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of the dollar falls the upward tendency of prices at once re-asserts itself.
4.
Given equal conditions of exchange, the increase in the emoluments of the sterling-paid Civil Service since 1914 may be put broadly at 30%. I have show, however, that the new system of exchange is less favourable than the old, and as the dollar falls all local charges rise. The exact effect of the fluctuations of the dollar must remain a matter of guess work; but it is probable, as far as I can judge, that a fall in exchange from, for example, 4s.8d. to 28.6d., will, if sustained for a sufficient period of time, result in an increase in local prices of considerably over 20%.
5.
The simplest method of arranging a sliding scale would be to allow 1% in respect of each fall of ld. in exchange; but this would give a range of 26% between 4s.8d. and 28.6d., which would in my opinion be too great. I accordingly recommend the adoption of a scale with a range of 20% between 48.8d. and 28.6d., as shown in the enclosure.
It is not likely that the dollar will fall below 28.6d. for some considerable time to come, and in any event I should prefer not to make any provision against such an eventuality until some experience has been gained of the prac- tical working of the sliding scale.
I have the honour to be, My Lord,
Your Lordship's most obedient,
humble servant,
TE. Statts
Governor,&c.