fact, it could be done if so wished by the Government, and it would be easily arranged that you could buy the Mexican dollars, provided the fineness is not less than the Mexican dollar. There is a difference of about 4 per cent between the Mexicans and the subsidiary coins, and they used to buy in the Mexicans and recoin them here for the difference of fineness in the subsidiary coin.

Q. Would that be true of a distinctive coin if its quantity is limited and its value is maintained by the gold reserve? A. I am afraid if the dollar were to be of a different fineness it might create a want of confidence. The people of the country are very peculiar, and it would take some time for them to become educated up to the point of understanding what a gold reserve is. That is, of course, with regard to the millions of provincial natives, and not with regard to the inhabitants of the principal cities.

Q. The point I wish to make is this: If Mexican silver dollars are a legal tender and the new coin is a legal tender, would it not be desirable, as soon as enough of the new coin is ready, to declare that Mexicans should cease to be a legal tender after a certain date, with a view to substituting the new coin?-A. You could only do that by buying up the Mexicans.

Q. Would they not be exported by degrees?-A. If you make a gold standard here and the Mexican coins are in the country as a legal tender at the moment, guaranteed by that gold standard, everybody would hang on to their legal tender until such time as they were forced to turn it in.

Q. But suppose the offer was not made to redeem Mexican dollars in gold?-A. I think you would find that a very difficult problem; you would have to solve the problem by buying them up, and prohibit, not the export, but the import, of the Mexicans.

Q. It would not be desirable, under any circumstances, to prohibit the export, I should say.-A. It has been done so here.

Q. But that has been repealed lately by the commission. I will state my idea again. Suppose we desired to make the new coin the only money of the islands, and we should offer to exchange these coins for gold under conditions where we thought the demand for gold was legitimate, but we never offered to exchange Mexicans for gold, would not the fact be, if, say, two years were allowed for the operation, that the Mexicans would gradually drift to China as the new coins came out of the mint and got into circulation?-A. To-day the exchange is in favor of Manila to the extent of about 3 per cent on account of an imaginary gold coinage here. The Mexican brings here about 3 per cent more than in China.

Q. Would not that cease to be the case if after December 31 next Mexican dollars should be declared no longer a legal tender?-A. Probably; but it would be very prejudicial to the people who have been dealing in trade here, who would lose 3 per cent on their Mexicans.

Q. But if we had put in circulation a lot of distinctive silver that was worth 50 cents gold?-A. That would make a circulation in exchange, but all the commerce would be entirely upset by such a radical measure. According to my idea the only way would be to prohibit the import of Mexicans and for the Government to buy up those Mexican dollars which are already in circulation here.

Q. It would have to buy them at the rate of exchange here?-A. Yes. The Government would have to lose one way or the other,

unless they made a dollar of different fineness, and this might, as I have said, create a want of confidence.

Q. Well, the people of the islands have shown a willingness to accept four of five different kinds of silver dollars.-A. Yes; that has been in places where they are familiar with money.

Q. But did they not accept the Spanish dollars, Mexican dollars, etc., when they were introduced?-A. At that time they did not know that the silver dollar was going to lose half of its value. In fact, in the year 1880 silver was practically as high, if not higher, than the value of gold. The exchange was then about 4 shillings and 2 pence in London. Four shillings would be about what we call par between silver and gold. Since the export of gold the natives have never noticed the difference between the silver dollar at its lower value and its former value when on a parity with gold. They paid out gold dollars in exchange for silver at the former value. The natives have lost, through the depreciation of silver, one-half of their money. But the native who was getting 874 cents a week in the provinces for agricultural work was quite as happy to have it at 2 shillings instead of the 4 shillings it was worth twenty years before. He had not noticed the difference.

Q. That being the case, it seems to me that a slight difference in the amount of silver in a dollar would not affect the native if the new dollar was of substantially the same size as the old.-A. Yes; you are right in that. However, that question has two sides to it. Of course you would force the export of Mexicans from the country.

Q. Yes; but if you had enough of the new coins to take their place, you would have enough currency.-A. You might take the Mexicans up, recoin them, and turn them out at a less fineness. I won't be too strong in my opinion regarding having the new dollar of the same fineness as the Mexican. It might be well to cover the expenses of taking up all the Mexicans and reduce the fineness.

Q. You are familiar with the system of British India, are you not?A. Well, I am not very strong upon it. They put the rupee at a standard value.

Q. And recently they have established a gold reserve.-A. That, of course, would be applicable here on a different ratio.

Q. Have you ever had occasion to note how they maintain the parity in Java?-A. No. I think down there it is done on practically the same basis as in India.

Q. I think there is this difference of detail, that in Java they do not deliver gold for silver, but they sell gold drafts on Holland at the ratio, so that if you have 1,000 guilders in Java and you desire to transmit it to Holland, you can get a draft payable in 1,000 gold guilders plus a reasonable charge for exchange. Now, what do you think would be the effect here of a similar offer by the insular treasury? Would they not be able to maintain the parity by offering to sell gold bills or drafts payable in gold at the subtreasuries of the United States?-A. They would have to get them discounted here.

Q. No; they could sell their own drafts if they had arrangements with the United States Treasury.-A. But under the way of doing business here nearly everybody must do business through the banks. If you take Treasury notes of the United States, for instance, they

come in to me as receipts for passage money from the American officers. I take them to the banks. The banks will only pay me 1.97that is, I lose 14 per cent on these United States Treasury notes.

Q. They charge 14 per cent for American currency?-A. For those Treasury notes.

Q. But suppose an American has $1,000 to pay in San Francisco; he goes to the insular treasury with $1,000 of the new coinage, and they will sell him a draft on the San Francisco subtreasury, payable in gold. All he has to do is to mail that draft to the people at home to whom he owes the money, and it will be collected in San Francisco without charge.-A. You can not do that; there will always be an exchange rate between here and the United States.

Q. But the Treasury can guarantee it?-A. Yes; although it would be very foolish for the Treasury to do so. It would be prejudicial to the administration here. You would have every head of a department here with his head in a whirl trying to make up his balances. There is only one solution with regard to the coinage and the financing of these islands, which is to buy up Mexican dollars with insular dollars. Whatever the coinage fixed here is, it must be entirely independent of the basis of the United States currency. Let exchange take its own course, and to avoid the departments having the difficulty they are at present having with the payment of different coins for transportation, for payment of officers and employees, etc., have established what may be called a "colonial salary," payable in the currency of the Philippine Islands. There is no doubt that, happen what may happen, exchange must exist.

If

Q. That is quite true in commercial matters. But the Treasury would be able to ship gold of its own motion. You understand the system in the United States. It differs from the systems in most European countries, in that the Treasury keeps its own money. they want to send money from Washington to San Francisco, they ship it by express. They pay express charges, it is true, but they do not go to any bank and buy exchange. They could do that here if we were to establish a subtreasury here, although of course it would be an expense to the Government.-A. It is exchange or the equivalent in any case, and, besides, there is the question of insurance. The ship might go down and they lose the money. There is no way of getting around the point. If we had enough circulating money to use in the Philippine Islands, there would be no difficulty for the Treasury at all. One of the difficulties has been-take, for instance, the Army and Navy. The Navy regulated its pay at a certain exchange to its officers, and that was what raised the whole difficulty in the islands. The officers of the Army said: "Why should the Navy get this advantage?" and then there was an order issued to pay the Army at the rate of 2 to 1. Q. What, in your opinion, would be the operation of exchange if we had a distinctive silver coin and a gold reserve?-A. It would raise the exchange here; it would make the exchange on a more solid basis, provided the rate was 32 to 1.

Q. The banks would then have to import gold if it were needed?A. No; the exchange would vary up or down to meet the balance in trade.

Q. If gold were in circulation, in ordinary use, it would be furnished by the Treasury for silver in order to maintain the parity. Now,

there would be times, as in England, France, or Russia, when the state of trade or the money market would demand more gold here or more in Hongkong-that is, when the rate of discount would be such as to attract gold. Now the banks, under ordinary, normal conditions, would either import or export gold to meet these conditions?-A. Never since 1880 has there been a case of importing gold.

Q. We would be on a different basis. We would be substantially on a gold basis. Suppose there has been an export movement of gold, and we have but a limited stock of silver in the country and a considerable part of that silver has been presented to the Philippine treasury to get gold. The result is to contract the silver currency in use. Now, if an acute demand arises the banks would import gold to draw out the silver, would they not?-A. I do not think so. I do not think it possible under any circumstances that gold would be imported here.

Q. But, for instance, if you had in the treasury two millions of silver dollars and they were needed in trade and could only be obtained with gold?-A. I do not think gold would be imported. The conditions here are very peculiar. Perhaps, if by any means silver was to get up high enough to make the value in favor of the silver as against gold, but I think it is not possible.

Q. You understand, of course, that if a gold reserve was established in the insular treasury it would be a fixed amount, say three millions gold to start with, or perhaps five millions gold, and no silver. Now the quantity of money in that fund would never change. When a man wanted to expert gold he would bring in a certain quantity of silver dollars. The effect would be to lock up those silver dollars. Now, if they were needed in trade, in any European country or in America, it would be the policy to offer gold to the treasury and get silver. A. But suppose you establish your treasury, start with five millions of gold dollars, and then allow them to be exported for the use of trade in certain cases and replaced by silver, and your silver is not worth the gold?

Q. But you must remember that your coinage of silver is limited; it is not free coinage of silver; the coinage is limited. The circumstances are the same in the United States. You know we have there five hundred millions of silver dollars, worth 43 cents on the dollar. A. I think you would find that the gold basis might be a mistake here. Q. What is the alternative?-A. A Government token in silver of the same fineness as the Mexican dollar. It could be guaranteed; but the guaranty should not be for circulation except under certain conditions.

Q. Yes; that is what I contemplate, not to give it to every comer. understood you previously to say that you thought that would work all right.-A. That would work all right so long as a solid basis is shown. You would have here a higher standard than you would have in Hongkong and Singapore. In fact, with the army and navy funds as a basis, on account of the influx from America of the money to pay the Army and Navy, exchange has been latterly maintained higher than it was in the years preceding the 2 to 1 ratio.

Q. It would be true, would it not, that you can not abolish exchange between gold-standard countries because the exchange covers the cost of transportation?-A. Also the balance of trade. For instance, a case between a branch bank here and one in Hongkong or elsewhere: The

bank here will sell you a draft on the other for $100,000. They have to pay that on the other side. Perhaps there are no means at the moment for replacing it on the other side.

Q. That is the same as legitimate exchange between gold-standard countries; that feature of the exchange does not include any difference in the value of the money. There is a difference in the exchange between gold moneys of the same value and between moneys in countries where in one case the money is gold and in others where the money is silver.-A. The gold standard, of course, always gives a solid base.

Q. What do you think of the willingness of the natives to accept a new coin? Do you think they would be suspicious of coins which, though perhaps of the same size, have a different stamp?-A. No; Í do not think they would, providing the coin was about the same size. You must remember, however, that the people have been much instructed by the people who are unfavorable to America and, in order to injure the Government, would tell the natives that the Americans were bringing them in an inferior class of coin. However, I do not think the appearance of the coins and images on them would matter if they were of the same fineness. If you were to introduce a coin of the same size at the present time, but not of the same fineness, it would be used as a weapon against America. Afterwards, after some time had elapsed, I do not think it would affect the natives.

Q. Are not the outstanding subsidiary coins of lower fineness?—A. Yes, I think the half dollar is about 6 per cent less in value.

Q. In fact, the Spanish silver is on the basis of the Latin Union's subsidiary silver, is it not?-A. I am not sure about that. I know that it was always considered less than a dollar.

Q. What do you think ought to be the denominations of the silver coins?-A. Ten cents, 20, and 50 cents is a very good coinage. Those are the outstanding denominations and serve very well. The trouble we have always had has been with the copper coins. I should suggest that they be 100 cents to the dollar. The old-fashioned way, as it exists to-day, is simply a residue of the old-fashioned Spanish reals and dollars. Instead of having 10-cent or decimal divisions, they had the divisions on the 12-cent basis, eight reals to the dollar. There was a half real. Their subsidiary coins were of the value of 50 cents, 25 cents, 12 cents, and 64 cents; then, for the copper coins, so many cuartos made a real, each one of the copper coins representing 2 cuartos. Everything has now been changed to the decimal basis except the copper. The whole of the copper coinage does not amount to a very large sum, probably not more than $200,000 in the whole islands. They could easily be bought up, and by making the weight somewhat less the Government could make a profit on the transaction. The new coins ought, without fail, to be 100 cents to the dollar.

Q. Do you happen to know about what is the price of copper at present? A. No, sir; but there would be no difficulty, providing you reduced the size. You could make two coins out of the present copper coin.

Q. I think there have been occasions, when there was a great boom in the copper market, when pig copper has gone above the value of the coins. I think that that happened in Portugal some years ago. But you do not think that there would be any danger?-A. You could