CHAPTER XIV

MONETARY SYSTEMS OF FOREIGN COUNTRIES

ENGLAND[89]

[90]The monetary unit is the _pound_, or _sovereign_, equal to $4.8665, divided into 20 _shillings_ of 12 _pence_ each, each penny equal to 4 _farthings_. Originally the pound was a Troy pound of silver, .925 fine. Under the law of 1816 gold was made the standard and silver subsidiary. The coinage of gold is free, and to avoid delay the Bank of England is required to buy all gold and pay for the same at once at the [minimum] rate of L3 17_s._ 9_d._ per ounce, a [maximum] charge of 1-1/2_d._ being imposed for the accommodation. Silver is only coined on government account and the coinage ratio is 14.29 to one.

They have the gold _sovereign_ (containing 113.001 grains pure gold), the unit of their currency, also _half-sovereigns_, _crowns_ (5_s._), _double florins_, (4_s._), _half-crowns_, _florins_, _shillings_, _six_ and _three pence_ pieces, _four pence_ (groat), _two pence_ and _penny_, all in silver, also _penny_, _half-penny_, and _farthing_ in bronze. A few English banks, operating under old charters, issue notes to a limited extent, which circulate as money. Otherwise the paper currency of England and Wales consists wholly of notes of the Bank of England....

Extraordinary measures were resorted to by the British government in the early stages of the European war of 1914; with the close of the war currency conditions will doubtless go back to normal, as described above.

The Government, also, under date of August 6, authorized an issue of currency notes, in denominations of L1 and 10 shillings....

These notes, which were first issued to the public August 7, were deposited with the Bank of England for account of the British government, as the practical way of getting them into use; they were used for various purposes, including advances to banks at 5 per cent. per annum, up to 20 per cent. of their deposits; the volume outstanding December 30, 1914, was L38,478,164; the amount outstanding on June 23, 1915, was L46,199,705. These notes were protected in part by securities and by an increasingly large gold reserve, exceeding 75 per cent. in March, 1915.

Postal orders were made legal tender and so remained until February 4, 1915....

CANADA

In 1857 the legislature of Upper and Lower Canada formally adopted dollars and cents as the money in which public accounts should be kept. The Confederation in 1867 adopted the same for the Dominion, retaining, however, the sovereign.

In 1871 the Currency Act prescribed the same for all accounts, providing also that the gold coins of the United States of America should be legal tender along with British sovereigns, the latter at a rating of $4.86 2/3.

The silver and bronze tokens (including pieces of 50, 25, 20, 10, 5, and 1 cents) had been supplied from the London Mint, or from Birmingham on its behalf, from 1856 to 1907. After the Confederation no more coins were issued for the separate Provinces. The twenty-cent piece (though still retained by Newfoundland) has not been struck for Canada since 1864.

From January 2, 1908, the whole supply of British and Canadian coins was undertaken by the Ottawa Mint. By the Ottawa Mint Act the Dominion Parliament undertook the support of a branch of the Royal Mint in Ottawa, the administration to be in the hands of the British Treasury. This system (the same as that of the Australian Branch Mints, Sydney, Melbourne, Perth) was preferred to the plan of an independent Dominion Mint because that was the only way of procuring the privilege of coining British sovereigns.

A royal proclamation published on November 2, 1907, duly established a branch of the Royal Mint at Ottawa, and authorized the coinage of British sterling gold coins from dies prepared in England, such coins to rank with those struck in London. The depositor of gold bullion has the right to demand British sovereigns in exchange....

The British sovereign (or pound) is legal tender in Canada at $4.8666. The American gold coins are also legal tender. Canadian silver coins are 925 parts fine, and have a slightly less amount of fine silver than United States of America silver coins of similar circulating values. The dollar, though sanctioned, has not yet been struck.

Paper currency consists of legal-tender Dominion notes and bank-notes issued against the credit of the banks; there were at the end of 1914, 22 banks, with 3,130 branches in the Dominion, 20 in Newfoundland and 72 in the United States and other foreign countries....

On July 31, 1914, just before the war, Dominion notes were issuable without limit, providing the amount over $30,000,000 was covered by gold. The volume at that time was $112,821,618.53 and the gold held amounted to $90,292,833.28. As a consequence of the war the limit beyond which Dominion notes may not ordinarily be issued without being entirely covered by gold was by an Act passed in August increased from $30,000,000 to $50,000,000....

BRITISH COLONIES

The British West Indies, as also Guiana, make British gold legal tender. United States gold also circulates freely. There are a few banks with limited note-issuing power, and minor coins are similar to those of England. There is a growing use of United States currency.

British Honduras has a dollar unit, identical with that of the United States.

British India has ... adopted the gold [-exchange] standard and India has for some years been largely absorbing gold; the _pound_ is the unit--the metallic currency, mainly silver, is maintained at parity with gold by an arbitrary valuation or rate of exchange. The principal coin is the _rupee_, equal to $0.3244; by a fixed government rating 15 rupees equal L1. There is a gold [-exchange] standard reserve for India, amounting, March 13, 1915, to L25,627,393, about one-half held in India and one-half in London; it consists of gold and investments.... Paper money is issued only by the Government and is covered by gold, silver largely, and securities to some extent.

The Straits Settlements have a _dollar_ currency, divided into 100 _cents_; the value of the dollar was fixed by the Government at 2_s._ 4_d._, on January 29, 1909, and has since been maintained at approximately that rate, a gold [-exchange] standard reserve being accumulated for that purpose. The system is copied after that of India.

Hong Kong, silver standard, is the exchange point between gold and silver countries, and hence important. The British _dollar_ of 416 grains is the principal coin. It fluctuates in value with the value of silver bullion.

Australia and New Zealand have the British system of banking. There are many banks, some with British charters, and many branches; they issue notes covered by gold. Gold in large quantities has been produced in these states since 1851.

British Africa and other minor Eastern possessions have the British system, modified in various respects.

Egypt having recently been formally annexed by Great Britain, her monetary system will naturally be closely identified with that of England in the future. The English sovereign has been for many years the gold coin of common use.

LATIN UNION

The Latin Union consists of France, Italy, Belgium, Switzerland and Greece; they are bimetallic, both gold and silver being full legal tender, and the coinage ratio being 15-1/2 to 1; they have identical systems, and formed a union to maintain the parity of silver and gold, at the above ratio, by accepting each other's silver coins; while their systems are bimetallic in law, silver is now coined only in small denominations and on government account. The general adoption of the gold standard by other countries has embarrassed the efforts of the Union to preserve the parity and also the interchangeability of silver coins between these nations.

FRANCE

France has the _franc_, equal to $0.193, as the monetary unit; the principal gold coin is the _louis_, equal to 20 francs. The paper currency of France is issued wholly by the Bank of France, a private corporation, privately owned, but whose chief officers are appointed by the Government, which thereby obtains a general control of policy and administration; the maximum amount of note-issue is fixed by law, arbitrarily, and by occasional increase is kept well ahead of the country's necessities; no fixed legal reserve is required, but the total note-issue must be covered by gold, silver, securities, and commercial paper; as a matter of fact it carries very large metallic reserves, and since it may lawfully pay its obligations in either gold or silver, it can always conserve its gold holdings by requiring a premium for the same, or withhold gold payment altogether.

It has over 400 branches and the same rate of discount obtains in all branches on the same day; it thus regulates and controls the interest rate throughout France, in the interest of uniformity and fairness; it may do business with banks or individuals and has many very small loans; its notes are a legal tender; the power to issue currency is one of its chief elements of banking power....

BELGIUM

Belgium is bimetallic and its coins are the same as those of France and have unlimited lawful currency; bank-notes are issued only by one bank, privately owned; the Government receives a share of the dividends in excess of 6 per cent., and imposes a tax upon the note-issues; demand liabilities, including notes, must be protected by a coin reserve of 33-1/3 per cent. and the notes must be covered by cash, commercial paper and securities.

ITALY

Italy has the _lira_, equal to $0.193, and divided into 100 _centesimi_; her coins correspond to those of France; the Bank of Italy largely, and two other banks to a lesser extent, issue notes against their credit, limited, however, to three times their capital, unless covered by gold; the issue may be increased, but comes in for a tax of 1 per cent. per annum and must be protected by a 33-1/3 per cent. reserve in coin and foreign exchange....

SWITZERLAND

Switzerland's coinage system duplicates that of France, and her Federal Bank is very similar to the Bank of France....

GREECE

Greece ... has for its monetary unit the _drachma_, equal to $0.193. Her coinage follows the Latin Union agreement. Paper currency is issued both by the Government and by banks, and both are depreciated. Greece had to resort to emergency measures during the Balkan War, which may have an influence upon her currency for some time.

SPAIN

Spain ... has the _peseta_, equal to $0.193 United States, as her unit. The Bank of Spain has the sole right to issue notes, which may equal five times its capital and must be protected by a 25 per cent. coin reserve. Gold commands a premium. Silver is coined only on Government account....

GERMANY

Germany, gold standard, has for her currency unit the _mark_, of 100 _pfennig_, equal to $0.238; the 5-mark piece contains the same amount of pure silver as the 5-franc piece and two United States half-dollars.... Silver is legal tender to the amount of 20 marks. The coins for her colonies are varied to suit local needs.

AUSTRIA-HUNGARY

Austria-Hungary, gold standard, has as its unit the _krone_, equal to $0.2026; 20-krone and 10-krone pieces are coined in gold, also gold ducats, worth $2.288; silver coins are of various fineness....

PORTUGAL

The Portuguese Government, by decree of May 22, 1911, adopted a new monetary system and the coins will be placed in circulation as soon as possible. The unit of the system, excepting for her possessions in India, is the gold _escudo_,... equal to $1.08 American gold. The escudo is divided into 100 equal parts called _centavos_.... Multiples are 2, 5, and 10 escudos. Divisions of the escudo are of silver, with values of 50, 20, and 10 centavos; subsidiary coins consist of bronze and nickel pieces. Her currency is not maintained at a parity with gold.

NETHERLANDS

... The unit is the _florin_ or _guilder_ of 100 cents, equal to $0.402. The 10-florin piece is the principal gold coin; the _ryksdaalder_ (2-1/2 florins), the florin and half-florin in silver are legal tender, as well as all gold coins; silver is maintained at parity with gold by law; coinage of silver is only on Government account; paper money is issued by a central bank and 40 per cent. metallic (gold and silver) reserve is required against deposits as well as notes; the balance of the notes are covered by negotiable instruments. The central bank was organized in 1814. Banking in the Netherlands is excellently managed.

SWEDEN--NORWAY--DENMARK (SCANDINAVIAN UNION)

These have the gold standard and have for their unit the _krone_, equal to $0.268 United States currency; their subsidiary silver has various fineness; paper currency of Sweden is issued by the Royal Bank, owned by the Government; notes are legal tender and may be issued to a fixed amount in excess of gold on hand or in foreign banks, but must at all times have gold to the extent of at least 10,000,000 _kroner_.

Norway has a single bank of issue, controlled by the State, which owns a majority of the stock; notes are legal tender and may be issued to twice the amount of gold on hand and in foreign banks.

Denmark's paper money is issued by a privately owned bank, but under strict control by the Government; the notes are legal tender and may be issued to a sum 30,000,000 kroner in excess of the gold on hand.

RUSSIA

Russia is on a gold basis and has for its unit the _ruble_, of 100 _kopecks_, equal to $0.51456 in United States currency; the silver coins in common use are the ruble, one-half and one-fourth ruble; paper money is issued by the Imperial Bank, which is owned by the Government and managed as part of its finance department; the law requires the coin reserve to equal two-thirds of the note issue....

JAPAN

Japan maintains the gold standard and its unit is the _yen_, equal to $0.498; the yen is divided into 100 _sen_, the sen into 10 _rin_. The yen equals 11.574 grains of pure gold.

The Bank of Japan may issue notes to the extent of $120,000,000 upon securities, any amount upon specie, and also may issue further sums in excess of specie, subject to a tax of 5 per cent. The stock of the bank is all privately owned. Japan first copied the national banking system of the United States and after trial abandoned the same for a central bank. She has managed her finances and her banking with wonderful ability and great success. Besides the Bank of Japan, there are many strong private banks, notably the Yokohama Specie Bank.

CHINA

China, silver basis, had for its unit the _tael_, divided into 1000 _cash_; there are said to be sixteen different kinds of tael in the different states of China; the most valuable is the "Haikwan," or "_customs tael_," the one in which customs dues are reckoned, and this equalled $0.664 United States currency, October 1, 1914. The cash is of base metal, with a square hole punched in the centre and is worth less than a mill in our currency.

In the last years of the Empire a new system of coinage was established and since continued by the Republic. The unit is the _yuan_ of silver, worth $0.477, but varies with the price of silver; one-half, one-fifth, and one-tenth yuan are also coined in silver and smaller coins in copper and brass....

PHILIPPINES

The unit of value is the _peso_, equal to $0.50 in United States currency. The fiscal affairs are administered by the United States and the currency is safe and maintained on [essentially] a gold basis.

ARGENTINA

At a time when the cultivation and development of trade relations with South America seem most alluring, we find a principal embarrassment in the currency and credit conditions which obtain in most South American States, but Argentina, one of the most favored of South American States, has a stable and sound currency system. Her unit is the _peso_, of 100 _centavos_. The gold peso is equal to $0.9647 in United States money. In 1889 the Government took measures to acquire gold and fixed the relation of paper to gold at 227.27 per cent., and it has since been maintained at that level without fluctuation. This made the paper peso equal to about $0.44 gold. They have a very large gold reserve in their _caja de conversion_, 262,000,000 pesos gold, which protects the paper money and gives it stability. Gold payments were suspended temporarily at the commencement of the European war (1914), but paper money seems to have remained at par....

BRAZIL

Brazil was formerly a colony of Portugal, and naturally copies the parent country in her currency system. Her unit is the _milreis_, of 1000 _reis_. Nominally the gold standard prevails, but depreciated paper is the currency of her commerce. The milreis contains 12.686 grains of pure gold and is worth in United States currency $0.546.

In 1898 the Government assumed the sole power to issue paper money, and strove to bring the same to a parity with gold; the arbitrary valuation put upon the milreis by the Government was 15_d._ or $0.30.

On December 20, 1910, the value of a milreis was raised to 16_d._ The Government accumulated a conversion fund, understood to be $60,000,000 to $70,000,000, but owing to crises at home and abroad it has not yet been able to make gold and paper notes interconvertible.

Brazil possesses an enormous area, and is wonderfully rich in undeveloped resources. Her coffee and rubber are especially valuable and should take care of her international trade balances. In the near future her currency should become stable and free from fluctuation. Brazilians receive important service from foreign banks and bankers.

CHILI

Chili has the gold standard, but her paper currency is not maintained at a parity with gold; her unit is the _peso_, of 100 _centavos_, of the value of 18_d._...

FOOTNOTES:

[89] The following table, from _The Monetary Systems of the Principal Countries of the World_, compiled in the office of the Director of the Mint, Washington, 1912, gives the weight, fineness, etc., of the coins of Great Britain:

GOLD -----------------+-------+------------+-------+--------+--------+-------- | | | | | Pure |Value in Denominations. |Weight.| Fineness. | Fine | Weight.|gold or | United | | |weight.| |silver. |States |Grams. |Thousandths.|Grams. |Grains. |Grains. | money. -----------------+-------+------------+-------+--------+--------+-------- 5 pounds |39.9410| 916-2/3 |36.6125|616.3720|565.0080|$24.3325 2 pounds |15.9764| 916-2/3 |14.6450|246.5488|226.0032| 9.7330 Sovereign | 7.9881| 916-2/3 | 7.3225|123.2744|113.0016| 4.8665 Half sovereign | 3.9941| 916-2/3 | 3.6612| 61.6372| 56.5008| 2.4332 -----------------+-------+------------+-------+--------+--------+-------- SILVER -----------------+-------+------------+-------+--------+--------+-------- Half crown |14.1379| 925 |13.0775|218.1760|201.8119| $0.6083 Florin |11.3103| 925 |10.4620|174.5405|161.4495| .4866 Shilling | 5.6551| 925 | 5.2309| 87.2695| 80.7232| .2433 Sixpence | 2.8275| 925 | 2.6154| 43.6339| 40.3008| .1216 Fourpence (groat)| 1.8850| 925 | 1.7436| 29.0893| 26.9071| .0811 Threepence | 1.4137| 925 | 1.3076| 21.8162| 20.1788| .0608 Twopence | .9425| 925 | .8718| 14.5446| 13.4536| .0405 Penny | .4712| 925 | .4358| 7.2715| 6.7252| .0202 -----------------+-------+------------+-------+--------+--------+--------

[90] A. Barton Hepburn, _A History of Currency in the United States_, pp. 450-473. The Macmillan Company. New York. 1915.