efforts of the 
 producing classes, instead of allowing time, the further develop- 
 "i*^"t 01 public wealth and the opening up of new sources of activity 
 and labor hitherto unknown, to supply them with the means of 
 adapting themselves to the new conditions which, to the advantage 
 of the entire nation, will be solidly founded on the stability of 
 international exchange. It has also been stated elsewhere how dan- 
 gerous it is to alter by any legislative act the relations between 
 debtors and creditors into which they have voluntarily entered, 
 and if on the top of a modification in the value of the instrument of 
 exchanges there were to come the imposition of a brief period within 
 which that modification would have to be effected, leaving no time 
 for the prices of all commodities to adjust themselves to the new 
 legal parity, it must be admitted that, however wise and safe might 
 J3e the provisions of the law, the sacred rights of one of the contract- 
 ing parties would be violated to a greater extent than the public 
 welfare seems inevitably to demand. 
 
 The ExpedibncV of Creating a Gold Fund to Attain and Preserve Stability 
 IN THE Rate of Exchange is Examined. 
 
 There has been considerable difference of opinion among the mem- 
 bers of the monetary commission and business men in the Republic 
 and abroad in regard to the proposal that the Government should 
 at once create a gold fund for the purpose of exercising a decisive 
 influence on the market in the achievement of stability in our ex- 
 change rates or of maintaining that stability when once achieved. 
 
 The Executive was, in consequence, bound to give, as it has in effect 
 given, special consideration to this point, and only after a most care- 
 ful study has it decided, for the present at least, in the negative. 
 The principal reasons for that decision may be set forth : 
 
 Without entering into an examination of the proposal according 
 to which the fund in question would be used, openly and without 
 limitation, to furnish gold, or gold drafts on foreign points, in ex- 
 change for silver coins at the legal parity, to persons desiring to 
 make payments outside of the Republic (a proposal that would be 
 equivalent to introducing the gold standard in a complicated way 
 that could in no manner be recommended), it is necessary to take 
 into consideration the magnitude of the sacrifice that would be 
 imposed on the nation in order to procure the amount of gold that 
 would be necessary to exert an efficacious influence on the rate of 
 exchange. The means to which it would be inevitably necessary to 
 have recourse in order to procure the gold in question would be a 
 loan, and the sum that would have to be borrowed, according to the 
 most optimistic opinions, would not be less than $40,000,000. It is 
 true that the credit of the nation has improved to a gratifying extent, 
 and that, therefore, neither would the operation be impracticable 
 nor would the sacrifice represented by the interests on the loan be 
 more than the exchequer could afford. But it must not be for- 
 gotten that one ought only to have recourse to measures of this 
 nature when they are absolutely necessary, and above all when the 
 benefits which they entail are so undeniable that they evidently out- 
 weigh the objections, and on many and substantial grounds it may 
 seriously be doubted whether this condition would be realia^d in the 
 present instance. 
 
446 GOLD STANDARD IN INTEENATIONAL TBADB. 
 
 In point of fact, what do the advocates of the gold fund hope to 
 accomplish through its creation? Primarily to bring about legal 
 parity either at once or very soon; and this, as has been shown else- 
 where in this exposition, far from being a desideratum, would give 
 rise to a rather dangerous situation. 
 
 Moreover, though, in the case of problems so complex and obscure, 
 it may not be wise to trust to the efficacy of a single principle nor to 
 cling thereto with obstinacy, we may not disregard the laws of ratio- 
 cination and we should be disregarding them if, while announcing 
 that the fundamental principle of the reform consists in subjecting 
 the currency to the effects of relative contraction, we were to show 
 that we did not feel adequately confident that that contraction would 
 produce its natural consequence — that4s to say, that it would enhance 
 the gold valuation of our silver money. There is, in fact, all the 
 greater reason for expecting this result in that, in spite of exception- 
 ally adverse circumstances, it has been achieved in other countries, 
 which, without serious upheavals, notwithstanding all that may have 
 been said to the contrary, accomplished, some time ago, the object 
 which we now seek to attain. 
 
 The economic progress of the Republic is so perceptible; the mate- 
 rial conditions of its inhabitants are improving so rapidly and unmis- 
 takably; foreign capital evinces such eagerness to find in our terri- 
 tory a more remunerative employment than in other countries, that, 
 without erring on the side of optimism or empty presumptuousness, 
 it is permissible to trust that when coinage shall have been suspended, 
 the necessity of an increase of the circulating medium will begin to 
 be felt, and that necessity will of itself cause gold to flow into the 
 Republic, for only in exchange for gold will new silver dollars be 
 coined and the currency augmented. 
 
 Some other persons who argue in favor of the reserve fund do not 
 regard it as intended to inure to the attainment of legal parity but 
 to the maintenance of that parity when attained, within the narrow 
 limits of fluctuation to which foreign exchange is subject even in 
 gold-standard countries. 
 
 The question being thus stated, it becomes necessary to consider 
 two classes of phenomena which are susceptible of causing grave per- 
 turbations in the exchange market. If the disturbing cause were to 
 belong to the domain of politics, domestic or international, it seems 
 at least doubtful whether the existence of a gold fund would suffice to 
 prevent the collapse of exchange rates, for the calamities that are 
 inherent to disturbances of this nature absorb money in such quanti- 
 ties and with such urgency that the reserve fund could hardly con- 
 tinue to be devoted exclusively to banking purposes. In regard to 
 crises of an economical nature, which may also occasion severe varia- 
 tions in the rates of exchange, it is undoubted that they do not produce 
 such violent and protracted upheavals of the market as the other 
 cause, nor are they of a nature to baffle the foresight of the banks and 
 business men, who can almost always ward them off or mitigate them 
 by efficacious means based on the principles which govern inter- 
 national commerce. 
 
 No doubt situations will occur in which a gold reserve would render 
 great services, and undoubtedly the most advantageous use that could 
 be made of such a reserve would be its immediate effect on the market 
 in checking any brusque movement that might occur in the direction 
 
GOLD STANDAKD IN INTERNATIONAL TRADE. 447 
 
 of a rise in exchange rates. But if the free action of the measures 
 that are proposed for the purpose of enhancing the value of the mone- 
 tary circulation and bringing about a higher price for the national 
 currency, should prove inefficacious to neutralize the upward move- 
 ™^"l^j^!. ®^^^^"g® rates and to restore legal parity, then the time 
 would have come for the great banking institutions, for private 
 hrms and business concerns of all kinds, to solicit gold loans abroad, 
 against which they would draw with all the greater confidence in that, 
 as the disturbing factor of the market would not be of long duration, 
 the reaction would in due course set in, enabling them to refund the 
 amounts drawn for on profitable terms. 
 
 The Government might also, if necessary for the same purpose, 
 make use of its credit or of the gold funds which it frequently has 
 at its disposal. 
 
 Such, stated as briefly as possible, are the reasons which have influ- 
 enced the resolve of the Executive not for the present to create a 
 reserve fund. But this does not imply any purpose on its part not 
 to have recourse to that method of maintaining monetary parity if 
 circumstances clearly demonstrate its necessity. Still less does it 
 indicate the intention of using for the needs of the exchequer the 
 profits that may in future be derived from the coinage of silver in 
 exchange for gold at the legal parity, for in this respect the Execu- 
 tive is fully alive to the risk of imparing public confidence that would 
 be run by converting what will, in a certain sense, be a deposit 
 intrusted to its care, into a source of revenue. If the expectations of 
 this exposition are realized, the profits in question which according 
 to the contemplated plan will not be held and handled exclusively 
 by fiscal agents or employees, will constitute a reserve fund which in 
 time will come to be of considerable volume, and then the legislature 
 will decide as to the best manner of using and increasing it. 
 
 Subsidiary Coinage and the Mintage of Dollabs Intended fob Expoetation. 
 
 Coming down to points of less importance than those above treated, 
 this department has considered that a radical reform of our monetary 
 system afforded, a suitable occasion for ridding it of certain imper- 
 fections which are attended with drawbacks of some moment to the 
 country. Contrary to sound economic principles and the practice of 
 all civilized nations, our subsidiary coins are unlimited legal tender 
 and are of the same fineness as the Mexican dollar, occasioning not 
 only excessive expenses for coinage, but also giving rise to the incon- 
 venient condition under which, while some portions of the country 
 are afflicted with a plethora of small change, causing it to be at a dis- 
 count, other portions suffer from a scarcity of token currency for 
 payment of wages and other small transactions, and have to offer a 
 premium to procure it. It is time that such anomalies should end, 
 that the subsidiary coins now in circulation be withdrawn, and that 
 new coins be issued subject to rules that will in future obviate the 
 drawbacks with which the present ones are attended, while also pre- 
 venting the lesser fineness of the subsidary coinage from being con- 
 verted some day or other into a source of fiscal revenue, to the detri- 
 ment of the estimation of that species of currency and hence to the 
 detriment of public wealth. 
 
448 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Again, as it is probable that the oriental nations will not, at any 
 rate for some time to come, abandon their inveterate custom of using 
 the Mexican dollar, even though only in the nature of small bars of 
 silver of uniform and recognized fineness, it seems expedient to main- 
 tain the Government's power to coin said dollar exclusively for 
 exportation at times when the condition of foreign markets allows 
 some profit to be derived from this operation. 
 
 Final Considerations. 
 
 It may seem strange that in an affair of such importance as is the 
 subject-matter of this exposition, and which has been so carefully 
 studied, this department should not, in conclusion, submit to the 
 National Legislature one or more bills looking to the immediate 
 reform of our monetary system, but should content itself with asking 
 Congress to authorize the Executive to issue the laws in question, 
 subject to the terms of the accompanying project. 
 
 In adopting this form of procedure the President of the Republic 
 has been influenced by the consideration that the reform can not be 
 put in practice save after the realization of numerous enactments and 
 measures of an administrative nature, and that it is desirable to wait 
 for a moment when the conditions of the silver market shall not be 
 particularly adverse, in order just then to decree the reform in ques- 
 tion. And inasmuch as said measures could not be taken until Con- 
 gress had been pleased to approve the projected reform, at any rate 
 in so far as its fundamental principles are concerned, and as it would 
 be anomalous to defer the execution of laws, after their actual issue, 
 until a favorable conjunction of circumstances should occur, the 
 Executive had no other course open to it than to solicit from the 
 Federal Chambers a new proof of the confidence which they have 
 hitherto reposed in it, and which it has always endeavored to use for 
 the welfare of the nation. 
 
 In conclusion, the Executive hopes that if the monetary reform is 
 carried out along the lines set forth success will crown the efforts of 
 the nation to implant it and this without vitally affecting the great 
 interests represented by the mining industry and the other industries 
 involved in this change, and also without shock to the silver market, 
 seeing that no new factors influencing the price of bar silver will be 
 brought into play, as Mexico will be in a position, by means of her 
 coinage for exportation and mintage of subsidiary currency, to use a 
 quantity of silver nearly equal to that which in said forms she has 
 circulated and consumed year after year for long past. 
 
 Be pleased to report to the Chamber, of which you are the worthy 
 secretaries, the accompanying bill and to accept for yourselves the 
 assurances of my courteous consideration. 
 
 J. Y. LiMANTOUR. 
 
 To the Secretaries of the Chamber of Deputies of the Federal Con- 
 gress, Present. 
 
 Mexico, Novemher 16, 190^. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 449 
 
 The Bill. 
 
 Article 1. The Executive of the Union is empowered to amend 
 i^^iV^u'^^*^^'^^ ^^"^^ °* *^® Republic, determining the kinds of coin that 
 shall have legal circulation; the value, weight, fineness, and other 
 characteristics of said coins ; their margin, or " remedy," both as to 
 mintage and circulation, and, in general, laying down such provisions 
 as said Executive may deem necessary to perfect the monetary system 
 and adapt it to the economic necessities of the Republic. 
 
 In the exercise of these powers the Executive will conform to the 
 following rules : 
 
 A. The present silver dollar, containing 24.4391 grams of pure sil- 
 ver and 2.6842 grams of copper, will be retained and wiU be unlim- 
 ited legal tender. 
 
 B. There will be ascribed to this silver dollar a value equivalent to 
 75 centigrams of pure gold. 
 
 C. The subsidiary silver coins will contain a smaller quantity of 
 that metal than that which, proportionally speaking, they ought to 
 have on the basis of their token value in terms of the peso [dollar] . 
 
 D. These subsidiary coins will not be legal tender for more than 
 twenty dollars in one and the same payment nor will the bronze coins 
 be legal tender for more than one dollar in a single payment ; but the 
 Government will designate offices where private persons may freely 
 secure hard dollars in exchange for subsidiary silver coins or bronze 
 coins which they may present in amounts of one hundred dollars or 
 multiples thereof. 
 
 E. The mints will not be obliged to coin the precious metals pre- 
 sented to them, but the issuance of coined money of all kinds will be 
 reserved for the Executive, so that said Executive may exercise this 
 power in accordance with the lav/s, and on such occasions and in such 
 quantities as they may prescribe. 
 
 Art. 2. The Executive of the Union is also authorized to adopt the 
 following measures : 
 
 A. To prohibit the importation of Mexican silver dollars into the 
 territory of the Republic. 
 
 B. To demonetize coins which it considers desirable to withdraw 
 from circulation. 
 
 C. To coin for exportation dollars of designs antedating the present 
 
 one. • ,. , •, 
 
 D. To alter, if found desirable, the design of the present silver 
 
 E. To permit the legal circulation, for a limited period, of the gold 
 coin's of other nations, at the same time fixing their value in Mexican 
 coin in case the standard ounce of silver in London goes above SS^d. 
 
 F.' To modify the fiscal laws in regard to mining, lightening the 
 aggregate burdens which are borne by the precious metals in the shape 
 of the 2 per cent coinage tax, the 3 per cent stamp tax, and the dues 
 for assay, melting, refining, and separation. 
 
 G. To modify the laws which authorize the collection or a tax ot 
 $10 per claim on the title deeds of mines and also the annual tax on 
 mining claims, so as to favor mines producing the precious metals. 
 
 H. To modify the law of June 6, 1887, so as to reduce to 1^ per cent 
 the maximum of 2 per cent, which, according to the law in question, 
 is the present limit of local taxes on the value of the precious metals. 
 S. Doc. 128, 58-3 29 
 
450 GOLD STANDARD IN INTEBNATIONAL TRADE. 
 
 I. To remove or reduce existing import duties on articles" destined 
 for use in mining. 
 
 J. To organize offices, which, without loss to the public exchequer, 
 will advance money on the value of silver bars and afford to holders 
 thereof facilities for the sale of said bars on the best possible terms, 
 and, with this end in view, to make suitable contracts in the Republic 
 and abroad. 
 
 K. To modify civil and mercantile legislation in all matters con- 
 nected with prestations and payments in money. 
 
 L. To modify the precepts of the banking law which have direct or 
 indirect coimection with metallic currency or which affect the instru- 
 ments of credit or transactions in exchange. 
 
 LL. To appoint a committee whose functions shall be to regulate 
 the monetary circulation and to accomplish, as far as possible, stabil- 
 ity in the rate of foreign exchange and to this end the Executive may 
 clothe said committee with such powers as it sees fit and may also 
 intrust to it the manipulation of a special fund, the amount of which 
 will be fixed by the Executive. 
 
 M. To issue all suitable enactments, including such as aim at the 
 repression and chastisement of misdemeanors and offenses connected 
 with the subject-matter of this law ; to organize services and establish 
 offices that may be necessary and to defray the expenses needed for- 
 any of the purposes hereinbefore set forth ; to which end the Execu- 
 tive may suppress or modify the present distribution of offices, their 
 personnel, and the appropriations and disbursements authorized by 
 special laws or by the budget of expenditure. 
 
 J. Y. LiMANTOUR. 
 
 Mexico, November 16, 190Jf. 
 
Appendix' E. 
 THE STRAITS SETTLEMENTS. 
 
 A GOLD STANDARD FOR THE STRAITS SETTLEMENTS. 
 
 By Dr. E. W. Kemmerer, Chief of Division of the Currency, Treasury of the 
 
 Philippine Islands. 
 
 The decade from 1870 to 1880 was noteworthy in monetary history 
 for the extensive substitution throughout the western world of a gold- 
 standard currency for the previously dominant bimetallic standard. 
 •The ten years beginning with the closing of the Indian mints in 1893 
 will in like manner be noteworthy for the extensive substitution in 
 the eastern world of the gold standard for the silver standard, which 
 had theretofore existed throughout almost the entire Orient from 
 time immemorial. 
 
 Among the most recent of oriental countries to undertake the 
 adoption of a gold-standard currency is the Straits Settlements. 
 This British colony, composed of Singapore, Penang, Malacca, and 
 their dependencies, is one of the great entrepots of the shipping trade 
 of the Oi-ient. Like most eastern countries it has had a varied mone- 
 tary experience.'* The tin " pice," the various kinds of silver rupees, 
 the Dutch rix dollar, the Japanese copang, the Carolus dollar of 
 Spain, the Mexican and British dollars and their kindred South 
 American coins, as well as sterling coins and money coined by the 
 Straits Settlements themselves, have all had at one time or another 
 a wide circulation in the Malay Peninsula. From early in the six- 
 teenth century until the present time, however, in spite of several 
 attempts to displace it,» the principal medium of exchange and the 
 real money of account of the Straits Settlements has been the old 
 Spanish dollar or some of its illustrious descendants like the Mexican 
 and British dollar. 
 
 In 1867, the year of the transfer of the Straits Settlements from 
 the control of the Indian government to that of the secretary of 
 state for the colonies, an ordinance was passed repealing all laws 
 makino- Indian coins legal tender and declaring that after April 1 
 of that year " the dollar issued from Her Majesty's mmt at Hong- 
 kong the silver dollar of Spain, Mexico, Peru, and Bolivia, and any 
 othCT silver dollar to be specified from time to time by the governor 
 in council, shall be the only legal tend er," with the exception of certain 
 
 a An excellent brief historical treatment of the Straits Settlements currency 
 will be found in Chalmers's Colonial Currency, chap. 38. 
 6 Ibid. 
 
 451 
 
452 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 subsidiary coins.'' Since 1871 subsidiary coins for the Straits Settle- 
 ments have been struck by the royal mint. An order in council, dated 
 October 21, 1890, repealed all previous laws with reference to legal 
 tender in the colony and declared the Mexican dollar the standard of 
 value, at the same time giving unlimited legal tender to the Japanese 
 yen, the Hongkong dollar and half dollar, and the American trade 
 dollar. Prior to the passage of the currency law of 1903 two subse- 
 quent orders in council of importance relative to the currency were 
 passed, under dates of February 2, 1895, and October 20, 1898. These 
 orders taken together removed the legal-tender quality from the 
 American trade dollar and the Japanese yen, reaffirmed the law mak- 
 ing the Mexican dollar the standard coin, and declared that the Hong- 
 kong dollar and the recently coined British dollar should be legal 
 tender and be treated as equal to the standard dollar. The Straits 
 currency thus established wa«, with a slight modification, adopted by 
 the Federated Malay States. 
 
 About the beginning of the calendar year 1903 the actual cur- 
 rency of the Straits Settlements, the Federated Malay States, and 
 Johore was roughly estimated as follows : " 
 
 (1) About 30 million British and Mexican dollars, of which by 
 far the larger part was British dollars, and of whicli nearly a third 
 represented coin held in reserve against the government's note issue! 
 
 (2) Nearly 7 million dollars of Straits Settlements subsidiary 
 coins, of which it was olRcially estimated that something like $300,000 
 had been shipped out of the country. 
 
 (3) An unknown amount of copper coins, the remainder of a total 
 coinage since 1871 officially stated at $1,887,500 (nominal), of which 
 large quantities had been shipped out of the country. 
 
 (4) About 13 million dollars of governnient notes. 
 
 The effect of the fall in the gold price of silver was similar in the 
 Straits Settlements to what it was in India, Mexico, and the other 
 silver-standard countries of the world which had extensive trade rela- 
 tions with gold-standard countries. The evils resulting to local busi- 
 ness from the rapidly falling and fluctuating exchange with gold- 
 standard countries finally became so serious in 1893, after the closing 
 of the Indian mints and the calling of the extra session of the Con- 
 gress of the United States to consider the repeal of the Sherman law, 
 that the British colonial secretary telegraphed to the governor of the 
 Straits Settlements for a report as to possible remedial measures in 
 the direction of securing for the colony greater stability of exchange. 
 In response to this telegram a special committee was appointed by 
 the governor to investigate local monetary conditions and to suggest 
 remedial measures. The committee examined a considerable number 
 of witnesses, whom they considered " fair representatives of the think- 
 ing men of the colony of all classes," and found that, with the excep- 
 tion of the majority of the Chinese traders, the witnesses examined 
 were " mostly in accord in declaring that the fall in exchange has been 
 disadvantageous to these Settlements." In spite of this fact, however, 
 the committee was unable to agree upon any proposition favoring the 
 introduction of the gold standard, and their report was divided. 
 
 a Report of the Straits Settlements Currency Committee, London, May, 1903, 
 pp. 4 and 5. 
 
 6 Ibid., pp. 5 and 6. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 453 
 
 Half of the twelve members of the committee favored a gold standard, 
 five of them advocating the introduction of the rupee upon the plan 
 which had at that time but recently been adopted by India, provided, 
 however, that that plan should prove a success in India. The other 
 half of the committee, including all the native members, favored a 
 continuation of the silver standard." 
 
 From 1893 to 1897 there was considerable agitation and newspaper 
 discussion in the Straits Settlements concerning the advisability of 
 adopting a gold standard, but nothing came of it until 1897, when, on 
 August 25, the committee of the Singapore Chamber of Commerce 
 by a unanimous vote, adopted a resolution favoring the establishment 
 of a fixed par of exchange with gold countries, and appointed a com- 
 mittee " to inquire into the local currency with the view of calling 
 attention of government to the question of converting the Straits 
 currency to a gold standard." 
 
 The essence of the recommendations of this subcommittee may be 
 summed up as follows : " 
 
 (a) The adoption of the English sovereign as the basis of the new 
 currency, "with a Straits dollar — fixed at the value of 2s. — subsidiary 
 to it." The existing subsidiary silver coinage to continue unchanged 
 except for being placed upon a gold basis. 
 
 (&) The government " not to let its intention be known, and, when 
 a decision is arrived at, to pass a law at one sitting of the legislative 
 council, and immediately thereafter issue a notification to the effect 
 that during a term sufficiently brief to prevent importation all dollar 
 coins then legally current in the colony would be received at certain 
 specified places and government currency notes given in exchange; 
 and that after the expiry of such terms the British, Mexican, and 
 other dollars in circulation would be demonetized;" the Federated 
 Malay States to promulgate the same law simultaneously. 
 
 (c) From the stock of silver obtained by the government from its 
 exchange of notes for British and Mexican dollars a limited supply 
 of the new two-shilling dollars to be coined, these dollars to contain 
 an amount of silver of from 60 to 70 per cent of that contained in 
 the British and Mexican dollars, the seigniorage to accrue to the gold 
 reserve. 
 
 Nothing of any consequence in the way of monetary reform devel- 
 oped from the above plan. It was severely criticised by the governor, 
 by the president-general of the Federated Malay States, and by many 
 others in high position." This criticism was based on the following 
 grounds : 
 
 (1) The expense involved in maintaining such a token coin at a 
 2-shilling value and in exchanging the new dollar for the old one. 
 
 (2) The danger of counterfeiting, which in the Orient would be 
 great in the case of coins like the ones proposed, whose nominal 
 value was so far above their bullion value. ... 
 
 (3) The difficulty of the^ Government's keeping its intentions 
 
 a A coDv Of the report of this committee is given in Appendix XVI of the Min- 
 utes of Evidence and Appendices of the Straits Settlements Currency Committee, 
 liondon, May, 1903. 
 
 c Thid" ADoendK XXVIII, No. 12. See also Appendix No. 54 of the Index and 
 ApDendices to the Evidence Taken before the Committee Appointed to Enquire 
 into the Indian Currency, London, 1889. 
 
454 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 secret until the final passage of the law; and on the other hand, if 
 the public were notified in advance, the danger of an inundation of 
 British and Mexican dollars, to take advantage, either legally or 
 illegally, of the 2-shilling dollar exchange offered. 
 
 (4) The difficulty of inducing the natives, who were accustomed 
 to judge the value of a coin by its weight, to take at a higher value 
 a coin of little more than half the weight they were accustomed to. 
 
 (5) The difficulty of inducing the native holders of the old dollars, 
 especially those of the Federated Malay States, to exchange them for 
 a paper currency with which they were not familiar. 
 
 As a result of these and other similar objections nothing came of the 
 plan proposed. 
 
 The rejection of this plan gave a quietus to the subject of a gold 
 standard for the Straits Settlements, as far as any official action was 
 concerned, until the middle of 1902. On June 9, 1902, the Singa- 
 pore Chamber of Commerce again addressed a letter to the colonial 
 government asking whether — 
 
 " in view of the recent serious decline in the value of the dollar cur- 
 rent here, the violent fluctuations in the price of silver and the ex- 
 treme uncertainty as to the future of this metal, all of which are not 
 only causing great inconvenience to the trade of the colony but con- 
 stitute grave obstacles to the development of its natural resources by 
 stopping the flow of capital from other parts of the world," 
 the Government were prepared to investigate into " the feasibility 
 .and expediency of securing fixity of exchange."" This letter, to- 
 gether with certain subsequent communications upon the subject, 
 was forwarded to the colonial secretary in July. 
 
 The result of these communications was that a committee com- 
 posed of Sir David Barbour, Mr. W. Adamson, Mr. G. W. Johnson, 
 and Mr. W. Blaine, were appointed by the secretary of state for the 
 colonies to consider : '' 
 
 "(1) The expediency or otherwise of introducing a gold standard 
 of currency in the Straits Settlements and the neighboring Malay 
 States. 
 
 " (2) The practicability of making the change and the steps which 
 in the opinion of the committee should be taken to effect this object 
 if the change should be decided upon." 
 
 The committee began its hearing in London, November 13, 1902, 
 and continued taking testimony until about February 1, 1903. Dur- 
 ing that time a mass of testimony, both verbal and written, was taken. 
 The committee's sittings having been in London, it was necessary that 
 the greater part of the testimony should be that of English merchants 
 having trade experience , with the Straits Settlements or with the 
 East generally — ^the class of persons, who, it will be noted, naturally 
 would have been most favorable to the establishment of a gold stand- 
 ard. The masses of the population, represented by the natives and 
 by the Chinese, who do a large part of the business of the Straits 
 Settlements and of the Federated M*lay States, could not be heard 
 directly; while through petitions and resolutions they took compara- 
 tively little part in the controversy — in fact they were for the most 
 part ignorant of the entire matter. On the whole the evidence seems 
 to show that the weight of opinion among the more intelligent of 
 
 <» Report of the Straits Settlements Currency Committee, p. 7. 
 6 Ibid., p. 3. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 455 
 
 these classes was on the side of maintaining the status quo. The 
 Jliuropean community, with the exception of the bankers and of a few 
 exporters, were almost a unit in favor of a gold standard. 
 
 A detailed discussion of the evidence brought forth in this tes- 
 timony and published in the minutes of the committee's report is not 
 necessary. The exhaustive discussion during the last decade or more 
 of the effects of a fluctuating standard of value has made knowledge 
 of the evils connected therewith general. The report of the local 
 committee appointed in 1893 to consider the subject of the Straits 
 currency declared that " all the effects remarked on in paragraphs 
 21-28 of the report of Lord Herschell's committee are in operation in 
 the Straits." This statement was nearly as true in 1903 as in 1893. 
 A few salient features of the conditions leading to the legislation of 
 1903 may, however, be briefly referred to. 
 
 The annual fluctuations in the gold value of the local money dur- 
 ing the period 1891 to 1901 are shown in the following table : " 
 
 Rates for hanlo Mils on London. 
 
 [Four months sight.] 
 
 year. 
 
 Highest. 
 
 Lowest. 
 
 Average. 
 
 1891 
 
 s. d. 
 3 6i 
 3 If 
 2 9t 
 2 35 
 2 3,1b 
 2 3 
 2 113 
 •i 
 
 2 t'b 
 2 2ft 
 2 IS 
 
 s. d. 
 3 If 
 2 95 
 2 4J 
 2 5 
 
 1 Hi 
 
 2 1 
 
 1 9ft 
 
 \ l?f 
 
 1 m 
 
 1 9i 
 
 s. d. 
 3 3 
 
 1892 
 
 2 lOJ 
 
 1893 
 
 2 71 
 
 1894 - 
 
 2 U 
 
 1895 
 
 2 1* 
 
 1896 - 
 
 9. 2 
 
 1897 --- -- - 
 
 1 11 8 
 
 1898 --- 
 
 1 n\ 
 
 1899 --- 
 
 1 11 I 
 
 1900 - -- 
 
 1901 
 
 2 k 
 1 IIH 
 
 
 
 The Straits Settlements were not, like India, practically forced 
 to the establishment of a fixed par of exchange by the existence of 
 a large public debt payable in gold. The Straits government itself 
 had no public debt, while the small debt of the Federated Malay 
 States was a local interstate debt, payable in the local silver currency. 
 Both governments, however, regularly had large sterling obligations 
 to meet in the purchase of supplies, while the salaries of all the higher 
 officials of the Straits government were on a sterling basis. !< Inas- 
 much as these charges remained relatively fixed regardless of the 
 fluctuations in the value of the local dollar, while the gold value of the 
 revenue received tended to fall rapidly with the fall of exchange, 
 the government found itself handicapped in meeting its obligations. 
 
 The relative importance of the Straits Settlements' trade during 
 the period from 1891 to 1901, with gold and silver countries respec- 
 tively, may be seen from the following figures representing imports 
 and exports of merchandise inclusive of intersettlement trade and 
 exclusive of treasure.'' 
 
 o Minutes of Evidence and Appendixes of the Straits Settlements Currency 
 Committee, p. 143. 
 
 6 Vide Colonial Office List, 1903, pp. 309-311, and August Iluttenbach, The 
 Silver Standard and the Straits Currency Question, Singapore, 1903, pp/^G 
 
 * Minutes of Evidence and Appendixes of the Straits Settlements Committee, 
 pp. 130 and 131. 
 
456 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Trade with silver-standard countries. 
 [Values expressed in millions.] 
 
 Year. 
 
 Exports. 
 
 Imports. 
 
 Total ex- 
 portsand 
 imports. 
 
 1891 
 
 $45,579 
 48,140 
 44,992 
 53,771 
 55,434 
 57,079 
 57,299 
 64,747 
 68,710 
 76,294 
 79,965 
 
 $83,937 
 
 93,946 
 
 83,891 
 
 94,068 
 
 96,877 
 
 96,260 
 
 98,769 
 
 98,615 
 
 121,945 
 
 135,402 
 
 142,033 
 
 $129,516 
 
 1892 . .... 
 
 142,086 
 
 1893... 
 
 128,883 
 
 1894... 
 
 147.839 
 
 1895... 
 
 162,311 
 
 1896. 
 
 153,339 
 
 1897 
 
 156,068 
 
 1898 
 
 163,362 
 
 1899... 
 
 190,655 
 
 1900 . .. 
 
 211,696 
 
 1901.... . . 
 
 321,998 
 
 
 
 Trade wiih gold-standard countries. 
 [Values expressed in millions.] 
 
 Year. 
 
 Exports. 
 
 Imports. 
 
 Total ex- 
 portsand 
 imports. 
 
 1891 
 
 $68,910 
 74,693 
 89,538 
 104,971 
 105,394 
 104,698 
 114,878 
 129,394 
 157,145 
 174,621 
 176,808 
 
 $44,895 
 43,436 
 68,547 
 88,613 
 88,468 
 89,936 
 99,591 
 124,387 
 133,346 
 154,994 
 150,776 
 
 $113 805 
 
 1892... 
 
 118, 129 
 
 1893 
 
 157,085 
 193,862 
 
 1894 
 
 1895.... 
 
 193 862 
 
 1896 
 
 203,634 
 
 1897 
 
 214,469 
 253 781 
 
 1898 
 
 1899..; 
 
 290,491 
 
 1900 
 
 829,615 
 
 1901 
 
 327,584 
 
 
 
 While the figures show a healthy growth of trade in general, it is 
 noteworthy that the greater proportion of the foreign trade at the 
 close of the period was Avith gold-standard countries, that the trade 
 with those countries was a rapidly growing one, that its growth was 
 more than commensurate with that with the silver-standard countries, 
 and that despite the severe handicap given to the import trade with 
 gold-standard countries by a falling exchange, the reported imports 
 from those countries had been for some time larger than those from 
 silver-standard countries, while the growth of the former had been 
 much the more rapid. As would have been expected on a falling 
 exchange, the exports to sih'er-standard countries lagged far behind 
 those to gold-standard countries. 
 
 While it is doubtless true that most of the trade with gold-standard 
 countries appears in the colonies' trade statistics and that a consider- 
 able part of what Mr. August Huttenbach calls the '' Hinterland 
 trade " with silver countries does not appear and that dollar for dol- 
 lar the trade with the silver-standard countries is somewhat morj 
 important to the colony than that with the gold-standard countries, 
 it IS none the less true that the Straits' foreign trade both actually anrl 
 prospectively should logically have placed it among the gold-stand- 
 ard countries long before 1903." 
 
 a Vide on this subject August Huttenbach, Memorandum on the Straits Set- 
 tlements Currency Scheme, Penaug, August 10, 1903, pp. 2-3. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 457 
 
 One of the most serious disadvantages of the existing silver stand- 
 ara, the committee beheved, was the discouragement to the invest- 
 ment ot toreign capital in the colony, due to the apparent, and in 
 many cases real, decline in the sterling value of capital invested in 
 the colony. 
 
 These facts, together with the element of uncertainty and specula- 
 tion brought into business by a fluctuating exchange, the feeling that 
 exchange had fallen to the point beyond which a further fall would 
 cease to be profitable to the export trade, and the movement on the 
 part of neighboring countries toward a gold basis, forced the com- 
 mittee to the conclusion that the time was ripe for placing the Straits 
 Settlements, the federated Malay States, and Johore upon a gold 
 standard. 
 
 Three principal methods of making the change to the gold stand- 
 ard were considered. The plan suggested by the Singapore chamber 
 of commerce in 1897 was believed to be impracticable for the reasons 
 already stated. The introduction of the Indian currency system, 
 which was recommended by five members of the local currency com- 
 mittee in 1893, involving, "as it did, a change in the unit of value 
 from the dollar to the rupee, the adoption of a currency which would 
 be largely controlled by another country, and whose bullion value 
 was -far below its face value, found comparatively few supporters in 
 1893, whatever might have been the merits of the plan ten years 
 before. 
 
 The plan finally recommended by the unanimous vote of the com- 
 mitteei may best be briefly stated in their own words : " 
 
 " A special Straits dollar of the same weight and fineness as the 
 British dollar at present current in the East [to be gradually sub- 
 stituted] for the Mexican and British dollars, the latter dollars 
 * * * _ [to be] demonetized as soon as the supply of the new dol- 
 lars is sufficient to permit of this being done with safety. Under this 
 plan it will be necessary for the Straits to obtain a considerable sup- 
 ply of the new dollars, and as soon as this is received the new dollars 
 should be made full legal tender concurrently with the Mexican and 
 British dollars, and steps should be taken to put them into circulation. 
 The first supply of new dollars might be obtained * * * j^y j,g_ 
 mitting to one of the Indian mints a portion of the coin reserve of the 
 currency commissioners to be melted down and converted into the 
 new Straits dollars, and this process might be continued until prac- 
 tically the whole of the coin reserve is converted into new dollars 
 
 :]: ^ # 
 
 " Simultaneously with the arrival of the first supply of the new 
 dollars and with the making of them legal tender, the import of 
 Mexican and British dollars should be temporarily prohibited and 
 the export of the new dollars should also be prohibited. As there is 
 ordinarily a large import of Mexican and British dollars into the 
 Straits and subsequent export of them, we think it likely that when 
 their import is prohibited there would be a tendency toward a consid- 
 erable drain of^these coins from the Straits Settlements, and if the 
 new dollars are freely supplied, the change of currency might be com- 
 pleted without any great delay. 
 
 o Report of the Straits Settlements Currency Committee, May, 1903, pp. 12 
 and 13. 
 
458 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 " When the currency is so largely composed of the new dollars as 
 to justify the measure, the Mexican and British dollars should be 
 finally demonetized, and the Straits Settlements would then be in the 
 position in which India was when the change of standard was under- 
 taken in that country, with, however, the very important advantage 
 that there would not be an enormous proportion of the new coins 
 either hoarded or circulating in foreign countries, which might, by 
 being thrown into circulation, indefinitely delay the establishment of 
 the gold standard. 
 
 "After the Straits Settlements had arrived at this stage the pro- 
 cedure might be exactly the same as it was in the case of India, i. e., 
 after sufficient Straits dollars had been coined to meet the require- 
 ments of business in the colony and the adjoining states the coinage 
 of dollars would cease until the exchange value of the dollar had 
 reached whatever value in relation to the sovereign might be decided 
 on by the government as the future value of the Straits dollar. 
 After this stage is reached the Straits government would issue the 
 new dollars in exchange for gold and at the fixed rate. 
 
 " When the gold standard is established it would not be indispen- 
 sable that any gold coins should be made legal tender in the colony 
 and the states. But the government should oe prepared not only to 
 give in exchange for a sovereign such a number of dollars as are 
 hereafter declared equivalent to a sovereign, but also to give sov- 
 ereigns in exchange for dollars at the same rate so long as gold is 
 available or to give bills on the Crown agents in London based on 
 the fixed rate of exchange." 
 
 The committee expressed the opinion that it was " desirable that 
 the standard of value and the currency of the Straits Settlements and 
 the Federated Malay States should continue to be identical, and they 
 hold the same opinion with regard to Johore." 
 
 The above recommendations of the currency committee were first 
 published in Singapore on May 7, 1903, and were adopted in toto by 
 the legislative council on May 29, and accordingly represent the law 
 under which the new currency is established. 
 
 On September 25, 1903, an ordinance was passed authorizing the 
 governor in council, subject to the approval of the secretary of state, 
 to issue an order prohibiting the importing, circulating, or holding in 
 one's possession of certain coins to be specified in the order, after a 
 date fixed therein, under penalty of heavy fines and the forfeiture of 
 the coins thus illegally used or held. 
 
 As soon as it became evident that the importation of Mexican and 
 British dollars into the Straits Settlements was likely to be prohibited 
 when the new Straits dollars began to arrive, sterling exchange rose 
 in the Straits, as compared with neighboring countries, and a strong 
 tide of Mexican and British dollars began to flow from Hongkong, 
 the Philippines, China, French Indo-China, and other neighboring 
 countries toward Singapore, in anticipation of the future prohibition 
 of their importation and their redemption in the new dollars. The 
 money market was so flooded with this money that considerable cur- 
 rency exportations were soon found profitable. 
 
 The new dollars began to arrive early in October, and the governor, 
 pursuant to the authority given him in the ordinance of September 
 25, 1903, immediately upon the arrival of the first shipment of the 
 
GOLD 8TAKDAED IN INTEEKATIONAL TRADE. 459 
 
 new coins, issued an order prohibiting the exportation from the col- 
 ony o± the Straits Settlements dollar and the further importation into 
 the colony of Mexican or British dollars. The new dollars are being 
 coined at the Bombay mint, and since October 1 nearly every boat 
 coming to Singapore from Colombo is said to have brought several 
 hundred thousand of the new dollars. The money received is being 
 placed m circulation through the instrumentality of the treasury and 
 the banks. 
 
 It is yet too early to pass judgment upon the success of the scheme 
 adopted, and prophecies with reference to currency problems in the 
 Orient are exceedingly dangerous. Moreover, the details of the 
 methods to be adopted for maintaining the sterling parity when it 
 once has been attained and for adjusting the currency supply to the 
 demands of trade have not yet been made public. So far the Straits 
 have simply begun to substitute one silver currency for another, and 
 the colony will continue to be on a silver standard until the old local 
 currency has been displaced by the new and the new currency has 
 been raised to a fixed sterling equivalent yet to be decided upon. 
 This process anywhere would be a slow one ; in the Orient, where cus- 
 tom and prejudice are such dominant factors in all matters pertaining 
 to the currency, it is likely to be especially slow. 
 
 The promptness and ease with which the change will be effected 
 depend very largely upon the future course of silver and the sterling 
 par of exchange which the Straits government finally adopts. It is 
 generally believed that the par of exchange fixed will be 2 shillings. 
 This is the rate that has been most persistently urged, a rate which 
 would not materially alter the existing unit of account, or the more 
 recently contracted long-time obligations, a rate in harmony with the 
 imits of neighboring countries, as for example, the Japanese yen, the 
 Philippine peso, the French piastre, the Mexican and British dollars, 
 and a rate easily assimilated to the currency of the home country. If 
 silver should continue anywhere near its present price the silver con- 
 tent of the new dollar, moreover, would, at a two-shilling rate, be 
 sufficiently large to offer little inducement to counterfeiting, and, on 
 the other hand, sufficiently below the nominal value of the dollar to 
 offer little probability of its being melted down for bullion. 
 
 If silver falls so that it shall become necessary to raise considerably 
 the value of the new dollars in order to bring them to the sterling par 
 decided upon, the time required to effect the change will be a long 
 one, and the monetary stringency, which will be a condition sine qua 
 non to raising their value, will be severe; while the additional burden 
 placed upon that part of the debtor class who have long-time obliga- 
 tions contracted at times when the monetary unit was considerably 
 below the par of exchange fixed upon, and payable in the new and 
 higher-priced dollar, will oe a heavy one, except in so far as it may be 
 lightened by special legislation or by increased incomes (largely tem- 
 porary) arising from the adoption of a monetary unit of account of 
 a higher value. In these respects a low price of silver is likely to 
 entail upon the Straits Settlements a repetition of the unfortunate 
 experiences which India passed through during the period from 1893 
 
 During the time that the value of the new dollar is being raised 
 above the value of the Mexican and British dollars, at a parity with 
 
460 GOLD STANDARD IK INTERNATIONAL TRADE. 
 
 which it shall have been permitted for a considerable time to circulate, 
 great care will be necessary to prevent the illicit importation of these 
 coins, which would tend to displace the new dollars and prevent the 
 i-ealization of the currency scarcity necessary to raise the new dollar 
 to the sterling par adopted. To prevent this contingency it seems 
 quite probable that if the Mexican and British dollars are materially 
 cheaper in the outside market than the sterling value fixed upon for 
 the new Straits dollar, it will be found necessary to put into effect 
 the measures penalizing the circulation of the old currency author- 
 ized in the ordinance of September 25, 1903. 
 
 If, on the other hand, the price of silver rises so that the market 
 value of the old dollars is practically equal to the sterling value given 
 to the new dollar, and if their value remains at this high point long 
 enough to create a prejudice in favor of the new dollar and to estab- 
 lish in the business community the habit of using it, a subsequent fall 
 in the value of the old money would leave the new dollar in possession 
 of the field, and offer little inducement toward the illicit importation 
 of the Mexican or British dollars. Under this contingency the penal- 
 izing of the circulation of the old money would probably be 
 unnecessary. 
 
 Manila, P. I., March 1, WO^. 
 
APPENDIX F. 
 
 THE MONETARY SITUATION. 
 
 I. THE DISLOCATION OF THE EXCHANGES— ITS EFFECT ON GOLD 
 AND SILVER COUNTRIES. 
 
 By Charles A. Conant, Treasurer of the Morton Trust Company, Jfeto York City. 
 
 The benefits of a single standard adapted to modern conditions 
 were so keenly felt in the advanced commercial countries which 
 adopted the gold basis after 1873 that the inconveniences whiah might 
 attend the step were at first disregarded or obscured. The evils of 
 the double standard — the uncertainty which it introduced into con- 
 tracts and the disturbance which it had caused to the monetary sys- 
 tem in so many countries — had proved so serious, and the advantages 
 of the single standard in internal trade were so great and obvious 
 that for a brief period it seemed as though there would hardly be a 
 discordant note in the general chorus of satisfaction. The advantages 
 of a single standard were in themselves considerable, apart from the 
 question which metal was adopted." It soon appeared, however, that 
 several evils threatened to result from the rupture between the com- 
 parative steadiness of the relationship between gold and silver which 
 had existed prior to the general adoption of the gold standard. 
 
 While the double standard had failed to maintain exact parity be- 
 tween gold and silver, it had tended to keep the metals much nearer 
 together in value than was found to be possible when one of them 
 ceased to be widely used as standard money. Silver was reduced to 
 the rank of a commodity measured in value by gold, and subject, in 
 the same manner as any other commodity, to fluctuations in supply 
 and demand. There were two important ways in which this c];iange 
 operated to make unsteady the gold value of silver. The first was by 
 closing certain countries' against its introduction as legal tender 
 money, and thereby directing any increase of supply entirely upon 
 those countries which remained on the silver standard. The second 
 was in separating the value of existing silver coins, in gold-standard 
 countries, from the value of the bullion which they contained, and 
 thereby removing from the market for silver bullion the steadying 
 influence of the great stock of silver in use as money. 
 
 It was contended, with some force, by advocates of the double 
 standard that so long as this standard prevailed in France and other 
 important commercial countries the entire world was, in a sense, 
 under the operation of the double standard. As Helm puts it, some- 
 what too strongly : * . „ . . -, o^o i.u 4- j j 
 
 " The ioint standard was m fact up to 1873 the common standard 
 of value throughout the civilized world, except where the circulation 
 
 a TTixitv of value between the various components of the currency is so essen- 
 tial n renulsite in any well-regulated monetary system that we need not be sur- 
 Ssed to find special importance attached to it. (Pierson, I., p. 573.) 
 
 i The Joint Standard, p. 129. 
 
 461 
 
462 GOLD STANDARD IJST INTERNATIONAL TRADE. 
 
 consisted of inconvertible paper money. In some countries the legal- 
 tender unit was of silver, in others of gold and silver, and in others 
 of gold. Since, however, the relative values of the two metals were 
 equalized by the action of the mint laws of the Latin Union there was 
 no greater variation in the rates of exchange between any two of the 
 three classes of countries than those which occurred, or might have 
 occurred, between any two of the same class." 
 
 While the concluding statement is subject to some qualification, it in- 
 volves an important principle. Even a country using only gold could 
 not escape the leveling influence upon the ratio of exchange between 
 the two metals, due to the fact that in bimetallic countries a market 
 existed to which silver would be attracted if its price fell, while gold 
 was released for use in the gold countries, and that on the other hand 
 (as proved to be the case after the gold discoveries in California and 
 Australia) a market for gold existed to which that metal, in its turn, 
 would be attracted if it fell below silver in value at the legal ratio of 
 coinage. Inevitably, under the operation of the law of supply and 
 demand, wide markets for both metals, and the possibility of substi- 
 tuting one for the other as money, tended to keep the metals nearer 
 together than if such markets were closed. Hence it would come that 
 if there should be a relatively decreasing stock of gold the value of 
 gold in relation to other things would not rise so rapidly if the bime- 
 tallic system lingered in important countries as if all countries were 
 upon a gold basis. The demand for money in the bimetallic coun- 
 tries would fall upon the cheaper metal, and thereby diminish the 
 pressure upon the dearer. England could not escape the operation 
 of such an economic tendency in keeping down the relative value of 
 gold when it tended to rise above silver, and a silver-standard coun- 
 try, like France, could not escape the operation of the same tendency 
 in keeping up the value of silver by the opportunity afforded for its 
 free conversion at its mints into coin. Hence it was natural that the 
 two metals should remain more nearly of the same value while several 
 powerful countries adhered to the bimetallic standard than after they 
 had closed their mints to the free coinage of silver and employed the 
 metal only in limited quantities for their subsidiary coinages. 
 
 Upon the market for silver bullion the closing of many mints to 
 free coinage produced a marked effect. It was not merely that the 
 market for bullion was narrowed, but that the old relations were 
 severed between the existing stock of coin and the new bullion. When 
 almost the entire volume of existing silver money came to be kept at 
 par by government control, and the bullion contained in it remained 
 continuously below par, the silver entering the market from time to 
 time represented almost the entire visible stock. If the new supply 
 of bullion was small, its price rose because it was not controlled by 
 the great reserve fund or the metal in coin. If the new stock was 
 large, its price fell because it found no check in the opportunity to 
 offer the metal for free coinage at the mints. One of the great merits 
 of the metals as money is the fact that the production of any one 
 year forms but a small fraction of the existing stock. A great 
 increase in production could not have any such influence as a great 
 increase in the production of a perishable commodity like wheat, nor 
 even a commodity which has entered into consumption, like copper. 
 The great product of previous years remains, in the case of gold and 
 silver, a permanent part of the stock on the market. The cost of 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 463 
 
 k ^,Sf°?' S^^«f«re or the value of the product of a given year, 
 IS siibject to the po^yerful steadying force of the whole stock. 
 
 i his regulating influence of the existing stock ceased to operate 
 when silver was no longer freely coined. Every day that the metal 
 was oflered in the London market it became the football of specula- 
 tion because the supply there offered was, in a sense, almost the entire 
 visible supply, instead of a very small fraction of it, as under pre- 
 vious conditions." The stock of those countries which remained on 
 the Sliver standard— British India, Mexico, and China— remained 
 nominally a part of the common stock in the market, but even this 
 inlluence was felt feebly in the minor fluctuations of the price in Lon- 
 don, because these countries were so largely under the domain of 
 custom rather than competition. 
 
 The effects of this change in the market position of silver were 
 intensified by changes in methods of production. After it became 
 unprofitable to work the poorer silver mines in gold countries, because 
 of the great fall in the gold price of silver, a large amount continued 
 to be mined as a by-product of copper, lead, and zinc. This supply 
 of silver, coming continuously upon the market, is was necessary to 
 sell as rapidly as it was produced, since the large capital which would 
 be required to hold it, and the almost continuous decline in its gold 
 price, discouraged any project for withholding it for more favorable 
 market conditions.'' 
 
 The most obvious evil resulting from the fluctuations in the gold 
 price of silver bullion which attracted the attention of the commercial 
 world was " the dislocation of the exchanges," or the rupture of par 
 of exchange between gold and silver countries. This means, in less 
 technical language, that it became no longer possible to calculate with 
 any certainty — or even within any definite limits, however wide — the 
 degree to which the money of the silver countries would depart from 
 its old relative value to the money of the gold countries. This was 
 designated the rupture of the par of exchange, because operations 
 between foreign countries are carried on through the foreign ex- 
 changes, and where the standard money is of the same metal the cost 
 of conversion of one currency into the other represents only the 
 delay and expense of shipment. The effect of this rupture of the par 
 of exchange upon countries thus deprived of a common monetary 
 standard was set forth by the British Gold and Silver Commission as 
 early as 1888, before the fluctuations in the gold price of silver had 
 attained anything like the range of later years. They said : " 
 
 " There is no common measure of value ; the metal composing the 
 standard in one country is little more than merchandise in the other ; 
 and many of the advantages of money as a means of facilitating 
 trade are thus curtailed. This inconvenience is reduced to a mini- 
 mum, or disappears altogether, if the value of the two metals is com- 
 paratively stable ; but it is urged that if to the difference in standard 
 
 a This is shown by the fall from a maximum of 24Jd. per ounce in September, 
 1902, to a minimum of 21 11-1 Gd. in November, 1902. 
 
 6 "As it is linown that silver is being shipped with great regularity, and as the 
 history of the last thirty years shovts an almost continual fall iu the price of 
 silver. It has been a somewhat safe speculation to sell ' futures ' at lower prices. 
 This fact places the seller of ' futures ' in a position to be interested in the con- 
 stant fall of silver and to work for it." — Memorandum of the Mexican Commis- 
 sion on International Exchange, Stability of International Exchange, p. 194. 
 
 c S Misc. Doc. 34, 50th Cong., 2d sess., p. 40. 
 
464 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 is added the uncertainty of variations in the relative value of the 
 two metals, a serious impediment to trade is established." 
 
 How serious is the influence of such conditions on trade was thus 
 stated by General Walker in his discussion of the subject in 1896 : " 
 
 " Such fluctuations in the relative values of the two money metals 
 continually involve international trade in embarrassment and dis- 
 turbances of a most serious character, and often reduce it to mere 
 gambling. Without some tie which can hold the two metals at least 
 near to each other during the time between the manufacture and sale 
 of commodities and the receipt of the proceeds, the producer in a 
 gold country can never tell for how much silver he must sell his goods 
 in order to make himself whole and perhaps win a profit. The range 
 of possible losses or possible gains from this source is such as to be 
 altogether out of proportion to the range of ordinary chances of 
 industrial and commercial enterprise." 
 
 As soon as the disturbing influence of the rupture of the par of 
 exchange between the gold countries and the silver countries began to - 
 be felt, discussion began as to its ultimate results. The natural tend- 
 ency of the new conditions was to increase the command of a given 
 amount of gold over labor in a silver country. This would not have 
 been the case if wages in silver countries had changed automatically 
 with the fall in the value of silver, so as to remain constant in ratio 
 to wages in gold countries. But under normal conditions, even if 
 such adjustments occur ultimately, neither wages nor prices conform 
 at once, even in advanced countries, to a change in the monetary 
 standard. Still less has this been the case in the silver-using coun- 
 tries,' where the principles of competition act much less efficiently 
 than in the gold countries. This condition naturally led to the belief 
 that a falling standard would permit slight reductions in gold prices 
 sufficient to conmiand foreign markets, and thus afford an opportunity 
 to the silver countries for increasing their exports, with the resulting 
 benefits which usually accompany expansion of trade. 
 
 There were strong hypothetical reasons for believing that these 
 tendencies would prevail, if it were true that the producer could 
 obtain labor at the old wages in silver.'' If he continued to sell at the 
 old gold price he would find, for instance, if silver declined 10 per 
 cent that an unearned profit of this amount over and above his usual 
 profit was left in his hands. If he found that competitors in gold 
 countries were controlling the market, it was in his power to cut under 
 their prices by throwing away a part of the profit due to the decline 
 in silver while still retaining a large part of it. Upon the belief that 
 this would be the course generally pursued by exporters from silver 
 
 o International Bimetallism, p. 139. 
 
 6 How these conditions have operated in Mexico is thus set forth by a careful 
 observer : " The progressive lovs^ering of wages as expressed in terms of gold 
 thus gives a margin of profit so long as silver falls faster than the wage of 
 skilled labor rises, a condition which has generally existed for a number of years, 
 because even in the factories, where competition for sliilled hands malies the 
 labor cost tend to rise as the price of the manufactured articles go up, it is 
 several years after a severe fall in silver has taken place before any per- 
 ceptible effect is produced upon wages. The stimulation thus induced has, how- 
 ever, not been a healthy one, even from the standpoint of the industries in ques- 
 tion, and it has been most baneful for the rest of the country." — Morrell W. 
 Gaines, "Effects of the silver standard in Mexico," Yale Review (Nov., 1903), 
 XII, p. 285. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 465 
 
 countries, and that they would thereby greatly increase their market, 
 was based the fear that in certain lines of manufactures they would 
 destroy competitors in the gold countries, or at least impose upon 
 them the necessity of sacrificing their profits or reducing the wages of 
 labor. Some of these cpnsec^uences appeared to be suffered by certain 
 industries in Great Britain m their competition with the correspond- 
 ing industries in British India and other silver-using countries of the 
 East. 
 
 It was even contended in some quarters that low gold prices abroad, 
 caused by the fall in silver, tended to reduce gold prices in gold 
 countries. This might have been true if the export trade of gold 
 countries to silver countries was a large part of their total export 
 trade, upon the theory of equilibrium in the value of products ex- 
 changed." The real difficulty in the case of those industries which 
 suffered most appeared to be due, however, to the artificial stimulus 
 given by the progressive fall in costs of production, which caused the 
 creation of a volume of products exceeding effective demand, and by 
 special tariff legislation. Thus it was declared by a committee of the 
 Manchester Chamber of Commerce, in 1888, that the special duty 
 levied in British India on English yarn " so assisted in stimulating 
 the trade that more mills were built than could profitably be employed, 
 as shown by a fall of nearly 40 per cent, on the average, in the shares 
 of 19 principal mills in Bombay during the six months ending March, 
 188.5, and at the end of that year 35 out of 52 mills paid no dividend." * 
 
 After a generation of an almost steady decline m the gold price of 
 silver, however, a sxirvey of the influence vipon the silver countries of 
 the rupture of the par of exchange does not indicate that large benefits 
 have been derived by these countries from their monetary policy, or 
 that they have even derived from it the benefits which, upon a priori 
 reasoning, might have been expected. The countries which adhered 
 longest to the silver standard after 1873 were British India, China, 
 and Mexico. British India, as we shall see, changed her system in 
 1893, but changed it after her governors had been convinced, by care- 
 ful examination of her economic condition and trade statistics, that 
 she had not derived essential benefits from remaining on the silver 
 
 standard. in ^ i • 
 
 There are two propositions, which may be considered separately, in 
 examining the actual operation of a declining monetary standard: 
 First, whether such a standard does or does not stimulate exports; 
 second, whether, if such a stimulation occurs, it is beneficial to the 
 
 X- flS'fi-tVstion the statistics fail to afford evidence of a 
 direct and powerful stimulation of exports under the silver standard 
 Such increase in exports in British India, in China, and m Mexico, as 
 was shown by the valuations in silver, failed to materialize m an 
 Tr-tLl increase in gold values. The commission which, m 1893, 
 fnvitigSS^Sb^^ 
 
 "the endurance oy^^^^^f.fbelr the brunt of the fall in exchange, has gen- 
 eTaTlyVoveHerXu^VCn^hat of the latter."-The Joint Standard, 
 
 p. 141. .,„ 
 
 i Quoted by Helm, p. 147. 
 
 S. Doc. 128, 58-3 30 
 
466 GOLD STANDAKD IN INTERNATIONAL TBADE. 
 
 made the following observations on this subject in its report to the 
 British Government :" 
 
 " Although one may be inclined, regarding the matter theoretically, 
 to accept the proposition that the suggested stimulus would be the 
 result of a falling exchange, an examination of the statistics of 
 exported produce does not appear to afford any substantial foundation 
 for the view that in practice this stimulus, assuming it to have 
 existed, has had any prevailing effect on the course of trade; on the 
 contrary, the progress of the export trade has been less with a rapidly 
 falling than with a steady exchange." 
 
 In the case of China, the average annual value of the exports rose 
 from £19,242,153 in gold, upon the average, of the ten years ending 
 with 1891, to £23,376,360, upon the average of the ten years ending 
 with 1901. Measured in gold, therefore, this increase was only 21 per 
 cent in ten years, or an average of a little more than 2 per cent a year. 
 Such increase of exports as occurred, moreover, was largely to sur- 
 rounding silver countries, like Japan (under the silver standard until 
 1897), Korea, the Straits, the Philippines, and Hongkong. The 
 result, in the opinion of expert observers, was that it could not be 
 claimed " that the decline in the gold value of silver has done any- 
 thing to stimulate the growth of China's exports to gold-using coun- 
 tries, while, on the other hand, it has not checked an expansion of 
 imports from these gold countries." ' 
 
 In the case of Mexico, also, the increase in the exports, when meas- 
 ured in gold, was small for a country which has developed her 
 natural resources to such an extent as has this Republic in recent 
 years. The gold value of the exports from Mexico increased onlv 
 from $63,328,157, in 1892, to $74,106,200, in 1902, representing ah 
 advance in ten years of 18.38 per cent, or less than 2 per cent a year. 
 These figures of the increase in export trade, measured in the gold 
 value of silver, it may be contended do not represent the real increase 
 in the quantity of goods exported. This is the fact, but it involves the 
 additional fact — of cardinal importance in this discussion — that the 
 silver countries have been progressively giving up under the silver 
 standard a larger and larger quantity of the products of their labor 
 in exchange for the products of the gold countries. It is this fact 
 which has impaired the benefits of any increase of trade which they 
 might have derived from falling exchange, and would tend, if con- 
 tinued indefinitely, to leave them poorer in the end than if their trade 
 had not expanded. In the case of Mexico, careful comparison of the 
 quantities and gold values of some of the principal articles exported 
 showed that six selected articles exported from Mexico in 1902, at a 
 reported value of $10,781,090 in gold, would have been worth 
 $16,951,328 in gold if the silver money in which the value was ex- 
 pressed had retained in 1902 the same value as in 1892.° 
 
 If this fall in the gold prices of exports were found, on examination, 
 to apply in a corresponding degree to the exports of gold countries, it 
 
 « Report of the Indian Currency Committee, par. 27. This view was reaffirmed 
 by the committee of 1898. — " Stability of International Exchange," p. 306. 
 
 6 Views of officers of the China Association, May, 1903. — Stability of Interna- 
 tional Exchange, p. 2.59. 
 
 The Influence of Palling Exchange upon the Return Received for National 
 Products, arguments submitted to the Monetary Commission of the Republic of 
 Mexico, April 18, 1903.— Stability of International Exchange, pp. 431^39. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 467 
 
 would not affect the real return received in commodities by the export- 
 ■ nn ^^^r 7' '^' h?^ever, has not been the case. Upon this point 
 
 l^'!!} ■'' cpmparision was made by a financial publication of the 
 export prices of certain products of the United States and the import 
 prices ot certain leading tropical products. These statements showed 
 that the export price of products of the United States tended to rise, 
 or at aiiy rate not to fall, while the import prices of the articles 
 received ti-om tropical countries tended steadily to fall. The results 
 01 the comparison were thus summed up : » 
 
 "The exports of cotton, wheat, and corn for the fiscal year 1902, 
 which were actually valued at $409,275,000, would have brought at the 
 prices of 1899 only $319,232,000, or $90,000,000 less than wai actually 
 received. On the other hand, the average import price of coffee 
 dropped from 14.04 cents for the five years ending with 1897 to 6.89 
 cents tor the five years ending with 1902. The corresponding decline 
 in sugar was from 2.47 cents to 2.26 cents, and of tea from 14.10 cents 
 to 12.79 cents. The imports of these three articles into the United 
 States for 1902 were actually entered at the gold value of $134,861,500, 
 while at the prices of 1897 the same quantities would have been 
 entered at $191,078,600. The XTnited States, therefore, obtained these 
 three important tropical products at $56,000,000 less than it would 
 have obtained them at the prices of five years ago, while at the same 
 time obtaining a considerably enhanced price for its own products." 
 
 If these figures could be treated as representative, it would appear 
 that over a very short space of time there was a gain to the United 
 States, a gold country, in its trade with tropical countries, of about 
 $146,000,000 in a total trade of $500,000,000. Undoubtedly other 
 influences than the depressing effects of the silver standard operated 
 upon relative prices in gold and silver countries, but the conclusions 
 of a committee, which carefully investigated this subject, seem to be 
 reasonably justified, " That the ability to reduce gold prices afforded 
 by a depreciating standard, whether of silver or paper, tended every- 
 where to impoverish the economic forces of the countries having such 
 a standard in their relations with the countries having a more stable 
 standard." * 
 
 These conclusions have been the result of very recent investigations, 
 and their influence was only vaguely recognized, if at all, down to a 
 recent date. They illustrate the necessity that, for the benefit of the 
 silver countries as well as the gold countries, steps should be taken to 
 restore the par of exchange which was ruptured when the advanced 
 countries universally adopted the gold standard. In the restrictions 
 imposed by the risks of fluctuation upon the investment of capital in 
 the silver countries is probably found the explanation of the failure 
 of their foreign commerce to respond as much as expected to the stim- 
 ulating influence of falling exchange. They could not flnd the means 
 for developing their export trade while their monetary system kept 
 foreign capital aloof. This was conspicuously the case in British 
 India and Mexico during the closing decade of the nineteenth century, 
 in spite of the rapidity with which surplus capital was accumulating 
 in the gold-standard countries. The uncertainties of exchange made 
 it unprofitable, if not absolutely hazardous, for the owner of capital 
 
 a Wall street Journal, February 16, 1903. 
 
 6 Stability of International Exchange, p. 439. 
 
468 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 in a gold country to invest it in a silver country." How this condition 
 restricts the trade of the gold countries has been thus set forth : * 
 
 " The rich countries surrender their products to the poor countries 
 and accept promises to pay instead of exacting full payment from 
 the poor countries in their products. These transactions are carried 
 on in a manner convenient to all through the medium of the negotia- 
 ble securities of joint stock companies. The exporter in the rich coun- 
 try who desires ready money for his goods gets it from the domestic 
 or foreign joint stock company operating in the poor country. The 
 latter company sells its shares and bonds in the exporting country 
 and applies the proceeds in money to paj'ment for what it buys in 
 machinery, raw materials, and the means for maintaining laborers. 
 Thus, in effect, the rich country lends its capital, in the form of prod- 
 ucts, to the poor country, exacting only an annual interest, and not 
 the principal, in return. The great resources of the manufacturing 
 capitalistic nations are thus put at the command of the undeveloped 
 countries where they are capable of yielding the largest returns and 
 the greatest sum of benefits to all concerned in the transaction." 
 
 Already this evil of the dislocated exchanges, in its influence on 
 investments, was a subject of discussion in the report of the British 
 gold and silver commission in 1888, when silver had fallen in gold 
 value from an average of 59 -^ pence in 1873, to 42| pence in 1888. 
 The evil became much more acute in later years, especially after the 
 drop from the average quotation of 27^^ pence in 1901, to 2'i:^ pence 
 in 1902. Under the conditions which then prevailed it was pointed 
 out by the Commission on International Exchange that even short- 
 term loans could not be made safely in the silver countries by capital- 
 ists in the gold countries. " 
 
 The growth of these evils in the trade between gold-standard and 
 silver-standard countries began to attract attention soon after the 
 general adoption of the gold standard in Europe and the United 
 States. That they called loudly for a remedy was denied in few 
 quarters. As to the nature of the remedy and the degree of sacrifice 
 which might properly be made by the gold-standard countries in 
 order to restore stability of exchange with the silver countries, there 
 
 1 It was declared by Probyn in 1888, before the monetary reform in British 
 India : " There is urgent need for the investment of fresh capital in India. 
 Railways are wanted for its development. Its manufacturing power is capable 
 of almost indefinite expansion. Its mineral i-esources are believed to be vast. 
 Its internal trade is open to immense extension. One witness examined before 
 the Gold and Silver Commission thinks 'that from £15,000,000 to £20,000,000 
 might be earned as an annual dividend on money in England for investments 
 in silver-using countries if the money could be protected from the effects of this 
 uncertainty.' " — Indian Coinage and Currency, p. 3. 
 
 6 Arguments submitted by the American Commission on International 
 Exchange, Stability of International Exchange, p. 101. The statistical and 
 political aspects of this subject are more fully discussed by the present writer 
 in The United States in the Orient ; the Nature of the Economic Problem, 
 Houghton, Mifflin & Company, 1901. 
 
 « Several hundred million dollars of American and European capital was 
 awaiting investment in Mexico as soon as that country gets on a gold basis. 
 Mexican bankers could borrow money in Paris, Berlin, or Brussels in large 
 amounts, and make 7, 8, or 10 per cent on the investment, but they dare not do 
 it because if it was loaned on short time and they vs^ere called on to repay it the 
 fluctuations in silver might more than wipe out all their profit." — Stability of 
 International Exchange, p. 100. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 469 
 
 were wide diiferences of opinion. For many j'ears there was a per- 
 sMent — in some respects well reasoned and eminently respectable — 
 effort on the part of economists and statesmen to bring about the cor- 
 rection of the evil by a return to the policy of the double standard, 
 under such a binding arrangement among commercial nations as 
 would tend to insure its successful operation. These efforts com- 
 pletely failed, because they were contrary to the logic of events and 
 were confronted by practical diiRculties which proved insurmountable. 
 
 The project of international bimetallism approached the subject of 
 regulating the value of silver from the side of demand. It did not 
 undertake to deal with the matter on the side of supply. By creating 
 an unlimited demand for silver. at a fixed ratio to gold, by opening 
 the mints to free coinage on private account, it was sought to maintain 
 a fixity of value between gold and silver bullion. The experiment 
 failed, so far as it was tested in the countries of the Latin Union, in 
 British India, and in the United States, because the supply of silver 
 was in excess of the demand at the legal ratio. The demand which 
 was created, while it undoubtedly enhanced in some degree the value 
 of silver by widening the market for it, was too artificial to absorb 
 the product at its old gold value in the face of a growing preference 
 for gold. This was plainly indicated by the accumulation of silver 
 5-franc pieces in the Bank of France, when the option was open to 
 any Frenchman to obtain them in exchange for gold, if he preferred 
 them. 
 
 The problem was approached from another side — the side of regu- 
 lating the supply — when the proposals of the Mexican Government 
 were made to the United States, in 1903, for securing fixity of 
 exchange between the moneys of the gold standard and of the silver 
 standard countries. It was no longer a proposition to secure fixity 
 of value between gold and silver bullion, but between gold and silver 
 coins. Therein lay a marked distinction. It is easily within the 
 scope of government authority to regulate the quantity of silver coin 
 by providing a supply up to the limit of demand. This regulation 
 of supply was the one factor lacking to success under the project of 
 bimetallism. If the governments of the world which desired to use 
 silver should keep the amount of silver money in use just equal to the 
 need for it, and should take steps to keep this silver at par with gold, 
 either by direct redemption or by the sale of foreign bills of exchange, 
 the problem would be solved of keeping at par coins of both metals. 
 The gold price of silver bullion would then be subject to the play of 
 supply and demand in the market, but the fluctuations in bullion 
 would not affect the value of the coins. That it was easily possible 
 to maintain silver coins at par in gold without reference to the gold 
 value of their contents in bullion, has been demonstrated by the con- 
 tinuous circulation of such coins in the countries of the Latin Union, 
 in the United States, in Java, and in British India, since their value 
 as bullion has fallen 50 per cent below their face value. 
 
 This policy of giving a fixed exchange value to silver coins by gov- 
 ernment control of the output would not be without influence, more- 
 over upon the market value of silver bullion. It would permit 
 countries whose scale of transactions was adapted to silver money to 
 emolov such money in large amounts without being subject to the 
 inconveniences of fluctuations in its gold value, ]ust as m the advanced 
 
470 aOLD STAND ABD IN INTERNATIONAL TRADE. 
 
 commercial countries the subsidiary coins were easily maintained at 
 gold par and the public were thus guarded against the inconvenience 
 of having them fluctuate in relation to the standard coin." An exten- 
 sion of the same princij)le to the currency most used would permit a 
 larger employment of silver than would otherwise be possible, with 
 equal convenience, and would thereby contribute to widen its market 
 and maintain its price.* 
 
 The adoption of what was called a gold-exchange system, of this 
 character, escaped another fundamental difficulty of the proposed 
 bimetallic arrangement. This difficulty was to secure a general 
 agreement among commercial nations. No such agreement was re- 
 quired to permit any nation to issue a limited amount of silver coins 
 and to keep them at par with its gold standard. There were advan- 
 tages in cooperation, especially in regard to the ratio of weight to be 
 adopted between the gold and silver coins, but the difficulties were 
 not insurmountable in the way of independent action by each gov- 
 ernment. The system of a fixed exchange between gold and silver 
 coins avoids, therefore, two of the cardinal difficulties in the project 
 of international bimetallism. The system of a fixed exchange attacks 
 the problem of the value of silver by adjusting the quantity of coins 
 to the demand for them, instead of endeavoring to create an artificial 
 demand for an indefinite supply, and it permits each nation to act 
 for itself without the cooperation which has been found in practice, 
 after repeated efforts, impossible in the project of international 
 bimetallism. 
 
 ■A. THE END OF THE. MEXICAN DOLLAR. 
 
 By A. Piatt Andrew, assistant professor of economics, Harvard University. 
 
 [Prom the Quarterly Journal of Economics, May, 1904.] 
 
 We of to-day are witnessing the rapid extinction of a coin which 
 for a very considerable period was more widely used than any other 
 known to history. Within fifty years the silver peso issued from the 
 Mexican mints was current throughout the two American continents, 
 circulated in the West Indies and in most of the islands of the Pa- 
 cific, and was the familiar means of payment among all of the Asiatib 
 markets from Vladivostok to Singapore. Its predecessor, issued 
 when Mexico was still a Spanish colony, had enjoyed throughout the 
 eighteenth century, and much of the seventeenth, a similarly wide 
 currency. 
 
 From the Mexican mints, the first of which was established in 
 1535, emanated the pesos, or " pieces of eight," which, with their 
 divisional pieces, were almost the only coins in use among the Eng- 
 lish colonists of North America. From the same venerable source 
 
 » As Professor Laughlin says : " The circulating medium of India will and 
 must remain silver, and the demands of the people for silver will remain 
 unchanged." — History of Bimetallism in the United States, p. 203. 
 
 i The instructions given by the Government of Mexico in 1903 to its Commis- 
 sion on International Exchange declared, " The fundamental object of the com- 
 mission must be to secure the stability of the rate of exchange betwen silver- 
 standard countries and gold-standard countries, without preventing thereby the 
 nations wiheh now use silver coin from contiuulng to coin it or from consuming 
 it in the same or larger quantities, provided that Its value with relation to 
 gold becomes fixed." — Stability of International Exchange, p. 165. 
 
GOLD STANDABD IN INTEBNATIONAL TEADE. 471 
 
 naturally came the coins used in Florida, Cuba, Santo Domingo, 
 I'orto Kico, and the other Spanish Antilles. Even before 1600 it is 
 said that they circulated in the Philippine Islands, and had become 
 lamihar at such Chinese ports as Canton, Ningpo, and Amov." 
 During three centuries these coins, under one guise or another, halve 
 been pouring out of the Mexican mints and distributing themselves 
 over the two hemispheres. They have played a long and important 
 part in the developing relations" between East and West, and at one 
 time or another they have been employed by men of nearly every 
 color and race. To-day, however, they seem destined to disappear 
 completely from international commerce." 
 
 The coins of but few other countries have ever attained any ex- 
 tended international currency, and the coins of Austria alone are at 
 all comparable in this respect to those of Mexico. The Maria The- 
 resa thalers, instituted in 1751 and reissued continually since then 
 with the eighteenth-century designs and dates, have been commonly 
 current in Egypt, Abyssinia, and the Soudan, and are known in the 
 East Indies and the extreme Orient. They have made " the male 
 profile and the elegant blazonry of the great Empress more familiar 
 to the black races and to the yellow races than to the white," " but 
 even these dollars of Austria have not conquered many markets when 
 compared in range with the coins of Mexico. 
 
 The persistence and universality of the Spanish dollar as a coin of 
 commerce is not difficult to explain. Until the opening of silver 
 mines in our own West some forty years ago, nearly all of the silver 
 used in the civilized world had come from Mexico and Spanish 
 America. More than four-fifths of the silver estimated to have been 
 produced between 1493 and 1850 had been taken from the mines of 
 these regions.* It is not strange, therefore, that the Spanish colonies 
 of America, with their unexampled resources of money material and 
 their well-equipped mints, came to supply so many countries with 
 means of exchange. That this condition should have come to be 
 three hundred years ago is the more understandable if one recalls 
 the wide trade relations of Spain at that time and the fact that the 
 Spanish monarchs of the sixteenth century were masters of both of 
 the Indies and controlled the most extensive empire that the world 
 had ever known. Nor is it strange that these coins, once established, 
 have held their own, when one remembers that their standard of 
 weight and fineness has suffered comparatively few alterations since 
 their institution. For a long period, when the neighboring govern- 
 ments were outdoing each other in the way of debasement, the Span- 
 
 " Robert Chalmers, A History of Currency in the British Colonies, London, 
 1893, p. 371. Cf. pp. 391-394. 
 
 b Upon the General subject see J. D. Casastis, El peso Mexicano y sus rivales 
 en los mercados del extremo oriente, Mexico, 1903. 
 
 c L'economiste frangais, September 21, 1895, p. 37.5. See also the Geschichte 
 des Maria-Theresien-Thalers, by Karl Pecz and Josef Raudnitz (Vienna, 1898). 
 These writers estimate the coinage of the Maria Theresa dollars between 1751 
 and 1897 at 133,200,695, In the years 1898-1903 13,662,700 such dollars were 
 issued from the central mint in Vienna. 
 
 d The total production of silver from 1493 to 1850 is estimated by Soetbeer as 
 149 826,000 kilograms, of which Mexico is credited with 63,657,000, Bolivia with 
 35 064,000, and Peru with 29,432,000. Ad. Soetbeer, Edelmetall-Produktion und 
 Werthverhaltniss zwischen Gold und Silber. Gotha, 1879. Further estimates 
 based upon Soetbeer's Edelmetall-Produktion (1879) and his Materialien (1886) 
 are given in Table No. 1. 
 
472 GOLD STANDARD IK INTERNATIONAL TRADE. 
 
 ish coins remained intact, and their exceptional goodness caused 
 them to be the more eagerly sought abroad and to pass in a steady, 
 flow across and beyond the Spanish boundaries. IJntil the begin- 
 ning of the eighteenth century the " pieces of eight " underwent no 
 serious debasement, with the exception of certain local issues, such as 
 the Peruvian coins, which suffered " scandalous falsification " about 
 the year 1650, and were accordingly denied currency not only in the 
 British colonies, but in Spain itself. 
 
 During the eighteenth century their content was only twice slightly 
 tampered with. In 1728 they were reduced in millesimal fineness 
 from 930'' to 916", and at the same time were lowered in weight by 
 about 1^ per cent; but this was ostensibly to pay for the increased 
 cost of making the more elaborate coins then struck. Again, in 1772, 
 when a great recoinage was accomplished, their fineness was reduced 
 to 902', without alteration in weight.'^ The standard both of weight 
 and fineness adopted in 1772 has been adhered to ever since and 
 remains at the present time that of the dollar of the Mexican Repub- 
 lic, which is by far the most important surviving representative of 
 the old Spanish " peso." In all, between 1497 and our own time, ac- 
 cording to Professor Sumner, the dollar as a world coin was reduced 
 by only 5.9 per cent.* 
 
 Since the end of the seventeenth century the output of the Mexican 
 mines has continuously exceeded the combined product of all the 
 other Spanish-American States, and Mexico has held the primacy 
 among all the silver-producing countries of the world, her position 
 in this regard having been contested by the United States only within 
 the last thirty years. Considerablj' more than a third of all the 
 silver extracted from the earth since the discovery of America has 
 come from her mountain slopes alone,'' and throughout this long 
 period silver has formed her principal and, for most of the time, vir- 
 tually her only article of export. 
 
 As recently as the fiscal year 1890-91 the silver exports of Mexico 
 were reported as amounting to more than 81 per cent of her total 
 export trade, although to-day they represent less than 40 per cent of 
 that total. Nor has this silver been exported mainly in the form of 
 bullion or of plate or of manufactured ware. Until quite lately most 
 of it has passed through the Mexican mints and has left the country 
 
 n Robert Clialniers, A History of Currency in the British Colonies, p. 392. 
 
 While the, legal standard has remained comparatively stable, the law has 
 tolerated an excessive variation from the standard, which has sometimes 
 been taken advantage of at certain of the Mexican mints. Particular issues 
 have thus proved of inferior assay, although within the provisions of the law, 
 and have been so discredited in foreign markets as only to circulate at a dis- 
 count. This was for a long time the case with the pesos marked G., which 
 indicated that they had been coined in Guadalajara. See J. L. Riddell, A 
 Monograph of the Dollar, New Orleans, 18-15. This work contains pictures of 
 425 varieties of dollars. See also Chalmers, op. cit., pp. 393-394. 
 
 6 W. J. Sumner, " The Spanish dollar and the colonial shilling," American 
 Historical Review, iii. p. G17. 
 
 " Using the data collected by Soetbeer and Lexis and the directors of the 
 mint in France and the United States, I estimate that between 1493 and 1902 
 the world's production of silver aggregated about 284,000,000 kilograms, 
 and that of this total at least 107,000,000 kilos came from Mexico. Of the rest 
 the greater part came from Spanish South America — about 43,000,000 kilos 
 from Bolivia, the seat of Potosi, and about 33,000,000 from Peru. The United 
 States has contributed about 44,000,000, almost exclusively during the past 
 thirty years. 
 
GOLD 8TANDAED IN INTERNATIONAL TRADE. 473 
 
 in the form of coin. In the appended table " one can observe how 
 recent has been the change in these conditions. In 1872-73 more than 
 93 per cent of the silver exported had been coined ; in 1882-83, almost 
 81 per cent ; in 1892-93, about 49 per cent ; but in 1902-3 only 27 per 
 cent. 
 
 That the situation is rapidly changing to-day is evident from these 
 figures and admits of no doubt. At present Mexico's exports of silver 
 bear a far less important relation to her total trade than ever before, 
 and her export of coin exhibits even more rapidly dwindling propor- 
 tions. On many .accounts the day now seems not far distant when 
 the field of activity for the Mexican dollar will be limited to the Mex- 
 ican confines, and it is confidently predicted that the outward flow of 
 coins will soon cease altogether, some even apprehending that it will 
 be reversed, and that a back flow will overwhelm the country unless 
 the Mexican Government takes measures of protection against such 
 an event. In the following pages I shall sketch the conditions and 
 occurrences in different countries from which this change originated 
 and through which it is being brought to pass. 
 
 We may begin with the 
 
 UNITED STATES. 
 
 The North American colonists, as has been said, seldom saw any 
 other than the Spanish coins. In the English settlements men natu- 
 rally continued for a long time to reckon in the traditional terms of 
 pounds, shillings, and pence ; but they possessed scarcely any coins of 
 these denominations, and when coin payments occurred they were 
 usually made with " pieces of eight " and " reals." In the course of 
 time the word " dollar " gradually superseded the older terms " peso " 
 or " piece of eight " in referring to these coins, and in the colonial 
 records of the eighteenth century one frequently finds accounts and 
 due bills explicitly reckoned in dollars.* During the war for inde- 
 pendence, when the Federal Congress issued bills of credit they made 
 them explicitly payable in the Spanish dollars; and when a little 
 later the leaders of "the new Eepublic set about the establishment of a 
 national currency, Jefferson only expressed the common opinion in 
 declaring that among the various currency units the dollar was " the 
 most familiar of all to the minds of the people." " It was generally 
 agreed, therefore, to do away altogether with the old system of keep- 
 ing accounts in pounds, shillings, and pence; and on July 6, 1785, 
 Cono'ress declared the dollar to be the ideal monetary unit for the 
 United States. The following year, on August 8, 1786, they decided 
 that the American Government should itself issue a coin modeled 
 after the Spanish-milled dollar as the same was then current; and 
 adequate provision for its coinage was at length voted m the act of 
 April 2, 1792, establishing the national mint. 
 
 Those who framed this act undoubtedly expected that the new 
 dollar of the United States would rapidly supersede its prototype 
 
 ftsS'fo^^elample, Acts and Resolves of the Province of the Massachusetts 
 
 ^?ison'fnot'es on'thT'eltekishment of a money unit and of a coinage 
 fo the united Spates, written in 1782 - 1783 -d^f ^ in the Report of the 
 International Monetary Conference of ISiS, pp. 437-^3. 
 
474 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 upon this continent, and that the Spanish coin after a brief interval 
 would no longer have a place in our circulation ; but for several rea- 
 sons this situation was not achieved until sixty-five more years had 
 elapsed. From the opening of the mint in 1793 until 1857 only 
 2,675,550 silver dollars were issued, making an annual average of 
 but 41,806 dollars. As many of these passed quickly out of the coun- 
 try, the Spanish coins and later those of the Mexican Republic con- 
 tinued to form an integral part of our currency during all of this 
 period. 
 
 The reasons for this situation are well known and may be stated 
 briefly. Congress in 1792 had authorized the issue of an American 
 dollar, of weight and fineness corresponding to the Spanish dollar; 
 but, through an error in assay, it was decided that the Spanish dol- 
 lars contained only 37lJ grains of pure silver, when in reality they 
 averaged of greater weight." Nevertheless this had been prescribed 
 in the act as the silver content of the American coins, and with such 
 content the new coins were struck. As the dollars began to be issued 
 it was soon discovered that they did not enter into circulation and 
 that a regular profit was being obtained from their export. Being 
 fresh and bright they were readily accepted in the West Indies, and 
 there they could be exchanged for the old but heavier Spanish dollars, 
 which in turn were im|)orted and presented to the mint for coinage. 
 
 The expensive operations of the mint, it soon appeared, were result- 
 ing in no increase of our national currency, but were merely a source 
 of profit to money dealers. Jefferson, upon learning of this in 1806, 
 at once ordered a suspension of the coinage of the dollar pieces, and 
 for a continuous period of thirty years thereafter not another silver 
 dollar was issued from the United States Mint. Nor was the situa- 
 tion materially altered with the resumption of the coinage of the 
 dollar in 1836. The act of 1834 had in the meantime established a 
 new mint ratio between silver and gold (16 to 1), which for several 
 succeeding decades was destined to undervalue silver and to exclude 
 from circulation not only all full weighted foreign coins, but the new 
 American silver coins as well. 
 
 So it happened that for more than sixty years after the founding of 
 the United States Mint, worn and mutilated foreign coins, mostly of 
 Spanish origin, continued to form the larger part of the country's 
 silver currency. In fact, these Spanish- American dollars, with their 
 divisional pieces, were not only a familiar, but a legal means of pay- 
 ment in the United States throughout the period. They were de- 
 clared by Congress on February 9, 1793, " a legal tender for the pay- 
 ment of all debts and demands " — a provision which was periodically 
 renewed in succeeding sessions; and on January 25, 1834, after the 
 Spanish countries of America had achieved their independence, it was 
 specifically enacted that the dollars of Mexico, Colombia, Chile, and 
 Peru should likewise be made a legal tender. Not until February 21, 
 1857, did Congress make any serious effort to rid the country of this 
 ignominious chaos of imported coins. Then, at last, all former acts 
 making these pieces current were repealed, and rates were fixed at 
 
 "Dr. H. V. Linderman says that "the content of pure silver should have 
 been within a fraction of 377i grains." Report on Branch Mints, 1872, p. 9. 
 Prof. J. Laurence Laughlin says that " the foreign dollars contained about 
 373i to 374 grains pure silver." History of Bimetallism in the United States, 
 1897, p. 53, note. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 475 
 
 which the Government would receive them for a certain period for 
 reminting into American coins. 
 
 The year 1857 thus marks the first serious contraction in the field of 
 activity of the Spanish-Mexican dollars. In that year North America 
 was formally closed to the coins which had freely circulated there 
 since the early years of its settlement." 
 
 Nor was this the only measure which the American Government 
 adopted to restrict the sphere of the Mexican dollar. A few years 
 later a more aggressive step was taken. The attempt was made to 
 interfere with its circulation in the Far East by the introduction there 
 of a new American " trade dollar," in some respects superior to that 
 of Mexico and intended to compete with it. During the sixties the 
 United States suddenly developed silver resources second only to those 
 of Mexico ; and Congress, desirous of assisting American mine owners 
 to secure an oriental market for their product, in 1873 consented to 
 their having their silver stamped at the Government Mint into coins 
 adapted for the Eastern trade." So great was the foreign demand 
 for Mexican dollars at this time that they continually commanded a 
 premium, and as the Mexican Government levied a tax of 8 per cent 
 upon their export," there was every reason to believe that the new 
 American coins, which could be freely exported, and which would be 
 more accurate in mintage and superior in bullion value to the Mexican 
 dollars," would meet a real demand in the East, and might even super- 
 sede the Mexican coins in those parts. The ordinary American dollar, 
 containing 371J grains of pure silver, had never been well received in 
 China on account of its inferior content. So the new coins were to 
 contain 378 grains, or three- fourths of a grain more than the standard 
 of the Mexican dollar. This would make them worth, at the ratio of 
 exchange prevailing when the act was passed, a little more than $1.04 
 in gold, and would have the double advantage, it was thought, of 
 rendering them acceptable in the Orient, without danger of their 
 invading the circulation at home. 
 
 The new trade dollars, as had been expected, found a ready market 
 in the East. At Hongkong and the Straits Settlements, in French 
 Indo-China, and at several Chinese ports they were made a legal 
 tender along with the Mexican dollars, and the California mint soon 
 found difficulty in turning them out fast enough to meet requirements. 
 Within six years after the commencement of their coinage nearly 36 
 millions had been struck, and in January, 1877, the leading bankers 
 in China reported that there was " evidence powerful enough to con- 
 vince the most sceptical " that the United States trade dollar has been 
 a success, predicting that "ultimately it will be current all over 
 
 oThe Spanish and American coins ceased to have a legal standing in Canada 
 
 '''i'^ldolf Soetbeer ' a few years later, proposed that the German Government 
 similarly issue a trade dollar for oriental use, as a means for facilitating the dis- 
 posal of its surplus silver. Bulletin de Statistique et de Legislation Comparee, 
 
 ^'c^Thp^JJooH;' of silver dollars from Mexico had been subject to a tax ever since 
 the conquest. From the year of Independence down to 1857 this tax stood at 3i 
 \Zf T-^ +hnt vpnr it was raised to 6 per cent, and in 1872 it was raised 
 'again'to's Sr'cent.'at'which pof^t it stood until its abolition November 1, 1882. 
 Since this last date the export of coined silver has been free. 
 i See appended table, No. 3. 
 
476 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 China." "^ The American dollar was thus making rapid inroads upon 
 the territory of the Mexican dollar and threatening it with very 
 serious competition in the Far East, when unanticipated conditions 
 in America resulted in the abrupt cessation of its coinage and its 
 ultimate withdrawal from the field. 
 
 The decline in the price of silver reached such a point in 1877 that 
 the silver in a trade dollar was worth not only less than a gold dollar, 
 but also less than the depreciated paper dollars which constituted 
 the circulating medium of almost the entire country. As a conse- 
 quence large numbers of trade dollars began to appear in circulation. 
 These trade coins really had no legal standing in the country, being 
 neither an authorized tender for debts * nor receivable at the public 
 treasury. 
 
 In the ej'es of the law they were only disks of metal assayed and 
 stamped at the Government mint for foreign use; but they bore on 
 their face the words " trade dollar " and " United States of America," 
 and it was not strange, therefore, that they were frequently given and 
 taken at home at their face value. The confusion was aggravated in 
 the following year, when Congress ordered the renewed coinage of 
 the old standard silver dollar under the Bland -Allison Act (February 
 25, 1878), for this meant that dollar pieces of even less intrinsic value 
 were to circulate at par under governmental authority. If these 
 smaller silver coins were to be everywhere receivable as equivalent 
 to the gold dollar it appeared but logical that the larger coins issued 
 from the same mint should not be worth less. 
 
 Apprehending the increasing misuse of the trade dollar, the Secre- 
 tary of the Treasury therefore ordered the discontinuance of its coin- 
 age on October 15, 1877, and the ban was lifted upon only a few occa- 
 sions after that date, when small amounts were coined expressly for 
 exportation. The trade dollars still outstanding in the country con- 
 tinued, however, to be a source of embarrassment, until finally, in 
 1887, Congress decided to get rid of the anomalous pieces altogether. 
 An act was passed upon March 3 of that year authorizing the redemp- 
 tion and recoinage into standard silver dollars of all trade dollars 
 presented during the succeeding six months. The Government had 
 coined in all 35,965,924 of them, of which 7,689,036 were withdrawn 
 under the provisions of the act, a considerable number having been 
 reimported after the passage of the act. The vast majority, how- 
 ever, seemed destined to remain in the Orient, unrepaired and unre- 
 enforced until time and use have accomplished their decay or the 
 melting pot has consumed them. 
 
 THE PHILIPPINES. 
 
 The next and most recent encroachment which the American Gov- 
 ernment has made upon the domain of the Mexican dollar dates from 
 the Spanish-American war, and culminated in the Philippine cur- 
 
 o Reports made by the Oriental Bank and the Hongkong and Shanghai Bank- 
 ing Corporation, quoted in H. R. Linderman, Money and Legal Tender, New 
 York, 3878, pp. 57-58. 
 
 t The act of February 12, 1873, which first authorized the coinage of the trade 
 dollar, had included a list of subsidiary silver coins that were to have a legal- 
 tender power to the amount of $5. In this list the trade dollar was inad- 
 vertently included ; but the mistake was rectified by a special act passed July 
 22, 1870, which removed its legal-tender quality altogether. 
 
GOLD STANDARD IN INTEENATIONAL TKADB. 477 
 
 rency act of March 2, 1903. With the coining of the Spaniards in 
 the sixteenth century the coins of Spain began to circulate in the 
 Philippines, and these coins, and later their successors of the Mexican 
 Republic, have constituted almost the only currency in those islands 
 since then. In 1877, to be sure, the import of foreign coins was pro- 
 hibited in the Philippines, but as no dollar pieces or pesos were ever 
 issued from the mint in Manila, and as few coins were sent out directly 
 from Spain until 1897, the Mexican dollars, which still retained their 
 power of legal tender, and which were being regularly smuggled 
 into the islands with the knowledge or connivance of the customs 
 officials, remained until 1903 the only 'monetary standard. 
 
 The advent of the Americans brought a very different currency 
 system, based upon a gold standard, into close contact with the Mex- 
 ican silver-standard system, and some readjustment soon became 
 inevitable. Rates of exchange betweefi the money of the United 
 States' and the money of the new oriental possessions were in con- 
 tinual movement, both on account of oscillations in the market value 
 of silver and because the demand for Mexican dollars fluctuated in 
 the contiguous Chinese markets. In December, 1898, for instance, 
 the metallic content of the Mexican dollar had an average value of 
 46.6 cents. Then it began rising, and by December, 1900, it had risen 
 to 50.5 cents. Then once again the process was reversed, and two 
 years later, in December, 1902, it had sunk to the unprecedented 
 average of only 37.8 cents." Meanwhile the value of the Philippine 
 money was also affected by the changing demand for Mexican dollars 
 in adjacent countries — demands which often could not be readily 
 supplied because of the remoteness of the issuing mint. 
 
 In the autumn of 1900, to cite one instance, when inore than 3 
 million in Mexican silver were exported from the Philippines to meet 
 the demands of the foreign forces in China, the exchange rate for 
 the Mexican dollar rose very rapidly above its metallic value, only 
 to fall again a few months later with equal rapidity when the 
 foreign forces in China were reduced. Under such conditions the 
 efforts of the Philippine Commission to maintain the value of the 
 Mexican dollar at 50 cents by temporary makeshifts, such as making 
 appropriations in that money whenever it tended to fall in value, and 
 levying duties upon its export whenever it tended to rise, were predes- 
 tined to fail." The Commission repeatedly urged upon Congress the 
 necessity of providing a substitute for the Mexican dollar which 
 would continue uniform in its relation to the United States dollar, 
 and which would be so distinctive in character as to impede its export 
 from the islands. This was the advice also of Mr. Charles A. Conant, 
 the special commissioner appointed to investigate the monetary con- 
 ditions there, in his report to the Secretary of War dated November 
 25 1901 ' and eventually a plan along the lines of these recommenda- 
 tions was adopted by the American Government. ,.,-,• 
 
 The matter of remodeling the Philippine currency was debated in 
 several sessions of Congress before a bill was devised upon which a 
 majority of both Houses could be pers uaded to agree. Ihe benate 
 
 a nptos pstadisticos preparados por la seci-etaria de hacienda y eredito publico, 
 espe^falmente para el estudio de la cuestion monetaria, Mexico, 1903, Estado 
 
 ^""^PP Reoort of tbe Taft Philippine Commission, made November 30, 1900. 
 ! Annual Report of the Secretary of War, 1901, Appendix G. 
 
478 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 for long inclined toward the conservative policy of issuing a substi- 
 tute for the Mexican dollar without disturbing the existing silver 
 standard — an arrangement suggested by the English Bombay dollar 
 then used in the Straits Settlements and at Hongkong, of which we 
 shall hear later on. A majority of the House, on the other hand, 
 voted to introduce a gold standard and the complete American system 
 of coins. The compromise which was eventually effected in the law of 
 March 2, 1903, provided for the adoption of a gold standard, while 
 leaving silver the circulating medium of the country. It made the 
 gold coins of the United States a legal tender for all debts, but pro- 
 vided at the same time for the issue of a new American-Philippine 
 peso of silver, weighing a trifle less than the Mexican dollar, and 
 intended to take its place as the usual currency of the islands. This 
 peso, which contained 3| grains more silver than the standard Ameri- 
 can dollar, was made the legal equivalent of 50 cents in American 
 money (although at the time the act was passed its bullion value was 
 somewhat less than 40 cents), and the Commission was enjoined to 
 preserve this parity by limiting the coinage, by selling foreign 
 exchange, by creating a gold reserve through the issue of certificates 
 of indebtedness, or by " such measures as it may deem proper," no 
 requirement for redemption, however, being stipulated. The Secre- 
 tary of the Treasury began at once to purchase silver for the new 
 coins, the dies for which had already been prepared in anticipation of 
 the passage of the act. The act was passed in March, but before the 
 end of April the first shipments of pesos had been made, and by the 
 end of 1903 more than 17 million pesos had been sent out. Governor 
 Taf t at once instructed all disbursing ofiicers to make no payments in 
 local or Mexican coins after July 1, 1903, and since January 1, 1904, 
 the Mexican and Spanish silver has no longer been receivable for 
 public dues. 
 
 The reorganization of the Philippine currency is being carried 
 through with surprising expedition. Before the American occupa- 
 tion there was an amount of Mexican silver circulating in the islands 
 varioiisly estimated as between 20 and 40 million dollars, and 
 there were in addition about six million especially coined Philippine 
 dollars of lighter weight, sent out by the Spanish Government only 
 a few months before the war began. Much of this coin has been 
 shipped out of the countrj' in anticipation of its demonetization, the 
 rest will be purchased as bullion and remade into new Philippine 
 pesos. Meantime, since January, 1904, the further importation of 
 silver coins not upon a gold basis has been forbidden, and, beginning 
 with October 1, 1904, a tax is to be levied upon all written contracts 
 made payable in Mexican or Spanish, coin, or other money not based 
 upon gold. The substitution of the new money for the old is being 
 accomplished with some difficulty, because many of the Mexican dol- 
 lars weigh a trifle less than the Philippine pesos, and are thus pre- 
 ferred in making purchases or in settling debts to the heavier coins, 
 for which a premium not infrequently can be obtained." In the re- 
 mote parts of the archipelago the process of getting rid of the old coin 
 IS not improbably a matter of years. Indeed, it is within the bounds 
 
 o Fourth Annual Report of the Philippine Commission, dated December 23, 
 1903, p. 47. See also the Report of the Chief of the Bureau of Insular Affairs, 
 dated October 31, 1903, pp. 6-17. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 479 
 
 of possibility that the price of silver should rise again above 64.1 
 cents per ounce, its nominal value at the present coining ratio of 32.25 
 10 i, so that the new pesos would be worth more as bullion than as 
 coin -in that event the whole scheme of monetarv transformation 
 would tall through." There is little likelihood, ho'wever, of such a 
 recovery in the value of silver, and we may safely consider the 
 rnuippme coinage act of March 3, 1903, as marking another defini- 
 tive stage in the contracting field of the Mexican dollar. 
 
 ■+i"*li? cf ^^^P ^^ ^^^ ^^™^ direction, which is in part connected 
 V7ith the bpanish- American war, may be mentioned in passing, 
 namely, the change of currency in Porto Eico. The Mexican dollars 
 • *,"™^^^?'i ^'^^ principal currency for the island during a long 
 period, but in 1895 the Spanish Government undertook to supplant 
 them by making a special issue of lighter coins to take their place, and 
 arranged favorable terms for their exehange. The new coins were 
 made of the same weight and fineness as the Spanish pesos and bore 
 identical devices and mint marks, except for the substitution of the 
 words " Puerto Rico " in place of the name of the mother country. 
 One hundred of these coins of lighter weight were given for ninety- 
 five of the Mexican, and about six million were exchanged in this 
 way. The Mexican dollars were thus withdrawn from the island, 
 but their successors were destined to endure only a brief period of 
 service. With the accession of the American Government they in 
 turn were supplanted and demonetized, and under the act of April 12, 
 1900, the coins of the United States were substituted for them, at the 
 rate of 60 cents in American money for 1 peso of Porto Rican coin.* 
 
 BRITISH COLONIES IN THR FAR BAST." 
 
 If we turn now to the British colonies we are confronted with a long 
 series of tentative and more or less futile endeavors on the part of 
 the British Government to dislodge the Mexican dollars and to estab- 
 lish in their stead the British system of coins. In the former effort 
 the Government has only within very recent years achieved a fair 
 measure of success ; in the later effort it has failed completely. If we 
 look no further back than 1825 we find the home Government in that 
 
 ffl It was in anticipation of some such contingency that Mr. Conant advocated 
 lowering the standard of the new coins to 0.835 instead of 0.900, so that it would 
 not be profitable to melt or export them until the price of silver rose above 75 
 cents per ounce. See his report to the Secretary of War, 1901, pp. 21-25. 
 
 Colonel Edvcards, Chief of the Bureau of Insular Affairs in the War Depart- 
 ment, maintains that under the present law the new coinage is in no danger 
 until silver sells at 66 or 66J cents. " I reach this figure by counting in the 
 expense of transportation, melting, refining, and casting into bars, all of which 
 go to make up the total cost of reducing the coinage to merchantable shape as 
 bullion." — New York Evening Post, September 14, 1003. 
 
 s See the Report of the Military Governor of Porto Rico on Civil Affairs, pp. 
 171-174, in House Documents, 56th Congress, 2d session, 1900-1901, vol. 14. 
 
 The Spanish dollars circulated in England once for a brief period. In 1804, 
 when the ordinary British silver had been driven out of circulation by the notes 
 issued under the Restriction Act, the Bank of England, with the consent of the 
 Government, had a considerable amount of Spanish dollars restamped and put 
 in circulation. They were not given legal-tender power as between individuals, 
 but the bank was obliged to receive them at the rate at which they were issued. 
 (Lord Liverpool, A Treatise on the Coins of the Realm (1805), chap, xxv.) Illus- 
 trations of these restamped dollars may be found in J. L. Riddell, A Monograph 
 of the Silver Dollar (1845), figure No. 29. 
 
480 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 3'ear undertaking a systematic plan to force the new British silver 
 coined under the act of 1816 into circulation throughout all of the colo- 
 nies. The troops were everywhere to be paid in British money, and, 
 in order to give this money general currency, rates were established 
 at which it was to be received in place of the Spanish coin." These 
 orders were far too simple and sweeping to be widely effective, and 
 they remained generally inoperative until the great discoveries of 
 gold in California and Australia came to reinforce them. Then, as 
 the relative value of silver rose, the full-weighted silver coins were 
 everywhere forced out of circulation where gold and silver had 
 been current side by side at a legal ratio. The depreciation of gold 
 was not followed, however, in the British colonies in every case by 
 the adoption of the British currency. In Canada, for example, the 
 gold coins of the United States virtually became the standard, and 
 in Newfoundland a gold standard of a quite peculiar $2 denomina- 
 tion was adopted. But it did have one primary effect. It accom- 
 plished the final exclusion of the Spanish and Mexican dollars from 
 the British colonies in America, and except for the republics of 
 Spanish America these coins henceforth were banished to the Far 
 East. 
 
 In the British colonies of Hongkong and the Straits Settlements 
 the Mexican dollar has continued to dominate the circulation down to 
 the present time, notwithstanding the efforts of the British Govern- 
 ment to displace it. Great Britain came into possession of Hong- 
 kong in 1841, and three years later British token silver was pro- 
 claimed to be the standard, the home Government confidently expect- 
 ing that shillings and pence within a brief period would take the 
 place of dollars and cents in the new settlements. This anticipation 
 was formed, however, without sufficient regard either to the character 
 of the British coins or to the habits of the people concerned. Silver 
 had seldom circulated among the Chinese except by weight, and as 
 the British silver had been deliberately underweighted in 1816 it 
 was certain to be discounted by the Chinese, and the proclamation of 
 1844 was foreordained to remain ineffective. It eventually became 
 evident, even to the authorities, that the Mexican dollars were not to 
 be displaced by this sort of legislation, and a new plan was devised, 
 intended to establish a British currency in the Far .Eastern colonies 
 without altering the denomination of the coins then in use. In 1864 
 it was decided to open a local mint in Hongkong and to issue a 
 British dollar of size and weight like the dollar of Mexico, and this 
 was actually done two years later. 
 
 The coins issued from the Hongkong mint for some reason or other 
 contained nearly three grains less of pure silver than the standard 
 Mexican coins, and for this reason and because of their unaccustomed 
 devices they were not at the outset well received by the Chinese. It 
 appeared that they could only be made to circulate at a discount. 
 So after two years of tentative experience with them the colonial 
 authorities became discouraged with the prospective results, closed 
 the mint, and sold its machinery to the Government of Japan. In the 
 course of two years only a little more than two million of the British 
 dollars had been struck, and the experiment therefore can not be said 
 to have been very persistently pursued. That the experiment might 
 have succeeded, if persevered in for a longer time, is indicated by the 
 
 a Chalinei-s, pp. 23-32. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 481 
 
 fact that these identical dollars were subsequently accepted at par," 
 and still more by the recent success of similar issues. 
 
 1 he trading communities of the Straits Settlements and of Hong- 
 Jfong have several times since then urged a repetition of the experi- 
 ment; but not until 1895, nearly thirty years after, could the Govern- 
 ment be persuaded to make the attempt, the usual reason given for not 
 doing so being the difficulty of furnishing coins at a price low enough 
 to compete with the Mexican dollar. After the summer of 1893 there 
 had been many complaints of a scarcity of Mexican dollars, the rating 
 lor which, with the fall in the price of silver, had risen materially 
 above its bullion value. At the same time the Indian mints were 
 without work because of the suspension of the rupee coinage. The 
 occasion seemed peculiarly propitious for a renewal of the British 
 dollar, and the Government accordingly, by an order in council of 
 February 2, 1895, authorized the mints' of TSombay and Calcutta to 
 strike dollar pieces for any bankers and merchants who might re- 
 quire them. The new coins, as regards weight and fineness, were to 
 be modeled upon the old dollars of Hongkong and the Japanese yen. 
 and a uniform charge of 1 per cent was to be levied upon their issue! 
 Two of the largest eastern banlts guaranteed the experiment by 
 agreeing to take a minimum coinage of five million dollars annually ; 
 but it was hoped that the new money, when once established, would 
 command a wide circulation, not only in Hongkong and the Straits 
 Settlements, but also, on account of England's wide trade relations, 
 in countries not under the British Crown. That their hopes have 
 already been successfully realized is indicated by the amount of dol- 
 lars coined in the intervening years.^ More than 150 millions have 
 been issued and exported to the English settlements on the Pacific, 
 and, being of superior coinage and unabraded, they have come into 
 circulation in all of the great markets of the extreme Orient. They 
 constitute to-day, in fact, the most serious rival which the Mexican 
 dollar has ever encountered in those ports. 
 
 Number. 
 
 •1895-96 3,316,063 
 
 1896-97 6,135,617 
 
 1897-9S 21, 286, 427 
 
 1898-99 21, 545, 564 
 
 1899-1900 30, 743, 159 
 
 1900-1901 9,464,991 
 
 1901-2 27,198,656 
 
 1902-3 31,671,117 
 
 Total, eight years 151,361,594 
 
 Meanwhile the fractional silver coins of 50, 20, and 10 cent denomi- 
 tions, issued at the mints of London and Birmingham for the colony 
 at Hongkong, have also been making inroads upon the territory in the 
 neighborhood of Hongkong that hitherto has belonged to the Mexican 
 coins. Over 23 million dollars in these coins have been sent out 
 within the past ten j'^ears, and the Chinese seem actually to prefer 
 them because of their newness and unimpeachable purity to their own 
 copper cash or the other foreign silver. 
 
 In the Straits Settlements a still further step has just been taken 
 toward the extinction of the Mexican dollar. For a number of years 
 
 a Chalmers, op. cit., p. 376. 
 
 » From the annual reports of the deputy master and comptroller of the mint, 
 London. 
 
 S. Doc. 128, 58-3 ^31 
 
482 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 the matter of introducing a gold standard in the Settlements and the 
 Federated Malay States has been mooted, and in 1902 the colonial office 
 appointed a committee to consider the expediency and practicability 
 of such a change. This committee reported in March, 1903, recom- 
 mending the gradual introduction of " a special Straits dollar of the 
 same weight and fineness as the British dollar at present current in the 
 East, to be substituted for the Mexican and British dollars, the latter 
 dollars being demonetized as soon as the supply of new dollars is 
 sufficient to permit of this being done in safetj^" When this condi- 
 tion has been attained, the procedure recommended is exactly the 
 same as that which was followed in British India. " The coinage of 
 dollars would cease until the exchange value of the dollar had 
 reached whatever value in relation to the sovereign might be decided 
 on by the Government as the future value of the Straits dollar," 
 and then " the Straits government would issue the new dollars in ex- 
 change for gold, and at the fixed rate." " 
 
 The proposals of the committee were almost immediately adopted. 
 On June 26, 1903, an order was issued for the coinage of a new 
 Straits Settlements dollar, to be of weight and fineness like the Bom- 
 bay dollars, but to bear distinctive inscription and devices. A few 
 weeks later the new dollars began to be struck at the Indian mints, 
 and the first consignment of new coins reached the Straits in October, 
 1903. Upon October 2 the further importation into the colony of 
 Mexican or British dollars or Japanese yen was prohibited, the export 
 of the new local dollars being made illegal at the same time. The 
 next step will be the demonetization and reminting of the silver coins 
 now circulating in the country ; and then we may expect a halt in the 
 proceedings, in the expectation that the new dollars will rise to a 
 fictitious value in exchange for English gold, as the rupee rose in 
 British India after the suspension of its coinage in 1893. The exact 
 rate at which the par of exchange will eventually be fixed has not yet 
 been announced, but it is generally surmised that it will be at 2 shil- 
 lings — a rate virtually the equivalent of that recently adopted in the 
 Philippines. 
 
 The execution of this plan will mean the complete exclusion of the 
 Mexican coins from another extensive region in which they have long 
 held sway; and the change will affect not only the Straits, but also 
 many of the surrounding native states which constitute the hinter- 
 land of the Straits, whose trade is principally with that colony and 
 whose people are naturally co-users of the Straits currency.*" In fact, 
 the new laws regarding the Straits currency were stretched to cover 
 the Federated Malay States by a series of enactments and proclama- 
 tions even before the end of 1903.'^ The influence of the change is likely 
 to be still more extensive, in that similar methods may be adopted in 
 some of the other English colonies of the Orient, and will not im- 
 probably be followed in neighboring countries as well. As we shall 
 see, an almost identical plan seems about to be adopted in the French 
 oriental possessions, to which we shall next direct attention. 
 
 a Report of the Straits Settlements Currency Committee [Cd., 1,556], 1903, 
 pp. 12-13. Many details as to tbe situation in the Straits Settlements can be 
 found in the Minutes of Evidence and Appendices [Cd., 1,585]. 
 
 i August Huttenbach, The Silver Standard and the Straits Currency Ques- 
 tion, Singapore, 1903, pp. 102-103, 127-128. 
 
 c See, for instance, the order cited in the Report of tbe United States Coia- 
 ipission on International Exchange, p. 2p4, 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 483 
 I.\DO-CIIINA. 
 
 The-monetary history of the French colonies in China runs closely 
 parallel to that of the English colonies which we have just sketched. 
 Here, again, we have a region in which the Spanish and later the 
 Mexican dollars had long circulated side by side with native cur- 
 rency; and here again M-e find the dominant European power 
 undertaking to displace the Mexican coins, first by attempting to 
 force its own money into circulation, then by issuing an imitation 
 of the Mexican dollar, and now at last by the proposed adoption of a 
 gold " exchange standard." France came into possession of Cochin 
 China in 1862, and the following year her coins were given legal 
 tender power there, and began to be paid out by her disbursing 
 officers. They never attained a wide currency, however, and when, 
 a few years later, the depreciation of silver set in, they were of so 
 much greater value in France, where they retained their fictitious 
 power of exchange, that they were no sooner brought into the colonies 
 than they were re-exported. Moreover, the trade of Cochin China, 
 and of Annam and Tonking regions which were later annexed, was for 
 the most part with the ports of China, Singapore, and Hongkong, 
 where the French coins were unavailable and where the Mexican dol- 
 lars were the usual medium of exchange, and were continually being 
 exported and imported in settlement of trade balances. The futility 
 of the efforts to substitute the French currency system eventually 
 became clear to the French home Government, very much as the simi- 
 lar situation in the English colonies had a few years before become 
 clear to the English Government, and France then fell baclf upon the 
 expedient which England later tried. With the recognition of the 
 expediency of retaining the dollar currency the question arose whether 
 a French dollar might'not be substituted for those of Mexico and the 
 United States then current in the country. 
 
 The coinage might in this way still be made to affirm the sover- 
 eio-nty of France, even if the usual French coins could not be made to 
 circulate. The experiment was undertaken tentatively in 1879 with 
 the issue of fractional pieces of the dollar." Then in 1885 a French 
 piastre de commerce of identical weight with the American trade 
 dollar began to be struck. Like its American prototype, the French 
 trade dollar was favorably received, both on account of its accurate 
 fabrication and its superior weight, which somewhat exceeded that 
 of the Mexican dollar and the Japanese yen. This slight surplus, 
 however, which rendered the French dollars popular among the 
 Chinese, was in fact a serious shortcoming as regards their circula- 
 tion- for, although 13,170,471 were struck during the next decade, 
 scarcely any were ever seen, the majority being hoarded or melted 
 down by the Chinese. Upon this account in 1895 the weight of the 
 French dollar was reduced below the standard of the Mexican com 
 and almost to that of the yen; and since then the French dollar, 
 lilte the British dollar, has developed into a formidable rival for the 
 coins of Mexico. ^ 
 
 oF Ziv Histoire monetaire des colonies frangaises d'apres les documents 
 officiels Paris 1890, pp. 110-123 ; Aug. Arnaune, La monnaie, le credit, et le 
 ClmugeVsd edition, Paris, 1903, pp. 291-328. 
 
484 GOLD STANDARD IN INTERNATIONAL TRADE.' 
 
 In the period since the new F'rench dollar began to be issued in 
 1895 down to December 31, 1903, as many as 44,000,000° of these 
 pieces had been struck ; and they appear now to circulate freely and 
 without friction alongside of the other dollars. 
 
 Within recent months, in Indo-China as in the Straits Settlemeiats, 
 a further step has been in contemplation. Plans have been debated 
 for bringing the currency around to a gold standard upon the lines 
 of the currency reforms in British India and the Straits Settle- 
 ments; and, if the changes now under consideration are adopted 
 and successfully carried through, it will soon be a question, not 
 merely of increasing competition for the Mexican dollars, but of 
 their supersession and legal exclusion from still another large tract 
 in the Orient.* 
 
 JAPAN. 
 
 Japan represents another of the oriental countries in which the 
 Mexican dollar was for long firmly intrenched, resisting repeated 
 efforts made to exclude it, but from which it has at last been com- 
 pletely driven within the course of the past twenty years. When 
 the newly constituted Government of »7apan some thirty years ago 
 set about the reorganization of the currency^ and established a mint 
 at Osaka, with the machinery purchased from the British Govern- 
 ment after the fiasco at Hongkong, they were confronted with the 
 universal employment of the Mexican dollar. Though desirous of 
 establishing the currency upon a gold standard, the Government 
 thought it necessary to yield to the general predilection for the 
 familiar silver dollar, but hoped to meet the demand for it with a 
 coin of local mintage. They provided in the act of May 10, 1871, for 
 the issue of a silver coin to be known as the " yen," of size and quality 
 like the dollar of Mexico, and gave it the power of legal tender in 
 the treaty ports, intending that it should take the place there of the 
 familiar Mexican coin. The yen, like the Hongkong dollar of 1866, 
 in reality contained about three grains less of pure silver than the 
 standard Mexican dollar, and, when a few years later it was observed 
 that foreign coins still circulated, the situation was at once attributed 
 to the underweighting of the yen. The Japanese upon this account 
 in February, 1875, raised the Weight of their coins from 416 to 420 
 
 " Tlie total issue of the second series of Frencli trade dollars is as follows : 
 
 1895 1,782,012 
 
 1890 11,858,018 
 
 1897 2, 511, 128 
 
 1898 4, 303, 953 
 
 1899 4, 681, 244 
 
 1900 13, 318, 850 
 
 1901 3, 150, 000 
 
 1902 3, 326, 534 
 
 1903 10, 076, 893 
 
 Total nine years 55,008,038 
 
 From the Bulletin de statistique et de legislation coinparee. 
 
 s See tlie articles of Paul Leroy-Beaulieu in the Economiste frangais for 
 .January 10 and 17, 1903 ; also the Report of the United States Commission on 
 International Exchange, Appendix H, i)p. 379-391. The various decrees and 
 ordinances regulating the currency of Indo-China, issued between 1862 and 
 1900, may be found in the Rapport du directeur de la monnaie au mlnistre des 
 finances, Septi&me annee, 1902, pp, 378-425. 
 
GOLD STANDARD IN IKTERNATIONAL TRADE. 485 
 
 grains, the weight of the successful American trade dollar, at the 
 same tune changing the name of yen to boyeki gin, or trade dollar. 
 The experiment proved futile as a means oi expelling the undesired 
 pieces. It had in fact just the contrary effect, of attracting them to 
 Japan in exchange for the heavier Japanese coins; and in 1878 the 
 Government decided to suspend the further coinage of the trade 
 dollar and to revert again to the issue of the lighter yen. At the 
 same time they gave to that coin full legal-tender power throughout 
 the country. 
 
 During the years which followed, as the value of silver declined, 
 the Japanese mint was called upon to coin larger and larger amounts 
 of that metal; and the yen grew more and more familiar and more 
 and more popular. It became in fact a doughty rival of the Mexi- 
 can dollar, not merely in Japan, but in all of the great entrepots of 
 the Far East. Being of superior design and less frequently counter- 
 feited, it enjoyed peculiar credit throughout the Orient, and before 
 the appearance of the Bombay dollar in the middle nineties the 
 Japanese silver coins were probably the most familiar of all coins in 
 the Straits Settlements and the Malay Archipelago, " and were freely 
 current also in most of the ports of China, Korea, Indo-China, and 
 Siam. Between 1871 and 1897 more than 165,000,000 of them were 
 issued, and of this total more than 110,000,000 had been sent abroad. 
 So, while the Japanese yen gradually ousted the Mexican dollars from 
 the Japanese trade centers, at the same time they had invaded much 
 of the territory which hitherto had been the exclusive domain of the 
 Mexican coins. 
 
 Just at this juncture, when the Japanese silver yen had conquered 
 so many of the markets of the East, the Japanese stopped their coin- 
 age, and at the same time took steps toward their demonetization 
 within the boundaries of Japan. The fluctuations in the price of sil- 
 ver had for long rendered trade with Europe and America exceed- 
 ingly unreliable, and for years the government of Japan had had 
 under advisement the possible adoption of a gold standard. The 
 receipt of the indemnity money from China after the war of 1894-95 
 at last made this possible, and m March, 1897, a law was promulgated 
 declaring a new gold coin, thereafter to be known as the yen, to be the 
 standard unit, and restricting the future coinage of silver to under- 
 weighted coins of subsidiary denominations. The coinage of the sil- 
 ver yen, which had found so ready a market from one end of the 
 Orient to the other, thus came to an end. Those of the coins which 
 had remained within the country — about 46 millions in alL--were 
 redeemed in gold, and were either made into subsidiary silver or sent 
 abroad for sale in Hongkong, Shanghai, and elsewhere. After the 
 31st of April, 1898, the circulation of the silver yen in Japan was pro- 
 hibited, and after July, 1898, it was no longer acceptable by the Gov- 
 ernment for taxes or public dues. -, n r, j , j ■ 
 
 In the course of two decades the Mexican dollar had been driven 
 from Japan, and there had even ceased to be in that country any coin 
 of equivalent size and denomination. Yet in the meantime Japan 
 had injected into the oriental trade the greatest number of competing 
 
 a^AP Oount Matsukata Mnsayoshi, Report on the Adoption of the Gold 
 Standard in Japan, Tokyo, 1899, pp. 284-300. Upon the general subject of 
 Tnnnnese cwrency this work and Count Matsukata's Report on the Post- 
 bellum Financial Administration of Japan (Tokyo, 1901) are the best authorities. 
 
486 GOLD STANDARD IN INTEENATIONAL TRADE. 
 
 coins that the Mexican dollar had ever encountered up to that time. 
 It might be added, in passing, that in the newly acquired territory of 
 Formosa" the Mexican dollar and the Japanese yen also ceased to be 
 legal tender after 1897-98, and that the gold standard coins ol Japan 
 were installed in their stead. 
 
 CHINA. 
 
 If we turn last of all to China, we find even here the sway of the 
 Mexican dollar meeting challenge in our day. Ever since the six- 
 teenth century, when the Spanish dollars were introduced from the 
 Philippines, these coins have been widely used. The Chinese Gov- 
 ernment until very recently had never issued silver coins of its own, 
 but local rulers and well-known firms had authenticated the standard 
 of the foreign coins and given them a local character by marking them 
 with a special stamp.* The coins by far the most familiar to the Chi- 
 nese were those of Spain and Mexico, circulating by weight, and often 
 stamped or chopped by their indorsers beyond all possibility of recog- 
 nition. During the past decade, however, these Mexican dollars have ' 
 been subjected to competition in China, not only Avith the British dol- 
 lars and Japanese yen, but also with local issues, very much as they' 
 have in other countries. Various of the Chinese provinces have 
 established their own minting machinery, and have begun to turn out 
 local coins in imitation of the Mexican dollars. The first such mint 
 was opened in Canton in 1890, but to-day similar provincial establish- 
 ments are coining dollars at Foochow, Nankin, Chungking, Tientsin, 
 Moukden, and Kirin,'' and in April, 190-3, an imperial edict provided 
 for the establishment of a national mint at Peking to issue uniform 
 coins for the whole Empire.'' 
 
 The coins as yet struck in the local mints have been unreliable as to 
 weight and fineness, and we have no complete record as to their 
 amounts. They appear to have met with little success in supplant- 
 ing the Mexican dollars. With the opening, however, of a carefully 
 regulated imperial mint maintaining an unvarying standard, and the 
 adoption of these national coins by the various treasuries for pur- 
 poses of public revenue and expenditure, the eventual supersession of 
 the Mexican dollar within its last oriental stronghold may be confi- 
 dently expected. Should the suggestion of the American Commission 
 on International Exchange, that China issue at once 200 million such 
 coins, be adopted, this outcome will be attained in a very short time.® 
 
 "■ Matsukata, The Adoption of the Gold Standard in Japan, pp. 379-389. 
 
 6 Upon the general subject of Chinese currency see H. B. Morse, " Currency 
 and measures in China," in the Journal of the China Branch of the Royal Asiatic 
 Society, vol. xxiv (1888-89) ; Talcott Williams, " Silver in China," in the Publi- 
 cations of the American Academy of Political and Social Science for May 8, 
 1897 ; J. Edkins, Chinese Currency, Shanghai, 1901, and the article of Consul- 
 General Jernigan in the History of Banking in All Nations, New York, 1896. 
 
 f Report of the Director of the Mint, 1902, p. 280. 
 
 i Ibid., 1903, p. 217. 
 
 In the commercial treaties recently concluded with China by Great Britain 
 (September 5, 1903), the United States (October 8, 1903), and Japan it was 
 distinctly stipulated that China " take the necessary steps to provide for a uni- 
 form national coinage." Report on the Introduction of the Gold Exchange 
 Standard into China and other Silver-using Countries, submitted to the Secre- 
 tary of State October 1, 1903, by the Commission on International Exchange, pp. 
 201, 221, 224. 
 
 " Report of Commission, p. 52. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 487 
 
 ^^ f j"icn®' *^'^"' ^^hich is not renioto, the Mexican dollar will 
 cease to tulhll the functions of an international coin, which it has per- 
 tormed without interruption for nearly four centuries. The coins 
 which have served so long as money for most of the peoples of East- 
 ern Asia, in the British possessions of North America, in the Spanish 
 West Indies, and elsewhere, will no longer be current outside of the 
 Mexican boundaries. Nearlv half a century has already elapsed since 
 these coins were banished from the United States and Canada, but 
 until within a decade they had held their own in the Orient. One by 
 one in the East rival dollars have appeared, lived for a brief day, and 
 disappeared. The British dollars of Hongkong were issued for only 
 two years (1866-1868) ; the American trade dollars survived for four- 
 teen years (1873-1887; and, last and most formidable of all, the 
 Japanese yen were issued for twenty-six years (1871-1897). 
 
 Two rival dollars of importance continue to be coined and used 
 through the Orient to-day — the British dollars of Calcutta and 
 Bombay and the French piastres of Indo-China — but the expulsion of 
 the Mexican dollar must be credited not so much to the competition of 
 these silver coins as the swift and all-pervading drift of the Orient 
 toward a gold standard, which threatens the extinction of the Mexican 
 and the competing dollars alike. The already accomplished adoption 
 of gold as a standard in Japan and in the Philippines has virtually 
 excluded the hitherto familiar coins from those regions, and the pros- 
 pective changes now hanging fire in the Straits Settlements, Indo- 
 China, and even in the Chinese Empire itself, will probably seal the 
 doom of the Mexican dollar throughout the rest of the East. The 
 coin which has literally been a " universal unit," known in every 
 region of the earth, will soon have only a local range; and what is 
 more, as we shall presently see, it is not unlikely that even in Mexico 
 it will be superseded, or become ere long only a subordinate and over- 
 valued token. 
 
 MEXICO. 
 
 The general movement which we have been observing would seem 
 destined to leave Mexico isolated as regards her currency and seriously 
 crippled as regards the most important factor in her export trade. 
 But Mexican financiers have for some time foreseen the situation 
 which was impending, and the Government has wisely done what it 
 could to provide against such contingencies.' Since early in 1903 
 monetary commissions and subcommissions appointed by the Govern- 
 ment have been busily investigating plans of currency reform for 
 Mexico which will bring her monetary system into line with those of 
 most of the great trading nations, and they have been spreading before 
 her public bewildering arrays of figures and data relevant thereto." 
 
 The proposal has now been made by one of these commissions to 
 close the mints to the free coinage of silver, to prohibit the reimporta- 
 tion of the present silver dollars, and to issue in their stead a new 
 
 The following volumes have heen issued by the Commission : 
 Datos iJfira el estudio de la cuestion monetaria eu Mexico, 1903. 
 D'ltos estadistieos preparados por la secretaria de hacienda y credito publico, 
 P<snecialmente para el estudio de la cuestion monetaria, 1903. 
 
 natos sobre rentas de fincas urbanas in la ciudad de Mexico, 190.S. 
 
 of the Commission's Datos mentioned above. 
 
488 GOLD STANDARD JN INTERNATIONAL TRADE. 
 
 dollar, which for the future is to be maintained at a stable ratio with 
 gold by some such system as that which the United States has put in 
 operation in the Philippines. Whether, however, legislative approval 
 for these proposals can be secured is a matter so doubtful that the 
 denouement of the present agitation can not as yet be safely surmised. 
 
 Meanwhile the Mexican Government has taken steps in another 
 line, and has adroitly promoted measures aimed to restrict the losses 
 which her mine owners were likely to suffer through the dwindling 
 export of silver dollars. The general adoption of a gold standard in 
 the Orient threatened to reduce the market not merely for the coins 
 of Mexico, but for her uncoined silver as well, and suggested the grim 
 possibility of an even further decline in the value of that metal. An 
 outlook so portentous for Mexico's leading industry called for imme- 
 diate action; and the Mexican Government met the situation 
 shrewdly, though, as it proved, ineffectively. Her officials plainly 
 saw that, if the Oriental governments and the European powers, 
 especially those having dependencies in the Orient, could be induced 
 to purchase and coin silver in regularly continued amounts, notwith- 
 standing their adoption of a gold standard, the foreign demand for 
 Mexican silver might survive the extinction of the Mexican dollar, 
 and the price of silver might be saved from a further decline. 
 
 The American Government was accordingly approached by Mexican 
 representatives, and solicited to cooperate with the other countries 
 concerned through diplomatic channels in an effort " to restore and 
 maintain a fixed relationship between the moneys of the gold-standard 
 and the silver-using countries," and after various maneuvers the 
 American Congress was induced in March, 1903, to make an appro- 
 priation for this purpose. The upshot was the appointment of the 
 " United States Commission on International Exchange," which, 
 accompanied by a similar delegation from Mexico, visited the leading 
 European capitals during the summer of 1903, with a number of 
 proposals for the stabilizing of exchange rates between gold and silver 
 using countries. The suggestions advocated by the American com- 
 mission were of two sorts. First, they proposed the inauguration in 
 China of a uniform silver coinage, to be maintained at a fixed ratio 
 with gold — a plan which required that China should " coin as rapidly 
 as possible 200,000,000 silver coins * * * about the size of a 
 Mexican dollar."" Second, they proposed that the powers cooperate 
 in maintaining the price of silver by agreeing for a period of years 
 in advance to purchase regular amounts of bullion.* The Mexican 
 
 a Report of Commission, p. 52. 
 
 ^ The position talcen by ttie commissions has been so misunderstood in many 
 quarters tliat it may be worth while to call attention again to the fact that the 
 purpose was not to inci'ease the price of silver but to steady that price in order 
 to stabilize exchange. A great increase in price was considered as harmful 
 as a great decrease — possibly even more harmful. 
 
 It should be noted also that no proposal was made to any country to buy any 
 bullion in order to maintain the price. It was suggested only that the purchases 
 actually to be made for coinage purposes be declared beforehand and be made 
 with regularity — a suggestion which has been actually accepted and followed by 
 Great Britain in its purchases for India. A careful reading of the Mexican 
 proposals referred to shows that they were estimates as to the probable needs 
 for actual coinage of the various governments. The Mexican commission, if 
 those estimates were approved, suggested that the governments buy those 
 amounts with regularity. No stronger opponents of the principle of buying sil- 
 ver not needed, in order to maintain the jirice, could be found than the Mexican 
 commission. See Report of Commi.ssiou on International Exchange, Vol. I, 
 pp. 51, 179, 180, 182, 195-107. 
 
GOLD STANDARB IK INTERNATIONAL TRADE. 489 
 
 delegates even went so far as to suggest the exact amounts ^^hich each 
 government should jjurchase, the combined engagements to aggregate 
 an annual total of 96,000,000 ounces.-' Either of these plansTTf real- 
 ized, would help to prop the sinking value of silver, would promote 
 greater stability of exchange with the remaining silver-using coun- 
 tries, and incidentallj' would be of benefit to the silver-producing 
 interests of the world. Unfortunately, however, for those concerned, 
 the voluminous arguments of the American delegates aroused onlv a 
 lukewarm interest. The British representatives made no reply otKer 
 than by a series of vague and general resolutions,'' occupying less than 
 a third of a page." The French commission replied with more elabo- 
 ration, but expressed dissent from almost every detail of the Amer- 
 ican plan.* 
 
 Brief and variant opinions were also received from the defegates 
 of Eussia, Germany, and Holland. 
 
 As regards the reform of the Chinese currency (a proposition 
 which after all was not an affair of direct concern to European gov- 
 ernments), there was little objection upon general principle; but there 
 were many misgivings, reservations, and differences of view as to 
 method. Concerning the second proposition, that the various gov- 
 ernments should make regular purchases of silver, the French dele- 
 gates thought it " dangerous " and " useless to dwell on ; " the British 
 delegates opined that it " might be adopted as far as possible in each 
 country, subject to its monetary policy and convenience;" the dele- 
 gates of one or two other countries courteously acceded to its prin- 
 ciple. But no government seems likely to take any step toward its 
 practical adoption." 
 
 The efforts of the Mexican Government to secure international 
 assistance in support of the silver market seem to have been without 
 avail. Mexico remains to-day still confronted with a contracting 
 market for her leading export and with one of the knottiest of money 
 problems to disentangle. 
 
 a Report of Commission, pp. 187-188, p. 129. 
 
 » The British resolutions were of the form and nature suggested by the Amer- 
 ican commission, who wished only u brief statement of general princii>les. 
 They met the American views in all particulars but one. They stated that the 
 new silver coins for China should be given a gold value " as soon as practi- 
 cable." The Americans would have preferred the words quoted to read " when 
 introduced." 
 
 c Report of Commission, p. 141. 
 
 a Report of Commission, pp. 146-162. The following passage from the French 
 report well illustrates the attitude of the French commission: "In order to 
 maintain the commercial quotations of silver, the producing countries mvite the 
 consuming countries to give regularity to the demand, while they declare them- 
 selves unable to give regularity to the supply. It is useless to dwell on the 
 unusual character of a proposition which tends to invite on the part of Europe an 
 intervention contrary to all economic principles to fix the price of a commodity 
 at the very moment when it is declared that fidelity to these same principles 
 ijrevents the giving of regularity to production " ^ ^^ „ .^_ ^ 
 
 e See Appendix F 5, p. 497. This shows that the British Government has 
 adopted the policy in its purchases for India with the results anticipated by the 
 Commission on International Exchanges. 
 
490 
 
 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Table 1. — Production of silver — Estimated output of silver in the principal 
 silver-producing countries, in kilograms (000 omitted)- 
 
 
 1493-1850. 
 
 1851-1875. 
 
 1876-1900. 
 
 1493-1900. 
 
 
 63,657 
 (?) 35,064 
 (?) 29,432 
 6,861 
 5,860 
 2,031 
 
 12,648 
 
 (?)a,650 
 
 (?) 1,790 
 
 909 
 
 2,055 
 
 398 
 
 5,271 
 
 6,383 
 
 27,097 
 
 (?) 4,260 
 
 (?)2,570 
 
 1,338 
 
 4,372 
 
 251 
 
 35,071 
 
 10,805 
 
 103, .303 
 
 Bolivia 
 
 41,974 
 
 
 33,792 
 
 Austria-Hungarv 
 
 9,108 
 
 
 12,277 
 
 Russia 
 
 2,680 
 
 United States 
 
 40,342 
 
 
 6,932 
 
 29,120 
 
 
 
 
 149,827 
 
 31; 004 
 
 91,764 
 
 272,595 
 
 
 
 This table is compiled for the earlier periods from the estimates of Soetbeer and Lexis, 
 and for, the later periods from the mint reports of the United States and France. 
 Although many of the figures are uncertain and have been differently estimated in other 
 investigations, I find no variations which would seriously affect the relative positions of 
 the different countries as contributors to the world's silver supply. 
 
 Table 2.« — Exports of Mexico. 
 
 [Exports expressed in millions.] 
 
 Fiscal years. 
 
 Total ex- 
 ports in 
 Mexican 
 dollars. 
 
 Exports of 
 silver in 
 Mexican 
 dollars. 
 
 Percent- 
 age of 
 silver ex- 
 ports to 
 total ex- 
 ports. 
 
 Percent- 
 age of 
 
 coined sil- 
 ver in 
 
 silver ex- 
 ports. 
 
 1881-82 - - 
 
 29,207 
 
 41,919 
 
 46,861 
 
 46,812 
 
 43,797 
 
 49,330 
 
 49,079 
 
 60,380 
 
 62,680 
 
 43,426 
 
 75,661 
 
 88,045 
 
 80,084 
 
 95,020 
 
 110,022 
 
 117,784 
 
 138,068 
 
 148,454 
 
 158,248 
 
 158,009 
 
 168,041 
 
 197,729 
 
 15,822 
 28,601 
 32,524 
 32,878 
 29,243 
 33,041 
 30,399 
 38,157 
 38,054 
 35,489 
 48,145 
 55,479 
 45,620 
 48,138 
 59,056 
 59,578 
 67,637 
 67,281 
 63,584 
 72,421 
 59,582 
 77,555 
 
 64.17 
 68.22 
 69.40 
 70.2? 
 66.77 
 66.98 
 61.93 
 63.19 
 60.71 
 81.72 
 63.63 
 63.01 
 56.98 
 60.60 
 53.67 
 50.58 
 48.98 
 45.32 
 40.17 
 45.83 
 35.45 
 39.22 
 
 73.69 
 
 1882-83 
 
 80 72 
 
 1883-84 - — 
 
 1884-85.- - 
 
 80.45 
 
 77.47 
 
 1885-86 -..- 
 
 75 28 
 
 1886-87 -. - 
 
 1887-88 
 
 67.26 
 65 39 
 
 1888-89 
 
 59 87 
 
 1889 90 
 
 60 89 
 
 1890-91 
 
 1891-92 
 
 49.98 
 55 48 
 
 1892-93 
 
 48 97 
 
 1893-94 
 
 38 11 
 
 1894-95 - 
 
 1895-96 - 
 
 35.47 
 34 50 
 
 1896-97. - 
 
 1897-98 
 
 24.47 
 26 90 
 
 1898-99 
 
 20 98 
 
 1899 1900 
 
 17 10 
 
 1900-1901 
 
 22 27 
 
 1901-1902 
 
 19 05 
 
 1902-1903 
 
 27.21 
 
 a This table is taken from the Datos estadisticos preparados por la secretaria de hacienda 
 y credito publico, espeoialmente para el .estudio de la cuestion monetaria, Mexico, Palacio 
 nacional, 1903. 
 
 Table 3. — Silver content of the Mexican dollar and its competitors. 
 
 Name and date of origin. 
 
 Weight. 
 
 Fine- 
 ness. 
 
 Pure 
 
 silver. 
 
 Mexican dollar 
 
 American standard dollar 
 
 American trade dollar (1873). ..^ 
 
 Spanish 5 peseta piece 
 
 Spanish Philippine dollar (1897) 
 
 American Philippine peso (1903) 
 
 Hongkong dollar (1866).. 
 
 Bombay and Calcutta dollar (1895)... 
 
 Straits Settlements dollar (1903) 
 
 French trade dollar (1885).... 
 
 French trade dollar (1895) 
 
 Japanese yen (1871). . 
 
 Japanese trade dollar (1875). 
 
 Austrian Maria Theresa dollar (1751) 
 
 Grains. 
 417i? 
 412i 
 420 
 
 416 
 
 416 
 
 416 
 
 416 
 
 420 
 
 416* 
 
 416 
 
 420 
 
 433 
 
 900 
 900 
 
 900 
 
 900 
 900 
 900 
 900 
 900 
 900 
 900 
 900 
 833i 
 
 Grains. 
 3771 
 37U 
 378 
 
 347} 
 
 374g 
 .3748 
 374? 
 3741 
 378 
 875 
 374g 
 378 
 361 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 491 
 
 Table -t. — Coinage of silver dollars. 
 
 Mexico — Silver coinage of all denominations : 
 
 Colonial period, 1537-182-1 million pesos__ 2,082 
 
 Since Independence, 1821-1903 do 1,466 
 
 Entire period, 1537-1903 do 3,548 
 
 Coinage of 1-peso pieces, 1874<i-1903 ]clo 674 
 
 Austria, Levant dollars, 1751-1903 146,863,395 
 
 United States : 
 
 Standard dollars — 
 
 1792-1873 8, 031, 238 
 
 1878-1903 580, 045, 090 
 
 1792-1903 588, 076, 328 
 
 Trade dollars, 1873-1887 35,965,924 
 
 Philippine pesos, 1903 17,883,250 
 
 British India — Bombay and Calcutta dollars, 1895-1903 , 151, 361, 594 
 
 Hoiigliong : 
 
 Dollar, 1864-68 2, 108,054 
 
 Fractional silver, 1893-1902 23,550,000 
 
 Straits Settlements— Dollar, 1903 
 
 Indo-China : 
 
 French trade piasters, first series, 1885-1895 13,170,471 
 
 French trade piasters, second series, 1895-1903 55,008,638 
 
 Japan— 1-yen pieces, 1871-97 165,133,170 
 
 3. COMMENTS ON MONETARY CONDITIONS. 
 
 (o) TRANSLATION OF EXTRACT PROM THE REPORT OF THE 
 BOARD OF ADMINISTRATION OI' THE B.ANK OP INDO-CHINA MADE 
 AT THE GENERAL MEETING OP SHAREHOLDERS ON THE IITH OP 
 MAY, 1904. 
 
 [Printed in rEconomiste Franjais of June 26, 1904.] 
 
 The fluctuations .in exchange of the white metal have been, in fact, 
 as great in 1903 as in the preceding year. The lowest and highest 
 rates on the London marltet have been respectively 21 ll/16d. and 
 28^d. per standard ounce. Parallel with this the value of the dol- 
 lar (piastre) went down in February, 1903, to 1.95 francs, and strat- 
 ing from this date it gradually increased in value until it reached 
 2.40 at the beginning of September, after which it fell again. These 
 variations, which amount to more than 20 per cent between the 
 extreme rates, render business particularly diiBcult on account of 
 the risks which they bring about. 
 
 In consequence the countries in the Far East, one after the other, 
 have sought for a remedy, or at any rate for a palliative, for a state of 
 affairs so dangerous. Following the example of Japan, Siam has 
 tried, without having been entirely successful up to the present, to 
 avoid this instabilitv of exchange by adopting a monetary policy like 
 that so happily established in British India. . , ^ .,, , ^ 
 
 The Philippines, on the other hand, have carried out with complete 
 success their monetary reform. Finally the Straits Settlements are 
 now en<^aged in the same work, and each country has coined a new 
 dollar for its own special use, to which it will try to give a fixed value. 
 
 On the other side, the great producers (we mean the United jstates 
 and Mexico) being directly affected in an important branch of their 
 export trade, were moved bv a condition of affairs which was dailv 
 becoming worse. They were then entirely prepared to give a good 
 reception to the overtures froni China when that country, frightened 
 
 a Statistics as to the number of tl.e=e eoins issued before this period are not 
 available. 
 
492 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Ijy the consequences for itself which the fall in the value of silver 
 brought about by compelling her to make unforeseen sacrifices in 
 order to pay in gold the amount due on the debt of the war indemnity, 
 turned to those countries to ask for aid, of which it recognized the 
 necessity. The American and Mexican Governments responded to 
 this appeal by naming a Commission, composed of the eminent men 
 of each of these two countries, most skilled in economic and monetary 
 questions. This Commission went to the principal countries of 
 Europe which have business relations with the Far East. 
 
 After a brief stay in London, where it studied the principles of a 
 monetar}' system suitable to be introduced into China, and one the 
 establishment of which the English Government declared that it was 
 willing to assist, the delegates of the United States and Mexico came . 
 to France. They explained the purpose of their mission and the 
 means which appeared to them the most appropriate to bring about 
 the result which they desired to a commission appointed by the min- 
 ister of finance, under the enlightened and competent presidency of 
 the governor of the Bank of France. Those of their propositions 
 which had to do more especially with the monetary reform in China 
 appeared to be such as to afford real benefits. The same explanation 
 was then given in Germany and in Russia. 
 
 The study of this important question is now being carried on in 
 China itself. It would be extremely desirable if the assistance of all 
 these good wishes would bring about the establishment in China of a 
 monetary system having more unity and stability than the customs 
 now common there. 
 
 As regards Indo-China, where the fall in silver had produced feel- 
 ings and results no less important, the thorough study which was 
 given to the subject by the department of colonies ended in prac- 
 tical conclusions, some of which have already been put into effect. It 
 had appeared, in fact, that the end to be obtained was the establish- 
 ment in their colony, so far as economic conditions would permit, of a 
 system liJce that of British India. This result was to be brought about 
 by successive stejDS. It was necessary in the first place to permit, even 
 to assist the exportation of Mexican dollars, which the export tax of 
 i^ per cent was retaining in the colony. It was necessary, then, to pro- 
 hibit the importation of new Mexican dollars in such a way that the 
 circulation should be, progressively, more and more made up exclu- 
 sively of French commercial dollars (piastres). The Government of 
 Indo-China did not hesitate to adopt this measure, the effect of which 
 was immediately felt, if we may judge by the reserves of our branches. 
 While last year they were composed in great part of Mexican dol- 
 lars, they are no longer composed, so to speak, of anything but French 
 dollars. We may all, then, foresee the time when the Mexican dollars 
 will have been demonetized. 
 
 It is indispensable, however, before making the French dollar the 
 sole legal tender, to introduce into Indo-China a considerable quantity 
 more of that money. In fact, since the adoption of that piece of 
 money in 1879 and the beginning of its minting in 1885 there have 
 been coined by the mint in Paris up to the 31st of December, 1903, 
 and introduced into China, both by the Government and by our banks, 
 $70,194,979, French commercial dollars, without taking account of the 
 subsidiary coins; or, as up to the 8th of July, 1895, the weight of 
 these dollars was 27.215 grams, a weight sensibly greater than the 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 493 
 
 Mexican dollar, there was still a profit in exporting them to China 
 tor melting, so that it may be estimated that the $13,140,471 of 
 that weight which were coined have disappeared from circulation, 
 ihe quanbty o± money which remains in the country appears, then, 
 still insutticient, taking into consideration the importance of the 
 population and the habit of hoarding, which remains among the 
 Annamites. 
 
 16)TEANSLATI0N OF AN ARTICLE ENTITLED "LA VIE FINANCI^RE " 
 FROM THE REVUE ^CONOMIQUE INTERNATIONALE OF iMARCH 
 1904. 
 
 The year 1903 added still more to the monetary discredit of silver 
 in spite of certain appearances, and in spite notably of the better sup- 
 port of the price of the white metal on the London market. Silver 
 was ruling still, in fact, without exception, as a monetary standard 
 throughout the Far East, India and Japan excepted, when at the end 
 of 1902 the measures taken by Siam were accompanied in the neigh- 
 boring colonies, and even in China, by a movement of reform' in the 
 monetary systems which has continued throughout the year 1903. 
 
 By a decree of November 25, 1902, the Siamese Government had by 
 implication substituted gold for silver as the base of the monetary 
 system, by giving to the tical of silver a fixed rate of exchange in rela- 
 tion to the pound sterling. It was doubted at first whether the reform 
 would be seriously followed up. Would the Siamese Government be 
 in a condition to maintain the rate adopted? Such a question was 
 certainly justified after all the difficulties which were felt in India by 
 England to carry out such a reform after 1893. But the Siamese 
 Government proceeded cautiously, raising only gradually the nominal 
 value of the tical. Representatives of the banks led the Government 
 to adopt in the first place the rate of 20 ticals for a pound ; then the 
 price of silver having improved little by little, this rate was without 
 difficulty carried to 18| ticals per pound on the 11th of March, and to 
 J Si in October, approaching thus to the limit of 17 ticals per pound, 
 which the Government proposes, for the present at any rate, to reach 
 definitively. The legal ratio of gold to silver will be found, then, to 
 have been raised from 1 to 40 to about 1 to 34. 
 
 At the same time that the Siamese reform was made public the 
 English and French Governments each created a commission charged 
 with studying the question whether the time were opportune to bring 
 about a like reformation in the monetary systems of their depend- 
 encies nearest Siam, the Straits Settlements and the Malay States on 
 the one hand and French Indo- China on the other. 
 
 The English commission, which sat at London, went into a thor- 
 ough investigation of the different interests affected. The results 
 were published in May, 1903. After having cleverly freed its hands 
 by declaring that in the actual condition of the monetary systems the 
 question was only that of doing away with commercial uncertainty, 
 or rather of transferring it from one frontier to the other — from the 
 frontier of the countries on a gold basis to that of countries on a silver 
 t,asis— the commission busied itself with calculating the relative 
 importance of the two commercial parties interested. It then declared 
 that the business of the Straits Settlements with countries on the gold 
 basis was far superior to the transactions with countries on the silver 
 basis. 
 
494 GOLD STANDAKD IN INTERNATIONAL TRADE. 
 
 Nevertheless, the commission concluded prudently in these words : 
 " We do not believe that a gold standard ought to be imposed on the 
 Straits Settlement against the will of the Government and of the 
 population, but we think that the Government of His Majesty ought 
 not to raise any objection to the principle of the change, provided that 
 the Government of the Straits, after having studied all phases of the 
 question, were to decide finally in favor of the change from the silver 
 standard to the gold standard." In view of this eventuality, the 
 commission indicated besides what steps the reform policy should 
 follow. It would be suitable to create a special kind of a dollar for 
 the Straits, exclusively coined by the State, and intended to circulate 
 at first concurrently with the trade dollars and the Mexican dollars. 
 Then these last moneys would be gradually eliminated from the circu- 
 lation and their use prohibited. Finally, a fixed rate of exchange 
 would be adopted between the pound and the new dollar. The Gov- 
 ernment would make secure the maintenance of this parity by a policy 
 similar to that followed in India. The suggestions were, in fact 
 adopted in September by the Government of the Straits and were 
 extended to the Federated Malay States. The first shipment of the 
 new dollar arrived in the colony on the 3d of October. 
 
 The results of the work of the commission appointed in France on 
 the 6th of December, 1902, to study the monetary system of Indo- 
 China have not been published. However, from information col- 
 lected by representatives of parliamentary committees, as well as by 
 certain journals, it is clear that its conclusions have been substantially 
 the same as those of the English commission of the Straits Settle- 
 ments. It appeared that the stabilization of the rate of exchange of 
 the dollar (piastre) at a fixed value in gold was desirable, but that 
 certain preparatory measures ought to be taken first. It was neces- 
 sary to extend the circulation of the French dollars, to substitute them 
 little by little for the Mexican dollars, and finally to prohibit the use 
 of the latter. Only then could the gold standard, in terms of the law 
 at least, be introduced. This policy, furthermore, has not remained a 
 mere plan ; they have purchased silver ; they are coining new dollars. 
 The first part of the programme is being put into effect. 
 
 4. COINAGE, CURRENCY, AND EXCHANGE, 1903. 
 [From the Indian financial statement for 1904-5, Indian office, March 23, 1904.] 
 
 19. During the year now drawing to a close our coinage operations 
 have been on a very large scale, and the issues of new rupees, includ- 
 ing recoinage of withdrawn issues, have amounted to no less than a 
 sum of E. 13,94,91,408, in addition to which we coined for native 
 states rupees to the value of R. 12,15,682. I submit the figures of 
 coinage during the last four years : 
 
 Rupees. 
 
 1900-1901 17, 14, 79, 318 
 
 1901-2 4, 95, 20, 400 
 
 1902-3 11, 27, 22, 680 
 
 1903-4(11 months only) 14,07,07,090 
 
 20. There have been very heavy demands for currency in connection 
 with the disposal of the bumper rice crop in Burma, the large cotton 
 crops in Bombay and central India, and the generally good crops of 
 cereals and seeds. The demands for currency began this year some- 
 what earlier than usual, and the strain on our resources was at its 
 height toward the close of the first week of January, fully six to 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 495 
 
 seven weeks before the usual period. A certain nervous anxiety pre- 
 vailed tor a time in financial circles, particularly in Calcutta, induced 
 Ti^ • '■fiP''^ ^""^ unusually early decrease in the stock of silver coin 
 held in the currency reserve, which fell on the 7th of January to so 
 low a figure as 11. 7,50,76,000. Although the strain came, as'l have 
 pointed out, unusually early and surprised many, government had 
 taken measures in good time to meet possible difficulties, and within 
 one week from the date of low-^^'ater mark— that is, by January 15— 
 and notwithstanding the continuance of very heavy demands, we 
 added approximately a crore to the amount of ""rupees in the currencv 
 reserve, and by the end of February we held in the currency reserve 
 approximately lOf crores, or about 3^ crores more than on January 7. 
 In this connection I may mention that the withdrawals of rupees 
 from the currency reserve during the single month of December 
 amounted to no less than K. 4,05,23,000. The nearest approach 
 hitherto to this extraordinary figure was in January, 1903, when the 
 withdrawals reached R. 3,77,17,000. 
 
 21. I submit a table which I think will be found of interest, show- 
 ing month by month the gain or loss in the stock of rupees held in the 
 currency reserve during the last four years, such gain or loss being 
 calculated without reference to the additions M'hich have been made 
 from time to time by new coinage. It will be observed that the total 
 loss during the period has amounted to approximately 21 J crores, 
 and I may mention that the amount of new rupees coined for govern- 
 ment, exclusive of recoinage of withdrawn rupees of 1835 and 1840 
 issues, has during the four years amounted to approximately 26J 
 crores. The withdrawals of rupees from the currency reserve do 
 not in any way necessarily correspond with the amounts of new coin- 
 age, but there will, in existing circumstances, be a certain general con- 
 nection between them. There will only be a direct correspondence 
 when gold is taken from the currency reserve to purchase silver 
 for coinage; but silver may also be purchased from the proceeds of 
 council drafts or locally, and, moreover, differences will arise on 
 account of coinage for native states and coinage to replace withdrawn 
 rupees of early issue. The two latter sources of differences have 
 been allowed for in the following statement: 
 
 [In thousands of rupees.] 
 
 Month. 
 
 1900-1901. 
 
 1901-2. 
 
 1903-3. 
 
 1903-4. 
 
 Average. 
 
 April 
 
 May 
 
 June 
 
 July - - --- 
 
 August - - - 
 
 September - 
 
 October 
 
 November 
 
 December 
 
 January 
 
 February 
 
 March 
 
 Total gain or loss —.-—■ 
 
 Add on account of coinage of native 
 states in 1900-1901 and withdrawals 
 of old issues ---■ 
 
 Net gain or loss 
 
 - 2,21,ra 
 + 10,37 
 + 1,00,13 
 
 - 68,40 
 
 - 2,06,69 
 
 - 1,94,51 
 
 - 1,90,43 
 
 - 1,03,08 
 
 - 1,76,25 
 
 - 2,04,44 
 
 - 2,04,06 
 + 1,62,98 
 
 -12,96,11 
 
 3,73,69 
 
 9,22,43 
 
 -1,77,62 
 + 17,84 
 +2,59,88 
 + 51,80 
 
 - 80,48 
 
 - 77,73 
 + 76,55 
 + 2,93 
 -1,95,18 
 
 - 83,60 
 -1,10,69 
 + 34,51 
 
 - §5,07 
 + 45, .50 
 + 1,57,57 
 + 91,34 
 
 - 53,18 
 
 -i,m,M 
 
 - 47,60 
 
 - 88,25 
 -2,14,29 
 -3,77,17 
 -1,93,86 
 
 - 3,14 
 
 - 2,14,76 
 
 -1,74,79 
 
 - 18,26 
 
 + 13,87 
 
 + 91,65 
 
 +1,52,31 
 
 + 21,62 
 
 + 23,97 
 
 - 1,15,00 
 
 -1,13,84 
 
 - 2,25,77 
 
 -1,51,84 
 
 + 12, ;« 
 
 - 37,30 
 
 - 1,97,82 
 
 - 96,56 
 
 - 4,05,23 
 
 -2,47,74 
 
 - 2,12,86 
 
 -2,19.52 
 
 - 2,02,10 
 
 -1,77,68 
 
 
 + 64, 78 
 
 -2,82,19 
 
 +1,16,58 
 
 -8,77,49 
 
 +8,07,25 
 
 -14,66,33 
 
 + 4,52,10 
 
 -1,65,61 
 
 70,24 
 
 -10,14,23 
 
 -9,80,63 
 
 +4,37,40 
 
 -5,43,14 
 
 + Galn, —Loss, 
 
496 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 22. In anticipation of the heavy demands certain to arise as. the 
 result of exceptionally good crop prospects, we had already in the 
 month of October commenced the purchase of silver and the coinage 
 of rupees, and when the crisis came we had considerable stocks of 
 bullion both in the mints and in course of delivery from England, 
 while further parcels were under orders. I think that it is not 
 sufficiently recognized by the banking and commercial community 
 that a low stock of rupees in the currency reserve, which might give 
 some reasonable cause for apprehension in the absence of preparations 
 for a rapid increase should necessity arise, is not an indication of 
 danger when such preparations have been made as on the present 
 occasion. Danger point when there has been no provision and no 
 preparation is not danger point when all due precautions have been 
 taken to meet a strain. 
 
 23. In connection with the large coinage during the last few months 
 I think I should take this opportunity of expressing my warm appre- 
 ciation of the manner in which the mint masters, and all those respon- 
 sible for the conduct of minting operations, have worked to satisfy 
 public requirements and to maintain the high reputation of the mint 
 staff. AVork at the mints is conducted under many difficulties, owing 
 to the fact that when coinage operations were resumed some four 
 years ago, after a long period of comparative idleness, the machinery 
 and appliances were found to be in many respects inadequate and 
 unsuitable to meet the strain of very much work. Proposals have been 
 under consideration for the establishment of a combined mint with 
 new machinery, and with all the latest improvements, but various 
 objections have been raised to the scheme, and meanwhile the mint 
 staff are to be congratulated on their success in coping with the diffi- 
 culties arising from the imperfections of existing arrangements. 
 
 24. Large as was the sale of council drafts during the year 1902-3 
 the amount has been very greatly exceeded during the current year. 
 It has already reached £22,592,900; and it is estimated that it will 
 attain the altogether phenomenal figure of £23,700,000 ; and in addi- 
 tion to this quite abnormally large sale of council bills the imports of 
 gold up to the end of February reached a figure approximating 12 
 millions sterling. 
 
 The secretary of state, by his drawings, and the government of 
 India, by measures taken locally, have done all in their power to meet 
 the demands of trade. The question of how this should best be done 
 has been, and is likely still further to be, a matter for some discussion ; 
 here I would only say that I adhere to my opinion that it is impossible 
 to admit the direct responsibility of government to immediately and 
 in all circumstances meet abnormal demands. Government has every 
 right to expect that those who make it their special business and 
 derive a profit from financing the trade of the country will consider 
 beforehand what are likely to be their requirements, and make due 
 preparation to meet the wants of their customers. We, on our side, 
 will do all we can, and it is our intention, in view of a probably per- 
 manent increase in demands for rupees during the winter season, to 
 increase the standard of the stock of silver coin which it has hitherto 
 been considered sufficient to hold in the currency reserve at the begin- 
 ning of October, and further, to take permanent measures to enable a 
 rapid addition to be made to that stock without the risk of delay in 
 importing silver bullion for coinage. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 4»)7 
 
 nntl^'"^^'^'"'^!*^'' ''''r*' °* *^^ ^^^* *e^ "months I may point out that 
 opinions in the most competent financial circles in India were by no 
 
 nr^«f TTr^^'l.''' anticipating the great demand for coin which 
 ai ose. As late as December 15 none of the presidency banks had found 
 it necessary to raise their rate above 4 per cent, and this rate is pri- 
 marily dependent on the rates at which money is being offered in the 
 open market; by January 5 all the presidency banks had, however, 
 been obliged to raise rates to 6 per cent. This very rapid rise does 
 not appear from the figures before us to have been in anv way due to 
 low balances held by the presidency banks at the beginning of "the 
 period of pressure. It was caused by the extraordinary trade 
 aeniands which the presidency banks alone appear to have been in a 
 position to satisfy, and I have not heard of any case in which accom- 
 modation_ was refused to regular customers when good security was 
 torthconung. Similarly, Government showed no hesitation through- 
 out the crisis in exchanging gold and notes for rupees when 
 demanded. 1 must insist on the fact that the currency reserve is 
 maintained for the purpose of securing the stability of the note circu- 
 lation and exchanging sovereigns, and as long as all obligations in 
 this respect are fulfilled the public have no claim to further assistance 
 from its resources. 
 
 25. During the year the gold reserve fund has increased from 
 £3,810,730 to £6,382,200, of which amount £6,376,500 are invested in 
 consols, the national war loan, and local loans stocks. In addition to 
 these resources the last returns show a sum of £10,494,556 held in gold 
 in the currency reserve. 
 
 26. Our exchange operations, as indicated by the rates obtained 
 for council bills, have naturally been very favorable during the clos- 
 ing year. The estimated average exchange rate for the. rupee for 
 1903-4 is 16.053d. as compared with the rates noted below for the four 
 preceding years : 
 
 Pence. 
 
 1899-1900 16. 067 
 
 1900-1901 15. 973 
 
 1901-2 15. 987 
 
 1902-3 16. 002 
 
 1903-4 (estimated) 16. 053 
 
 S. STABILITY IN PRICE OF SILVER. 
 
 [Letter from chairman of English commission.] 
 
 9 Theogmorton Avenue, 
 
 London, E. C, October 4, 1904.. 
 Dear Mr. Hanna: With reference to your letter of July 16, I 
 have now the pleasure to send you a statement showing the purchases 
 of silver made by the government of India since March 6, 1900, which 
 I hope will give you the information which you desire to have. 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 March 6, 1900, up to the end of September, 1904, has 
 amounted to 12 millions sterling, the variation in prices has, I think 
 you will see, been extremely small. 
 S. Doc. 128, 58-3 32 
 
498 
 
 GOLD STANDARD IN INTEKNATIONAL TRADE. 
 
 I should mention that the figures given regarding the first and 
 second purchase differ slightly from those published on page 356 
 in the report of the Commission on International Exchange, which 
 included not only the bank's charges, as stated in the report, but also 
 freight and charges incurred in carriage to India and brokerage in 
 London. The figures given in the memorandum sent herewith repre- 
 sent in all cases only the sums paid by the bullion brokers for the 
 silver. 
 
 With kind regards, I am, yours sincerely, 
 
 Jas. L. MacKax. 
 H. H. Hanna, Esq., Ghahman, 
 
 Conunission on Internatiorial Exchange of the 
 
 United States of America, Indianapolis, Ind., U.S.A. 
 
 SILVER PURCHASED IN LONDON FOR THE GOVERNMENT OF INDIA. 
 
 First purchase. — 50,297,224 ounces of silver were purchased be- 
 tween March 6, 1900, and March 20, 1901, at a cost exclusive of 
 charges made by the Bank of England and of brokerage and minor 
 charges, of £6,002,816.12.1, i. e., 28|id. per ounce. 
 
 The average price per ounce of each installment was as follows : 
 
 Installment. 
 
 Date of purchase. 
 
 Sterling value of 
 silver. 
 
 Number of 
 ounces. 
 
 Average 
 
 price per 
 
 ounce. 
 
 First 
 
 Mar. 6 to Mar, 24, 1900 
 
 £ s. d. 
 500,189 11 3 
 
 500.222 7 5 
 500,034 6 9 
 400,098 8 8 
 500,296 5 
 500,216 5 4 
 
 500.223 1 2 
 500,245 11 11 
 500,218 11 2 
 500,158 12 4 
 500,269 11 4 
 600,643 19 9 
 
 4,348,001 
 4,360,345 
 4,347,9U 
 3,456,628 
 4,160,863 
 4,067,293 
 3,983,953 
 4,028,510 
 4,a59,913 
 4,125,234 
 4,247,677 
 5,110,873 
 
 Pence. 
 275| 
 
 
 Apr. 23 to May 4, 1900 
 
 27|| 
 
 Third 
 
 May 14 to May 28, 1900 
 
 27i| 
 
 Fourth 
 
 Fifth.. 
 
 June 12 to June ^,1900 
 
 Sept. 5 to Sept. 17, 1900 
 
 27J 
 285 
 
 Sixth 
 
 Sept. 27 to Oct. 8, 1900 
 
 29 i 
 
 Seventh 
 
 Oct. 20 to Oct. 25, 1900 
 
 30i 
 
 Eighth 
 
 Nov. 28 to Dec. 7, 1900 
 
 29 i 
 
 Ninth 
 
 Dec. 19 1900, to Jan. 4, 1901. ... 
 
 
 Tenth 
 
 Jan. 8, to Jan. 28, 1901 
 
 293% 
 
 Eleventh 
 
 Jan. 29 to Feb. 22, 1901 
 
 
 Twelfth 
 
 Feb. 26 to Mar. 20, 1901 
 
 
 
 Total 
 
 6,002,816 12 1 
 
 50,297,224 
 
 28a 
 
 
 
 Second purchase. — 3,188,890 ounces were purchased between Feb- 
 ruary 28 and March 13, 1903, at a cost, exclusive of the bank's 
 charges and of brokerage and minor charges, of £300,315.1.3, i. e., 
 22^-d. per ounce. 
 
 Third purchase. — 35,652,935 ounces were purchased between Sep- 
 tember 15, 1903, and February 20, 1904, at a cost, exclusive of the 
 bank's charges and of brokerage and minor charges,of £4,000,788.11.9, 
 i. e., 26|-|d. per ounce. 
 
 The average jDrice per ounce of each installment was as follows : 
 
 Installment. 
 
 Date of purchase. 
 
 Sterling value of 
 silver. 
 
 Number of 
 ounces. 
 
 Value 
 
 per 
 ounce. 
 
 First . 
 
 Sept. 15 to Oct. 2, 1903 
 
 £ s. d. 
 500,109 14 9 
 500,087 6 6 
 500,122 16 8 
 500,109 6 9 
 
 500.093 15 5 
 500,116 8 7 
 
 500.094 11 11 
 500,054 11 2 
 
 4,406,654 
 4,262,018 
 4,431,780 
 4,667,608 
 4,620,610 
 4,475,009 
 4,406,348 
 4,382,908 
 
 Pence. 
 
 if 
 
 27S 
 26« 
 
 27J 
 27| 
 
 
 Oct.9toOct.26,1903.- 
 
 Third .... 
 
 Nov. 12 to Nov. 24, 1903 . 
 
 Fourth 
 
 Dec. 12 to Dec. 19, 1903 
 
 Fifth—. 
 
 Dec. 21, 1903, to Jan. 4, 1904 
 
 Sixth 
 
 Jan. 5 to Jan. 11, 1904 
 
 Seventh 
 
 Jan. 11 to Jan. 16, 1904. . . . 
 
 Eighth 
 
 Feb. 15 to Feb. 20, 1904 
 
 
 
 Total - . 
 
 4,000,788 11 9 
 
 35,662,935 
 
 2681 
 
 
 
GOLD STAKDAED IN INTERNATIONAL TKADE. 
 
 499 
 
 Fourth ?>(/rr/i,a,se.— 18,300,644 ounces have been purchased between 
 May -1 and August 27 at a cost, exclusive of the bank's charge and 
 of brokerage and minor charges, of £2,000,407.13.10. 
 
 The average price per ounce of each installtnent has been as follows: 
 
 Installment. 
 
 Date of purchase. 
 
 sterling value of 
 silver. 
 
 Number of 
 ounces. 
 
 Value 
 
 per 
 ounce. 
 
 First 
 
 May 2 to May 20, 1904 
 
 £ 8. d. 
 500,220 2 5 
 500,062 2 10 
 499,982 8 8 
 500,142 19 11 
 
 4,685,849 
 4,594,016 
 4,523,947 
 4,496,834 
 
 Pence. 
 2583 
 26t 
 
 Second 
 
 May 25 to July 4, 1904 
 
 Third... 
 
 July 4 to July 20, 1904 
 
 Fourth 
 
 July 28 to Aug. 27, 1904 
 
 2^11 
 
 
 
 Total 
 
 2,000,407 13 10 
 
 18,300,644 
 
 26H 
 
 
 
 6. PIXLEY & ABELL'S ANNUAL CIRCULAR, 1904. 
 
 Gold. — Excepting during June, July, and August, the continental 
 demand prevented any purchases of bars by the Bank of England. 
 
 Early in the year Paris bought largely and continued to do so until 
 June. Our own market not being able to satisfj^ requirements, con- 
 siderable shipments were made from New York direct. In August 
 Berlin became a keen buyer, presumably on Russian account, and at 
 one time as much as 78s. ^d. was freelv paid. Sovereigns were also 
 taken from the bank, as it paid to talce them at these rates. This 
 demand for gold continued until the end of the year. 
 
 Egypt in the latter part of the year was a heavy importer of sover- 
 eigns, and, in addition, part of the coin shipped from Bombay was 
 stopped there en route to London. 
 
 The South African production showed a steady increase and gave 
 a total for the year of £16,000,000, as compared with £13,800,000 last 
 year and £15,800,000 in 1898, the best total previously. 
 
 The India council shipped heavy sums to London, part of which 
 was allocated to the purchase of silver, and the large increase in 
 the export figures to England may be attributed to this cause. 
 
 West Africa showed a further advance, but not nearly in the same 
 proportion as the previous year. 
 
 Heavy sums were sent repeatedly to the Argentine Republic, par- 
 ticularly during the last few months. 
 
 The bank rate stood at 4 per cent on January 1, and was lowered to 
 3i per cent on April 14 and to 3 per cent on April 21. It remained 
 at this for the rest of the year, giving an average of 3.29r3 per cent. 
 
 Sil^gr.—The predominating feature of the year has again been the 
 laro-e purchases made on behalf of the Indian government. These 
 carried the price early in the year to over 27d., and when these orders 
 temporarilv ceased the price did not greatly fall, as cash silver re- 
 mained scarce, owing to covering orders by " shorts."' Some anxiety 
 was caused by the partial failure of the monsoon, especially in Gu]e- 
 rat but later this was removed, and it soon became evident that 
 Indian trade would require more silver currency than the stock pos- 
 sessed by the government. Fairly good bazar orders, interspersed 
 with French mint tenders totaling 77,500 kilograms, never allowed the 
 market to fall lower than 2iM- (in April), and the price quickly 
 recovered to 20d. In August the Indian government orders recom- 
 
500 GOLD STAND ABD IN INTERNATIONAL TRADE. 
 
 menced, and, with occasional pauses, these continued to the end of the 
 year. 
 
 Sales by China had at times a somewhat flattening effect, but this 
 was more than compensated for by the falling off of the American 
 supply, owing to the requirements for the new Panama coinage, 
 which absorbed about 1,500,000 ounces. The forward price, under 
 pressure of bear sales, showed a wide difference early in the year, 
 but closed up to within a fraction of cash in April. In September 
 renewed forward sales again caused the difference to widen, and 
 from then this averaged about ^-d. till the close of the year. 
 
 In November the Mexican Congress passed a bill closing the mints 
 to the free coinage of silver, with a view to gradually raising the value 
 of the Mexican dollar to half that of the United States dollar. So 
 far this measure has had no influence on the price of silver. 
 
 The war in the Far East has led to a large demand for silver, both 
 in Shanghai, Avhere considerable purchases have been made, and also 
 in San P'rancisco for Mexican dollars. 
 
 The Spanish Grovernment toward the close of the year sold 17,500 
 kilograms of surplus silver. 
 
 The average price for the year is 26f d. 
 
 Mexican dollars.— lja,rge amounts continued to be shipped here 
 from the Straits, but ceased before the end of January. Further 
 importations of the coin into Manila were stopped on January 14. 
 Japan bought large quantities in San Francisco, but, as a rule, the 
 quotation here remained more or less nominal until October, when 
 further shipments were made from China to London. 
 
 On the announcement of the passing of a bill in Mexico placing 
 the dollar on a fixed basis, the price rose to 27d., and all the dollars 
 that were available here were at once shipped to Mexico to take 
 advantage of the premium obtainable over their intrinsic value. 
 From January 1, 1905, an import duty of 10 Mexican dollars per 
 kilogram has been placed on all dollars sent into the country. It is 
 proposed by the Mexican Government to coin the dollars of the same 
 weight and fineness as before, and, further, to coin dollars for export 
 as required. 
 
 PixLEY & Abell, Bullion Brokers. 
 
 London, December 31, 1904. 
 
Appendix G. 
 STATISTICAL DATA. 
 
 Production of gold and silver in the world since the discovery of America. 
 
 
 Gold. 
 
 Period. 
 
 Average annual for period. 
 
 Total for period. 
 
 
 Fine ounces. 
 
 Value. 
 
 Fine ounces. 
 
 Value. 
 
 1493-1620 
 
 186,470 
 
 230,194 
 
 273,596 
 
 219, 906 
 
 237,267 
 
 273,918 
 
 ■266,845 
 
 281,956 
 
 297,709 
 
 346,095 
 
 412,163 
 
 613,422 
 
 791,211 
 
 665,666 
 
 671,948 
 
 571,563 
 
 367,957 
 
 457,044 
 
 652,291 
 
 1,760,502 
 
 6,410,324 
 
 6,486,262 
 
 6,949,582 
 
 6,270,086 
 
 5,891,014 
 
 5,643,110 
 
 4,794,766 
 
 6,461,282 
 
 7,882,566 
 
 9,783,914 
 
 11,420,068 
 
 13,877,806 
 
 14,837,776 
 
 12,316,136 
 
 12,625,527 
 
 14,321,360 
 
 15,747,378 
 
 83,866.000 
 
 4, 759; 000 
 
 5,666,000 
 
 4,546,000 
 
 4,905,000 
 
 5,662,000 
 
 5,516,000 
 
 5,828,000 
 
 6,154.000 
 
 7,154,000 
 
 8,520,000 
 
 12,681,000 
 
 16,366,000 
 
 13,761,000 
 
 11,823,000 
 
 11,815,000 
 
 .7,606,000 
 
 9,448,000 
 
 13,484,000 
 
 36,393,000 
 
 132,513,000 
 
 134,083,000 
 
 122,989,000 
 
 129,614,000 
 
 115,577,000 
 
 114,586,000 
 
 99,116,000 
 
 112,895,000 
 
 162,947,000 
 
 202,261,600 
 
 236,073,700 
 
 286,879,700 
 
 306,724,100 
 
 254,576,300 
 
 260,992,900 
 
 296,048,800 
 
 325,627,200 
 
 5,221,160 
 
 6,624,656 
 
 4,377,544 
 
 4,398,120 
 
 4, 745, 340 
 
 6,478,360 
 
 6,336,900 
 
 5,639,110 
 
 6,954,180 
 
 6,921,895 
 
 8,243,260 
 
 12,268,440 
 
 15,824,230 
 
 13,313,315 
 
 11,438,970 
 
 5,716,627 
 
 3,679,668 
 
 4,570,444 
 
 6,622,913 
 
 17,605,018 
 
 32,051,621 
 
 32,431,312 
 
 29,747,913 
 
 31,350,430 
 
 27,966,068 
 
 27,715,560 
 
 28,973,773 
 
 27,306,411 
 
 39,412,823 
 
 9,783,914 
 
 11,420,068 
 
 13,877,806 
 
 14,837,775 
 
 12,316,135 
 
 12,626,627 
 
 14,321,360 
 
 15,747,378 
 
 
 1521-1644 
 
 $107,931,000 
 
 1545-1660 
 
 114,206,000 
 
 1561-1580 
 
 90,492,000 
 
 1581-1600 
 
 90, 917, 000 
 
 1601-1620 
 
 98,096,000 
 
 1621-1640 
 
 113,248,000 
 
 1641-1660 
 
 110, 324, 000 
 
 1661-1680 
 
 
 1681-1700 
 
 123, 084, 000 
 
 1701-1720 
 
 143, 088, 000 
 
 1721-1740 
 
 
 1741-1760 
 
 263,611,000 
 
 1761-1780 
 
 
 1781-1800 
 
 
 1801-1810 
 
 
 1811-1820 
 
 
 1821-1830 
 
 
 1831-1840 
 
 134,841,000 
 363,928,000 
 662,566,000 
 670,415,000 
 614,944,000 
 648,071,000 
 577,883,000 
 572,931,000 
 496,682,000 
 664,474,000 
 814,736,000 
 202,261,600 
 236,073,700 
 286,879,700 
 806,724,100 
 264,576,300 
 260, 992, 900 
 296,048,800 
 325,627,200 
 
 1841-1850 
 
 1861-1866 
 
 1866-1860 
 
 1861-1865 
 
 1866-1870 
 
 1871-1876 
 
 1876-1880 
 
 1881-1886 
 
 1886-1890 
 
 1891-1896 
 
 1896 
 
 1897 
 
 1898 
 
 1899 
 
 1900 
 
 1901... 
 
 
 1903 . . . 
 
 
 Total 
 
 
 
 529, 652, 914 
 
 10,948,899,300 
 
 
 
 
 Period. 
 
 Silver. 
 
 Annual average for period. 
 
 Fine ounces. 
 
 Coining 
 value. 
 
 Total for period. 
 
 Fine ounces. Coining value. 
 
 1,611,060 
 2,899,930 
 10, 017, 940 
 9, 628, 925 
 13,467,635 
 13,596,236 
 12,664,240 
 11, 776, 546 
 10,834,660 
 10, 992, 086 
 11,432,640 
 
 Jl, 954, 000 
 3,740,000 
 12,952,000 
 12,460,000 
 17,413,000 
 17,579,000 
 .16, 361, 000 
 15,226,000 
 14,008,000 
 14,212,000 
 14,781,000 
 
 42,309,400 
 69,598,320 
 160,287,040 
 192,678,600 
 269,362,700 
 271,924,700 
 263,084,800 
 235,630,900 
 216,691,000 
 219,841,700 
 228, 650, 800 
 
 $64, 703, 000 
 89, 986, 000 
 207, 240, 000 
 248,990,000 
 348,264,000 
 361, 679, 000 
 327,221,000 
 304,625,000 
 280, 106, 000 
 284,240,000 
 296,629,000 
 
 501 
 
502 
 
 GOLD STANDAED IN INTERNATIONAL TBADE. 
 
 Production of gold and silver in the world, etc. — Continued. 
 
 
 Silver. 
 
 Period. 
 
 Annual average tor 
 period. 
 
 Total for period. 
 
 
 rine ounces. 
 
 Coining 
 value. 
 
 Fitie ounces. 
 
 Coining 
 value. 
 
 1721-1740 
 
 13,863,080 
 
 17,140,612 
 
 20,986,691 
 
 28,261,779 
 
 28,746,922 
 
 17,385,756 
 
 14,807,004 
 
 19,175,867 
 
 25,090,342 
 
 28,488,597 
 
 29,095,428 
 
 35,401,972 
 
 43,061,583 
 
 63,317,014 
 
 78, 775, 602 
 
 92,003,944 
 
 108.911,431 
 
 167,581,331 
 
 157,061,370 
 
 160,421,082 
 
 169,055,253 
 
 168,337,453 
 
 173,691,364 
 
 173,011,283 
 
 161,334,339 
 
 170,443,670 
 
 817,924,000 
 22,162,000 
 27,133,000 
 36,540,000 
 37,168,000 
 22,479,000 
 19,144,000 
 24,793,000 
 32,440,000 
 36,824,000 
 37,618,000 
 45,772,000 
 65,663,000 
 81,864,000 
 101,851,000 
 118,955,000 
 140,815,000 
 203, 742, 000 
 203,069,200 
 207,413,000 
 218,576,800 
 217,648,200 
 224,441,200 
 223, 691, 300 
 208,594,000 
 220,371,600 
 
 277,261,600 
 342,812,235 
 419,711,820 
 566,235,580 
 287,469,225 
 173,857,555 
 148,070,040 
 191,768,675 
 260,903,422 
 142,442,986 
 148,477,142 
 177,009,862 
 216,257,914 
 316,586,069 
 393,878,009 
 460, 019, 722 
 644,557,155 
 787, 906, 656 
 157,061,370 
 160,421,082 
 169,056,263 
 168,337,463 
 173,591,364 
 173,011,283 
 161,334,339 
 170,443,670 
 
 8358,480,000 
 
 1741-1760 
 
 443,232,000 
 
 1761-1780 
 
 642,658,000 
 
 1781-1800 
 
 730,810,000 
 
 1801-1810 
 
 1811-1820 . - 
 
 371,677,000 
 224,780,000 
 
 1821-1830 , 
 
 191,444,000 
 
 1831-1840 
 
 1841-1850 
 
 247,930,000 
 324,400,000 
 
 1861-1855 
 
 184,169,000 
 
 1856-1860 
 
 188,092,000 
 
 1861-1865 . ...;.... 
 
 228,861,000 
 
 1866-1870 
 
 278,313,000 
 
 1871-1875 
 
 409,322,000 
 
 1876-1880 
 
 609,256,000 
 
 1881-1885 
 
 1886-1890 
 
 694, 773, 000 
 704,074,000 
 
 1891-1895 
 
 1,018,708,000 
 
 1896 
 
 203, 069, 200 
 
 
 207,413,000 
 
 1898 
 
 218,576,800 
 
 1899 
 
 217, 648, 200 
 
 1900 
 
 224,441,200 
 
 
 223,691,300 
 
 1902 
 
 208, 594, 000 
 
 1903 
 
 220, 371, 600 
 
 
 
 Total 
 
 
 
 9,333,320,341 
 
 12,067,323,300 
 
 
 
 
 
 
 Percentage of production. 
 
 Period. 
 
 By weight. 1 
 
 By value. 
 
 
 Gold. 
 
 Silver. 
 
 Gold. Silver. 
 
 1493-1520 
 
 11 
 7.4 
 2.7 
 2.2 
 1.7 
 2 
 
 2.1 
 2.3 
 2.7 
 3.1 
 3.5 
 4.2 
 4.4 
 3.1 
 2 
 
 1.9 
 2.1 
 3 
 
 3.3 
 
 6.6 
 
 18.4 
 
 18.2 
 
 14.4 
 
 12.7 
 
 8.1 
 
 6.6 
 
 5 
 
 4.8 
 4.8 
 5.9 
 6.7 
 7.6 
 8.1 
 6.6 
 6.8 
 8.2 
 8.5 
 
 89 
 
 92.6 
 
 97.3 
 
 97.8 
 
 98.3 
 
 98 
 
 97.9 
 
 97.7 
 
 97.3 
 
 96.9 
 
 96.5 
 
 95.8 
 
 96.6 
 
 96.9 
 
 98 
 
 98.1 
 
 97.9 
 
 97 
 
 96.7 
 
 93.4 
 
 81.6 
 
 81.8 
 
 85.6 
 
 87.3 
 
 91.9 
 
 93.4 
 
 95 • 
 
 95.2 
 
 95.2 
 
 94.1 
 
 93.3 
 
 92.4 
 
 91.9 
 
 93.4 
 
 93.2 
 
 91.8 
 
 91.5 
 
 66.4 
 
 55.9 
 
 30.4 
 
 26.7 
 
 22 
 
 24.4 
 
 25.2 
 
 27.7 
 
 30.5 
 
 33.5 
 
 36.6 
 
 41.4 
 
 42.5 
 
 33.7 
 
 24.4 
 
 24.1 
 
 25.3 
 
 33 
 
 36.2 
 
 52.9 
 
 78.3 
 
 78.1 
 
 72.9 
 
 70 
 
 58.5 
 
 53 
 
 45.5 
 
 44.5 
 
 44.4 
 
 49.9 
 
 53.2 
 
 66.8 
 
 68.5 
 
 53.2 
 
 52.7 
 
 58.7 
 
 59.6 
 
 33.6 
 
 1621-1644 
 
 44.1 
 
 1545-1560 
 
 69.6 
 
 1561-1580 
 
 73.3 
 
 
 78 
 
 1601 1620 
 
 75.6 
 
 1621-1640 
 
 74.8 
 
 1641-1660 
 
 72.3 
 
 1661-1680 
 
 69.6 
 
 1681-1700 
 
 66.5 
 
 1701-1720 
 
 63.4 
 
 1721-1740 
 
 68.6 
 
 1741-1760 
 
 57.5 
 
 1761-1780 
 
 66 3 
 
 1781-1800 
 
 76.6 
 
 1801-1810 
 
 75.9 
 
 
 74.7 
 
 1821-1830 
 
 67 
 
 
 64.8 
 
 1841-1850 -. 
 
 47.1 
 
 1851-1855 
 
 21.7 
 
 1856-1860 
 
 21.9 
 
 
 27.1 
 
 1866-1870 ■ 
 
 30 
 
 1871-J875 
 
 41.5 
 
 1876-1880 ... - 
 
 47 
 
 1881-1885 
 
 54.6 
 
 1886-1890 , 
 
 66.5 
 
 1891-1895 
 
 55 6 
 
 1896 
 
 50.1 
 
 
 46.8 
 
 1898 . . 
 
 43 2 
 
 1899 
 
 41.5 
 
 1900 . . 
 
 46 8 
 
 1901 . 
 
 47 3 
 
 1902 
 
 
 1903 ... 
 
 40 4 
 
 
 
 Total 
 
 5.4 
 
 94.6 
 
 47 fi 
 
 52 4 
 
 
 
 
 
 
 
Oor.D STAlvfDASD In INTEENATiOi^AL TRADE. 
 
 503 
 
 ^oHd' a production of gold and silver for calendar years 1900, 1901, 1903, and 1903. 
 
 
 1900. 
 
 Country. 
 
 Gold. 
 
 Silver. 
 
 
 Kilo- 
 grams 
 (fine). 
 
 Ounces 
 (fine). 
 
 Value. 
 
 Kilo- 
 grama 
 Cflne). 
 
 Ounces 
 (fine). 
 
 Coining 
 value. 
 
 Commer- 
 cial value. 
 
 North America: 
 
 United States 
 
 Mexico 
 
 119,126 
 13,542 
 41,961 
 13,048 
 
 110,691 
 
 30,312 
 
 3,223 
 
 99 
 
 3,829,897 
 436, 375 
 
 1, a48, 720 
 419,603 
 
 3,666,606 
 
 974,637 
 
 103,615 
 
 3,192 
 
 $79,171,000 
 a 9, 000, 000 
 
 27,880,600 
 8,671,900 
 
 73, 498, 900 
 
 20,145,600 
 
 2,141,900 
 
 66,000 
 
 1,793,395 
 
 1, 786, 887 
 
 138,400 
 
 57,647,000 
 67, 437, 808 
 4,448,755 
 
 «74,533,600 
 74,263,000 
 5,751,900 
 
 $35,741,100 
 
 
 35,611,400 
 
 Africa 
 
 2,768,200 
 
 Europe; 
 
 415,014 
 
 4,458 
 61, 871 
 168,350 
 
 5,377 
 
 1,928 
 23,374 
 99,096 
 
 119 
 31,472 
 4,422 
 
 6 244 
 14,067 
 
 6,896 
 
 1,178 
 
 341,296 
 
 6129,503 
 
 57,994 
 
 240 
 
 13,340,263 
 
 143, 299 
 
 1,988,774 
 
 5,411,441 
 
 172, 839 
 
 61,983 
 
 751,335 
 
 3,185,316 
 
 3,790 
 
 1,011,656 
 
 142, 141 
 
 7,843 
 
 452, 161 
 
 221,673 
 
 37,898 
 
 10,970,610 
 
 4,162,718 
 
 1,864,165 
 
 7,734 
 
 17,248,000 
 
 185,300 
 
 2,671,300 
 
 6,996,600 
 
 223,600 
 
 80,100 
 
 971,400 
 
 4,118,400 
 
 4,900 
 
 1,308,000 
 
 183,800 
 
 10,100 
 
 684, 600 
 
 286,600 
 
 49,000 
 
 14,184,200 
 
 5, 382, 100 
 
 2, 410, 200 
 
 a 10, 000 
 
 8,271,000 
 
 Austria-Hungary . . 
 Germany . . 
 
 88,800 
 1,233,000 
 
 Norway 
 
 3,355,100 
 
 Sweden 
 
 88 
 63 
 13 
 3 
 
 2,845 
 
 1,704 
 
 418 
 
 83 
 
 68, 800 
 
 36,200 
 
 8,600 
 
 1,700 
 
 
 "ttaly 
 
 
 Spain 
 
 
 
 
 Greece 
 
 627, 200 
 
 Turkey 
 
 21 
 63 
 
 675 
 84 
 
 14,000 
 1,700 
 
 Finland 
 
 
 France 
 
 280,300 
 137, 400 
 
 23,500 
 
 6,801,800 
 
 2,580,900 
 
 1,156,800 
 
 4,800 
 
 Great Britain 
 
 Soutli America: 
 Argentii*a . . . 
 
 415 
 
 66 
 
 180 
 2,449 
 1,798 
 
 162 
 4,176 
 
 483 
 3,063 
 
 698 
 
 2,378 
 
 1,633 
 
 46 
 
 762 
 
 1,808 
 8,387 
 6,771 
 14, 197 
 
 860 
 664 
 
 13,360 
 
 2,112 
 
 6,786 
 78,735 
 57,804 
 
 6,208 
 134,260 
 16, 638 
 98,487 
 22,439 
 76,468 
 62,498 
 
 1,492 
 24,188 
 
 58,127 
 269,662 
 217,687 
 466, 444 
 
 27, 643 
 21,043 
 
 276,200 
 
 43,700 
 
 119,600 
 1,627,600 
 1,194,900 
 
 107,700 
 2,775,400 
 
 321,200 
 2, 036, 900 
 
 463,800 
 
 1,580,700 
 
 1,085,200 
 
 30,800 
 
 600, 000 
 
 1,201,600 
 
 !) 5, 674, 400 
 
 4,600,000 
 
 9,436,600 
 
 571,400 
 435,000 
 
 Bolivia 
 
 Chile....-: . . 
 
 
 Ecuador 
 
 Brazil 
 
 Venezuela 
 
 
 
 
 
 Guiana(British)... 
 
 
 
 
 
 Guiana (Dutch) ... 
 Guiana (French).. 
 
 
 
 
 
 
 
 
 
 Peru 
 
 226,973 
 
 25 
 
 31, 523 
 
 53,809 
 
 7,295,826 
 
 800 
 
 1,013,286 
 
 1,729,603 
 
 9,433,000 
 
 1,000 
 
 1,310,100 
 
 2,236,300 
 
 4,5-23,400 
 
 Uruguay 
 
 Central America 
 
 Asia: 
 
 Japan 
 
 628, 200 
 1,072,400 
 
 Korea 
 
 
 
 
 
 
 
 
 
 
 East Indies (Brit- 
 ish) 
 
 
 
 
 
 Eastlndies(Duteh) 
 
 2,609 
 
 80,659 
 
 104,300 
 
 60,000 
 
 Total 
 
 383, 049 
 
 12,316,135 
 
 254, 676, 300 
 
 6, 400, 418 
 
 173,591,364 
 
 224,441,200 
 
 107,626,400 
 
 
 
 Country. 
 
 Gold. 
 
 Kilo- 
 grams 
 (fine). 
 
 Ounces 
 (fine). 
 
 Value. 
 
 Silver. 
 
 Kilo- 
 grams 
 (fine). 
 
 Ounces 
 (fine). 
 
 Coining 
 value. 
 
 Commer- 
 cial 
 value. 
 
 North America: 
 
 United States 
 
 Mexico 
 
 Canada 
 
 Africa 
 
 Australasia 
 
 Europe: 
 
 Russia 
 
 Austria-Hungary . 
 
 Germany 
 
 Norway 
 
 Sweden 
 
 Italy 
 
 Spain 
 
 Portugal - 
 
 Greece 
 
 Turkey 
 
 Finland 
 
 France ■ 
 
 Great Britain 
 
 South America: 
 
 Argentina ■ 
 
 Bolivia 
 
 118,367 
 15, 475 
 36, 305 
 13,677 
 
 115, 679 
 
 34,383 
 
 3,215 
 
 90 
 
 1, 806, 600 
 497, .'i27 
 
 , 167, 216 
 439, 704 
 
 , 719, 080 
 
 , 105, 412 
 
 103, 363 
 
 2,893 
 
 $78, 666, 700 
 10, 284, 800 
 24, 128, 500 
 9, 089, 500 
 76, 880, 200 
 
 22,850,900 
 
 2, 136, 700 
 
 59, 800 
 
 1,717,705 
 
 1,793,692 
 
 163, 099 
 
 55,214,000 
 57, 656, 549 
 6,242,697 
 
 $71,387,800 
 74, 645, 900 
 6,778,400 
 
 $33,128,400 
 34,593,900 
 3, 145, 600 
 
 8 
 
 a 13 
 
 2 
 
 2,017 
 267 
 418 
 63 
 
 41,700 
 6,300 
 8,600 
 1,300 
 
 1,185 
 63 
 
 24, 600 
 1,300 
 
 175 
 
 46 
 180 
 
 6,626 
 
 116, 300 
 
 318, 256 
 
 4,884 
 62, 118 
 171,778 
 
 5,161 
 
 1,680 
 30, 000 
 99, 095 
 
 a 119 
 35, 902 
 13,362 
 
 n244 
 11, 964 
 
 6,392 
 
 n Kstimate Bureau of the Mint. 
 
 1 451 30,000 1,405 
 
 5' 786 119, 600 404, 201 
 
 6 Figures for 1S99 repeated. 
 
 10,230,046 
 
 156,993 
 
 1,996,706 
 
 5, 621, 648 
 
 166, 902 
 
 53, 986 
 
 964, 333 
 
 3, 185, 316 
 
 3,790 
 
 1,154,046 
 
 429, 180 
 
 7,843 
 
 384, 263 
 
 173, 297 
 
 46, 166 
 12,992,695 
 
 13, 226, 700 
 
 203,000 
 
 2, 681, 600 
 
 7,139,100 
 
 214, 600 
 
 69, 800 
 
 1,246,800 
 
 4,118,400 
 
 4,900 
 
 1,492,100 
 
 554,900 
 
 10, 100 
 
 496, 800 
 
 224, 100 
 
 58, 400 
 16, 798, 600 
 
 6, 138, 000 
 
 94, 200 
 
 1,198,000 
 
 3, 313, 000 
 
 99, 600 
 
 32,400 
 
 .578,600 
 
 1,911,200 
 
 2,300 
 
 692,400 
 
 257, 500 
 
 4,700 
 
 230,600 
 
 104,000 
 
 27, 100 
 7, 795, 600 
 
 ; Figures for 1898 repeated. 
 
504 GOLD STANDARI) in JElSfTfilllsrATlOIfAt TRADE. 
 
 World' s production of gold arid silver, etc. — Continued. 
 
 
 1901. 
 
 Country. 
 
 Gold. 
 
 Silver. 
 
 Kilo- 
 grams 
 (line). 
 
 Ounces 
 
 (tine). 
 
 Value. 
 
 Kilo- 
 grams 
 (fine). 
 
 Ounces 
 (fine). 
 
 Coiriing 
 value. 
 
 Commer- 
 cial 
 value. 
 
 South America— Con. 
 Chile 
 
 1,606 
 4,215 
 
 166 
 4,176 
 
 483 
 2,666 
 
 610 
 3,009 
 
 866 
 47 
 
 963 
 
 1,808 
 13, 680 
 
 4,514 
 14,138 
 
 1,296 
 
 748 
 
 61,626 
 
 135,613 
 
 6,321 
 
 134, 260 
 
 18, 538 
 
 85,701 
 
 19, 621 
 
 96,750 
 
 27, 825 
 
 1,530 
 
 30, 974 
 
 58,127 
 439, 801 
 145, 125 
 454,627 
 
 41,685 
 24,042 
 
 fl, 067, 200 
 2,801,300 
 
 110,000 
 2,775,400 
 
 321, 200 
 1,771,600 
 
 406,600 
 2, 000, 000 
 
 575,200 
 31,700 
 
 640,300 
 
 1,201,600 
 9,091,600 
 3, 000, 000 
 9,395,900 
 
 861,700 
 497, 000 
 
 287,926 
 58,537. 
 240 
 
 9,255,130 
 
 1,881,649 
 
 7,734 
 
 811,966,200 
 
 2,432,800 
 
 10,000 
 
 85,553,100 
 
 Colombia 
 
 1, 129, 000 
 
 Ecuador . 
 
 4,600 
 
 
 
 
 
 
 ^ 
 
 
 Guiana (British) .. 
 Guiana (Dutch) ... 
 Guiana (French) .. 
 Peru 
 
 
 
 
 
 
 
 
 
 
 
 
 
 110,965 
 
 a 25 
 
 27, 366 
 
 53,809 
 
 3,566,868 
 
 800 
 
 879,666 
 
 1,729,603 
 
 4,611,700 
 
 1,000 
 
 1,137,400 
 
 2,236,300 
 
 2, 140, 100 
 600 
 
 
 Central America 
 
 Asia: 
 
 527*800 
 1,037,800 
 
 
 
 
 
 
 
 India (British) .... 
 East Indies (Brit- 
 ish) 
 
 
 
 
 
 
 
 
 
 East Indies (Dutch) 
 
 3,466 
 
 111,877 
 
 144, 000 
 
 66,800 
 
 Total 
 
 392, 705 
 
 12, 625, 627 
 
 260,992,900 
 
 6,882,369 
 
 173,011,283 
 
 223,691,300 
 
 103,806,700 
 
 
 Country. 
 
 1902. 
 
 Gold. 
 
 Kilo- 
 grams 
 (fine). 
 
 Ounces 
 (flue). 
 
 Value. 
 
 Silver. 
 
 Kilo- 
 grams 
 (fine). 
 
 Ounces 
 (fine). 
 
 Coining 
 value. 
 
 Commer- 
 cial 
 value. 
 
 North America: 
 
 United States 
 
 Mexico 
 
 Canada 
 
 Africa 
 
 Australasia 
 
 Europe: 
 
 Russia 
 
 Austria-Hungary . . 
 
 Germany 
 
 Norway 
 
 Sweden 
 
 Italy 
 
 Spain 
 
 Portugal 
 
 Greece 
 
 Turkey 
 
 Finland 
 
 France 
 
 Great Britain 
 
 South America: 
 
 Argentina 
 
 Bolivia 
 
 Chile 
 
 Colombia 
 
 Ecuador 
 
 Brazil 
 
 Venezuela 
 
 Guiana (British) .. 
 
 Guiana (Dutch) ... 
 
 Guiana (French) .. 
 
 Peru 
 
 Uruguay 
 
 Central America . . 
 Asia: 
 
 .Japan 
 
 China 
 
 Korea 
 
 India (British) .. .. 
 
 East Indies (Brit- 
 ish) 
 
 East Indies (Dutch) 
 
 1,373 
 .,279 
 :, 106 
 
 ;,7i6 
 :,749 
 
 1,905 
 
 1,267 
 
 94 
 
 3,870,000 
 491,156 
 1,032,161 
 1,887,773 
 3, 946, 874 
 
 1,090,053 
 
 106, 037 
 
 - 3, 023 
 
 97 
 
 3,023 
 
 267 
 
 494 
 
 63 
 
 880, 000, 000 
 10, 163, 100 
 21,336,700 
 39, 023, 700 
 
 81, 578, 800 
 
 22, 538, 400 
 
 2, 171, 300 
 
 ■ 62, 600 
 
 2,000 
 
 62, 600 
 
 5,300 
 
 10, 200 
 
 1,300 
 
 1,726,603 
 
 ' 872,091 
 
 131 ,-887 
 
 55,500,000 
 60, 176, 604 
 4, 223, 304 
 
 871, 757, 600 
 77, 804, 100 
 5,460,400 
 
 829,415,000 
 
 31,893,600 
 
 2, 238, 800 
 
 1,480 
 
 30, 600 
 1,300 
 
 45 
 
 2 
 
 ,003 
 
 .,796 
 
 301 
 
 1,169 
 
 6.53 
 
 :,72i 
 
 484 
 
 ;,642 
 
 .,.500 
 
 87 
 
 ,012 
 
 ,936 
 ,138 
 ,514 
 ,428 
 
 ,545 
 713 
 
 3,737 
 
 1,451 
 
 48 
 
 32, 262 
 
 122, 031 
 
 9,675 
 
 101,584 
 
 20, 985 
 
 87,491 
 
 15, 577 
 
 117, 077 
 
 112, 625 
 
 2,796 
 
 96,842 
 
 62, 269 
 422,401 
 145, 126 
 463, 824 
 
 49, 686 
 22, 930 
 
 77, 300 
 
 80, 000 
 
 1,000 
 
 666, 900 
 
 2,522,600 
 
 200, 000 
 
 2, 099, 900 
 
 438,800 
 
 1, 808, 600 
 
 322, 000 
 
 2, 420, 200 
 
 2, 326, 100 
 
 57, 800 
 
 2,001,900 
 
 1,287,0D0 
 8,731,800 
 3,000,000 
 9, 588, 100 
 
 1,027,100 
 474, 000 
 
 249, 690 
 
 4,937 
 
 68, 523 
 
 178,032 
 
 6,422 
 
 1,439 
 
 80, 000 
 
 115, 118 
 
 118 
 
 33,044 
 
 14, 949 
 
 269 
 
 23, 250 
 
 4,551 
 
 1,174 
 
 279, 044 
 
 64,047 
 
 85,269 
 
 240 
 
 8,026,037 
 
 158, 679 
 
 1, 881, 132 
 
 5, 722, 641 
 
 206,413 
 
 46, 226 
 
 964, 339 
 
 3,700,189 
 
 3,778 
 
 1, 062, 177 
 
 480, 566 
 
 8,679 
 
 747, 359 
 
 146, 289 
 
 37, 720 
 
 8, 969, 596 
 
 1,737,300 
 
 1,776,604 
 
 7,736 
 
 10, 377, 100 
 
 205, 200 
 
 2, 432, 200 
 
 7,399,000 
 
 266, 900 
 
 69, 800 
 
 1,246,800 
 
 4, 784, 100 
 
 4,900 
 
 1,373,300 
 
 621,300 
 
 11,200 
 
 966,300 
 
 189, 200 
 
 48, 800 
 
 11,597,100 
 
 2,246,200 
 
 2,297,000 
 
 10, 000 
 
 4, 263, 800 
 
 84,100 
 
 997, 000 
 
 3, 033, 000 
 
 109, 400 
 
 24,500 
 
 511,100 
 
 1,961,100 
 
 2,000 
 
 563, 000 
 
 254, 700 
 
 4,600 
 
 396,100 
 
 77, 500 
 
 20, 000 
 
 4, 7,63, 900 
 
 920, 800 
 
 941,600 
 
 4,100 
 
 58 
 
 1,887 
 
 2,400 
 
 1,000 
 
 182, 668 
 
 24 
 
 80,217 
 
 4, 264, 528 
 
 765 
 
 971,320 
 
 5, 513, 700 
 
 1,000 
 
 1, 265, 800 
 
 605, 000 
 
 2, 260, 200 
 
 400 
 
 614,800 
 
 207, Of!0 
 
 ,793 
 
 121,919 
 
 167,600 
 
 O'l.rOO 
 
 Total 445,453 
 
 14,321,860 
 
 296, 048, 800 
 
 5, 019, 103 
 
 161,3 
 
 ,208,594,000 I 85,607,200 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 505 
 
 World's production of gold and silver, etc. — Continued. 
 
 
 1903. 
 
 
 Gold. 
 
 Silver. 
 
 
 Kilo- 
 grams 
 (fine). 
 
 Ounces 
 (fine). 
 
 Value. 
 
 Kilo- 
 grams 
 (fine). 
 
 Ounces 
 (fine). 
 
 Coining Commer- 
 value. cial value. 
 
 North America: 
 
 United States 
 
 110, 731 
 16,066 
 28,340 
 102,314 
 134,231 
 
 37,063 
 
 3,378 
 
 106 
 
 4 
 
 51 
 
 40 
 
 8 
 
 2 
 
 3,560,000 
 
 516,524 
 
 911,118 
 
 3,289,409 
 
 4,315,538 
 
 1,191,582 
 
 108,609 
 
 3,412 
 
 129 
 
 1,640 
 
 1,291 
 
 262 
 
 63 
 
 t73,591,700 
 10,677,500 
 18,834,600 
 67,998,100 
 89,210,100 
 
 24,632,200 
 
 2,245,100 
 
 70,600 
 
 2,700 
 
 33,900 
 
 26,700 
 
 6,400 
 
 1,300 
 
 1,689,270 
 
 2,193,249 
 
 97, 984 
 
 10, 677 
 
 301, 233 
 
 4,724 
 
 50,624 
 
 181,136 
 
 6,158 
 
 1,061 
 
 25,085 
 
 127,267 
 
 54,300,000 
 70,499,942 
 
 3,149,691 
 343,214 
 
 9,682,856 
 
 151, 835 
 1,624,048 
 5,822,452 
 
 197, 928 
 34,117 
 
 806,335 
 4,090,876 
 
 170,206,000 
 
 91,151,400 
 
 4,072,200 
 
 443, 800 
 
 12,519,300 
 
 196,300 
 2,099,800 
 7,528,000 
 
 265,900 
 
 44,100 
 
 1,042,500 
 
 5,289,200 
 
 829,322.000 
 
 38,070.000 
 
 1,700,800 
 
 186,300 
 
 5,228,700 
 
 82 000 
 
 Canada 
 
 Africa 
 
 Australasia 
 
 Europe: 
 
 Austria-Hungary . . 
 
 877,000 
 3,144,100 
 
 
 106. 900 
 
 
 18,400 
 
 Italy 
 
 436,400 
 
 
 2,209,100 
 
 
 
 
 33,044 
 
 14,274 
 
 299 
 
 23,250 
 
 4,551 
 
 2,880 
 
 279,044 
 
 80,804 
 
 35,117 
 
 1,062,177 
 
 468,830 
 
 9,618 
 
 747,359 
 
 146,289 
 
 92,592 
 8,969,596 
 2, 597, 355 
 1,128,799 
 
 1,373,300 
 
 593,200 
 
 12,400 
 
 966,300 
 
 189,200 
 
 119,700 
 
 11,597,100 
 
 3,3,68,200 
 
 1,459,600 
 
 573,600 
 
 
 31 
 3 
 
 999 
 96 
 
 20,700 
 2,000 
 
 247,800 
 
 Finland 
 
 5,200 
 
 
 403,600 
 
 Great Britain 
 
 South America: 
 
 116 
 
 45 
 
 2 
 
 1,004 
 
 4,100 
 
 413 
 
 3,422 
 
 127 
 
 2,424 
 
 666 
 
 3,162 
 
 892 
 
 77 
 
 2,822 
 
 3,013 
 11,021 
 
 4,514 
 17,197 
 
 1,770 
 755 
 
 3,737 
 
 1,451 
 
 48 
 
 32,262 
 
 131,795 
 
 13,272 
 
 110,016 
 
 4,087 
 
 77,948 
 
 18,183 
 
 101,658 
 
 28,669 
 
 2,491 
 
 90, 716 
 
 56,881 
 354,334 
 145,125 
 552,873 
 
 56,899 
 24,261 
 
 77,300 
 
 30,000 
 
 1,000 
 
 666, 900 
 
 2,724,400 
 
 274,400 
 
 2,274,200 
 
 84,500 
 
 1,611,300 
 
 375, 900 
 
 2,101,500 
 
 692,600 
 
 51,500 
 
 1,875,300 
 
 2,002,700 
 7,324,700 
 3,000,000 
 11,428,900 
 
 1,176,200 
 601,500 
 
 79,000 
 50,000 
 
 Bolivia . - 
 
 4,843,600 
 
 Chile 
 
 1,402,600 
 
 Colombia 
 
 609,500 
 
 
 
 Brazil 
 
 
 
 
 
 
 
 
 
 
 Guiana (British) .. 
 Guiana (Dutch).,. 
 Guiana (French).. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 54,339 
 
 1,746,674 
 
 2,258,300 
 
 943, 200 
 
 
 
 Central America 
 
 Asia: 
 
 65,831 
 16,875 
 
 2,116,063 
 642,428 
 
 2,735,900 
 701,300 
 
 1,142,700 
 292,900 
 
 
 
 
 
 
 
 
 India (British).... 
 East Indies {Brit- 
 
 
 
 
 
 
 
 
 
 Esst Indies(Dutcli) 
 
 3,817 
 
 122,696 
 
 158,700 
 
 66,200 
 
 
 489,810 
 
 15,747,378 
 
 325,527,200 
 
 6,302,493 
 
 170,443,670 
 
 220,371,600 
 
 92, 039, 600 
 
 
 
506 
 
 GOLD STANDAftD W iNT^EftJTATlONAt TBABB. 
 
 Highest, lowest, and average price of bar silvtr in London, per ounce British standard 
 (0.9SS), since 1833, and the equivalent in United States gold coin of an ounce 1,000 fine, 
 taken at the average price. 
 
 Calendar 
 years. 
 
 1833, 
 1834. 
 1836. 
 1836. 
 1837. 
 1838. 
 1839. 
 1840. 
 1841. 
 1842. 
 1843. 
 1844. 
 1845. 
 1846. 
 1847. 
 1848. 
 1849. 
 1850. 
 1851. 
 1852. 
 1853. 
 1854. 
 1855. 
 1856. 
 1857. 
 1858. 
 1859. 
 1860. 
 1861. 
 1862. 
 1863, 
 1864, 
 1865, 
 1866, 
 1867, 
 1868 
 
 Highest 
 
 Lowest 
 
 Aver- 
 
 quota- 
 tion. 
 
 quota- 
 tion. 
 
 age 
 quota- 
 tion. 
 
 d. 
 
 d. 
 
 d. 
 
 59J 
 
 58} 
 
 59^ 
 
 60} 
 
 59} 
 
 59JI 
 
 60 
 
 69} 
 
 59H 
 
 aoi 
 
 59i 
 
 60 
 
 60g 
 
 59 
 
 59^3 
 
 601 
 
 59J 
 
 694 
 
 60| 
 
 60 
 
 608 
 
 60J 
 
 601 
 
 60} 
 
 601 
 
 69} 
 
 60,^ 
 
 60 
 
 69} 
 
 59/, 
 
 59J 
 
 69 
 
 69A 
 
 59} 
 
 69} 
 
 694 
 
 691 
 
 58i 
 
 59} 
 
 601 
 
 59 
 
 59 "b 
 
 60S 
 
 58J 
 
 69 J 
 
 60 
 
 58J 
 
 59 
 
 60 
 
 594 
 
 59 
 
 6U 
 
 mi 
 
 61A 
 
 61f 
 
 60 
 
 61 
 
 61J 
 
 59J 
 
 604 
 
 61J 
 
 60i 
 
 614 
 
 61f 
 
 60} 
 
 614 
 
 61i 
 
 60 
 
 61ii 
 
 62} 
 
 604 
 
 61i^s 
 
 62S 
 
 61 
 
 61} 
 
 61i 
 
 60} 
 
 61 IB 
 
 623 
 
 61} 
 
 62fs 
 
 62S 
 
 61} 
 
 61 H 
 
 611 
 
 601 
 
 60}8 
 
 621 
 
 61 
 
 61fa 
 
 61} 
 
 61 
 
 6U 
 
 m 
 
 60} 
 
 61} 
 
 611 
 
 6QS 
 
 61,^ 
 
 621 
 
 60S 
 
 614 
 
 611 
 
 60J 
 
 60ft 
 
 61i 
 
 601 
 
 604 
 
 Value of a 
 fine ounce 
 at avera je 
 quotation. 
 
 ai.297 
 1.313 
 1.308 
 1.315 
 1.306 
 1.304 
 1.323 
 1. 323 
 1.316 
 1.303 
 1.297 
 1.304 
 1.298 
 1.300 
 1.308 
 1.304 
 1.309 
 1.316 
 1.337 
 1.326 
 1.348 
 1.348 
 1.344 
 1.344 
 1.363 
 1.344 
 1.360 
 1.352 
 1.333 
 1.346 
 1.346 
 1.345 
 1.338 
 1.339 
 1.328 
 1.326 
 
 Highest 
 
 Lowest 
 
 Aver- 
 age 
 quota- 
 tion. 
 
 quota- 
 tion. 
 
 quota- 
 tion. 
 
 d. 
 
 d. 
 
 d. 
 
 61 
 
 60 
 
 60/g 
 
 60} 
 
 60} 
 
 60A 
 
 61 
 
 60ft 
 
 604 
 
 61} 
 
 59} 
 
 
 69}| 
 
 674 
 
 59ft 
 
 594 
 
 67} 
 
 58ft 
 
 57i 
 
 554 
 
 56 i 
 
 584 
 
 46} 
 
 53 
 
 58} 
 
 53} 
 
 64ii 
 
 56} 
 
 494 
 
 52: 
 
 63, 
 
 484 
 
 51 
 
 52 1 
 
 514 
 
 52j 
 
 52, 
 
 604 
 
 61 
 
 52 
 
 60 
 
 61 ? 
 
 Bli's 
 
 60A 
 
 50ft 
 
 Bit 
 
 494 
 
 60 4 
 
 50 
 
 464 
 
 •>8ft 
 
 47 
 
 42 
 
 46; 
 
 47} 
 
 43- 
 
 44U 
 
 «]% 
 
 41 
 
 42- 
 
 44} 
 
 411 
 
 42 J 
 
 54} 
 
 43 
 
 47: 
 
 48, 
 
 435 
 
 45iV 
 
 43i 
 
 37 
 
 39} 
 
 38i 
 
 30 
 
 35ft 
 
 31i 
 
 27 
 
 28 i 
 
 31i 
 
 27ft 
 
 2948 
 
 31 1 
 
 29} 
 
 30 1 
 
 29: § 
 
 23} 
 
 27 ft 
 
 28i 
 
 25 
 
 26 1 
 
 29 
 
 261 
 
 27ft 
 
 30} 
 
 27 
 
 28ft 
 
 29ft 
 
 24: s 
 
 27ft 
 
 26^j 
 
 21 i 
 
 24ft 
 
 284 
 
 21H 
 
 24} 
 
 Value of a 
 fine ounce 
 at average 
 quotation. 
 
 SI. 325 
 
 1.328 
 
 1.326 
 
 1.322 
 
 1. 29769 
 
 1. 27883 
 
 1. 24233 
 
 1. 16414 
 
 1. 20189 
 
 1. 15358 
 
 1. 12392 
 
 1.14607 
 
 1. 13229 
 
 1. 13.562 
 
 1. 10874 
 
 1. 11068 
 
 1. 06510 
 
 . 99467 
 
 . 97946 
 
 .93974 
 
 . 93511 
 
 1.04634 
 
 .98800 
 
 .87145 
 
 . 78030 
 
 . 63479 
 
 . 6.5406 
 
 . 67565 
 
 .60438 
 
 . 59010 
 
 .60164 
 
 . 62007 
 
 . 69695 
 
 . 52795 
 
 . 64257 
 
aoLB STANDARD IN INTERNATIONAL TRADE. 
 
 )07 
 
 Ihqhest, lovvst, and average price of silver bullion and value of a fine ounce each month, 
 during the calendar years 1900-1903. 
 
 Month. 
 
 1900. 
 
 January 
 
 February 
 
 March 
 
 April 
 
 May 
 
 June 
 
 July 
 
 August 
 
 September. . . 
 
 October 
 
 November . . . 
 December ... 
 
 Average . 
 
 1901. 
 
 January 
 
 February . . . 
 
 March 
 
 April 
 
 May 
 
 June 
 
 July 
 
 August 
 
 September.. 
 
 October 
 
 November . . 
 December . . 
 
 Average . 
 
 1902. 
 
 January 
 
 February 
 
 March 
 
 April 
 
 May 
 
 June 
 
 July 
 
 August 
 
 September 
 
 October 
 
 November 
 
 December 
 
 Average . 
 
 1903. 
 
 January 
 
 February . . . 
 
 March 
 
 April 
 
 May 
 
 June 
 
 July 
 
 August 
 
 September., 
 
 October 
 
 November . . 
 
 Average (11 
 months) . . . 
 
 High- 
 est. 
 
 Pence. 
 273 
 27j 
 
 27i 
 27i 
 
 28A 
 
 29i 
 
 30} 
 
 29K 
 
 29|| 
 
 28/, 
 
 28J 
 
 27iJ 
 
 271 
 
 27J 
 
 27} 
 
 271 
 
 27 
 
 26J 
 
 264 
 
 253 
 
 26fB 
 
 26J 
 25/, 
 24J 
 241 
 24/, 
 24/, 
 
 24i 
 23}J 
 23} 
 22j 
 
 22j 
 
 22/a 
 
 2i\% 
 
 f,t 
 
 24A 
 
 254 
 
 263 
 
 27^ 
 
 284 
 
 278 
 
 Low- 
 est. 
 
 Pence. 
 27 
 
 27/, 
 
 VJ' 
 274 
 
 27/', 
 
 273 
 
 27n 
 
 28/, 
 
 291 
 
 29/, 
 
 291 
 
 273 
 
 27J 
 
 27ft 
 
 26H 
 
 27A 
 
 27} 
 
 26H 
 
 263 
 
 265 
 
 26g 
 
 25§ 
 
 24ig 
 
 25i 
 
 26A 
 
 24ig 
 
 23V% 
 
 23/e 
 
 23ii 
 
 24fi 
 
 24f>« 
 
 23} 
 21H 
 21 i§ 
 
 21H 
 
 2U 
 
 221 
 
 22| 
 
 24,'% 
 
 241 
 
 24} 
 
 25i'i, 
 
 26} 
 
 27/, 
 
 26} 
 
 Average 
 price 
 
 per ounce 
 British 
 
 standard, 
 0.926. 
 
 Equivalent 
 
 valueofaiine 
 
 ounce with 
 
 exchange at 
 
 par ($4.8665). 
 
 Pence. 
 27. 3088 
 27.4765 
 27.5810 
 27.4150 
 27. 6625 
 27. 8293 
 28. 2376 
 28. 2600 
 28.8376 
 29.5902 
 29. 6634 
 29. 6900 
 
 28. 2868 
 
 28. 9735 
 28. 1592 
 27. 9496 
 27. 2925 
 27.4189 
 27.4200 
 26. 9629 
 26. 9375 
 26. 9650 
 26. 6167 
 26. 0913 
 25.4475 
 
 27. 1861 
 
 26. 6260 
 25.4140 
 25. 0078 
 24. 3221 
 23. 6990 
 24. 1850 
 24. 3680 
 24. 22.69 
 23. 8750 
 23. 4004 
 22. 6926 
 22. 2067 
 
 24.0851 
 
 21. 9838 
 22. 1093 
 
 22. .5000 
 
 23. 3650 
 24. 8894 
 24. 3300 
 24. 8611 
 25. 6009 
 26.7624 
 27. 8935 
 27. 0060 
 
 .60016 
 .60460 
 .60096 
 . 60577 
 .61005 
 . 61895 
 .61927 
 . 63216 
 . 64805 
 .6.5026 
 . 65839 
 
 . 62007 
 
 . 63513 
 . 6172S 
 .61268 
 . 59828 
 .60106 
 . 60107 
 . 69107 
 . 69050 
 ..69110 
 .58344 
 .57150 
 . 65783 
 
 . 59595 
 
 . 56173 
 ..65711 
 . 64820 
 . 53316 
 . 51950 
 . 63016 
 . 53417 
 . 53106 
 .62326 
 . 51296 
 . 49'31 
 . 48679 
 
 . 52795 
 
 . 48191 
 . 48466 
 . 49322 
 . 61196 
 . 54560 
 . 53334 
 . 54498 
 .56120 
 . 68644 
 . 61146 
 
 24. 6618 
 
 Average 
 
 monthly 
 
 price at 
 
 New York 
 
 oi ex- 
 change on 
 London. 
 
 Equivalent 
 
 value of a fine 
 
 ounce based 
 
 on average 
 
 monthly 
 price and av- 
 erage rate 
 of exchange. 
 
 $4.8726 
 4.8748 
 4.8691 
 4. 8766 
 4.8806 
 4.8696 
 4. 8712 
 4. 8786 
 4.8689 
 4.8432 
 4. 8470 
 4.8488 
 
 .8668 
 
 4.8724 
 4. 8780 
 4. 8778 
 4.8817 
 4.8816 
 4.8820 
 4. 8752 
 4. 8731 
 4. 8485 
 4. 8623 
 ■4.8762 
 4.8698 
 
 4. 8731 
 
 1. 69938 
 .60346 
 .60363 
 . 60208 
 . 60619 
 . 61043 
 .61957 
 . 61839 
 .63286 
 . 64551 
 . 64760 
 . 64849 
 
 4.8716 
 4. 8749 
 4.8773 
 4. 8788 
 4. 8731 
 4. 8764 
 4.8800 
 4. 8748 
 4.8603 
 4.8626 
 4. 8714 
 4. 8701 
 
 4. 8726 
 
 4. 8689 
 4. 8763 
 4. 8702 
 4.8718 
 4. 8813 
 4. 8779 
 4. 8675 
 4. 8582 
 4. 8636 
 4. 8664 
 4, 8396 
 
 4.8664 
 
 . 61979 
 
 . 63682 
 .61858 
 . 61422 
 . 60014 
 .60366 
 .60298 
 . 59209 
 . 59130 
 . 58949 
 ..68294 
 . 57360 
 . .65820 
 
 . .69691 
 
 . 56231 
 . 55806 
 
 .53449 
 . 62021 
 . 63122 
 . 53666 
 . 63197 
 . 52270 
 . 61265 
 . 49768 
 . 48694 
 
 . 62858 
 
 . 48214 
 . 48653 
 .49359 
 . 61253 
 . 54''09 
 . 53457 
 . 54.509 
 .66026 
 . 58608 
 . 61064 
 . .58898 
 
 Average 
 monthly 
 New York 
 price of 
 fine bar 
 silver. 
 
 1. 60226 
 . 60602 
 . 60611 
 . 60395 
 . 60682 
 .61120 
 . 61936 
 .61865 
 . 63343 
 . 64936 
 . 64296 
 .64775 
 
 . 62066 
 
 . 63486 
 . 61693 
 . 61336 
 . 60033 
 . 60394 
 . 60335 
 . 59423 
 .59217 
 . 58978 
 . 68356 
 . 57400 
 . 58790 
 
 . 59703 
 
 . 66302 
 . 55833 
 . 64923 
 .53452 
 . 62000 
 . 63085 
 . 53152 
 . 53260 
 . 52269 
 . 51162 
 .49705 
 . 48653 
 
 . 62815 
 
 . 48213 
 . 48479 
 . 493,65 
 . 512.56 
 .54775 
 . 5a519 
 . 5'1500 
 . 66076 
 . 58606 
 . 60963 
 . 58745 
 
 . 54044 
 
508 
 
 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Highest, lowest, and average value of a United States silver dollar, measured by the market 
 price of silver, and the quantity of silver purchasable vnth a dollar at the average London 
 price of silver, each year since 1873. 
 
 
 Bullion value of 
 dollar. 
 
 a silver 
 
 Grains of pure 
 silver at 
 
 Calendar year. 
 
 Highest. 
 
 Lowest. 
 
 Average. 
 
 purchasable 
 
 with a 
 United States 
 silver dollar, a 
 
 1873 . 
 
 $1,016 
 1.008 
 .977 
 .991 
 .987 
 .936 
 .911 
 .895 
 .896 
 .888 
 .868 
 .871 
 .847 
 .797 
 .799 
 .755 
 .752 
 .926 
 .827 
 .742 
 .667 
 .538 
 .632 
 .541 
 .506 
 .481 
 .491 
 .509 
 .501 
 .442 
 .488 
 
 $0,981 
 .970 
 .941 
 .792 
 .902 
 .839 
 .828 
 .873 
 .862 
 .847 
 .848 
 .839 
 .794 
 .712 
 .733 
 .706 
 .711 
 .740 
 .738 
 .642 
 .517 
 .457 
 .461 
 .504 
 .400 
 .424 
 .451 
 .463 
 .423 
 .367 
 .368 
 
 $1,004 
 .989 
 .961 
 .900 
 .929 
 .892 
 .869 
 .885 
 .876 
 .878 
 .858 
 .859 
 .823 
 .769 
 .758 
 .727 
 .723 
 .809 
 .764 
 .674 
 .604 
 .491 
 .506 
 .522 
 .467 
 .456 
 .465 
 .479 
 .461 
 .408 
 .420 
 
 369.77 
 
 1874 
 
 375.38 
 
 1875 . 
 
 386.31 
 
 1876 
 
 412.50 
 
 1877 
 
 399.62 
 
 1878 
 
 416.20 
 
 1879. 
 
 427. 21 
 
 1880 
 
 419.49 
 
 1881 
 
 423.80 
 
 1882 . 
 
 422.83 
 
 1883 
 
 432.69 
 
 1884 
 
 432.18 
 
 1885 
 
 451.09 
 
 1886 . . . 
 
 482.77 
 
 1887 
 
 489.78 
 
 1888 
 
 510.66 
 
 1889 
 
 613. 48 
 
 1890 
 
 458.90 
 
 1891 
 
 485.93 
 
 1892 
 
 550.81 
 
 1893 
 
 614.65 
 
 1894 
 
 756. 11 
 
 1895 
 
 735. 14 
 
 1896 
 
 711.20 
 
 
 794.96 
 
 1898 
 
 814.14 
 
 1899 
 
 791.84 
 
 1900 ' 
 
 774. 10 
 
 1901 
 
 805.43 
 
 
 909.17 
 
 1903 
 
 884.67 
 
 
 
 a371.25 grains of pure silver are contained in a silver dollar. 
 
GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 509 
 
 Coinage value in gold of an ounce of fine silver at the ratios 1 : 16-1 : 40. 
 
 Ratio. 
 
 Value of 
 
 an ounce 
 
 of fine 
 
 silver. 
 
 Ratio. 
 
 Value of 
 
 an ounce 
 
 of fine 
 
 silver. 
 
 Ratio. 
 
 Value of 
 
 an ounce 
 
 of fine 
 
 silver. 
 
 ltol5 
 
 (S1.3780 
 1.3336 
 
 1.2929 
 
 1.2919 
 
 1.2527 
 
 1.2159 
 
 1.1811 
 
 1.1483 
 
 1.1173 
 
 1.0879 
 
 1.0600 
 
 1.0335 
 
 1.0083 
 
 .9843 
 
 .9614 
 
 .9396 
 
 .9187 
 
 1 to23 
 
 80.8987 
 .8796 
 .8613 
 .8437 
 .8268 
 .8106 
 .7960 
 .7800 
 .7666 
 .7617 
 .7382 
 .7253 
 .7109 
 .7007 
 .6890 
 .6777 
 .6668 
 
 lto32 
 
 80.6459 
 
 ltol5i 
 
 
 1 to 324 
 
 .6360 
 
 1 to 15.988 (United 
 
 lto24 
 
 1 to 33 
 
 .6264 
 
 States ratio) 
 
 
 1 to 334 
 
 .6171 
 
 ltol6 
 
 lto25 
 
 lto34 
 
 .6080 
 
 ltol64 
 
 1 to 254 
 
 lto344 
 
 .5992 
 
 ltol7 
 
 
 lto35 
 
 .5906 
 
 ltol74 
 
 1 to 264 
 
 1 to 354 
 
 .5823 
 
 ltol8 
 
 1 to27 
 
 lto36 
 
 .5742 
 
 ItolSJ 
 
 1 to 274 
 
 1 to 364 
 
 .6663 
 
 ltol9 
 
 1 to28 
 
 lto37 
 
 .5587 
 
 ltol94 
 
 
 lto374 
 
 .6512 
 
 Ito20 
 
 1 to29 
 
 lto38 
 
 .5439 
 
 Ito20i 
 
 1 to 294 
 
 1 to 384 
 
 .5369 
 
 lto21 
 
 Ito30 
 
 lto39 
 
 .6300 
 
 lto21i. 
 
 1 to 304 
 
 1 to 394 
 
 .5233 
 
 lto22 
 
 lto31. 
 
 Ito40 
 
 .5168 
 
 1 to 224-. . 
 
 1 to 314 
 
 .6562 
 
 
 
 
 
 
510 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Monetary systems and approximate stocks of money in the aggregate and 
 
 Countries. 
 
 United States 
 
 Austria-Hungary . 
 
 Belgium 
 
 Britisli Empire: 
 
 Australasia 
 
 Canada 
 
 Great Britain . . . 
 
 India 
 
 South Africa 
 
 Straits Settlements/ - 
 
 Bulgaria 
 
 Cuba 
 
 Denmark 
 
 Egypt 
 
 Finland 
 
 France 
 
 Germany 
 
 Greece 
 
 Haiti 
 
 Italy 
 
 Japan 
 
 Netherlands 
 
 Norway 
 
 Portugal 
 
 Roumania 
 
 Russia 
 
 Servia 
 
 South American States. 
 
 Spain 
 
 Sweden 
 
 Switzerland 
 
 Turkey 
 
 Central American 
 
 States. 
 
 China 
 
 Mexico 
 
 Siam 
 
 Total 
 
 Monetary 
 standard. 
 
 Gold. 
 ..do. 
 ..do. 
 
 -do. 
 .do. 
 .do. 
 -do. 
 
 ..do.... 
 Silver .. 
 Gold.... 
 ...do.... 
 ...do.... 
 ...do.... 
 ...do.... 
 ...do.... 
 ...do.... 
 ..do.... 
 ...do.... 
 ...do.... 
 ...do.... 
 ..do.... 
 ..do.... 
 ..do .... 
 ..do.... 
 ..do.... 
 ...do.... 
 ...doe... 
 ...do.... 
 ...do..., 
 ...do... 
 ...do... 
 Silver A 
 
 ...do... 
 ...do... 
 Gold..., 
 
 Monetary 
 unit. 
 
 Dollar . 
 Crown . 
 Franc . 
 
 Pound sterling . 
 
 Dollar 
 
 Pound sterling . 
 Pound sterling 
 
 and rupee. 
 Pound sterling . 
 
 Dollar 
 
 Lev 
 
 Peseta 
 
 Crown 
 
 Piaster 
 
 Mark 
 
 Franc 
 
 Mark 
 
 Drachma : . 
 
 Gourde 
 
 Lira 
 
 Yen 
 
 Florin 
 
 Crown 
 
 Milreis 
 
 Leu 
 
 Ruble 
 
 Dinar 
 
 Peso 
 
 Peseta 
 
 Crown 
 
 Franc 
 
 Piaster 
 
 Peso 
 
 Tael . . 
 Peso . . 
 Tical . 
 
 Popula- 
 tion. 
 
 000 
 omitted. 
 
 81,200 
 48, 100 
 6,900 
 
 5,600 
 
 6,400 
 
 42,600 
 
 296,200 
 
 7,100 
 
 6,100 
 
 3,700 
 
 1,600 
 
 2,600 
 
 9,800 
 
 2,700 
 
 39, 000 
 
 56, 400 
 
 2,400 
 
 1,300 
 
 33, 000 
 
 48,400 
 
 6,300 
 
 2,300 
 
 6,400 
 
 6,000 
 
 130,900 
 
 2,600 
 
 39,400 
 
 18,600 
 
 6,200 
 
 3,300 
 
 24,000 
 
 4,200 
 
 330, 100 
 
 13, 600 
 
 6,300 
 
 1,296,200 
 
 Ratio be- 
 tween gold 
 and full le- 
 gal-tender 
 silver. 
 
 1-15J 
 
 1-16J 
 l-16i 
 
 1-15J 
 
 l-15i 
 1-15J 
 1-15J 
 
 1-155 
 
 l-15i 
 
 l-16i 
 1-164 
 l-15i 
 
 l-15i 
 
 1-164 
 
 Ratio be- 
 tween gold 
 and lim- 
 
 Stock of 
 
 gold in 
 
 banks and 
 
 public 
 
 ited-tender"'«^™"<''' 
 silver. 000 
 
 omitted. 
 
 1-14.95 
 1-18. 69 
 1-14. 38 
 
 1-14. 28 
 1-14. 28 
 1-14. 28 
 1-21. 90 
 
 1-14. 28 
 1-14. 38 
 1-14. 28 
 1-14. 88 
 1-16. 68 
 1-15. 50 
 1-14. 38 
 1-13. 95 
 1-14. 38 
 1-14. 38 
 1-14. 38 
 1-28. 75 
 1-15.13 
 1-14.88 
 1-U. 09 
 1-14. 38 
 1-23.24 
 1-14.38 
 1-14. 38 
 1-14. 38 
 1-14. 88 
 1-14. 38 
 1-16.09 
 
 1-16J 
 
 $859, 000 
 
 a 235, 800 
 
 b 18, 000 
 
 50,000 
 a 182, 800 
 9 63, 200 
 
 a 39, 400 
 
 c 1,400 
 
 18, 000 
 
 o 17, 400 
 
 10,000 
 
 c 4, 100 
 
 o 458, 900 
 
 b 132, 800 
 
 a 200 
 
 <i 1,000 
 
 o 116, 400 
 
 a 69, 800 
 
 a 20, 200 
 
 a 6, 700 
 
 a 5, 200 
 
 c 14, 300 
 
 a 385, 800 
 
 c3,100 
 
 a 91,800 
 
 78,800 
 
 n 15, 900 
 
 a 20, 800 
 
 10,000 
 
 a 1,900 
 
 6 8,600 
 
 2,941,300 
 
 a Official information furnished through United States representatives. 
 
 6 Estimate, Bureau of the Mint. 
 
 c L'Economiste Europ^en, January, 1903. 
 
 d C. Cramer Frey. 
 
GOLD STANDARD IN INTERNATIONAL TKADE. 
 
 511 
 
 ■ capita in the principal countries of the world on December SI, 1903. 
 
 Stock of gold. 
 
 In circu- 
 lation. 
 
 000 
 omitted. 
 
 $461, 400 
 a 51, 000 
 612,000 
 
 347,600 
 29,200 
 
 81, 320, 400 
 
 1286,800 
 
 6 80, 000 
 
 0128,600 
 
 60,000 
 
 530,400 
 
 B 63, 200 
 
 68,600 
 
 60,000 
 
 6 509,400 
 
 6 668,600 
 
 2,100 
 
 a 24, 700 
 "o8,'266 
 
 olOO 
 o397,"966 
 
 03,200 
 b 9, 400 
 40, 000 
 
 Total. 
 
 000 
 omitted. 
 
 1,400 
 
 18, 000 
 
 17,400 
 
 6 60,000 
 
 <!4,100 
 
 6968,300 
 
 6 801,400 
 
 2,300 
 
 o 1, 000 
 
 0141,100 
 
 69,800 
 
 28,400 
 
 06,700 
 
 05,300 
 
 14,300 
 
 783,700 
 
 c3;i00 
 
 91,800 
 
 78,800 
 
 o 19, 100 
 
 6 30, 200 
 
 6 50,000 
 
 01,900 
 
 6 8,600 
 61,000 
 
 Stock of silver. 
 
 Pull 
 tender. 
 
 TOO 
 omitted. 
 
 $572, 200 
 
 6 15, TOO 
 
 546,400 
 
 a 13, 800 
 6 2, TOO 
 
 373,500 
 
 50,900 
 
 0500 
 
 01,000 
 
 016,000 
 
 052,300 
 
 4,000 
 
 6 30, 000 
 03,100 
 
 6 345, 8TO 
 48,900 
 o 193, OM 
 
 Limited 
 tender. 
 
 000 
 omitted. 
 
 $107,000 
 
 79,200 
 
 6 9, 700 
 
 06,100 
 
 6,700 
 
 0116,800 
 
 02,200 
 
 03,200 
 
 c 1,500 
 
 6,000 
 
 o 6, 200 
 
 015,000 
 
 C600 
 
 46,300 
 
 0157,700 
 
 a 1,400 
 
 o 1, 200 
 
 a 20, 800 
 
 29,400 
 
 04,000 
 
 03,000 
 
 o 6, 500 
 
 C600 
 
 0101,900 
 
 t.- 1, 700 
 
 010,700 
 
 0173,700 
 
 07,000 
 
 d 10, 700 
 
 6 10, TOO 
 
 Total. 
 
 000 
 omitted. 
 
 $679, 200 
 79,200 
 6 24, 700 
 
 06,100 
 
 06,700 
 
 116,800 
 
 546,400 
 
 02,200 
 
 017,000 
 
 3, 500 
 
 5,000 
 
 o 6, 200 
 
 15,000 
 
 06OO 
 
 419,800 
 
 208,600 
 
 ■o 1,900 
 
 02,200 
 
 o 36, 800 
 
 29,400 
 
 a 56, 300 
 
 03, TOO 
 
 o 6, 500 
 
 06OO 
 
 101,900 
 
 "1,700 
 
 014,700 
 
 a 173, 700 
 
 o 7, 000 
 
 d 10, 700 
 
 6 40,000 
 
 3,100 
 
 6 345, 800 
 o 48, 900 
 0193,000 
 
 Uncovered 
 paper. 
 
 000 
 omitted. 
 
 $500, 600 
 
 63,600 
 
 6 107, 800 
 
 "56,900 
 0117,100 
 32,400 
 
 04,100 
 o 3, 900 
 
 o7,8M 
 
 09, 600 
 
 0175,600 
 
 0193,800 
 
 o 29; 100 
 
 a 3, 500 
 
 0177,900 
 
 58,300 
 
 648,800 
 
 7,900 
 
 63,000 
 
 c 19, 800 
 
 c 2, 700 
 
 01,549,400 
 
 0139,300 
 
 29,700 
 
 019,900 
 
 32,500 
 
 054,000 
 02, 600 
 
 Per capita. 
 
 Gold. 
 
 $16. 26 
 6.96 
 4.36 
 
 22.96 
 
 9.26 
 
 12.48 
 
 .21 
 
 9.66 
 
 11.25 
 
 6.69 
 
 3.06 
 
 1.52 
 
 24.83 
 
 14.21 
 
 .96 
 
 .77 
 
 4,28 
 
 1.44 
 
 5.36 
 
 2.91 
 
 .98 
 
 2.38 
 
 5.99 
 
 1.19 
 
 2.33 
 
 4.24 
 
 3.67 
 
 9.15 
 
 2.08 
 
 .45 
 
 .63 
 .16 
 
 Silver. 
 
 1.65 
 3.58 
 
 1.09 
 1.24 
 2.72 
 1.85 
 
 .31 
 
 3.33 
 
 .95 
 
 8,13 
 
 2,38 
 
 .65 
 
 .22 
 
 10.76 
 
 3.70 
 
 .79 
 
 1.69 
 
 1,11 
 
 .61 
 
 10,62 
 
 1,30 
 
 1,20 
 
 .10 
 
 .78 
 
 .65 
 
 .37 
 
 9,84 
 
 1,35 
 
 3,24 
 
 1,67 
 
 .74 
 
 1,06 
 3,60 
 30.63 
 
 Paper. 
 
 $6.17 
 1.32 
 16.62 
 
 10.54 
 
 2.76 
 
 .11 
 
 .81 
 1.05 
 
 ;.00 
 
 3.55 
 4.60 
 3.43 
 
 12.12 
 2.69 
 5.89 
 1.20 
 9.21 
 3,44 
 
 11,67 
 3,30 
 
 "i,'64 
 
 39,32 
 
 7,49 
 
 6,71 
 
 6,03 
 
 7,74 
 
 3.97 
 ,41 
 
 Total, 
 
 $30.79 
 8.93 
 23.55 
 
 24.06 
 
 21,04 
 
 17.96 
 
 2.17 
 
 9.97 
 
 4.14 
 
 2.38 
 
 14.38 
 
 12.07 
 
 3.71 
 
 5.29 
 
 40,09 
 
 21,34 
 
 13,87 
 
 5.15 
 
 10.78 
 
 3.25 
 
 25.19 
 
 7.66 
 
 13.86 
 
 5.78 
 
 6,77 
 
 2,88 
 
 42.02 
 
 21.07 
 
 10.73 
 
 18.42 
 
 3.75 
 
 8.93 
 
 1.05 
 8.20 
 31.20 
 
 2, 614, 800 
 
 5, 686, 700 
 
 2, 268, 400 
 
 944,800 
 
 3,213,200 
 
 4.37 
 
 2.71 
 
 e Except Bolivia. 
 
 /Includes Straits Settlements, the Malay States, Ceylon, and Johore. 
 
 a Report of head commissioner of paper currency. 
 
 A Except Costa Rica and British Honduras, gold-standard countries. 
 
 Note,— The value of the monetary stock of silver-standard countries has been changed to conform 
 to the decline in silver values. The monetary stock of Mexico and other countries where the Mexican 
 dollar circulates is given in Mexican dollars at bullion value. 
 
512 
 
 GOLD STANDARD IN INTERNATIONAL TRADE. 
 
 Tiieoretical parities of the principal gold coins of the world. 
 
 
 Descriptive. 
 
 United 
 States. 
 
 Russia. 
 
 England. 
 
 Latin Union. 
 
 I. Gold dollar and cents of the 
 
 Dollar. 
 
 Ruble. 
 
 Pound sterling. 
 
 lYam. (a) 
 
 United States. (1 gold dollar= 
 
 
 
 
 
 23.22 troy grains of fine gold; 
 
 
 
 
 
 5,760 troy grains = 378.24196 
 
 
 
 
 
 grams; hence a gold dollar = 
 
 
 
 
 
 1.504631611 grams of fine gold) 
 
 1.00 
 
 0.5145673 
 
 4.866664 
 
 0.1929526 
 
 II. Russian ruble and kopecks. (1 
 ruble == 3^ of an imperial; 
 
 
 
 
 
 
 
 
 
 1 imperial = 261.36 doli, or 
 
 
 
 
 
 11.61351571875 grams of fine 
 
 
 
 
 
 gold;!> 1 ruble = 17.424 doli of 
 
 
 
 
 
 fine gold) 
 
 1. 94337999 
 
 1.00 
 
 9 45758222 
 
 . 37498022 
 
 III. English pence. (1 penny = ji, of 
 
 
 
 m/ m ^U I l/UAf^^f 
 
 
 a pound sterling, and 1,869 
 
 
 
 
 
 pounds sterling = 40 troy pounds 
 
 
 
 
 
 of gold, H, 0.9161 fine; 1 troy 
 
 
 
 
 
 pound = 373.24195 grams; a sov- 
 
 
 
 
 
 ereign (£1) = 7.32238532 grama of 
 
 
 
 
 
 fine gold) 
 
 49. 316 
 
 25. 376464 
 
 240 
 
 9. 5157 
 
 IV. Francs and centimes. (The gold 
 
 
 
 
 
 20-franc piece contains ^ grams 
 
 
 
 
 
 of fine gold) : 
 
 5. 18262 
 
 2. 666807 
 
 25. 22155 
 
 1.00 
 
 V. German Empire. Mark and pfen- 
 
 
 
 
 
 nig. (1 crown or 10 marks 
 
 
 
 
 
 contains VV^ grams of fine gold) , 
 
 4.19792 
 
 2.160113 
 
 20.429455 
 
 .81 
 
 VI. Netherlands. Florins and cents. 
 
 
 
 
 
 (The 10-florin piece contains 
 
 
 
 
 
 6.048 grams of fine gold) 
 
 2. 4878 
 
 1.2801494 
 
 12. 1071186 
 
 . 48003072 
 
 VII. Austria. Crowns and hellers. (1 
 
 
 
 
 
 crown = 100 hellers; 10 crowns 
 
 
 
 
 
 contain 3.04878 grams of fine 
 
 
 
 
 
 gold) 
 
 4. 93519247 
 
 2.6394891 
 
 24.0174277 
 
 . 9522582 
 
 VIII. Portugal. (1 crown of 10 mil- 
 
 
 
 
 
 reis = 16.257083f grams of fine 
 
 
 
 
 
 gold) 
 
 .9256 
 
 476244 
 
 4. 604 
 
 . 178582 
 
 IX. Japan. Yen and sen. (20 gold 
 
 
 
 
 
 yens = 16.6665 grams of gold 0.900 
 
 
 
 
 
 fine; 1 yen contains 0.7499925 
 
 
 
 
 
 grams of fine gold) 
 
 2.006119915 
 
 - 1.0323228 
 
 .76327806 
 
 .38710064 
 
 Descriptive. 
 
 German 
 Empire. 
 
 Nether- 
 lands. 
 
 Austria. 
 
 Portugal. 
 
 Japan. 
 
 I. Gold dollar and cents of the 
 United States. (1 gold dollar = 
 23.22 troy grains of fine gold; 
 6,760 troy grains = 373.24195 
 grams; hence a gold dollar = 
 1.504631611 grams of fine gold) . . . 
 II. Russian ruble and kopecks. (1 
 ruble = ^ of an imperial; 1 
 imperial = 261.36 doli, or 
 11.61351571875 grams of fine gold;6 
 1 ruble = 17.424 doll of fine 
 
 gold) 
 
 English pence. (1 penny = ^c oi 
 a pound sterling, and 1,869 
 pounds sterllng=40 troy pounds 
 of gold, }4, 0.916S fine; 1 troy 
 pound = 373.24195 grams; a sov- 
 ereign (£1) = 7.32238632 grams of 
 
 Mark. 
 
 0. 23821 
 
 in. 
 
 fine gold) 
 
 Francs and centimes. (The gold 
 20-franc piece contains Jjf- grams 
 
 of fine gold) ■....- 
 
 V. German Empire. Mark and pfen- 
 nig. (1 crown or 10 marks con- 
 tains ^'V» grams of fine gold) 
 
 VI. Netherlands. Florins and cents. 
 (The 10-florin piece contains 
 6.048 grams of fine gold) 
 
 Austria. Crowns and hellers. (1 
 crown = 100 hellers; 10 crowns 
 contain 3.04878 grama of fine 
 gold) 
 
 Portugal. (1 crown of 10-milreis = 
 16.257083J grams of fine gold) 
 
 Japan. Yen and sen. (20 gold 
 yena=I6.6665 grams of gold 0.900 
 fine; 1 yen contains 0.7499925 
 grama of fine gold) 
 
 IV, 
 
 VII. 
 
 IX, 
 
 11. 74774 
 
 1. 2346679 
 ' 100/81 
 
 1.00 
 . 5926305 
 
 1.1756274 
 .22047 
 
 Florin. 
 
 0.402 
 
 . 78115879 
 
 19. 82306 
 •2. 0832 
 
 1. 687392 
 1.00 
 
 1. 983744 
 . 372022 
 
 Croum. 
 
 0. 20262634 
 
 . 39377998 
 
 9.99274373 
 1.050135 
 
 . 8506096 
 .5040974 
 
 1.00 
 1.8755365 
 
 Crown. 
 
 Yen. 
 
 0.498455 
 
 20. 9976252 
 
 532. 84549 
 55.997 
 
 45. 3672626 
 26. 880098 
 
 53. 323242 
 10.00 
 
 24.681907 
 2. 5833076 
 
 2. 092479076 
 1.24006696 
 
 2. 45997699 
 . 46133275 
 
 . 47790203 . 80640806 
 
 40650806 21. 676327 1. 00 
 
 a One Russian pound=409.5124 grams. 
 
 !>0r Italian lira, new drachma; Roumanian lei; Finnish mark, or Spanish peseta. 
 
 o 
 
^^ 
 
 x>y 
 
 . ■ f 
 
 
-^^«^».^. 
 
 y\ . 
 
 ^ fc. <r 
 
 "V. 
 
 *. ^'^ 1 / 
 
 i^K^ 
 
 I , 
 
 l^flhv^^^^^^^^^^C 
 
 [^■m^BiftflMi 
 
 1 Date Due 
 
 1 
 
 
 1 RfMi^&S 
 
 ^ 'fl_r 
 
 
 1 
 
 
 
 
 1 
 
 
 
 
 % 
 
 V 
 
 
 
 1 
 
 
 
 
 '' h 
 
 
 
 
 s 
 
 
 
 
 1 
 
 
 
 
 1 
 
 ^ 
 
 
 
 
 1 
 
 4 
 
 1 
 
 
 
 
 1 
 
 
 
 
 1 
 
 
 
 
 , A 
 
 ,-.. 
 
 
 
 ( 
 > 
 
 ' ■ ■** ■■ 
 
 
 
 
 ■ »■■■ 
 
 
 
 
 
 
 
 
 PRINTED IN 
 
 U. S. A. 
 
 («r 
 
 NO. Z3233 
 
 "^;;/- 
 
 
% 
 
 
 
 V