NEPERT
PUBLIC RECORD OFFICE
لسلا...
C.O
Reference :-
882
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
7PUBLIC RECORD OFFICE, LONDON
56
MINUTES OF EVIDENCE:
Mr. Barr London for so much gold ?"—Why should the Straits Robertson. enter into the exchange business at all?
Jan. 1903.
2010. The only reason why it should that I can see is this that unless there is some arrangement either to receive gold and give out dollars, or to give out dollars in exchange for a bill on London, which comes to the same thing, except that you avoid the trouble of moving the gold from one country to another: unless there is some arrangement of that sort, how is the Straits Government to settle how many new silver dollars it should issue -It would very soon see by experience whether the rate was tending to be very high. The banks here, and in India, must among themselves take the chances of what will be shipped. If the shipment is not effectual, the exchange continues, and another shipment will be made until the rate is beaten down. There is no necessity to beat it down at once. It might even be a rather slow process, but it is effectual. The effect of the introduction of gold and the drawing of bills, as you suggest, is to bring out dollars and put them into circulation. The Government is quite as good a judge as the banks as to whether the exchange is or is not high. My point is that the pivot of the whole thing is to name a certain rate of exchange. When the exchange rises above that rate you circulate more dollara. As to this process of a bank manager in London deciding whether or not the Straits Govern- ment is to issue more dollars, is not the Government as well fitted to do it, and likely to do it as effectually? 2011. Here is this difficulty. Say the exchange rises to 18. 8d. The Government, I suppose, would keep a number of dollars in reserve -They could do
BO, yes.
2012. Suppose they did that: how are they to let then out 1-They could deliver out of the reserve.
2013. But they would not give you dollars unless you gave them something in exchange -But they are paying out something all the time; they can pay out the dollars.
2014. They pay out the dollars in any case; they will pay out more because they coin more; but what will they be given in exchange for them ?They could place them on deposit if they could not do anything else with them. They have payments of all descriptions to make.
2015. Would you charge the banks interest 1-Of course, the position of the banks hardly enters into this question. It would depend really upon the local cua-
tum.
2016. But the Government have paid out money for these dollars; it has cost the Government money to get them; it is losing interest on this money if it lodges the dollars with the bank; it is clearly entitled to charge the bank interest ?-On the other hand. it is perfectly open to them to name a rate at which they would give out dollars.
2017. (Mr. Blain.) To put dollars into a bank would not necessarily put them into circulation ?—Yes; it would add to the volume of the currency.
(Mr. Blain.) Not necessarily.
2018. (Chairman.) A banking company has to try to lend them out, or to make use of them in some way? Yes. The Bank of England hold the reserves of the other banks and makes use of them.
2019. (Mr. Blain.) It would be a very roundabout way, when you want to get more dollars into circu- Iation, to pay them into a bank account, and trust that the bank had a developing business so that it would be able to use them. The bank might be contracting its business 7-Yes, in the meantime. What is the pre- sent process? The bank sends out the gold and geta the dollars.
2020. (Chairman.) Is not that the very same process as in this country; when a bank finds it profitable it imports more gold and has it coined ?—If the exchange and everything favour.
2021. Suppose the Government had placed 1,000,000 dols. on deposit with the bank, exchange being at I. 8id., and the exchange fell in the course of a few weeks to is. 7jd. What if the Government said, “* We want that money back," and the bank said, "We have lent it all out, and you cannot have it back?"—Of
course, these are conditions. At the same time, the point is that the gold that would be sent out under a gold system would be in the hands of the banks just
these night be; consequently, while I am not pre pared to say exactly the methods by which it should be done, they could pay it out. At the same time, they have the revenue and expenditure going on all the time; and I think there would be various ways of iuing it from the Treasury.
2022. I do not think the fact that the Government receives so much in revenue and pays out so much in expenditure makes much difference: its revenue and expenditure would probably be the same whether exchange were high or low ?--Probably so. We know that money's increased in this country by being placed in the banks; consequently, I do not see why there should be any material difficulty in doing it there.
2023. (Mr. Blain.) Then you would leave it to the banks 7-Yes. Suppose it went on a rate of 18. 84d., or suppose you gave the bank a commission on carrying it out, I do not see any material difficulty: it is exactly what happens now in India, viz., that the banks take the Council Bills and get the rupees out of the Trea- sury, and it has the effect of lowering the Indian exchange. My contention is that without gold you can have just as permanent a gold value as you can with it.
2024. (Chairman.) By increasing or contracting the currency 1-Yes. This is a process of doing it through the banks in London, whereas there is no reason why you should not do it out there without any trouble about gold at all,
2025. (Mr. Johnson.) Would not the consequence be that the people would bring in their currency notes and ask for silver -They do not do it now. I believe the people you speak of would never know there had been any change; they would always find lots of dollars floating about, just as now. The same as in India; all but a very small fraction of the people do not know there is any particular change in the circulation of the rupee. The point is that you get it at the same stable value. That is the real point, and when you do that you do everything that gold could possibly do for you.
2020, (Chairman.) Then there is your proposal, No. 47—Yes.
2027. That is rather a continuation of No. 3 7-Yes, it is a continuation. The difference between the two is that No. 3 fixes no permanent gold rate, no limit to its rising, but the rate may be arrested at any point to which it may reach, if the Government decided to do 80. The next one runs nearly on all fours with the Indian system. You have this high rate up to which
you work over a long period of years, and then you get far removed from the bullion value of silver. Whether the Straits people would care to raise the dollar to 28. is a question for them.
2028. In this way, if they wished to raise the dollar to 2s., you think it could be done in time -I think so. I estimate the time at six, seven, or eight years, judging by the Indian standard.
2029. Do you think the argument based on the time it took the Indian standard to become effective is applicable to the Straits Settlements 1-Of course you are aware of the fact that it did not run straight owing to causes which I have given in detail in my memoran- dum, viz., the great increase in the purchasing power of gold; it did not get the opportunity. In the next place, as we know, for the first eighteen months or two years there was really no contaction. The mints took in and coined Rx. 2,000,000 from the banks immediately after the closing of the mints, Silver having fallen in value, this went into circulation as money. Rx. 2,000,000 or Rx. 3,000,000 per annum was formerly perhaps the whole of the effective rupees going into circulation, al- though they coined Rx. 8,000,000, or Rx. 7,000,000, or Rx. 8,000,000. They got from the banks that Rx. 2,000,000; then they reduced_the_proportion of the reserve, and that gave them another Rx. 2,000,000. I think Mr. Harrison and others have calculated on an examination of the facts that it was in 1895 or 1896 that the real contraction began, and in this I agree.
2030. That being so, you might get your 28. rate rather more quickly in the Straits? Yes. To make a brief statement, the rupee came to 1s. 4d. in the begin-
•
COMMITTEE ON STRAITS SETTLEMENTS CURRENCY.
ning of 1899; that was four years after that contraction began. From 18. 7d. to 28. is a greater rise than was the case in India. It might take six or seven years if normal conditions prevailed.
2031. Are you strongly opposed to making gold legal tender in the Straits 7-Yes, I have a strong feeling on that point.
2032. Why? Well, they have got on exceedingly well in all these oriental countries without it; con- sequently, you begin to introduce a new currency which, after all, never becomes the effective currency of the country because its circulation must be very limited. 2033. They would not use it except in so far as it suited them; but if they found it more convenient, why should they not use it ?-Of course, when it is legal tender people will be bound to take it when they would not otherwise take it at all; there is no option. I rather think they found out in India that the people were unwilling to take sovereigns; they preferred to have rupees.
2034. I think they found that nobody offered any- body else a sovereign. If the population generally do not take to the sovereign they will not use it, so there would be no difficulty. If a particular individual knows that his customers and the people with whom he has to deal do not like sovereigns he will not provide himself with them 7-That is true. On the other hand, why should you make the currency, the principal currency, the standard currency, out of something which is totally inapplicable to the country when the money the people need can be had in abundance.
2035. But you are using gold as the standard; you have made it the standard of value ?—That is quite true. At the same time, I do not wish to intro- duce gold with the standard. I propose to make it the standard in my No. 3, but I do not propose to have any gold currency. In countries where for thousands of years they have been using silver, why introduce gold at all, when the whole object in view can be equally obtained without their knowing any- thing of gold at all!
2036. You consider that the most important of all measures would be to establish the same par of exchange between gold and silver all the world over ?- That is the real solution.
2037. But is that practicable at the present time?-- Well, it is not practicable within any very short time.
2038. Looking at the state of opinion generally 7 Of course, opinion is very much regulated by some leading statesman giving a very strong reason for making a new departure. Now we have at the present time a very strong reason for looking into this question, viz., the position of China itself, where the United States and all the leading European Powers are holders of indemnity bonds or claims to receive indemnity from China, and they fixed a very large indemnity in silver, and, at A time of considerable pressure on silver, when all the warlike operations were being carried on, when all these Governments were spending money largely, they chose to fix the highest rate for the tael that it had touched for years, and thus con- verted an onerous silver debt into a still more onerous gold debt. The Chinese are rebelling now, and I think quite rightly.
2030. Do not people, as a rule, bear the misfortunes of their neighbours with great equanimity 1-That is perfectly true. Still, there is the question that a greater failure of statesmanship is difficult to con- ceive than the fact that the value of bar silver should have been 60 84d. per ounce 30 years ago, and that to-day it should be 22d., and that this whole fall should have been produced by unwise legislation.
57
2041. You quote certain figures with regard to the Mr. Barr movements of gold in this country 7-Yes. The Table is Robertson. intended to show that in 1876 we began to export gold on a very large scale.
2042. There were net exports in certain years 1— Yes, the net exports from 1877 to 1888 amounted to nearly £10,000,000 sterling. Now, if you take it that in those ten years we must have used £2,500,000 of gold per annum in the arts, namely, £25,000,000 sterling more, that is altogether about £35,000,000 sterling, that was actually taken out of circulation in ten years. The corresponding index number is from 94 in 1877 down to 69 in 1886; so that the two run together the diminution in the currency of this country, and the fall in the gold prices of commodities.
2043. Since 1887 there appear to have been con- siderable imports ?—Yes; still not a great deal,
2044. But after 1893 there are very large imports 1— Yes, £11,900,000 and £14,700,000; but in the next two years £5,600,000 were exported. I point out that those two years were the time when Russia was withdrawing from the European countries a very large quantity of gold-£50,000,000 of gold was imported into that country, of which we had to give our share. The result was that it not only imported this £50,000,000, but it also consumed its own production to the extent of £35,000,000 in the eight years that I give. The
result was that the index number fell again, notwith- standing all these gold imports to 81 in 1896, the lowest it has ever touched.
2045. You state that the stocks of gold and silver passing as gold in the principal gold money countries amounted to £1,193,000,000 in 1901 7-Yes, that is correct.
2046. And as Mr. Sauerbeck's index number is 70 for that year, you argue that to raise the price of commodities to their former level you would require an addition of metallic money of about 536 millions ster- ling -That is correct, yes.
2047. That is on the assumption that the range of prices is precisely proportional to the quantity of full legal tender money I could give a number of reasons why it does not exactly conform, but really, when you take very large figures, you find that all these generally average each other, so that I can only give an idea that it is five hundred millions, and that is a very large sum. You asked in the earlier questions whether there was a prospect that the gold to be pro- duced in the future would carry the index number back to 100. I say I do not think it ever will do so, because in order to raise it to 100 you would have to provide such immensely increasing supplies to cover the enormous area over which gold is now dis tributed, that I do not think the gold will ever be found in sufficient quantity.
2048. You make a suggetion in your memorandum, which no doubt you will recognise is not one for this Committee to consider, viz., to open the Western mints to silver at some reasonable ratio with gold ?—Yes, if it were adopted there would be no need for gold in the currencies of the Asiatic countries. The tie betwecz gold and silver would be effected in the West, and the teeming millions of Asis would never know that there was a tie, because silver would be at par with gold, and there would be no need for gold in Asia at all.
2049. Now, as matters stand, which proposal of the four that you have made do you actually recommend? -Just one moment; allow me to say that my reason for saying that it requires £500,000,000 sterling is to show that even with all the silver we could expect to get the chances are that we cannot get back to 100. Con- sequently, whereas we are very much alarmed in case silver might be added to the money of the Westeru countries, in reality I do not think that it would take us back to the former level, because we should not have anything like enough gold and silver to maintain any such high level sa 100.
2040. Do you think that if you went into the City of London and proposed that they should use silver in a fixed ratio to gold in order to relieve the misfortunes of China they would pay much attention to you ?—No, I do not think they would, but the Governments in- terested might see a country struggling with very great financial difficulties which these Governmenta had themselves created, and they might desire to amiat China in extricating itself from its difficulties by the adoption of a solution that would provide a par of area. exchange for the whole world.
6849.
2050. Your argument is that even if silver had maintained its place in the currencies of the world, prices would have fallen ?-To some extent.
2051. To some extent 7-Yes, owing to the larger
2052. And there would not have been the great
H
27 Jan 1903.