7. somewhat similar system prevails in India. The currency consists of silver rupees issued by the Government out of the profits of which a "Gold Standard Reserve" has been accumulated in London and invested in gold and short date and cash loans. When the exchange value of the rupee falls below 16 pence gold, the parity is maintained by the sale of bills drawn on London. These bills are met from the funds of the "Gold Standard Reserve" and the rupees received in payment are kept out of cir culation.
8. Argentina.--The Argentina currency is on the model of that of France, and the peso is equivalent to the five-franc gold piece. It weighs 1.451646 grammes of fine gold equivalent to $.96475 or 47.58 pence. Argentina introduced the gold standard in 1881 but maintained it for only five years when a paper currency took its place. Gold commanded a premium subject to enormous fluctuations. In 1899 the Government fixed the premium in gold at 127.2727 per cent; that is to say, it fixed the value of the dollar in paper at 44 cents gold or $100 paper x loo) equal $44 gold or ---=-- 227.27 paper dollars .44 equal $100 gold. The value of the currency or theo retical dollar in United States money is therefore $.96475 X .44 = $.42449, and in English money 47. 58d X .44 -=-- .20.935 pence. The Government main tains this parity thru the medium of the "Ca ja de Con version" which exchanges notes (curso legal) for gold coins and gold coins for notes on a basis of 44 gold centavos per paper dollar. The following foreign coins are legal tender at a fixed rate: Sovereign, for gold $5.04 20 franc piece, for gold 4.00 Eagles, for gold 10.364 20 mark piece, for gold 4.96 Peru, 5 soles, for gold 5.00 Spain, 25 pesetas, for gold 5.00.
Bills of exchange on foreign countries are quoted both in gold and paper and rates fluctuate according to the usual course of supply and demand, the rate for a 90-day bill on London varying from to 49% pence per gold peso. To convert a gold quotation to a paper basis, multiply the gold rate by 44 centavos; for example, X .44 = 21.34 pence or vice versa; to convert a paper rate to gold divide by .44, = 48V2 pence. The value of a sovereign is $5.045 gold, therefore — $11.459 paper pesos. Quotations in New York vary from 41% cents to 43% cents per paper peso (94.32 cents to 98.86 cents per gold peso) .
9. Brazil.—The unit is the milreis divided into 1,000 reis. The milreis weighs .82207 gr. of fine gold equivalent to $.54634.
The circulating medium is composed of convertible and inconvertible Government notes, both classes of notes having legal tender qualities and the same pur chasing power in the country. In 1906 the Brazilian Government established the "Caixa do Conversao" on the model of the Argentina "Caja de Conversion" and fixed the value of the paper currency at 15 pence per milreis or 16 milreis to the pound sterling and is sued on that basis 320,000,000 milreis. In January,
1911, the Government increased the amount of con vertible notes and increased the value of the paper milreis to 16 pence or 15 milreis to the pound sterling. This overvaluation was unwise as it precipitated a financial crisis from which Brazil is still suffering. At 1.5 pence per paper milreis, gold was at a premium of 79.63 per cent, or 1 milreis in gold equalled 1.7963 paper milreis. In fixing the value of the milreis at 16 pence instead of 15 pence the Government lowered the premium on gold to 68.40 per cent, or 1 milreis gold = 1.684 paper milreis. As a sovereign contains 7.32238 gr. of fine gold the present theoretical unit, like that of India, weighs of 7.32238 or .48816 gr. of fine gold; equivalent to 32.444 cents (or as there are .82207 gr. of fine gold in the gold milreis X .82207 = .48816 gr.). Brazil quotes as follows: London 90 days sight in pence per milreis, Paris 90 days sight milreis per franc, Hamburg 90 days sight milreis per mark, New York at sight 90 days sight milreis per dollar.
Owing to the depreciation of the paper milreis, the war and other causes, the quotations on London have recently ruled low; about 12 or 13 pence per milreis as against the theoretical normal of 16 pence. When the paper currency of a country depreciates, the ex changes fall in sympathy because, as foreign exchanges are on a gold basis, the premium on gold naturally ex tends to them. Depreciation, therefore, stimulates exports and benefits those who have to receive money from foreign countries, but checks imports and ad versely affects those who have to pay money to foreign countries. For instance, in the case of Brazil, when exchange is at 15 pence per milrcis, an exporter would receive 16,000 milreis for a £1,000 draft on London, but with exchange fallen to 12 pence, he would receive 20,000 milreis for the £1,000—a profit of 4,000 mil reis, probably clear, as it is unlikely that his rent and other expenses in Brazil have increased. He has Made a large profit out of the turn of exchange. On the other hand, an importer buys £1,000 worth of goods in England ; he will have to pay, when exchange is at 15 pence, 16,000 milreis ; but when exchange drops to 12 pence per milreis, he will have to pay 4,000 milreis more for his £1,000. Consequently, the im porter has to be constantly raising his prices to meet the fall in exchange, and the public in turn have to meet these increases and pay greatly enhanced prices for the necessaries of life, altho their wages, salaries, etc., remain exactly the same. A ninety-day sight bill on London has an average currency of 110 days (17 days' voyage + 90 days 3 days' grace) .