Q. David Bowers
"The Chinamen utterly refused to take them except simply as bullion. They disappeared as rapidly as they reached China, and after persevering in the experiment for between two and three years, we were obliged to abandon it. Now there is the historical fact; and that is the fact today. Nor is it all strange. The business in China was rated on the level of the Mexican dollar. That dollar contains 377-1/4 grains of pure silver while our standard dollar contains only 371-1/4 grains, and the idea of substituting our standard silver dollar for the Mexican dollar would be very much like trying to put the French franc alongside of our quarter dollar. All our retail business being done on the basis of a quarter dollar, the French franc could not be substituted for it. Neither could you substitute this 371-1/4 grain dollar in China in place of the 377-1/4 grain dollar, so that the experiment utterly failed, and we were driven back to the old system, and renewed our method of shipping Mexican dollars to China and paying the balance in exchange on London. Then we conceived the idea of trying the shipping of fine bars. That was measurably successful. We could make a portion of our shipments in fine bars, but only to a very limited extent. (In a letter to the author dated February 3, 1992, R.W. Julian commented as follows: "The Davis remarks cannot be correct, and either his memory was at fault or, more likely, he was presenting this 'information' purely for the silver interests. Very few dollars were coined at San Francisco before the Civil War. Most of the 1859-1860 coinage had nothing to do with the Orient but, rather, involved the overproduction of silver. This coinage is the same as happened in the late 1860s when bullion dealers and mine owners used the 1853 law to strike dollars as a temporary way of disposing of their accumulated silver.")
"Mr. MULDROW. What do you mean by a fine bar? "Mr. DAVIS. I mean a parted-bar-a pure silver bar. "Mr. DWIGHT. Do you mean assayed bars?
"Mr. DAVIS. Not only assayed but parted and brought up to standard fineness, which in England is 925. The highest standard fineness of silver is only 999. In 1872 Dr. Linderman, in consultation with the bankers of San Francisco, conceived the idea (about that time the bonanzas had been discovered and the glut of silver had become fearful) of making a dollar which should be the equivalent with it on the Chinese market. There was not much confidence felt in the experiment, but it was determined to try it, if it would not be too expensive. The government accorded us all the aid it could give us, and we started the trade dollar. The trade dollar is worth about 27/100 of a cent, or, in round numbers, a quarter of a cent more than a Mexican dollar. It contains 378 grains of pure silver against 377-1/4 grains in the Mexican dollar, and against 371-1/4 in the standard dollar. We shipped these trade dollars to China, and the progress which they made there was rapid, as will be shown by the figures of our shipments. In 1874 the shipments were, in round numbers, three million six hundred thousand, and last year we coined nine million one hundred thousand. Last year, however, all the trade dollars were not sent to China. Some of them went into circulation here; but during the calendar year of 1877 there were shipped to China (I telegraphed for this information, which I received), 8,696,584 dollars in trade dollars, and I observe by a memorandum which I have here that the shipments during the month of February were clear up to the average of what they had been. They were over eight hundred and twenty-five thousand dollars for the month of February of this year.
"I do not question the abuse of the trade dollar, if it was to be coined for circulation here. I admit that a wrong would be inflicted upon the government and upon private parties by doing so. That I will come to presently. The reason why the trade dollar has been so popular in China is because it contains a shade larger quantity of silver than the Mexican dollar does, and because it was perfectly accurate in assay and weight. It was found to be a better and more reliable dollar even than the Mexican dollar itself had been, and it has been made a legal tender throughout the southern parts of China, and has become current there by count. I want the committee to understand the meaning of that phrase, "current by count." From a little north of Canton clear down to Singapore it has become a count coin for the enormous mass of people. The Chinese government has no count coin of its own. The only count coin there is the Mexican dollar and the trade dollar.
"Mr. CLARK, of Missouri. What do you mean by count money?
"Mr. DAVIS. Everything in China goes by weight. For instance, if the standard dollars of 412-1/2 grains were sent there they would only be taken by weight, but the trade dollar goes by count in the south of China. The confidence which the Chinese have in it has increased, and the trade dollar has been found so accurate and good, that the Chinese are satisfied now to take the trade dollars by count all the way from Singapore up.
"Mr. CLARK, of Missouri. All other coins they take by weight?
"Mr. DAVIS. Yes; except the Mexican dollars.
"Mr. DWIGHT. Would they not take the 412-1/2 grain dollars by count after they became familiar with it?
"Mr. DAVIS. I think not, because in the first place we have made the experiment and kept it up for nearly three years and it was an utter failure. The reason of it is very plain. It is because all transactions in China are based upon the Mexican dollar. The Mexican and Spanish dollars have been going there for over 100 years. They are scattered all through the interior of China, and all commercial transactions are based upon it. For instance, in buy a draft, the transaction is always made in Mexican dollars. If I make a shipment to China and draw against it, the draft is made at the bank in Mexican dollars. They do not take any other drafts. You cannot expect these exceedingly conservative people (the most conservative people in the world), after they have got a good currency, a currency which their fathers and grandfathers have been using clear back for 100 years, to give up that currency merely to gratify us, while there stands England with its trade dollar and Japan with its trade dollar, both ready to jump in and take the market away from us the moment we cease to coin the trade dollar. There will be no occasion for the Chinese to take our standard dollar of 412-1/2 grains, because they have plenty of better dollars without it.
"Mr. DWIGHT. In your business operations, do you not payout and receive the standard dollar and the trade dollar as equal?
"Mr. DAVIS. We have never had any 412-1/2 grain dollars in San Francisco. If they circulated at all, of course the trade dollar and the standard dollar would be on a level.
"Mr. DWIGHT. Then the real difficulty seems to be that in your transactions you would receive the heavier dollar at the same rate as the lighter one, and you get the benefit of the difference.
"Mr. DAVIS. I will show you a method by which all that can be remedied. My proposition to this committee will be, if you conclude to continue the coinage of trade dollars, that you limit the amount, or that you authorize the secretary of the Treasury to limit the amount to a certain monthly provision which is equivalent to the trade demand, and that when the trade dollars are coined they shall be placed in the Treasury, or SubTreasury, or custom house, only to be drawn out for the purpose of exportation, and, if you please, to be placed by the government teams upon the ship. Then I do not see what possible competition there can be between the trade dollar and the standard dollar. The secretary spoke in his conference with this committee of the possibility of the standard dollar's going over to China and coming back here, but he forgets that it costs, in the first place, 1 %'freight to send silver to China, 1% freight to bring it back, 1-1/2% insurance for bringing it to China and 1-1/2% insurance on bringing it back, besides the interest on the money, which would be 1-1/ 2% more, so that there is a margin of 6-1/2 or 7% which would be lost in sending those standard dollars to China and bringing them back again; so that it is hardly possible they should comeback.
"The CHAIRMAN. What the secretary of the Treasury said on that point was that the Chinese would take care of it themselves.'
"Mr . DAVIS. The committee will recollect that the cost of the coinage of these trade dollars is paid by the depositor. The secretary .of the Treasury is authorized to assess upon it whatever is deemed to be the cost of the coinage, and which Dr. Linderman states to be 1-1/4% at Philadelphia, and 1-1/ 2% at San Francisco and Carson City.
"The CHAIRMAN. What you state is that those who hold silver bullion and want trade dollars coined for it pays the expenses of the Coinage.
"Mr. DAVIS. The secretary of the Treasury has the privilege of assessing upon them whatever he deems the cost of the coinage. I make that statement here, because I find that there is a general impression that the government paid for the coinage of the trade dollars. That is an error. Now for the benefits which have resulted from this coin. It has turned the tide of exchange; 'so that now, instead of shipping our bullion to London, and from London round to India and China which are the great markets to which it all flows), our bullion is put in this popular form, and we are enabled to ship it directly across the Pacific to China, thereby saving the transportation from San Francisco to London, and making San Francisco a rival bullion center with London. It has made us independent of Mexico. We are no longer obliged to stand this tremendous export duty on the Mexican dollar, which Mexico charged us with, and which, at one time, was as high as 6%. It has made us independent of London, in that we can often sell exchange to London. We not only ship coin and bullion enough to pay our ordinary indebtedness to China, but also enough to pay a large part of the indebtedness of other people. Last year we shipped across over 17 millions in coin and bullion, over half of it in trade dollars alone.