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community, a new Proclamation would have no more effect than the existing Dollars would continue to have the same purchasing power as at present, sovereigns would have no more. Silver would remain the standard of value,
But, if we are to be governed alone by a reference to Government transac- tions, a very serious question arises regarding the principle on which a new Proclamation should be based.
The general difficulty of establishing any permanent system for the concur- rent circulation of gold and silver coins, as unlimited tenders for payment, has been already adverted to. In China this difficulty is much aggravated, not only by the want of concurrence on the part of the trading community, but by the fluctuations in the exchanges and in the relative price of gold and silver, which are much greater and more frequent there than in Europe. At best, we could not hope to attain an average which would admit of the long-continued action and casy transition which have been witnessed in the West Indies.
Overlooking these difficulties, it is proposed to attempt a new regula- tion; and, in order to avoid a recurrence of the failure which has resulted from past proceedings in China, to found it on a principle different from that which governed the West Indian Proclamation of 1838, It is suggested that the dollar should be rated for circulation at Hong Kong, not according to the relative value of silver and gold in the European market, but according to the price of silver in China after it has borne the cost of transmission to that country that is, that in fixing the rate of the dollar at Hong Kong, a value should be added, equal to the cost of freight and other expense, beyond its cost price in London. The reason for this proposal is plausible. It is assumed that China derives its supplies of silver principally from South America through this country; and, if this be correct, it would seem to follow that the course of the exchange with this country would be such as to create a tendency to the flow of that metal towards the East, and that its price in China would hence generally exceed that in London.
It is, however, obvious, that when it is proposed to rate different coins for concurrent circulation, the same conditions should apply to each. If sovereigns circulate in China, they could only do so after they have borne the cost of transmission from this country. Why should the charge be taken into account in the case of one coin more than the other? If dollars bear a higher relative value to gold in China than they do in London, it is only because they are accepted in payment of debts in China, while sovereigns are not. Can we then, in justice, impose a charge on dollars, and exempt sovereigns from it, in order to counteract this natural law?
I am disposed, however, to doubt altogether the correctness of the assump tion. Sir Charles Trevelyan has fallen into an error, when he states that "4s. 2d. was below the worth of the dollar in gold in that part of the world (China), even when the rate was originally fixed in 1844." The contrary appears, from the annexed account of commissariat transactions up to 1850, to which I have already referred. I doubt also whether London is the principal source of the supply of silver for China, Advices from California show that Mexican dollars have, of late, been exported by the Pacific Ocean to China, in considerable quan- tities, whereby the charge of freight is much reduced. We know, moreover, that there exist supplies of native silver in China. The information afforded as to the localities from which it is obtained, and the quantity derived from them, is defective. But there is no proof whatever that, previously to 1850, China was dependent on this country for its supplies of that metal. We drew from it large amounts in payment of the indemnity after the war; and there is reason to believe that even the large sums that have been exported to China of late years, bear but a small proportion to the quantity of bullion which is contained in the Empire. And be it remarked, that whatever cost may be incurred in the transmission of specie falls on the merchant who sends it in payment of his debts. When it arrives in China, it bears no higher value than other silver already in the country.
Some illustration of this argument may be derived from a circumstance attending the purchase, referred 10 by Sir Charles Trevelyan, of dollars for transmission to China. He states the cost of these dollars; but a remarkable fact connected with that cost remains to be noticed. The dollar, as is well known, is of an inferior standard of fineness to British standard silver. The intrinsic contents of fine silver are about fourteen grains less in the ounce
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of dollars than in the ounce of standard silver, which would give a difference in the value of about 2d.; but the coined silver bears in the market a some- what higher relative rate than bar silver, and the difference between the price of dollars and that of bar silver in the London market is usually 1d. the ounce. So great, however, was the demand for dollars last year, that their price became equal to, and indeed on one occasion exceeded, the price of standard silver. This was obviously occasioned by an exceptional demand, arising from extraordinary circumstances. Yet whatever may have been the momentary requirement for coin, it is probable that the greater part was melted into sycee silver soon after its arrival in China, when of course the temporary price which it bore as coin would be lost, and its only real value would be derived from the silver it contained. So surely does the value of coin, sooner or later, subside to the level of its intrinsic contents of precious metal.
Avoiding the refined and complicated questions connected with the general consideration of the foreign exchanges, into which it is unnecessary to enter, and supposing, for the sake of illustration, a case of two countries trading solely with each other, the par of exchange between them would be that point at which the aggregate obligations of one exactly balanced those of the other. When this point is approached, the obligations of each would be settled by the interchange of bills of exchange, and no transmission of specie either way would be required. The currency of one country, when the exchange is at par, bears its exact equivalent to that of the other in reference to the trade carried on by each, or, in general terms, the money of the two is of equal value. If the standard of value of both is founded on the same metal, the par can be easily ascertained by a comparison of the contents of fine metal contained in the coins of each. When the standard of one is of gold and the other of silver, no real par can be expressed, but an approximation can be made, founded on the average relative value of the two metals. . For any lasting or practical object, such as the rating of coins for circulation, that average ought to be founded on the price of the metals as compared with one another, at some common point, irrespective of the expense of transmission, which is only incurred when the exchange is not at par. conceive that, on this ground, the principle adopted in the Proclamation of 1838 is the correct one; other- wise the effect will be to introduce into the valuation of coins the uncertain element of the course of the exchange, and we may fall into an error like that which led to the anomalies which formerly prevailed in the British Colonies of North America. The Governments of those Colonies sought to correct the depreciation of coins, arising from an unfavourable condition of the exchanges, by arbitrary alterations of the rating of coins, and I think that the present pro- position would, if adopted, lead practically to the same result.
If, then, we are to revise the Proclamation of 1844, with a view to readjusting the rating of coins to the present relative value of silver and gold, I submit that we should adhere to the existing principle, and fix the rates with reference to the price of standard silver in the London market. That price has been on an average during the last two years 5s. 1d. per ounce, and at that rate the dollar might be valued at 4s. 34d. But I doubt whether sufficient expe- rience has yet been afforded of the permanent effect of the gold discoveries on the price of silver, to justify the adoption of a new average. Already, since the date of Sir Charles Trevelyan's Memorandum, a reaction in the exchanges with the East has occurred, which has had the effect of reducing the price of standard silver in London to 5s. Od. the ounce. and it is probable that further oscillations will occur before the trade in the precious Even normal condition. metals can be considered to have assumed a assuming, however, that there is sufficient ground for the adoption of the average of last year, and for fixing the rate of the dollar at 4s. 3d., or 4s. 3 d., the only effect would be to relieve the Government from the losses The adverted to by Sir Charles Trevelyan, to the extent of 1 to 2 per cent. difficulties in regard to the circulation of the sovereign would not be removed. The value of that coin would still fluctuate with the exchanges, and, when it is at a discount, persons having payments to make to the Government will prefer to "The transactions of a very make them in that coin rather than the dollar. questionable character," which are commented upon, really amount to no more than that the Government is paid in its own coin.
The relief, then, which would be obtained by a revision of the Proclamation,
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