HISTORY OF PHILIPPINE CURRENCY &

PHILIPPINE MONETARY STANDARDS

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Stability Development

STATE

Prosperity Order
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Stability Development
MONETARY
Standard
Prosperity Order
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 USD JPY

PHP
MONETARY GBP

UniT
SGD
EUR VND
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CLASSIFICATION OF MONETARY
STANDARDS
1. Commodity Standard or
Metallic Standard
 Equal value of Monetary unit and
particular commodities
 Full Bodied Money
 Either a monometallic or bimetallic
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 COMMODITY STANDARD
Monometallic
Gold Standard Silver Standard

Gold Gold Gold

Coin Bullion exchange
Standard Standard Standard

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MONOMETALLIC STANDARD
Gold Coin Standard
 Stated in Definite weight and
fineness of gold
 Free conversion of bullions to coins
 Freely imported and exported
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GOLD COIN STANDARD
 All kinds of money/bills are convertible
to coins
 Money Supply are determinable thru
gold reserves
 There’s a Free Coinage area
 Free market of gold
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MONOMETALLIC STANDARD
Gold Bullion Standard
 Expressed in Definite weight and
fineness of gold
 Freely imported and exported
 Forbidden the conversion of bullions
to coins HELLASL 9
GOLD BULLION STANDARD

 No redemption of representative money

except foreign transaction
 Government fixed the price of gold
 Government buy and sell gold as required
 All currencies are convertible into gold
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MONOMETALLIC STANDARD
Gold Exchange Standard
 Interchangeable for foreign gold draft
at fixed rate
 Defined in terms of specific quantity
of gold
 Central Bank should build up a credit
balance with bank in foreign countries
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GOLD EXCHANGE STANDARD
 Treasury buy and sells any amount of
gold draft drawn upon bank located in
foreign countries
 Allows people even to hoard and use in
any other purpose

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GOLD EXCHANGE STANDARD
 All kinds of currency circulating in the
country can be redeemed at par in gold
drafts

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MONOMETALLIC STANDARD
Gold Bullion Advantages
Eliminate expense in minting
gold
Low tendency of hoarding

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GOLD BULLION DISADVANTAGES
Small amount of gold less than 400
ounce are not redeemed
Difficult conversion of paper money into
gold
Destroying Parity between gold and
other forms of money
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MONOMETALLIC STANDARD
Gold Exchange Advantages
Can adopt any medium to use as monetary
unit
Does not have to maintain large size
reserves
There is economy in the use of gold and
prevention of losing gold abroad
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GOLD EXCHANGE ADVANTAGES
Avoid exporting expense of gold
Earned interest abroad
Favourable credit transaction
Government realizes profit from gold
draft
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MONOMETALLIC STANDARD
Gold Exchange Disadvantages
No balanced ratio between gold reserves
and money supply

No control in reserve deposited in other

country
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GOLD EXCHANGE DISADVANTAGES

Over exportation encourage hoarding of

gold

In a crisis, suspension of convertibility of

currency or might reduce its money supply
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COMMODITY STANDARD
Bimetallic Standard/Bimetalism
Two metal provides as the basis of
money in circulation, and issuer stands
ready to buy or sell either of two
metals at stated price
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COMMODITY STANDARD
Legal Ratio
Ratio between weights of gold coins
and silver coins in the mint
Market Ratio
Value of silver as being bought and
sold in the market
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BIMETALLIC STANDARD
Gresham’s Law
Bad or overvalued money drives out good
or undervalued money
Characteristic Of Bimetallic Standard
Has a fixed legal ratio
Two kinds of metal are used and there is
unlimited coinage HELLASL 22
GRESHAM’S LAW
Mint Ratio 16 1

Market Ratio 17
1

Then it will be profitable to convert gold coins into

bullion then sell it to the market for silver coins
and earn 1 silver coin without any change in it’s
buying power because of that people tend to sell
their gold in the market and used silver as money
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GRESHAM’S LAW
Mint Ratio 10 1
Market Ratio 9 1
In this situation, it is profitable to buy gold and
mint it to silver to earn 1 silver coin

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CHARACTERISTIC OF BIMETALLIC
STANDARD
Can adopt any medium to use as
monetary unit
Both gold and silver are legal tender
Free market of gold and silver
All money circulating are convertible into
gold and silver HELLASL 25
NON-COMMODITY/FIAT MONEY By: Group 2

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B. NON-COMMODITY/FIAT STANDARD

refers to a monetary system in which

the face value of the currency is much
higher than what it is made of
ESSENTIAL CHARACTERISTICS OF THE
FIAT STANDARD:
1) A fiat money is adopted as the
standard unit of value or monetary unit.
2) The fiat money is legal tender.
3) All other money issued by the
government is redeemable in the
standard fiat money.
TYPES OF FIAT STANDARD

1) Utopian Paper Standard or Pure Fiat

Standard
2) Involuntary Paper Standard
3) Managed Currency Standard
GENERAL CHARACTERISTICS OF THE
MANAGED CURRENCY STANDARD
1) The paper money is inconvertible and
irredeemable.
2) No reserves are maintained to back
up the domestic money supply.
3) The Central Bank is authorized to
exercise control over the credit system
so as to control money supply.
OBJECTIVES OF THE MANAGED
CURRENCY STANDARD:
1) To facilitate production
2) To make prices stable
3) To make each and every Filipino
maximize his income
4) To promote full employment
OBJECTIVES OF THE MANAGED
CURRENCY STANDARD:
5) To have an equitable distribution of
wealth in the country
6) To preserve the international value of
the peso
7) To make the country economically
rich, and politically and militarily strong
and powerful
ADVANTAGES OF THE MANAGE
CURRENCY SYSTEM:
1) Money supply is not dependent on the
gold reserves, but is controlled by the
monetary authorities.
2) There will be greater price stability
since prices depend on the volume of
money in circulation.
DISADVANTAGES OF THE MANAGE
CURRENCY SYSTEM:
1) Since money is not tied up to any reserve,
there is always the danger of over issuance
of money, which will lead to inflation.
2) Since foreign exchange rates are not
fixed by the metallic content of currencies,
this may result to an erratic fluctuation of
prices.
DISADVANTAGES OF THE MANAGE
CURRENCY SYSTEM:
3) Competitive monetary depreciation
might easily be used by each nation in a
fight for world trade.
4) From a political point of view, it is easier
to issue paper money or what we term
“Printing Press” money than increase
taxes.
PRE-SPANISH REGIME
PRE-SPANISH REGIME
SPANISH REGIME
“Hilis Kalamay “ (1571)
 “Spanish Barilla” was the first coin minted in the
Philippines during the reign of King Charles V (1700-
1746).
In the 17th to 19th century Manila became
one of the major centers of trade in the
Far East.
 “Spanish Dos Mundos” a.k.a. Mexican pillar
dollar were struck in 1732-1772 at the Mexican mints.
Round Barilla REPLACED the Cordirellas which was
2nd coin minted in the Philippines in 1776.
 The cuatro coins (1/4 real) of 1771 and of 1782-1783 and
the octavo (1/2 real) bearing the bust of King Carlos III were
circulated.
During the reign of King Ferdinand VII that
was 1808-1833, the coins bearing his head
were generally circulated
After the death of King
Ferdinand VII, his
daughter Queen Isabel
II became the new heir
of the Spanish throne.
Coins that were struck
bearing the bust of
Queen Isabel were
issued, and it was
called the “Isabelinas”.
 In 1852, the first Philippine bank note was printed. It was
called the pesos Fuertes issued by the El Banco Espanol-Filipino
de Isabel II.
In 1855 the pesetas silver coins were circulated.
Believed to be minted in either Madrid or Paris.
In 1857 Queen Isabel decreed the
establishment of the Manila Mint.
In 1861-1864
gold coins were
issued in
denominations of
one, two, and
four pesos
bearing the bust
of Queen Isabel
II.
In 1880-1885 four peso gold coins
bore the bust of King Alfonso XII .
FIRST PHILIPPINE
REPUBLIC
oThe Philippine Republic of 1898 under
General Emilio Aguinaldo issued coins
and paper money.
oThe notes were in Spanish and bore
Pedro A. Paterno’s signature, the
President of the Council of State at that
time.
oEmilio Aguinaldo issued coins minted in 1899 in denomination
of two centimos (Dos Centimos de Peso) that has a diameter of
25 millimetres.

Obverse Side of Dos

Centimos de Peso
copper coin

oWith the surrender of Aguinaldo, these were withdrawn from

circulation and declared an illegal currency.
AMERICAN REGIME
oThe American Regime started in the
Philippines on August 28, 1898.
oAfter the termination of Treaty of Paris, the
sovereignity of the United States over the
Philippines was established.
oThe principal currencies around to circulate
were as follows:
•Mexican Silver Dollar or Peso Containing Eight
Reals
•American Dollar

oThe Philippines is technically under quasi-

bimetallic standard.
oCharles Conant recommended a
monetary system for the country which
was the Gold Exchange Standard and
pegged the Philippine peso to the
American dollar at the ratio of 2:1.

oAnd by March 2, 1903, the American

Congress acted upon it when they passed
the Philippine Coinage Act of 1903.
oThe Philippine Coinage Act of 1903
provided that the monetary unit of value
of the Philippines was a theoretical gold
peso and silver coins.
oThe silver coin was considered the basic
currency unit.
 Conant Coin

oSilver prices started to rise between 1903 to

1906.
oGold Standard Fund was
established.
oPart of this fund was deposited
in the National Treasury of Manila
and the greater part was
deposited in designated
depository banks in America.
PHILIPPINE BANK NOTES
oPhilippine National Bank was
authorized to issue the Philippine
Bank Notes.
oBut later the El Banco De Las Islas
Filipinas was also authorized to issue
its bank notes.
PHILIPPINE NATIONAL
BANK NOTES
DOLLAR EXCHANGE
STANDARD
oIn 1933, the United States of America
abandoned the gold standard.
oSince Philippine monetary unit was linked
to the United States dollars, it had to adopt
a new standard called the Dollar Exchange
Standard.
oUnder the Gold Reserve Act of
1934, dollars devaluated by
40.94%, and the 2:1 ratio is
maintained.
oThe Gold Standard Fund was
made into a Dollar Standard Fund.
 CHAPER 2: HISORY OF THE

JAPANESE REGIME PHILIPPINE CURRENCY AND

PHILIPPINE MONEARY
SANDARDS
MICKEY MOUSE
money

JAPANESE WAR NOTES

Became INFLATIONARY
JAPANESE WAR NOTES
 CHAPER 2: HISORY OF THE

POST WAR PERIOD

PHILIPPINE CURRENCY AND
PHILIPPINE MONEARY
SANDARDS

71
JULY 4, 1994
JULY 4, 1944

Philippine Commonwealth was established under

President Sergio Osmena
EXECUTIVE ORDER 4049

All Japanese Currency circulating in the

Philippines are “ILLEGAL”

POST WAR PERIOD

POST WAR PERIOD
1949

CENTRAL BANK was established

POST WAR PERIOD

 CENTRAL
CENTRAL BANK
BANK NOTE
NOTE
Issued by President
Manuel A. Roxas

Old
OldCentral
CentralBank
BankNotes
Notes(In
(InEnglish)
English)

POST
POST WAR
WAR PERIOD
PERIOD
 CENTRAL BANK NOTE
Issued by President
Manuel A. Roxas

Bangko Sentral Notes Of Various Denominaiions

POST WAR PERIOD

JUNE 16, 1956

Paper money denominated in P200 and P500

were withdrawn from circulation

POST WAR PERIOD

Outline of the History of the Philippine Monetary System

POST WAR PERIOD

1972

Central Bank of the Philippines adopted

the FLOATING RATE

PESO was allowed to seek its own level in relation to foreign currencies
depending on the demand and supply of such foreign currency

POST WAR PERIOD

HAWALA
It is a system of traditional trust-based
banking.
Originated in Southern Asia.
The word Hawala came from the word
Hindi meaning “trust” or “exchange”.
In relation with the word Hundi stands for
“bill of exchange”.
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HAWALA
In Ancient China it was known as “fei
qian“ or “flying coins“
Unofficial alternative remittance
Money exchange system

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HAWALADARS
 Works as individual “brokers” or “operator”.
 Collect funds at one end of the payment chain
 Others distribute the funds at the other
 Operate independently
 Merchants or small business owners
 3000 international Hawala brokers in Asia

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HELLASL 83
FOR ASIAN IMMIGRANTS…
 The system provides a speedy, reliable, and
trustworthy method.
 Allows cash delivery in one place to another
The system proves superior to any Western banking
operation:
 Identification
 Commissions
 Transmissions
 Operation HELLASL 84
 NEGATIVE FACTOR Importance of Hawala (2
aspects)
 Money Laundering
 Other financial crimes  Estimated annual
 Financing of illegal volume
organizations
 “Hawala Triangle”
 Large
 Illegal in many
multinational firms
countries HELLASL 85
Economic Impact of Hawala (2 aspects)

Macroeconomic effect and state

sovereignty

 International financial markets,

financial regulation and monetary
policy HELLASL 86