Front Page Titles (by Subject) CHAPTER VIII.: FOREIGN EXCHANGES. - A History of Banking in all the Leading Nations, vol. 2 (Great Britain, Russian Empire, Savings-Banks in the U.S.)
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CHAPTER VIII.: FOREIGN EXCHANGES. - Editor of the Journal of Commerce and Commercial Bulletin, A History of Banking in all the Leading Nations, vol. 2 (Great Britain, Russian Empire, Savings-Banks in the U.S.) 
A History of Banking in all the Leading Nations; comprising the United States; Great Britain; Germany; Austro-Hungary; France; Italy; Belgium; Spain; Switzerland; Portugal; Roumania; Russia; Holland; The Scandinavian Nations; Canada; China; Japan; compiled by thirteen authors. Edited by the Editor of the Journal of Commerce and Commercial Bulletin. In Four Volumes. (New York: The Journal of Commerce and Commercial Bulletin, 1896). Vol. 2 A History of Banking in Great Britain, the Russian Empire, and Savings-Banks in the U.S.
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THOSE who have never had any experience of a circulation with an enforced legal-tender quality do not know, cannot even imagine, the uncertainties introduced into every business transaction by variations in the rate of exchange. In the first instance, only foreign commerce appears to be affected, and no harm seems to result except to importers who buy foreign goods on credit and do not know what amount of depreciated currency they must put aside against the day of settlement, to pay a debt contracted in francs, pounds, or marks. The domestic producer appears, for his part, to have no concern in the matter; he may even congratulate himself on the fact that the depreciation of the national currency, as measured in foreign money, affords him protection in addition to that furnished by the import duties, and enables him to sell his goods without fear of competition from abroad. But his joy and his profits are transitory. We have seen above, in our allusions to the Crédit Foncier, that Russian farmers were very well satisfied with the depreciation of the rouble caused by the Eastern war of 1877-8, making it possible for them to sell their grain at a higher price, or rather, to get a larger number of roubles for it. But we have seen also that the necessity which the depreciation of the rouble imposed upon these same farmers of paying seven or eight, or even nine roubles per year, as interest and contribution to the Sinking Fund upon every R. 100 of the specie debt they had contracted with the Société Foncier soon made them plead poverty; and this they did so loudly and so successfully that the Government soon took upon itself a part of these payments, and later assumed the whole burden by transforming the Société Foncier into a State mortgage bank, that Bank of the Nobility, of the unsatisfactory management of which we have had much to say above.
Our present purpose is simply to call attention to the very wide fluctuations through which the circulation, the fiduciary money, passes in a country that has once abandoned a specie basis, the only true foundation upon which to establish a circulation. The following table, which we borrow from an official publication, shows the great changes in value to which the rouble has been subjected, not only during the long period of twenty-five years, but often within the space of a single year.
Let us examine a few of the figures in this interesting table. Take the year 1876: war is not yet declared, but it is expected and dreaded; the value of the demi-impériale ranges from 620 copecks to 698, a variation of about sixteen per cent. We have seen above that during that same year gold exports attained their maximum—R101,800,000. But that value, 698 copecks, which marks the maximum depreciation for 1876, was not reached again for some years, except once at the beginning of 1877 (654 copecks), while the war was still in the future. Thereafter, up to and including 1889, the most favorable valuation was never below R. 7 for the demi-impériale; and in 1888 we reach a maximum of R. 10, or 168 copecks, paper, for R. 1 gold. The year 1888 was the year of Boulanger in France, of the death of the Emperor William I. in Berlin, and of the publication of the treaty of alliance between Austria and Germany. Now, observe the two figures standing, respectively, at the right and left of that maximum of R. 10. The average value was 841, and the lowest was 745. The explanation of this is that after the anxiety caused by the events we have named, William II., just after ascending the throne (June 18th), had paid a visit to St. Petersburg, and confidence had been restored by that fact. But what a margin such fluctuations furnish for speculation, for stock jobbers, and with what ruin they menace the honest merchant! It is in 1890 that we find the most favorable valuation of the rouble (611 copecks for the demi-impériale). The reason is that M. Wyschnegradski was then most busily engaged in his refunding operations, and a series of letters appeared in the “Berliner Boersenzeitung” declaring that the re-establishment of a metallic circulation was at hand. As a matter of fact, however, we know that the Minister had never given the subject a moment’s thought. Accordingly, the increased valuation of the rouble was not maintained. Even as we write (October 20, 1895), though the metallic reserve is twice as great as it was in 1890, and though the circulation of gold is officially authorized and encouraged, the paper rouble is, notwithstanding, lower than in 1890; the demi-impériale is quoted in St. Petersburg at 740 copecks in paper.
As to the silver rouble, which is still officially regarded as the legal tender of the Empire, it has been acted upon by two opposing forces—by the depreciation of paper money, tending to increase its value, and by its own depreciation, as silver, tending to lower its value. The table on page 421 shows the direction in which the silver rouble has moved during the past thirty-five years.
The last column of this table furnishes an interesting study for those who believe that the State has merely to put its impress upon a piece of metal in order to ensure it a fixed intrinsic value. During those years in which Russian credit was severely strained, the silver rouble was more valuable than the paper rouble, the difference being at times as great as forty per cent. But as the credit of the Government improved, silver depreciated as compared with paper money, and in 1893 the difference between them was only 1⅓ per cent. In other words, silver has not succeeded in Russia, any more than elsewhere, in holding out against the depreciation forced upon it by the universal law of demand and supply; it follows that bimetallism has not the slightest chance of revival in Russia. The Imperial Government has never had the least predilection for it, under any event, and we have already shown in our examination of the State Bank that its vaults contain the largest amount of gold and the smallest amount of silver of any on the continent of Europe. Moreover, in 1893, the Russian Government dissociated itself, to a certain extent, from the silver rouble, which had been its legal tender, by inserting in the “Messager Officiel” of August 12th
(24th) of that year the following comments upon an imperial decree of July 8th (20th):
“In view of a depreciation so rapid and so great, it became the duty of the Government to take such steps as would lessen, at least, if they could not neutralize, the disastrous consequences arising from the depreciation of a metal which, in legal contemplation, serves as the basis of our monetary system, though, as a matter of fact, the silver rouble of full weight and fineness (18 grams fine)* has entirely disappeared, and the credit-rouble (paper money) has become our real monetary standard.
“As a result of various steps on the part of the Government tending to the establishment of a fixed relation between gold and the credit-rouble a belief has arisen that the credit-rouble is no longer an equivalent of the silver rouble. The collection of customs duties in gold roubles, the acceptance of gold deposits as a guaranty for the issue of bills of credit, and the fact that the coinage of gold is much larger than that of silver have led the public to believe that the credit-rouble represents a specific value in gold. This conviction betrays itself in the lack of correspondence between the fluctuations of the credit-rouble and of silver; on the one hand, owing to certain political and economic disturbances, the credit-rouble has at times been of less value than 18 grams of fine silver; and on the other hand, the depreciation of the white metal has failed to affect the valuation placed upon the credit-rouble in London, Paris, Berlin, and other money markets. In 1891, before the promulgation of the Sherman Act, 18 grams of silver were worth less than a credit-rouble; in June, 1893, when the ounce of silver, which had recently been quoted at 37d., fell to 30d., and 6 per cent. Mexican bonds went down to 59, there was no change upon the Paris or Berlin Bourse in the value of the credit-rouble or of Russian funds expressed in credit-roubles. It is very fortunate that the silver rouble (of full weight and fineness) has practically gone out of circulation; otherwise the depreciation of the white metal would have been followed by serious losses in Russia. The Treasury will not be seriously damaged by the return to it of the twenty or twenty-five millions of coins outstanding which it will be obliged to accept at par (that is, as the equivalent of credit-roubles) notwithstanding that 18 grams of silver are now of less value than the paper rouble.
“The situation would be very different if there was free coinage of silver. Until we are able to adopt gold as our monetary standard, the silver rouble will continue to be our legal tender, and as such it must be received at par both by individuals and by the public treasuries, and inasmuch as the purchasing power of the rouble is greater than that of 18 grams of fine silver,† everybody would make haste to have as many roubles coined as possible, and our stock of silver roubles would soon become enormous. Not only would this result in a serious depreciation of our paper money, but the value of the credit-rouble would follow the rapid fluctuations of the white metal. It was to prevent this result that the further coinage of silver for private account has just been forbidden.”
[* ] More exactly, 17 996 grams, or 0.62555 (approximately 5-8) of a standard ounce.
[† ] Including the cost of coinage, which is considerable, for silver it was 6 2-3 per cent.