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2020 | OriginalPaper | Buchkapitel

3. From Silver to Gold: The Currency Reforms in Asia Before 1914

verfasst von : Takeshi Nishimura

Erschienen in: The Development of International Banking in Asia

Verlag: Springer Japan

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Abstract

Standard silver prices began rapidly declining in the London silver market in the 1870s. Most countries and colonies that had previously adopted bimetallism or the silver standard were forced to reform their currency systems and adopt the gold standard. However, in Asia, local and regional merchants, as well as the local and regional government and most authorities, continued to use silver currency as a primary medium of exchange. Adopting the gold standard was less straightforward for Asian economies than for continental Europe. However, between the end of the nineteenth century and the beginning of the twentieth century, most colonies and countries in Asia adopted the gold-exchange standard. This reform contributed to expanding the international trade between Asia and the rest of the world and also promoted intra-Asian trade at the beginning of the twentieth century. In other words, the gold-exchange standard, which had both the function of the gold standard and a large amount of silver circulation, was one of the most important institutional fundamentals for the development of Asian economies at the beginning of the twentieth century.

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Vorheriges Kapitel International Financial Centres in Europe and Asia, 1900–2000

Nächstes Kapitel British International Banking

In 1893, most native states in the Indian subcontinent officially abandoned their rights of free coinage. However, some major native states held on to their rights of coinage until the independence of 1947 (Gupta 1979, Chap. 18). Various silver currencies were maintained in circulation until the 1930s.

Bordo and Rockoff (1996) argued that the adoption of the gold standard was a sign of the adherence to the monetary rule. A ‘good housekeeping seal of approval’ gave developing countries that adopted the gold standard, such as most of the Asian colonies and countries, opportunities to have cheaper access to the international markets. Obstfeld and Taylor (2003) confirmed Bordo’s and Rockoff’s argument by using various data and improving their conclusion. Mitchener and Weidenmier (2015) focused on gold-denominated debts and local currencies-denominated debts and analysed various financial risks. Similarly, Ferguson and Schularick (2012) addressed several financial risks. Although Mitchener and Weidenmier argued that currency risk and country risk could be separated, Ferguson and Schularick contended that the various financial risks were mixed and not possible to separate. Flandreau and Maurel (2005) and Lopez-Cordova and Meissner (2003) also argued that the gold standard contributed to expanding international trade with countries and colonies adopting the gold standard. In particular, the adoption of the gold standard reduced various transaction costs and risks of exchange-rate instability. Bordo and Schwartz (1999) argued that the instability of the currency systems and the suspension of the convertibility generated severe financial crises even after the adoption of the gold standard. However, in this context, Asian colonies and countries were outliers. Before 1914, these colonies and countries were neither affected by any financial crises nor forced to suspend the convertibility because of the adoption to the gold-exchange standard.

It relies primary on Takeshi Nishimura's research (Nishimura 2003). The other researches are referred to in the writing of this chapter as well. Keynes (1913), Shirras (1920), Spalding (1920), de Cecco (1974), Inoue (1994).

The final report of the Royal Commission (chaired by Sir. A. Chamberlain) contended that the gold-exchange standard was the most efficient monetary system for the Indian economy. This argument was mainly supported by J. M. Keynes. At the Royal Commission, Keynes also stressed the importance of establishing a central bank in India. The Reserve Bank of India was founded in 1935, and the Imperial Bank of India was founded in 1921. Keynes realised the potential of the gold-exchange standard as the world monetary system, in the spirit of the Bretton Woods Agreements.

It relies primary on the following researches. Vissering (1914), Kann (1928), Yang (1952), Miyashita (1990), Hamashita (1990), Kuorda (1994), Shiroyama (2009), Horesh (2014).

Subsidiary coins mainly consisted of copper and bronze. The amount of nickel and other materials’ coins in circulation was smaller than that of copper and bronze. Although gold also circulated in China, the amount of gold in circulation was much smaller than that of silver. Local authorities and merchants issued and supplied paper monies to local economies. After the establishment of the international banks at the open ports of China, these banks began issuing their original banknotes and used them for settling economic transactions between foreign and Chinese merchants. However, the number of these banknotes was much smaller than that of silver, and banknotes did not penetrate the hinterlands of China.

It relies primary on Takeshi Nishimura's research (Nishimura 2009). The other researches are referred to in the writing of this chapter as well. Kann (1928), King (1957), Zhang (2001).

It relies primary on Takeshi Nishimura's research (Nishimura 2005). The other researches are referred to in the writing of this chapter as well. Kemmerer (1916), Nelson (1987) .

It relies primary on the following researches. Vissering (1914), Spalding (1920), Helfferich (1921), Inoue (1926), Matsuoka (1936), Vissering (1941), Gonggrijp (1943), van Laanen (1983), Potting (1987), Kuitenbrouwer (1991), van der Berg (1996), van der Eng (1999).

It relies primary on the following researches. Icard (1912), Ingram (1971), Brown (1979), Brown (1992).

It relies primary on the following researches. Icard (1912), Spalding (1920), Nawada (1932), Pargoire (1933), Matsuoka (1936), Nawada (1942), Robequain (1955), Touzet (1956), Gonjo (1985).

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Titel: From Silver to Gold: The Currency Reforms in Asia Before 1914
verfasst von: Takeshi Nishimura
Verlag: Springer Japan
Buch: The Development of International Banking in Asia
Print ISBN: 978-4-431-55614-5

Electronic ISBN: 978-4-431-55615-2

Copyright-Jahr: 2020
DOI: https://doi.org/10.1007/978-4-431-55615-2_3

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