When the American troops arrived, there were in circulation the
Spanish-Philippine peso and subsidiary silver coins; Spanish pesos
of different mintings; Mexican pesos of different mintings; Hongkong
dollars, fractional silver coins from different Chinese countries,
and copper coins from nearly every country in the Orient. Although a
law had been passed prohibiting the introduction of Mexican dollars
into the islands, they were being constantly smuggled in. Fluctuations
in the price of silver affected the value of the silver coins, and the
money in common use was in reality a commodity, worth on any given day
what one could get for it. These conditions affected most disastrously
the business interests of the islands. Merchants were forced to allow
very wide margins in commercial transactions, because they did not
know what their goods would actually cost them in local currency upon
arrival. The most important business of the local banks was in reality
that of exchange brokers and note shavers. They hammered the exchange
rate down and bought silver, then boosted the rate skyward and sold.
The American army brought in a large amount of gold, but this did
not remain in circulation long, as it was exported by the different
business concerns, or hoarded.
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