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carried on chiefly by American capitalists and others from without who will be governed in a large measure by conditions elsewhere. They will not be swayed by the seeming prosperity in the islands to the extent that they would be swayed by similar conditions in their own country, where the entire environment would tend to stimulate overproduction and obscure the suggestions of prudence and

conservatism.

The reasons appear to be conclusive, therefore, for the adoption in the Philippine Islands of a monetary standard based upon gold. Whether the position of investors is theoretically sound or not, there is no doubt, as a matter of fact based upon experience, that they will be deterred from investments under the silver standard and will be attracted under the gold standard. It would be of questionable propriety to introduce the money of the United States, or gold money of any kind, for general circulation, for the reasons which have already been pointed out; but if the use of silver money can be continued while it is given a fixed and unquestioned relation to gold, the double result will be accomplished of leaving undisturbed the present customs of the people and of extending a tempting invitation to American and foreign capital to enter and develop the islands.

CHARACTER OF THE PROPOSED SILVER COIN.

For carrying out these purposes it is recommended that a silver coin be coined and issued by the government of the Philippine Islands, having the exchange value of 50 cents in gold, and that effective means be placed in the possession of the government to maintain such coins, at all times and without question, at the gold value thus fixed. The Mexican dollar has been receivable for public dues by the Philippine treasury at the rate of two such dollars for one American dollar, almost continuously since the American occupation of the islands. Fluctuations in the value of the coin outside the Philippines have affected somewhat the stock in the islands, but have not resulted as yet in any change in the official ratio proclaimed by the Philippine government. The substitution of a new coin, having the value of fifty cents in gold, will not, therefore, involve the impairment of contracts, nor a serious change in the customs of the people. There is no reason to apprehend that the adoption of new devices for the coin will cast distrust upon it with the masses, in view of the recent monetary history of the Philippine Islands. Within about twenty years silver has superseded gold there as the chief medium of exchange, and the Mexican silver dollar has been employed concurrently with the Spanish dollar of ancient coinage and with the new Philippine dollar, or peso, issued by the Spanish government in 1897. The people have, therefore, become accustomed to receiving coins of different devices

and are not likely to object to a new set of devices indicating the sovereignty of the United States over the islands.

It is recommended that the new coin be known distinctively as the "peso," in order to do away as far as possible in the future with the distinction between two coins each known as a "dollar," but differing widely in value. The necessity of qualifying the term "dollar” is a source of inconvenience in retail trade, and might, under some conditions, lead to litigation in regard to the interpretation of contracts. It seems probable that the adoption of a distinctive Philippine coinage system, with proper auxiliaries in the form of certificates and bank notes, would tend to reduce the amount of American money now in circulation in the Philippine Islands and to make the new currency the chief, if not the exclusive, medium of commercial transactions. It is proper, however, that the gold money of the United States and its paper representatives should be legal tender in the islands, in order that they may be used, if necessary, to maintain the parity and exchange value of the Philippine currency and to meet any extraordinary pressure for currency which it might not be possible to meet with the limited resources of the Philippine mints.

WEIGHT AND FINENESS OF THE PROPOSED COIN.

While it is suggested that the new coin should be similar in size to the Mexican silver dollar, it is not necessary that it should be exactly identical in weight and fineness. If it is to be a token coin, sustained at a fixed value by its exchangeability for gold, it might, theoretically, be greatly reduced in bullion value. A radical change in this direction would, however, invite distrust and expose the new coin to the same danger of counterfeiting as American silver money. The reason for recommending that the new coin should contain less pure silver than the Mexican dollar is chiefly to guard against a rise in the bullion value of silver. Such a rise, if it carried silver above the ratio of 32 to 1, would send the silver coins to a premium, drive them to the melting pot, and deprive the country of a sufficient volume of the medium of exchange. This is practically the only danger menacing the proposed system which would not be under the complete control of the government of the Philippine Islands.

To guard against such a danger, it is suggested that the new silver coins be of the fineness of the subsidiary silver issued by the countries of the Latin Union. This would make them of a fineness of 0.835 instead of 0.9, the latter being the fineness of the standard silver dollar of the United States and of the 5-franc piece which was formerly coined by the countries of the Latin Union. The adoption of the fineness proposed would bring the new peso into exact conformity with the subsidiary coin of the countries of the Latin Union, and the existing Spanish-Philippine peso. Some advantages might be found in this uniformity of character if the project of a uniform standard of coinage

throughout the world should ever be favorably considered by the leading commercial nations. The following table shows the weight in grams of various silver coins, with their fineness and their nominal value at the old coinage parity of gold and silver:

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At a higher ratio,

The ratio of 32 to 1 would reduce the par value of these coins to just half what is stated in the last column of the table. Hence the proposed Filipino peso would represent about 43 cents in bullion value if silver and gold stood at the ratio of 32 to 1. representing a lower price for silver, there would be a still greater difference between the bullion value of the coin and its par value in exchange. It is the amount of this difference which marks the limit. within which silver might rise in value without causing difficulty with the proposed Philippine coinage. It is this difference, also, which marks the seigniorage or profit which would be derived by the Philippine government from the coinage of the new coin from silver bullion purchased at the market price. This margin, under present conditions, would amount to about 15 per cent of the face value of the coin, and would seem to afford ample protection against a probable rise in the market price of silver.

THE FUTURE COURSE OF SILVER.

There seems to be little danger, in view of the recent course of the silver market, that there will be a rise of a serious and permanent character in the price of silver bullion. The course of the market was almost uninterruptedly downward from 1870 to 1894. Within this period of twenty-four years silver lost more than half its original market value in gold. Since 1894 the decline in value has been less marked, but the market for the metal has usually been weak rather than strong. The occasions of an upward movement have been those when some local demand was announced or reported for the subsidiary coinage of some gold-standard country, or when an attempt has been made by the owners of silver bullion to give fictitious value to the metal by combination or by manipulation of the market. The highest average price since 1894 was in 1896, when the bullion value of the silver dollar of the United States, which had been 50.587 cents in 1895, rose to 52.257 cents. The highest quotation of silver

in 1896 in the London market was 311 pence, and the average quotation was 301 pence. The minimum quotation of 1896 was 294 pence, but the minimum has since touched (in 1897) 233 pence and (in 1898) 25 pence. The market has been more steady during the past three years and the price has been sustained to some extent by the efforts of a syndicate of holders of silver bullion. The following table shows the price of silver bullion for various representative years and the effect of the price upon the American silver dollar, including the price for each month of the fiscal year 1901:

Highest, lowest, and average price of silver bullion and value of a fine ounce.

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There is no influence known to-day likely to come into operation in any part of the world which will cause a large or permanent rise in the value of silver or in the demand for it. The decision of any government to purchase a few million ounces for coinage purposes might raise the price a few pennies per ounce, and for this reason some margin for guarding against such a contingency is desirable between the par value and the bullion value of the coin issued in the Philippine Islands. The government of Japan, in establishing the ratio of thirty-two to one between silver and gold, has taken the risk that a comparatively slight rise in the bullion value of silver would expel its silver coins and thereby deprive the country of its small money. The subject of adopting a lighter coin, at the ratio of 24 to 1 or 27 to 1, is under consideration by some of the leading financiers of that country. The last-named ratio would not depart widely from that herein recommended for the coinage of the Philippines, which is about 1 to 27. Such a reasonable margin between the face value of the coin and the present price of silver bullion seems to guard sufficiently against the danger of counterfeiting on the one hand and against any probable rise in the price of silver on the other.

The probability of a large and enduring rise in the price of silver bullion, as the result of a large and continuous demand for the metal for coinage purposes, is very slight. The area over which the silver standard prevailed has been steadily contracting within the present generation, and even within the last few years. The United States have adopted the gold standard by law and suspended the purchase of silver bullion. Russia adopted the gold standard in 1896 and does not issue any considerable amount of silver coins. Her standard coins are now of gold, and her coinage of silver, purely for subsidiary purposes, was only $21,373,189 in 1898, $20,967,769 in 1899, and $3,946,971 in 1900. In the Orient the free coinage of silver was suspended by the government of British India in 1893, and measures were taken in 1899 to confirm and continue this policy by providing for the coinage of gold and the creation of a gold reserve. Japan adopted the gold standard in 1897 and is not likely to depart from it.

Throughout the civilized world the natural tendency has been to make gold the standard of value, as it has long been the standard of international trade, because of its conveniences for transfer, and its adaptability in other respects for large transactions. This tendency is not likely to be arrested by any cause now discernible, but rather to be intensified with the elevation of the standard of living, the rise of wages, and the approximation toward Western business methods of the Eastern nations. The Orient, once regarded as the great sink of the precious metals, is likely in future to make less demand than in the past upon the silver supply and more demand upon the gold supply. In the eighteenth century Newton regarded the occasional rise in the price of silver as always due to an increased demand for the Indies. This demand continued in some degree to sustain the price of

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