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The Philippine Monetary System

Reported By: Arvincarl Niño C. Oblina

Chapter 3

General Emilio Aguinaldo Vs General Frederick Funston

American Sovereignty

General Emilio Aguinaldo proclaimed on June 12, 1898 that there were issued paper money backed by the natural resources of this country, as an expression of sovereignty. However, the capture of Aguinaldo by General Frederic Funston in March 1901, that such currency was made illegal by the American forces

Currencies:

The Philippine Coinage Act of 1903

  • Mexican Silver Dollar or Peso
  • Spanish-Filipino Silver Peso
  • Filipino Silver Peseta
  • Filipino Silver Half-Peseta
  • Filipino Copper Centavo
  • Filipino Copper Half-Centavo

The peso was equivalent to a US half dollar and was made as the unit of value.

The currency provided for maintaining the silver peso and for financing the purchase of silver bullion for the currency through the issuance of notes or certificates of indebtedness.

Mr. Charles A. Conant, expert on banking and finance, adviced to form a new currency for the country on a strictly gold basis.

Until on March 2, 1903 that the US Congress passed the necessary legislation to provide a new coinage system in the Islands,

The Gold-Exchange Standard

United States Coinage Act of March 2, 1903

The operation of this arise from the variant of the gold standard and covered from 1903 to 1933 or a period of three decades. In order to maintain the parity of the peso with gold, the Philippine set up a currency reserve fund called as the Gold Standard Fund.

Under the gold-exchange standard, a country need not change gold into coins nor gold bullions as reserves.

The Act of 1903 defined monetary system of the Philippines Islands as follows:

  • The unit of value is the theoretical gold peso containing 12.9 grains of gold with 0.9 fineness. This was equivalent to exactly one-tenth of a five-dollar piece or fifty cents in US currency.
  • The silver peso was coined containing 416 grains of silver with 0.9 fineness.
  • Silver certificates were given circulation against which silver pesos of an equal value were held in reserve

Devaluation of the Dollar

President Franklin Delano Roosevelt cut the dollar's value 41% by raising the price of gold from $20.67 to $35.00 an ounce and also ended the use of gold as domestic US currency resulting in the devaluation of e American Dollar. The consequent abandonment of the gold standard results to changing of our Gold Standard Fund to Exchange Standard Fund.

Wherein under this standard, Philippine currency was no longer redeemable in gold but in dollars. The devaluation of the dollar resulted to devaluation of peso. Evidently using the total Philippine currency reserves of 56.3 million dollars on deposit in the US as a basis , the amount after devaluation should increase to 95.3 million. However the amount was not given owing to certain deductions made, and finally only a balance of $ 23,360,750.75 was credited to our government.

Note:

  • Silver peso was a legal tender in the Philippine Islands then for all debts, private and public
  • The sale of the certificates of indebtedness and the purchase of bullion were operations of importance and were executed with success by the Bureau of Insular Affairs
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