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TELEC.O. 882

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MINUTES OF EVIDENCE:

Hu. T. H. home with them, and it has been suggested that the Whitehead. Mexican dollar and the British dollar, even after the gold standard was established, should be allowed to be 20 Jan. 1003. imported as an article of merchandise into the Straits Bettlements, so that any man coming to the Straits Bettlements and selling his goods for the new Straits Settlements dollars could then exchange these Straits Bettlements dollars for Mexican dollars, if he wanted Mexican dollars to take home with him?--Yes, I quite see it, but then my difficulty is this-the Government will have to redeem Mexican as well as British dollars.

1827. We are assuming that all that is done, that Mexican dollars and British dollars are demonetised, and those that are in the Straits Settlements are converted by the Government, and after that the Government say, "You may bring in Mexican dollars or British dollars as you like; they are not legal tender in this country. Mr. Adamson's question is whether an arrangement of that sort would do away with the difficulties which some people have anticipated P-I think the trade could be carried on without that, because it is a very round- about way of financing the movements of mer- chandise. If the Straits sell to China or to Siam they get paid. Banks will negotiate their bills on Hong Kong or Bangkok; they will get paid in the Straits money, and buyers will pay the equivalent in Hong Kong or Siam.

1828. Well, suppose that the man came from a place where there is no bank; I think that is where the chief difficulty arises; there are places that have not got banks yet? If it paid the banks to so finance trade Whether they would do it, otherwise they would not.

the trade at these outside ports would aggregate a suf. ficient amount to warrant the banks incurring the ex- penditure of buying silver for coinage into British dollars, and buying Mexican dollars for shipment to the Straits, remains to be seen, but if it paid them they would do it. If the volume necessitated it it could be done. But so long as China and Hong Kong remain on a silver basis these dollars, Mexican and British, will continue to be sent out there.

1829. (Mr. Adamson.) The point is this, they import now $22,000,000 per annum, and only about $3,000,000 remain. To that you must add the Federated States of about $6,000,000, say $9,000,000, so that $13,000,000 are required for the outside trade of the colony, and it is with the view of providing for that that I ask this question: Would trade be interfered with if, after the demonetisation of other coins, there were still permitted under arrangement a free inflow and outflow of other coins? It might be possible to have that, so long as British and Mexican dollars are obtainable, but such could not be done during the time the standard was being changed.

1830. And would it not be necessary?-It might be necessary if it so happens, an the Chairman has stated, that there are places where there are no banka.

1831. (Chairman.) But there are places at present that take, we will say, $13,000,000 from the Straits Settle- ments every year, and it is to be presumed that they would even after the change was made in the Straits Settlements continue to take $13,000,000-Pre- sumably they would continue to take it.

1832. Therefore, that being one of the requirements of trade, would it not be convenient to allow tnem still to get those dollars in the Straits Settlements, not quite in the same way, but very much in the same way as they got them before?-It would certainly facilitate matters, but I do not see how it is possible for Govern- ment to permit their importation. The bulk of those dollars, I presume, are shipped up to China.

1833. (Mr. Adamson.) No?-They are not

1834. No, we have got particulars of that; a great many go to the Eastern coast of the Malay Peninsula and dodge and scatter about?-Then it would be a con- venience; yes, very convenient.

1835. (Mr. Blain.) You have described in your memor- andum the machinery by which it might be possible to make a gold standard effective in the Straits Settle- menta: I did not understand you to say whether you think it probable that success could be gained in that way or not, but rather this is the only way that you know in which it could be done, if at all P-There are other methods of doing it, but they may be more cir- Quitous; broadly speaking, I think that a change can- not be thorough or effective unless the present dollars are demonetised and redeemed, and a new dollar substituted. 1836. Yes, that is the essence of this scheme as stated here -Yes.

1837. But you do not commit yourself to saying that it would be possible for the Straits Government to carry that out with success -No, I cannot say that; the ramifications are too endless and too great, while -the time required and the cost involved would also be very great; I think it is impossible to estimate either the length of time required to make a gold standard effective or the cost thereof, owing to the situation of the Straits and the Malay States.

1838. I understand that there are two principal objec tions that you allege against making such an attempt. The first is, from the point of view of the Government, the difficulty they would have in making it effective and the expense that might be involved if they are to see justice done between man and man?—Yes.

1839. And the other one is the economic effect upon the community as a whole, which, I think, you define as resulting from the scarcity of the money-Of the quantity of money.

1840. Restricting the quantity of the circulating medium-Limiting the coinage; and there are other economic disadvantages.

1841 But in your examination by Mr. Adamson just how it rather seemed to me that that difficulty tended to disappear. I do not understand that the question of the supply of a circulating medium for trade transac tions within the colony is the important point?--I think it is a very important point.

1842. The sufficiency of circulating medium for the internal trade of the Straits Settlements you think a very important point1-A very if not an all important point, inasmuch as the trade is carried on with Asiatics, and their money has been and will continue silver, whatever the standard may be.

1843. Because of the effect upon prices if the cir culating medium was insufficient -The Asiatics and the trade require the movement of immense quantities of silver money from one point to another.

1844. Within the colony 7-Within the Straits Settle- ments and the States.

1845. And the States?-Shipment by steamer. the Malay States it is an ordinary occurrence to ship $400,000 or $500,000 of actual_dollars—from Sing pore or Penang to one of these States.

1846. But those are places that are all under the same currency law -All under the same law.

1847. And if you have a new law that increases the value of your standard coin a smaller quantity shipped would serve the same purpose, would it not?--I do not think it would at first. The ratio at which you would effect a change would, I presume, be near to the present level of the gold price of silver. But still, even after the change was effected, I think there would still be the transfer of large amounts of silver from one place to another, and principally from the main points, Singa pore and Penang, to the States of these large quantities of the new coinage. That would still be going on, it is only natural to conclude.

1848. But as regards the external trade of the colony, from what you said in your examination by Mr. Adam- son, you agreed that if there were facilities for import- ing and exporting the existing dollars merely as articles of bullion, that would be sufficient-That might be done by the banks if the aggregate amount required warranted the expense of the shipments and the pur- chase of silver on this side for coinage into British dollars at the Bombay Mint; but I repeat, I do not nee how it is possible to do this if a gold standard is to be established and made effective.

1849. And would you go further than that with regard to the effect of going on to the gold standard in the Straits Settlements; would you say that besides the embarrassment and injury to trade that would result from limiting the quantity of the circulating medium, the Straits would be liable to suffer in competition with other countries that remained on a silver basis 7-The main products of the States is tin, and that, I think, is a speciality, and so is pepper, and even with the re- stricted and limited currency or volume of money, that trade, I think, would continue. But the greater diffi. culties are these that through unforeseen and unknown causes the gold price of silver may increase 10 or 15 If the gold price of silver appreciates, the per cent. token silver currency in the States would be shipped away to the nearest markets and melted and sold for the 10 or 15 per cent. profit. An export duty would not stop the export, because there are hundreds and thousands of Chinese who would take these dollars

COMMITTEE ON STRAITS SETTLEMENTS CURRENCY.

away in their boxes and pookets, and the most elaborate Custom House machinery could not prevent the Asiatics from smuggling these coins away if they could make 10 or 15 per cent by so doing.

1850. But in your main evidence you attributed ■ much greater importance than this to the question between gold and silver, and I think you have said that some of the gold countries in the world had as regards some of their main industries been disastrously effected by the advantage that other countries had got from having a depreciating currency. You do not anticipate any disastrous result of that kind in the Straits Settlements if they adopt a gold standard? -Not of the same magnitude.

1851. Because they have got no industry that it can affect in the same way?—No great industries. No.

1952. So they really in that respect are in a better position for going on to gold than some of the other countries that have done it already because they have not competing industry which is liable to suffer 1-In that respect yes, but there are other causes which render the proposed change hazardous in many ways.

1853. (Chairman.) Is there anything you would like to add, Mr. Whitehead; we have no more questions?— In regard to Siam putting the standard on a sliding acale. This is a gold standard which sutomatically moves with the rise and fall in the gold price of silver, and to make contracts in such a standard is attended with great danger.

1854. (Mr. (Adamson.) Is not that arrangement in force only until they arrive at their intended ratio!— For three months, but contracts made at the beginning of the three months might easily be out 15 per cent. by the end of the three months.

1856. (Mr. Johnson.) But so they could on the pre- sent silver basis 1-Scarcely as much as 15 per cent.

1856-9. (Mr. Blain.) They were quite willing to give you absolute fixity at once?-Mr. Chairman, I desire to draw the attention of the Committee to a most in- teresting article which appeared in the "Statist," one of the leading financial newspapers in London, of 17th January, 1903, in connection with "the fall in silver and the Far East," and the problem now being considered. The following is an extract from the

article:-

"It is to be hoped that the Commission appointed by the Straits Settlements to consider the advisa- bility of adopting the gold standard will very seriously and very fully consider the question from all its aspects. In India, whose example is likely to have an undue influence upon European opinion in the Far East, the interest, or apparent interest, of the official classes, civil and military, and of im-

porting merchants and bankers, had entirely too Mr. T. H. great weight. The real welfare of the vast popula- Whitehen. lation of India was lost sight of, and what was sup- posed to be the dominant party amongst Europeans 20 Jan. 1903.“ carried everything before it. We hope the mistake will not be repeated in the Straits Settlements. The Commission should always bear in mind the peculiar position of the Straits Settlements. is surrounded by immense populations using silver currencies. It is a vast entrepôt for the trade of the Far East, and it is a kind of half-way house on the way to Australasia. The Australasian communication may seem to point to the adoption of the gold standard. But Australasia, whatever it may be a century or two hence, is a small affair compared with Eastern Asia, with its seven or eight hundred millions of people, close to which the Straits Settlements lie. The question is too big to be dealt with adequately here, but there is one part of it to which we would invite the atten- tion of all who have influence in the Straits Settle. ments. As we said last week, the renewed fall in silver that followed the closing of the Indian minta has given a marvellous stimulus to the export trade of China-has, indeed, enabled China to carry on a considerable export trade throughout the whole year, because it has made it possible for her to establish new branches of trade, which were quite out of the question while the gold price of silver was high. On the other hand, the stimulus has been nothing like so great in India. India has all the advantages of good government, of internal peace, of high credit, of easy communications, of immense expenditure upon railways, irrigation, and other public works; lastly, of the great skill, enter- prise, and capital of Europeans. Yet her export trade has not developed as rapidly in proportion as that of China, because, as we said above, the Indian Government was swayed too much by the sup. posed interests of officials, civil and military, and did not take due heed for the welfare of the Empire."

1860. (Chairman.) Does that include all you have to say?—I do not think I have anything more at the present time, but should anything further occur to me I will send it in to the Secretary, or add it to my evidence.

1861. We are very much obliged to you, for it must have given you much trouble to prepare your memoran- dum Well, of course it did, but the consideration of the money of the Far East has been in a measure my daily life for the last 28 years.

1862. But, even so, to prepare it all over again was a considerable task 7-Yes, thank you, but it has been 1 "labour of love."

NINTH DAY.

Tuesday, 27th January 1903.

PRESENT:

Jir DAVID BARBOUR, K.C.8.I., I.C.M.C. (Chairman), presiding.

Mr. W. BLAIN.

Mr. W. ADAMBON, C.M.G. Mr. G. W. JoHNSON,

Mr. J. BARR ROBERTSON, called; and Examined.

1883. (Chairman.) I think you have long been familiar with the questions arising out of the variations in the relative value of gold and silver in recent years? --Yes, for the last 25 years.

1864. You have put in a memorandum; have you any objection to it being printed with the evidence?— No, none whatever. As the tables are there, perhaps it will be better for reference if printed.

1865. I propose to ask you some questions on your memorandum, not dealing in the oral evidence with

6849.

Mr. A. E. COLLINS, Secretary.

every portion of it, but with the substance of it so far Mr. Barr as it affects the present inquiry 1-Yes.

1886. You consider, I understand from your memo randum, that the difficulties which have arisen in the silver-using countries owe their origin to the adoption of a gold standard by Germany in 1872-Yes; that is the origin of the difficulties.

1887. Which was followed by France stopping the free coinage of silver 7-Yes, limiting it in 1873, and finally refusing in 1876.

Robertson.

27 Jan. 1903.

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PUBLIC RECORD OFFICE, LONDON

Mr. Barr Robertson.

MINUTES OF EVIDENCE:

183€. You wish to point out that the area over which silver is now used as standard money is very much 27 Jan. 1903, contracted ?—Yes, it is very much contracted.

1868. You are also of opinion, I understand, that the fall in the value of silver as compared with gold is due in a material degree to the scarcity of gold as com pared with the increased demand for it 7-Yes. From 1873 to 1892 the fall in the gold value of silver was undoubtedly due to the scarcity of gold.

1870. And since that time 7-In 1890 and 1891 the Indian import of silver, which was diffusing itself over the silver countries, was very much increased, and I attribute the closing of the Indian mints largely to the fact that the supply of silver was 50 per cent. greater in 1890-1-2 than it had been at any time during the previous 30 years,

1871. From the table you have put in, I see that the estimated production of silver increased from 63 millions and odd ounces in 1873 to 172 millions and odd in 1900 7-Yea.

1872. To not quite three times the amount ?—Yes, rather less than three times the amount.

1873. Whereas the production of gold increased from £19,000,000 odd in 1873 to £51,000,000 in 1900 7- Yes. At the same time I must call attention to the fact that in 1890-that is 17 years after the date of 1873- the production was only £23,790,000, when the United States, Germany, and other countries had passed to the gold standard, and had certainly absorbed £250,000,000 sterling of gold, these being countries which formerly used very little gold.

1874. Allowing for the falling off owing to special causes in 1900, the production of gold ems to have increased rather more than three times ? Yes.

1875. But up to 1890 the production of gold had in creased really very little 7-Yes, with all the extension of gold coinage in new gold standard countries.

1876. You do not think then that up to 1890, or about that time, the fall in the value of silver was mainly due to the increased production ?-The fall in the valve of silver was due entirely, up to 1890, to the scarcity of gold.

1877. But there was an increased production of silver-There may have been, but it did not appear up to 1889 in the case of India, which is a typical silver country. After that time the amount flowing to India did begin to increase in volume, but not before. I make a point somewhere in my memorandum that the fall in the gold value

1878. I am coming to that. You have given here index numbers which may be taken to represent the average prices of a number of the chief commodities ?- Yea, of 45 commodities in London.

1879. In London, which is, I suppose, the greatest and the best market at which to take the prices -- Yes, the leading market. And these articles are nearly all raw products and articles of production; they scarcely at all include manufactured articles.

1880. You show that if the gold value of bar silver be taken at 974 for 1873, it was 65'4 for 18921-— Yes.

Was.

1881. And, in the same way, that if the average price of the commodities be taken at 111 in 1873, it was 68 in 1892 -Yes, that is correct. Or, rather, I would say, taking the average at 100 from 1867–77.

1882. I understand that. I merely wish to show the alteration. I understand that you take the average of a number of years as 100-Yes, and 1873 at 111, happened to be a year when coal and a number of other things were exceptionally high; the others are more normal; that is to say, they are 100.

1883. So that the fall in the gold price of silver and the fall in the average gold price of commodities up to 1892 appears to have been about the same?-Yes, practically the same.

1884. But from 1802 to the present time, the result has been different 7-In commodities 1

1885. I mean that there has not since 1892 been the same equality of movement in the two sets of prices -No; they parted at that point.

1886. The gold value of bar silver fell from 65'4 in 1902 to 39'6 in 1902 7-Yes, that is correct.

1887. And the average price of cornmodities altered from 68 in 1892 to 69 in 1902 7-Yes. In the mean- time it went down to 61 in 1898, and then went back to 60 for 1902.

1888. To what do you ascribe that difference of movement in the two sets of prices -Up to 1892, silver and commodities seem to have been very steady; the figures show that; they are compared for each year in the memorandum. After that time, silver was being placed on the markets of the world in excess of the quantity necessary to keep it on the level of the commodities. Formerly, apparently just by the natural course of events, it had been distributed over the world tolerably equally, so that commodities and it were steady together. Then more silver was inported into the silver countries, or rather, one would say, more silver was available in the world, and was pressed on the ruints of the silver countries, so that it broke the level which had formerly subsisted between the gold value of silver and the gold value of commodities.

1889. In your Table II. you have given a column 3, which I understand represents the silver prices of com- modities just as the figures in column 2 represent the gold prices 7-Yes; that is correct.

1890. And according to that, the silver prices of commodities, being 114 in 1873, and 108 in 1874, were 97 in 1891, and 104 in 1892 7-Yes, that is correct.

1891. But between 1892 and 1902 the silver prices of commodities have risen from 104 to 174 ?—Yes; they have steadily risen up to that figure,

1892. Do you consider that that is evidence that there has been, in every reasonable sense of the term, a great depreciation of silver since 18921-Certainly; that is to say, silver in regard to its own former pur- chasing power, and without considering gold at all.

1893. That is to say, it takes much more silver in 1900 to purchase the saine quantity of the chief com modities that are used in the world than it took in 1892 1-That is the point, yes.

1894. You do not think, I understand, that that is due to a greater scarcity of the commodities ?—I do not think so.

1895. Then you give some figures in Table III., showing the decrease in the gold prices of commodities up to 1902, the increased silver prices of commodities, the increase in the purchasing power of gold, and the decrease in the purchasing power of silver 7-Yes.

1896. These figures illustrate what you have already said --Yes. I would say here, though, that if you take the purchasing power of gold, it has increased by 45 per cent. Now, if you take the purchasing power of silver, it had fallen in 1902 to 57, but the index number of bar silver in London for the same year was 39 6. So the purchasing power of silver has not fallen to anything like the extent that the gold value of silver has fallen.

1897. No-The purchasing power of silver has fallen 43 per cent., and the purchasing power of gold has increased 45 per cent. The gap between the two is divided between those two conditions; it does not all belong to silver, and it does not all belong to gold.

1898. I understand you to say that from 1873 to 1892 the currency troubles were solely due to the inadequacy of the supply of gold 7-Certainly

1899. But do you not think that that is the case with regard to what has happened since 1892 1-Gold did increase up to 1896, but silver has decreased in pur- chasing power all the time since 1892.

1900. You admit that gold has increased?—The index number of 61 for 1896 shows the increased pur- chasing power of gold; the 50'5 for bar silver shows the fall in the gold price of silver; the two began to diverge in 1892.

1001. You point out that the gold value of the silver coin in use in the different countries of the world now varies vory much from country to country ?—Yes. Formerly it was practically uniform.

1902. For example, in some of the French colonia

COMMITTEE ON STRAITS SETTLEMENTS CURRENCY.

the value for the silver coins which circulate is at the rate of 60'88. per oz. 1-Yes.

1903. In others, at the fate of 13d. pcr uz.-the Indian rate Yes.

1904. And that in others there is a varying gold value according to the value of silver-Yeein Indo Chins and other French Colonies in the Far East.

1905. And in the British colonies also we seem to have three rates of value for the current silver coins 3- Yes, we have.

1906. The system of the West Indies is peculiar 7-- Yes.

1907. You state that the money of account is the dollar ?--Yes.

1908. Worth 48. 2d. 3-Yes.

1909. But there is no actual dollar 7-There is no coin. That gives a halfpenny to the cent; it makes it simple to calculate into pence at 100 cents for 48. 2d.

1910. And they use shillings, florins, and half-crowns -British subsidiary coinage -Yes.

1911. Which is full legal tender 7-Yes. 1912. So that, I imagine, if you went into a shop and wanted to buy an article, you would be told it was so many dollars 7-Yes.

1913. You would think in dollars, but you would pay in British coins 1-Yes. Of course there are bank notes there, but they are not legal tender.

1914. But they are commonly accepted 1-Oh, yes --of the Colonial Bank.

1915. In the Dutch colonies in the East, the silver money of the Netherlands circulates-Only the silver money of the Netherlands.

1916. At its face value ?—Yes; so that they may either import silver coin if it is deficient, or export it to the Netherlands if it is redundant.

1917. You think that the money which is current in the East must be to a great extent in the future, as it has been in the past, silver and copper ?—Yes, I think 80. The nature of the people and their transactions make it necessary to have silver and copper.

1918. You think the increased production of gold in the future will tend to raise the gold value of silver? -I think it will.

1919. Do you think it will have much effect 1- Well, I do not think it will have any great effect.

1920. Why? Because I do not think there will be enough of it. For instance, I say in one part of my memorandum that I do not think the goki index number of commodities will ever reach 100 again if we rely upon the supply of gold.

1921. That is so far as regards the effect on prices of the standard of value ?—Yes.

1922. You will admit that a famine as regards the chief articles of consumption might put the price of those articles up to almost anything -That is per fectly true. My point is that the quantity is not likely to increase so much, that if commodities are tolerably steady, there would be any very great rise, although I think it is highly probable that they might reach up to a figure. I should be almost inclined to fix a limit of 80; it may be higher.

1922. Have you formed any opinion as to what the production of gold will amount to 1-I have not gone into that question so as to offer an opinion.

1923. Do you think there is anything in the argu- ment that after some time the production of gold will begin to fall off?—I think so. I have had a good deal to do with gold mines, and the history of gold mining is the history of the exhaustion of successive mines-of one mining district after another getting exhausted.

1924. Do you approve of the proposal of the Straits Government to reduce the reserve against notes from two-thirds to one-half ?—No; I think that on general grounds it would be a very unwise step.

1925. It would increase, to some extent, the silver on the market 7-To reduce it from two-thirds to one-

half would bring down the present reserve of 8,000,000 dols. to 6,000,000 dola.; it would leave 2,000,000 dok. to be disposed of. That is adding to the

Mr. Barr Robertson.

very difficulty which your Committee has met to try to get rid of.

―

1926-7. It adds to the exchange difficulty, but, on the 27 Jan. 1903. other hand, the Straits Government makes a profit out of it. It roughly makes 2,000,000 dols. out of it ?— Well, of course it does if you consider the Straits as a corporation continuing for ever and never having to pay its note. But, after all, the notes are issued, and the withdrawal of 2,000,000 dollars would give the Government the use of that amount and nothing more. The notes issued would still be for 12,000,000 dols., and the reserve would be reduced from 8,000,000 to 6,000,000 dols. My objection is that they would be depreciating the silver currency if they sold 2,000,000 dola.

1028. Do you think a gold standard could be adopted in China -I lived in China for seven years in my early days, and I have given a good deal of attention to that question. China is the last outpost where silver has already landed and is going to land, and the problem in China is how to get rid of he enormous quantity of surplus silver that will be necessary to bring the standard up to any reasonable gold level. How can China get rid of the surplus silver ?

1929. Surplus silver-in what way 7-For instance, say both the Straits and the Philippines adopt gold. It is perfectly true they will not use so very much less silver than before, but, at the same time, no one can tender silver there. They can in China. Suppose for a moment I am talking in a general way now-they have £200,000,000 sterling of silver at the present rate; that is, at the rate of 22d. we will say. It would not be worth the while of China to go on any gold standard except at some substantial advance on that price. Three shillings for the tael has been suggested. Of course, the question is, where is the surplus silver to be disposed of if that rate were adopted.

毋

1930. When India changed to the gold standard there was no surplus silver-No, simply because India stopped at a moment when the rupee being at 1s. 2 d., it had only the rupees in circulation to deal with; it stopped at 18. 24d., and left silver to go to other countries. In the case of China, there are no other countries for silver to go to, and it can hardly begin to adopt a gold standard at 226. for the ounce of silver; it would not be worth while to create a whole new system of coinage unless there was some certain steady basis for the currency.

1931. There might be a further fall in the near future? -That might be. Then comes in another question. I should judge that two-thirds or more of the whole cur- rency of China consists of sycee silver, not coins at all. It is quite clear that there must be entirely new coining on an enormous scale.

1932. China would have to begin by coining the whole of her silver into some new coin which the people could be got to accept 7-Yes.

1933. And that would be a big business in such a country and under such a system of government ?-- Yea Another point is that if you attempted to con- tract the currency by demonetizing this sycee silver, it would lead to native troubles, because there would be a considerable amount of aycee silver that could not be accepted for coinage. I think it is not practicable for China to adopt a gold standard unless at a very low gold value for silver, as to adopt a much higher level would leave a large amount of surplus silver to be disposed of.

1934. Do you think there will be any further material fall in the gold value of silver 7-I think not; I must say I do not think there will be.

1935. That opinion. has been held at many stages during the past 25 years 7—Yes.

1936. And it has proved to be wrong ?-Yes, it has done so.

1937. So I suppose you do not speak with great confidence on that subject Well, I think there is a mechanical limit. No doubt there have been very great improvements in the production of both gold and silver-very great improvements, but at the same time, I can hardly believe that the enormous quantity being produced now can be produced for any length of time at that price. That is my view.

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