1901 Currency Takeover in the Philippines

Indeed, the year 1901 marks a significant moment in the unfolding narrative of American economic and political expansion, demonstrating how financial control became an integral tool of burgeoning U.S. imperialism. As we have seen with the 1896 election, the interplay between powerful financial interests and government policy was increasingly shaping the nation’s trajectory, and the currency takeover in the Philippines stands as a stark example of this reality.

The Bureau of Insular Affairs (BIA) of the War Department, the agency overseeing the U.S. occupation of the Philippines, appointed Charles A. Conant in 1901 to manage the currency takeover. This decision was far from coincidental; Conant was no ordinary hire. He was a Massachusetts-born financial journalist and historian of banking, known for authoring “A History of Modern Banks of Issue” in 1896. Beyond his academic background, Conant was a fervent advocate and leading theoretician of a then-emerging concept that would later be dubbed “Leninist theory of capitalist imperialism”. He argued that developed capitalist nations faced “overproduction” and a “falling rate of profit” due to “chronic oversavings”—savings for which there were no profitable domestic investment outlets. Conant posited that salvation lay in foreign markets and investments, necessitating Western governments to engage in imperialist ventures to forcibly open markets and investment opportunities abroad.

For Conant, this also implied a domestic transformation, demanding “centralized concentration of power” within the U.S. government to achieve “efficiency” in the “struggle for world empire”. He believed the U.S. Constitution might even need amendment to allow for “Tsarist absolutism” or, at the very least, a vastly expanded executive power in foreign affairs. His enthusiastic support for the U.S. war against Spain in 1898, which he viewed as a gateway to the vast Asian market via the Philippines, further solidified his position as a key voice for expansion.

Secretary of War Elihu Root, a “redoubtable Wall Street lawyer in the Morgan ambit,” personally handpicked Conant for this critical role. Root, who had no prior military experience, was appointed by President McKinley specifically because a lawyer was needed “to direct the government of these Spanish islands”. His primary mission was to develop a colonial policy for territories like Cuba, Puerto Rico, and the Philippines, where the U.S. Army was still engaged in a “bloody struggle with Filipinos who wanted independence”. Root’s focus was on “state building” in these newly acquired foreign lands, incorporating American legal traditions into a new imperial model.

The immediate problem Conant faced in the Philippines was a practical one: the islands were “happily using a perfectly sound silver currency,” the Mexican silver dollar. However, the U.S. military occupation, which was expensive due to its efforts “suppressing Filipino nationalism,” found that its revenues were being paid in these “unwanted and cheaper Mexican coins” because they were legal tender and more valuable than the U.S. gold dollar.

Conant’s cunning plan to address this issue was to “impose a gold U.S. dollar currency upon the country” while ostensibly allowing Filipinos to retain a silver currency. His scheme involved replacing the existing full-bodied Mexican silver coins with new American silver coins that were “tied to gold at a debased value far less than the market exchange value of silver in terms of gold”. This “imposed debased bimetallism” was designed to intentionally trigger Gresham’s Law. According to this economic principle, since the new American silver coins were “deliberately overvalued in relation to gold by the U.S. government,” the “overvalued silver would keep circulating in the Philippines and undervalued gold would be kept sharply out of circulation”. This also meant that the U.S. Treasury would reap a “seigniorage profit” from this debasement, with these funds happily deposited in a New York bank, effectively serving as a “reserve for the U.S. silver currency in the Philippines”. This arrangement allowed the U.S. government to issue paper dollars based on this new reserve, further integrating the colonial economy into the American financial system.

The motivations behind this currency takeover were deeply rooted in the broader American imperial project. Following the Spanish-American War, there was a palpable “hunger for action” among the business community and politicians. Powerful figures like Senator Albert Beveridge openly declared that the Philippines were “ours forever” because they provided a crucial “base at the door of all the East” and access to “China’s illimitable markets,” as well as vast natural resources like “timber,” “coal,” and “pure gold”. Business interests, including lumber, iron, and transportation, saw direct benefits and pushed for intervention to achieve “commercial supremacy” and relieve economic “suspense”.

Initial resistance to Conant’s plan was significant. Congress, influenced by the silver lobby, was hesitant to approve the BIA’s proposal. Conant, however, proved to be an exceptionally skilled lobbyist and public relations operative. He met with editors of major financial journals, securing their commitment to publish editorials supporting his plan—many of which he reportedly wrote himself. He leveraged the existing support of American banks in Manila and, crucially, used a “mixture of bribery and threats,” warning recalcitrant U.S. bankers that their opposition could lead to them losing “large government deposits from the War Department”. Furthermore, he appeased American silver companies and pro-silver bankers by promising them that the federal government would purchase silver for the new Philippine coinage from their companies. This “tireless lobbying” ultimately paid off, with Congress passing the Philippine currency bill in March 1903.

Despite legislative success, implementing the plan on the ground was challenging. The U.S. attempted to “coerc[e] the conversion” of the old Mexican silver coins by removing their legal tender privilege and mandating the new U.S. coins for taxes and government payments. However, the Filipinos “happily used the old Mexican coins as money,” causing the new U.S. silver coins to “disappear from circulation” into tax payments and transactions with the United States. This forced the War Department to intensify its efforts, leading Conant to devise further coercive measures, including a “legal prohibition on the importation of the Mexican coins” and “severe taxes on any private Philippine transactions daring to use the Mexican currency”. The success of this scheme was aided by a demand for Mexican silver in northern China, which diverted the old coins from the Philippines, and by the strategic design of the new U.S. silver coins, which were made to “look very much like the cherished old Mexican coins”. By 1905, through a combination of “force, luck and trickery,” Conant’s plan was largely successful, establishing the new U.S.-backed currency.

The Philippine currency takeover was not an isolated event but part of a broader push by Conant and his associates to spread the “gold exchange standard” and “dollar imperialism” globally. This system, which he argued was “more scientific and economic,” allowed for “greater elasticity of money”—a euphemism for the ability to inflate credit. Conant saw this managed standard, with its “debased and inflationary” character, as a way to integrate “undeveloped countries” into the economies of dominant imperial powers. He believed it would overcome the “shortage of gold” by allowing client states to hold reserves in key currencies like the dollar or pound, rather than in gold itself, thus enabling coordinated international inflationary paper money. This new monetary order, managed by central banks and explicitly serving “the interests of the rich,” effectively replaced the classical laissez-faire gold standard with a system of “managed money” and inflationary credit expansion, firmly establishing U.S. economic influence and setting the stage for future global financial structures like Bretton Woods after World War II.