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Subject Area: Political Theory

GALLATIN TO A. J. DALLAS, SECRETARY OF TREASURY. - Albert Gallatin, The Writings of Albert Gallatin, vol. 1 [1879]

Edition used:

The Writings of Albert Gallatin, ed. Henry Adams (Philadelphia: J.B. Lippincott, 1879). 3 vols.

Part of: The Writings of Albert Gallatin, 3 vols.

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GALLATIN TO A. J. DALLAS, SECRETARY OF TREASURY.

New York, 25th September, 1815.

Sir,—

I had the honor to receive your letter of 22d instant, asking for information respecting the state of the circulating medium of Russia. The specie or silver ruble contains 282½ troy grains of pure silver, and is worth about 76 cents money of the United States. But paper rubles (called bank paper) are the legal and only currency of Russia. I believe that all payments and purchases are made exclusively in that paper; and it is the only money of account. By ukase dated a short time after the Treaty of Tilsit, its value was fixed at the rate of four paper for one silver ruble. The legal value of the paper ruble or ruble of account is therefore about 19 cents money of the United States. From the date of that ukase till as late at least as last winter, the market price of silver in paper rubles has differed but little from that fixed by law. Even during the French war, and whilst they were at Moscow, there was [no] sensible depreciation in the paper currency. Still, there are some fluctuations, which are regularly quoted twice a week on exchange days, and may, I presume, be obtained from almost every merchant who has correspondents in Russia. Whilst I was there—from July, 1813, to the latter end of January, 1814—those fluctuations were from 396 to 408 paper for 100 silver rubles. I heard, however, in June last, whilst in London, that the paper currency had suddenly depreciated to the rate of five paper for one silver ruble. For this I cannot vouch, nor is it probable that such event, although it might instantaneously affect the rate of foreign exchanges, would have any immediate sensible effect on the price, in paper, of Russian commodities. Such an effect must necessarily be ultimately produced wherever there is a depreciated paper currency; but it is slow and progressive. I do not believe that the similar depreciation in English bank paper (or, as it is called now, the rise in the price of silver), which took place on the last entrance of Bonaparte in Paris, and which lasted till its capitulation to the allies, say the months of April, May, and June, had any material effect on the prices of English manufactures. The Treasury of the United States did not certainly alter on that account the mode of computing duties on British importations. The rate of exchange between St. Petersburg and London varies so much that it affords a very uncertain criterion for estimating the real value either of the respective currencies or of the merchandise exported from Russia. Payments being made in both countries in depreciated and fluctuating paper currencies, and St. Petersburg being at all times so remote, and inaccessible six months in the year, the equilibrium cannot be restored at once by shipments of specie, as is the case in the intercourse between England, Holland, and France. The exchange had been as high as 20 pence sterling per paper ruble during the winter 1812-1813. Whilst I was in Russia it varied from 16 to 13¼ pence sterling per ruble. And during the whole of that time there was no material variation in the relative value of silver to that of either British or Russian paper currency. The differences in the rate of exchange seem to be owing exclusively to the amount of bills at market and to the demand for them, and both these vary not only according to the commercial balance of trade, but are in a great degree connected with the operations of government, which has on one hand troops to supply abroad, and receives on the other subsidies from Great Britain. Yet importing and exporting merchants at St. Petersburg, as well as those in foreign countries who trade with that place, value the paper ruble, from the manner in which they obtain and dispose of their funds, at the price which it costs them or at which they can sell it in bills on England. It may not be improper to observe, in relation to Mr. Robert’s importation, that supposing his statement to be correct, viz., that the paper ruble was at the rate of five paper for one silver ruble, and that the exchange on London was at 10½ pence sterling per paper ruble, the mode of computing duties heretofore adopted at the Treasury will not place him on a worse footing than importers from England, if the value of specie be taken as the standard. I do not recollect the precise price of silver in England in May last, but it did not differ 2 per cent. from the rate of exchange on Holland, taking 11 guilders and 2 stivers for the par. If there was any difference, it was in favor of silver. The exchange was then, at most, 8 guilders and 19 stivers, equal to 3 dollars 58 cents per pound sterling, which makes 10½ pence sterling equal to 15 cents and . And the paper ruble, valued at five for one, is worth 15 cents and .

It is true that silver, though not a perfect, and there can be none, is the best and in fact the only common standard by which to ascertain the value both of paper currencies and of merchandise of different countries. But where the depreciation is neither acknowledged nor considerable, and varies from day to day, as is the case with English currency, it would be an endless task, if at all practicable, to reduce every invoice and to calculate the duties according to the silver value, for the time being, of that currency. It was not, therefore, attempted here, and no complaint was made, although the same duty was raised on the article which cost 23½ francs specie in France, and on that which cost one pound sterling bank paper in England, at a time when that pound was only worth 18 francs. When the question was raised respecting the manner of calculating duties on importations from Russia, neither the legal value of the paper ruble nor the steadiness for a number of years of its market value were correctly known at the Treasury; and the mode of calculating according to the rate of exchange on England was adopted on the ground of placing importations from those two countries on the same footing. That principle appeared more just and practicable than an attempt to ascertain the specie value of the ruble, because paper was the currency of both countries, and because the great mass of goods on which duties ad valorem were imposed was imported from England. If it shall be thought proper to alter that mode, it may be done in two ways: either to take the legal value of the paper ruble at the rate of 4 for 1, which will give the constant value of that ruble equal to 19 cents, and is the rule applied to importations from England, the pound sterling being always estimated here at its legal value, equivalent to 4 dollars and 44 cents; and to ascertain for each importation the relative value of the paper to the silver ruble. But in this last case it would be consistent to adopt the same principle with respect to importations from England, and, indeed, from every other country which has a paper currency.

I have, &c.