coined, and again they disappeared from circulation under the pressure of Gresham's law, because they were heavier than the British dollar and the Japanese yen. Finally, in 1895, a new piaster was authorized of substantially the same weight and fineness as its competitors in the trade of the East. Of this type 66,336,692 were coined before the problem was taken up of establishing a goldexchange standard.'

The first plan for bringing about stability of exchange, proposed by the eminent colonial governor, M. Doumer, in 1897, was decided by a special commission to lack the necessary elements of success." The fall of silver in 1902, and the closing of the mints of Siam in the autumn of that year to the free coinage of the metal, emphasized anew the necessity for action. The government of Indo-China announced a plan for a conference of representatives of Hong-kong, Singapore, China, and Indo-China, in connection with the exposition at Hanoi. Conditions were so serious, however, that they attracted the attention of the government at home, and led to the appointment of a special commission from different ministries interested in colonial or financial affairs. On this commission, named on December 3, 1902, sat M. Pallain, Governor of the Bank of France; André Bénac, of the Ministry of Finance; the eminent economists, Charles Laurent and Maurice Bloch; M. Simon, head of the Bank of Indo-China, and many departmental officials. Only five formal sittings of the commission were held, and its work was concluded on March 28, 1903. The various plans which had been proposed were discussed, but palliatives were recommended rather than a definite constructive policy.

M. Arnauné, Director of the French Mint, prepared the report, and he opposed the immediate adoption of a fixed par of exchange upon the ground that it could not be main

1 Arnauné, 344.

? M. Doumer proposed simply to suspend free coinage of silver, fix the piaster at 2.50 francs, and rely upon scarcity to maintain parity. The facts are fully set forth in the able and convincing work of M. Détieux, La Question Monétaire en Indo-Chine, 190-97.

tained in the face of an adverse balance of trade.' The measures adopted were the suppression of the export tax on silver coins, the gradual retirement and recoinage of Mexican piasters, including limitation of their legal-tender quality, and the issue of a sufficient quantity of French piasters to meet the needs of commerce. The importation of Mexican coins was prohibited and a convention was made with the Bank of Indo-China for the gradual exportation of the stock in the country. Their exodus was encouraged by the demand for money in Manchuria in 1905, due to the war between Russia and Japan, and the flight of the French pieces also was stayed only by a decree of January 30, 1905, imposing an export tax.'

The incompleteness of the measures taken in 1903 was the subject of severe criticism by French exporting interests and leading economists. The French chambers of commerce almost unanimously urged the definite adoption of the exchange standard.' The Governor of Indo-China appointed a local commission October 8, 1905, which recommended a value for the piaster of 2.75 francs ($0.531) and the adoption of the Philippine system for maintaining the parity of the silver coins. The home government was not ready to approve this step, and the rise of silver carried the value of the bullion contents of the piaster for a brief period in 1906 as high as 2.94 francs, or nearly seven per cent. above the proposed parity. The local currency remained subject to the fluctuations of the market for silver bullion, except that the government intervened from time to time in fixing a rate

A synopsis of the views of M. Arnauné is given by Détieux, 320– 28, and these views are analyzed by him, La Question Monétaire en Indo-Chine, 382-84, substantially in accord with the policy of the present writer.

2 Détieux, 333.

3 Vide list in Détieux, 311, and report of the Paris Chamber, May 13, 1903, by M. Laguionie, Commission on International Exchange, 1903, 379-91. The latter report declared flatly for "a gold fund destined to pave the way for the ult mate adoption of the gold standard."

for official purposes which followed in a halting manner the market rate, without conforming to it.'

I Thus, from June 15, 1908, the rate was 2.45 francs, which was changed on June 22, 1908, to 2.50 francs.-Économiste Européen, June 26, 1908, XXXIII., 804.

CHAPTER XXII.

THE EARLY CRISES OF THE LAST CENTURY.

The Periodicity of Crises up to 1793-The Use of Accommodation Bills in the Crisis of 1782-The Effects of the Napoleonic Wars and the Crisis of 1810-The Speculative Mania of 1825-The Specie Circular and the Bank War in the United States-The Railway Development and the Crisis of 1847.

TH

HE development of existing methods of commerce and of credit belongs essentially to the period of the last century and a half. Great commercial transactions were carried on before that time, but they were carried on by other banking methods than those of the modern age. The world was not linked, as it is to-day, in all its parts, by a community of commercial operations and by houses of international banking credit. Such economic crises as occurred were local in their effects and were produced, much more directly and more often than those of to-day, by political events. Their chief interest, therefore, is in demonstrating the essentially periodic character of such convulsions wherever commerce has attained anything like its modern development. Professor Jevons finds some evidence of a stock-jobbing mania as far back as 1682 and others in 1711, 1721, 1731, 1763, 1772-73, and 1783, with evidence of periods of high prices in 1742 and 1752. Complaints of stock jobbing and "bubbling" were so pronounced that acts were passed by Parliament in 1710 and 1711, and again in 1733, with the result, according to Defoe, that "a happy stop was put to this spreading mischief.""

1

1 Jevons, Investigations in Currency and Finance, 210-211.

The first serious credit crisis of which authentic details exist was that of 1763, when the inflated bubble blown by the Seven Years' War was pricked by the coming of peace. This crisis is of peculiar interest, because it was most severe at Amsterdam and Hamburg, where no paper currency was employed except the "bank money" issued against deposits of coin by the Bank of Amsterdam and the Bank of Hamburg. The next great crisis,-that of 1772,-fell upon England and Scotland in the midst of a period of remarkable industrial and inventive activity. The first act for the building of a canal in England was passed in 1755, and the next twenty-five years witnessed the construction of a network of canals more extensive than those of any other country except Holland. Brindley completed the canal from Worsley to Manchester in 1762 and Arkwright and Watt were at the same time developing their wonderful mechanical inventions.

The practice of drawing accommodation bills seems to have come into use in Scotland for the first time just before this crisis, although there is evidence that it had been practised earlier in England. A newspaper of the time contained a letter stating that "Banking companies had appeared in almost every corner of the Kingdom, and bills of exchange had been multiplied by a new method called Swivelling, without any solid transactions."1 Adam Smith alludes to "the well-known shift of drawing and redrawing," and says that "The practice of raising money in this manner had been long known in England, and during the course of the late war, when the high profits of trade afforded a great temptation to overtrading, is said to have been carried on to a very great extent.' Professor MacLeod declares the system of accommodation bills to be "the curse and bane of commerce," and expresses the opinion that "it has been the great cause of those frightful commercial crises which seem periodically to recur." The English courts have decided, however, that a bill given for a consideration is a good bill

1 Public Advertiser, July 8, 1772, quoted by MacLeod, II., 215. 'Wealth of Nations, Book II., Ch. ii.