decision of the Soviet Government to issue new silver coins there came information that a group of Cantonese financiers had met in Hongkong for the purpose of reopening the Canton Mint. Then there was the scare that overtook the speculators who quickly decided to cover themselves by free selling. The market advanced in a couple of days 14d. On Monday last it is estimated that both the Chinese speculators and the foreign merchant gamblers sold about a million pounds sterling. They would have sold a larger quantity but the banks were not good buyers. Then, again, there was the fact that on the resumption of business after the Chinese holidays money was very tight. In ordinary times one would have expected native interest to be very easy after the Chinese New Year. Money was in demand by the foreign banks, who are reported to be still short of funds. This is specially pronounced among the Japanese banks, who have been on the market. They have to make advances to cotton mills under Japanese management to enable them to buy raw cotton. It is reported that many of these Japanese mills have contracted to purchase Indian cotton and are laying in stocks of both Indian and Chinese for six months ahead. The silver market is at present in a robust state. The factor influencing the rise is not only the reported decision of the Soviet Government but the offtake of the white metal in India, which, owing to the marriage season in that country, is drawing upon the Bombay bazaar. The cfftake at present is about 300 bars per day. Some 12 days ago the stock in Bombay was reported to be about 3,000 bars, and by this time the supplies must have diminished considerably. Some 8,000 bars are stated to be on their way to India from London and America, but nevertheless India would have to make large purchases soon. In addition, it must not be forgotten that the export season in China will set in in the near future, and China would have to replenish her stocks of the white metal. All this serves to emphasize a firmer tendency for silver in the future months. Consumption of silver by China and India is increasing rapidly and a yearly consumption rate of around 200,000,000 ounces or more against new production of the same amount will not allow very much silver for coinage and industrial art uses in the rest of the world. Russia is reported to be accumulating silver, and if the Soviet mints new silver coins the demand for the white metal should grow. Again, it can not be expected that the continent will be able to sell as large quantities of melted-down silver this year. The amounts likely to be procurable this year through the melting down of European currency should be rather small. The all-important question is whether Europe will return to silver currency or not. Progress in this direction was made last year by Switzerland, Italy, Austria, and others, but these influences were of minor significance. From present indications it would seem that the demand of China for silver for the first six months of this year will be larger or as large as last year during the same period. The present holding in Shanghai is much less than the high of the past two years. NOTES. The early operation of the Shanghai mint, if it were to produce for circulation coins of standard weight and fineness, would facilitate silver exchange in China, and if such coins could circulate freely, one of the very apparent obstacles to the conduct of the trade in China would be removed. It is a cardinal essential to the success of such a mint that the weight and fineness of the coins be absolutely reliable and invariable. The Shanghai Foreign Exchange Bankers' Association has gone on record as doubting the possibility of securing this desired result, unless the mint is placed under foreign assayers and under foreign control. The building for the Shanghai mint has been completed and is well located to transportation. The machinery which has been purchased when installed will have a capacity of 500,000 silver dollars per day of 10 hours and a maximum output of 1,000,000 silver dollars per day of 24 hours. Therefore the mint, if in operation, would have a capacity sufficiently large to exert a marked influence in rapidly standardizing Chinese currency. The most important factor in delaying the construction and operation of the Shanghai mint has been the inability of the Chinese Minister of Finance to raise the additional $2,500,000 (silver) necessary to provide for the payments on the machinery and for its initial operating capital. A report from the commercial attaché at Peking of May 7, 1923, states: "The installation of the machinery is, however, delayed for the reason that the mint is in need of a further $2,500,000 (silver) to provide for the payments on the machinery and for its initial operating capital.' On June 28, 1923, it was reported that about $1,000,000 of this sum had been raised and that the Minister of Finance and the director of the mint were doing their utmost to secure the balance. The Chinese banking group, which made the original loan of $2,500,000 (silver), is reported as being unwilling to render further assistance by way of financial accommodations until the political control of the mint by the Peking Govern ment has been destroyed. It will require approximately $750,000 (gold) to secure the release of the machinery upon which the British hold a lien, and it will cost $250,000 (gold) to install the machinery. For the successful operation of the mint it will be neces‐ sary to have on hand 5,000,000 ounces of silver at all times and 5,000,000 ounces in transit. In the event that Americans were to assist in a financial way in completing the construction of the Shanghai mint and in providing the capital for its operation, provision should be made for an American-Chinese assay commission. The assay commission should be charged with the responsibility of determining the fineness of the coin minted and should certify that the coin emitted to circulation comes within the tolerance specified in the Chinese currency law of 1914, as follows: "ART. 8. The ratio of the difference between the weight of silver coins and that of the legal tender shall not exceed 3/1000. "The ratio of the difference between the total weight of per 1,000 pieces of the silver coins and the legal weight of that amount of coins shall not exceed 3/10000. "ART. 9. The ratio of the difference between the fineness of any piece of silver coin and the legal fineness shall not exceed 3/1000." As a precedent for the appointment of an assay commission, we have an assay commission that determines whether our own mint has conformed to the limits specified under the coinage laws and the commission makes an annual report of its findings. The fact that American interests operate under extraterritoriality in China makes possible the exercise of a supervisory control of an undertaking of this character. The Chinese coinage law of 1914 specified a standard dollar containing 900 parts of pure silver and 100 parts of copper. Later this was changed to $90 parts of pure silver and 110 parts of copper, the coin weighing 416 grains. It is estimated that 400,000,000 of these Yuan dollars are in circulation, so t'at it would be preferable, in the opinion of authorities, to specify the same fi eness for the dollar to be minted at the Shanghai mint. The heat of Yuan Shih-kai is imprinted on the Yuan dollar now in circulation. and it has been suggested that a new die be made of different design so that the dollars to be minted at the Shanghai mint can be readily identified. The selection of the design should, of course, be left wholly to the Chinese Government. The fact should be made clear that the assay commission was to exercise no control over the coinage design. Banking authorities believe that the best results can be obtained by eliminating for the present the consideration of minting of small denomination subsidiary coins at the Shanghai mint, but recommend that a 50-cent piece he struck containing just half as much silver and just half the weight of the Yuan dollar, namely, a total weight for the piece of 208 grains, containing 890 parts of pure silver and 110 parts of copper. Such a provision for the minting of 50-cent pieces, therefore, should be included. With a view to replacing variable content coin now in circulation by the standard coin to be minted at the Shanghai mint, it would be necessary to include a provision for reminting such material, the fineness of the material to be submitted for reminting to be not less than 890 and a charge to be made amply to cover the cost of operation, including overhead charges. In the last session of Congress a joint resolution was enacted which remitted the entire balance of the Boxer indemnity to China and the use of these funds was limited to educational and cultural work. It would be very helpful in connection with the currency reform in China if some of the students whose higher education in this country is provided by Boxer indemnity funds should specialize in the subjects of currency and mint operation. Such a study would not only be of great national service to China but would also inure to the benefit of the student, who should find ready employment and excellent compensation in China's mints. Reparation Commission, Hotel Astoria, Paris, France. MY DEAR GENERAL DAWES: In order that the material which the Senate Commission of Gold and Silver Inquiry has recently published, and also that which has been compiled but not yet published, may be of service to the American experts serving upon the committees of the Reparation Commission in Paris. the Commission of Gold and Silver Inquiry, at a meeting held on January 21, adopted a resolution transmitting serial 2," Foreign Exchange Quotations and Curves," published by the commission, and additional data and charts relative to the currency and exchange conditions in European countries, which are available in the files of the commission at the present time. It was further resolved that the advance manuscript presenting an analysis of the French currency and financial situation should also be transmitted. All of the material herewith submitted as listed in the accompanying memorandum, with the exception of serial 2, has been compiled by Dr. John Parke Young, economist in charge of foreign currency and exchange investigation, and will form a part of the report which the commission will later publish. In view of the fact that the material is only tentatively complete and is later to be published, will you please consider it confidential? The material gives only a partial review of the currency and exchange situation in Europe, but the commission has expedited its preparation that it might be available at this stage to the experts, with the hope that it may be of service to them. Should the American experts find that these data and charts are useful, I shall be glad to make available to them confidentially further information as the investigation proceeds. Very sincerely yours, TASKER L. ODDIE, Chairman. AMERICAN SECTION, COMMITTEE OF EXPERTS, Senator TASKER L. ODDIE, REPARATION COMMISSION, 15 Bellevuestrasse, Berlin, 5 February, 1924. Chairman United States Senate Committee of Gold and Silver Inquiry, United States Senate, Washington, D. C. MY DEAR SENATOR ODDIE: I beg to acknowledge with thanks, on behalf of the American section, committee of experts of the Reparation Commission, the receipt of your letter of January 24, together with the following documents sent us by your committee: (1) Four copies of your report on "Foreign Currencies and Exchange Investigations-Foreign Exchange Quotations and Curves.” (2) A confidential report prepared by Dr. John Parke Young, on "FranceCurrency and Foreign Exchange." (3) Statistical tables covering the subjects of currency, banking, prices and trade for the principal European countries. (4) Three sets of charts on the subjects of exchange rates, purchasing power parities, prices, note circulation and foreign trade for the principal European countries. This material arrives at an opportune time and we shall find it very useful in our work. I am glad to know that you plan to send us from time to time other information of this type as it is prepared by your committee. We shall treat unpublished material that you send us as confidential, in accordance with your request. We appreciate keenly your thoughtfulness and fine spirit of cooperation in sending us, in advance of publication, this valuable material in manuscript form. Very cordially yours, CHARLES G. DAWES, Chairman Committee of Experts of the Reparation Commission. 1 2. THE DAWES PLAN IN BRIEF. 1 A UNDER BANKER'S ANALYSIS OF THE REPARATIONS PROGRAM-SUMMARIZED DIRECTION OF FRED I. KENT, CHAIRMAN COMMISSION ON COMMERCE AND MARINE, AMERICAN BANKERS' ASSOCIATION. The plan to stabilize Germany's finances and secure payment of war damages, drawn up by the Allied and American committee of economic experts under the chairmanship of Gen. Charles G. Dawes, of Chicago, is so important a factor in the problem of world reconstruction at the present time that Our World desires to take every possible opportunity to give its readers information which would be of aid in an understanding of it. The summary of the Dawes committee plan prepared by the commission on commerce and marine of the American Bankers' Association, under the direction of its chairman, Mr. Fred I. Kent, vice president of the Bankers' Trust Co. of New York, reprinted herewith, is the clearest and most concise analysis of the complicated reparations program, now before the Allies and Germany, which has appeared. BANK OF ISSUE. A bank of issue is to be established with a capital of 400,000,000 gold marks, which shall be in shares of 100 marks each. One million shares are to represent assets of the Reichsbank and three million shares for subscription in Germany and abroad. All shares shall be alike, and after the initial subscriptions no restriction shall be imposed upon their purchase or sale. All shares shall be paid for entirely in gold or foreign bills at their current gold values. The prime purposes for the creation of the bank will be to give to Germany a unified and stable currency and for reparation payments. Other chief functions of the bank will be: 1. To issue notes on a stable basis in relation to gold with an exchange privilege for gold. 2. To serve as a banker's bank dealing in prime short-time paper and so establishing the final rate of discount. It will also act as a bank for the public. 3. To act as a Government bank but free of Government control: Advances to Government to be strictly limited and are placed under the control of the commissioner. 4. To hold on deposit reparation payments. 5. It will be directed by a German president and a managing board which can be assisted by a German consultative committee. 6. The due observance of its statutes will be further safeguarded by a general board, of which half of the members, including a commissioner, will be foreign. ISSUANCE OF BANK NOTES. A. The bank shall have the exclusive right of issuing and circulating bank notes in Germany during the period of its charter (50 years). B. Neither the German Government nor any German State bank shall have the power to issue paper money, with the exception of the banks of Baden, Bavaria, Saxony, and Würtemburg, which shall retain their charter of issue for sums not to exceed their present local quota. C. The Government shall not issue any coins for circulation except gold coins containing approximately their full value in gold metal. All coins other than gold issued by the Government shall be issued through the bank. 1 Our World Magazine, July, 1924. D. The bank may issue notes for circulation against gold coin or bullion. Presumably the law creating the bank is expected to cover any further necessary details. : REPARATION PAYMENTS. All reparation payments are to be made through the bank of issue. These payments, fixed on a sliding scale, run from 1,220,000,000 gold marks in 1926 to 2,500,000,000 gold marks in 1934, subject to addition or reduction in certain contingencies; i.e., controlled revenues. (See notes 1 and 2 under table, p. 283.) In order to prevent these payments from affecting adversely Germany's financial stability an index of prosperity has been fixed, making it possible to judge whether the amounts of the scheduled payments are not beyond her capacity to pay. THE INDEX OF PROSPERITY. 1. Total German exports and imports taken together. 2. Total of budget receipts and expenditures taken together, including those of Prussia, Saxony, and Bavaria, after deducting from both sides amount of peace treaty payments included in the year. 3. Railroad traffic as measured by statistics of weight carried. 4. Total money value of the consumption of sugar, tobacco, beer, and alcohol within Germany, measured by prices actually paid by the consumer. 5. Total population of Germany computed from last available census data, vital statistics, and emigration records. 6. Consumption of coal and lignite reduced to coal equivalent per capita. TRANSFER OF REPARATION PAYMENTS. All payments for the account of reparations are to be deposited in the bank of issue to the credit of the "agent for reparation payments." The use and withdrawal of the moneys so deposited will be controlled by a committee consisting of the "agent for reparation payments" and five persons skilled in matters relating to foreign exchange and finance representing five of the allied and associated powers. This committee will regulate the execution of the program for deliveries in kind and the payments under the reparation recovery act in such a manner as to prevent difficulties arising with the foreign exchange. They will also control the transfer of cash to the Allies by purchase of foreign exchange and generally so act as to secure the maxiumm transfers without bringing about instability of currency. If the payments by Germany on reparation account in the long run exceed the sums that can be thus transferred, such payments will, of course, begin to accumulate in the bank. When such accumulation amounts in normal circumstances to 2,000,000,000 gold marks the committee will find employment for additional accumulation up to 5,000,000,000 gold marks in bonds or loans in Germany. When this accumulation, including deposit bonds and loans, amounts to 5,000,000,000 gold marks then further reparation payments by Germany cease until such time as the transfer of the accumulated fund is possible and this accumulation is reduced, when they are again resumed. In the event of concerted financial maneuvers, either by the German Government or by any group, to prevent transfer of funds, the transfer committee is empowered to accumulate funds in excess of the 5,000,000,000 gold mark limit and to employ the sums to its credit in the purchase of any kind of property in Germany. MORTGAGE OF GERMAN RAILROADS. Germany's railroads, estimated to be worth twenty-six billion gold marks with a net earning capacity as high as one billion gold marks yearly, were found to be an available means for securing reparation payments and aiding German finances. The experts propose a blanket mortgage of eleven billion gold marks on the entire German railroad system, bearing 5 per cent interest with 1 per cent sinking fund annually. In addition to eleven billion of bonds, the railroads are to have a capital of two billion of preference shares and thirteen billion common stock. One and onehalf billion of preference shares are to be sold to private persons, and the remainder, five hundred million preference shares and all of the common stock, is to go to the German Government to be kept or sold by it at its option. The preference shares are to bear a fixed rate of dividend and are to participate in 1728-24-SER 3-19 |