PUBLIC RECORD OFFICE
Reference :-
TLC.O. 882
سائلا
7PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
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APPENDIX:
they will not interfere with or disturb trade, and will not affect the relations between debtor and creditor.
Let me also pass in review the reasons or arguments for those measures keeping our currency from further decline, and even gradually causing it to rise in value. They are as follow:-
1 Because they make our currency independent of the
fate of silver.
2. Because, by the law of supply and demand, sa article which remains in demand, and of which there is no more supply, must rise in value.
3. Because the same causes have produced the desired effect in India under circumstances similar to but less favourable than ours; and this last argument should weigh most, on the principle that an ounce of experience is worth a pound of theory. This is, in short, the scheme which I venture to put forward, and on which I invite criticism. There are, of course, many secondary points which bear on the sub- ject, and which I have not touched upon, partly to avoid undue length of this letter, partly just to encourage others to come forward and raise any new points. Of course, the scheme should include the Native States."
The criticism invited in that letter has not been forth- coming very freely, at least not publicly. Privately I had a good many expressions of opinion, and they were, on the whole, favourable to my proposals,
The principal objections which were brought forward are the following:-
(a) That the rate of 34. suggested in my letter is
too high.
(b) That it would be impossible or very difficult to prevent importation of dollars into the colony during the time of prohibition and of illicit dollars afterwards.
(c) That stopping the free importation of dollars
would lead to a great stringency of money.
There objections are easy to anOWOT,
H (a) The rate of 3s. was a mere suggestion, and it is quite immaterial whether the rate at the out- set is fixed at that point or lower. It is not anticipated that the value of the proposed Straits dollar would at once jump up to the top rate; it is more likely that the rise of value would be gradual and slow, which would be an advantage. There would thus be no necessity to fix the top value finally st the outset. Government might say, we shall not coin additional dollars until the Straits dollar has reached 28. 3d., but when that time comes we may reconsider the question, and perhaps raise the limit, yet under no circum- stances shall we coin at a lower value. Such a declaration would be quite sufficient to create confidence and to start the rise.
Re (b). I cannot see any difficulty to check the im- portation of dollars into the colony. If the imporation of opium, spirits, arms, and gun- powder can be checked, surely that of dollars can be checked just as easily. The Govern- ment need only empower the spirits and opium farmer to look out for dollars, pro- mising the farmer a share of all confiscations, and intending smugglers of dollars would be very chary of embarking in their little ventures. Besides, if, as anticipated, the rise in the value of the Straits dollars would take place only slowly and gradually, there would not be enough inducement to smuggle. Who would risk the loss of $1,000 for the chance of making $200, or even $300? Of course, small sums would be imported by passengers, etc., and indeed passengers having a legitimate amount of dollars on them need not be troubled at all. What, after all, does it matter whether $20,000 or $40,000 or even $100,000 are added to the stock of dollars during the time of prohibi tion or not? That would only be a feabite. Of course, if later on the difference between the Straits dollar and silver should become larger, a good look-out for illicit full-weight dollars would have to be kept; but even then the means above suggested should prove sun- oient to prohibit importation of illicit coin to any large extent.
Re (c). The fear that a serious stringency of money
might arise has, I think, not much founda tion. It is, of course, taken for granted that the proposed measures would not be introduced when money happens to be excep tionally scarce, but that a time would be chosen when money is fairly easy and t....e banks have a fair supply of dollars. If any of the banks could show that they have any dollars on the way at the time of closure, they might even be allowed to bring such dollars in, as a couple of lace more or less to convert, would make no difference. When thus a fair supply of dollars is in hand, which, owing to their appreciated value, would not leave the colony, or, if leaving, would always flow back, astringency of money could not arise so easily. In most cases during the last decade, when money in the Straits was scarce, the reason was that it paid the banks better to send every dollar they could spare to Siam or to China and Japan. With the introduc- tion of a Straits dollar these periodical despoliations of our legitimate stock of dollars would be stopped, and so far from causing stringency of dollars, the proposed measure would tend to prevent it. Further, it seems obvious that if the Straita currency be protected from further depreciation, and has a fair chance of appreciating, capitalists at home will be more likely to invest money in the colony than at present, when they do not know how far their capital sent out here may shrink. It may be said that a simil measure in India has caused a great scarci of money during the last year; but is it qui sure that the closing of the mint is alon or at all, responsible for that? Might it ne be that the famine and plague, accompanie by a wild speculation in foodstuff, may have been the principal or sole reason for that scarcity of money?
So far in answer to the objections. Since the above- mentioned letter was written, the Singapore two shilling gold dollar scheme has seen the light of day, and, I may say, has been shelved. The scheme has been amply criticised in the Chamber's debate and in newspapers, and has also very ably been dealt with in this journal. I may therefore confine myself to only a few remarks
on it.
The promoters of the schome start from the ides that silver is doomed to fall further in value, and can never recover. If that were quite sure, the scheme, with a few improvements, would be good enough; but the danger is that after we have discarded all our full- weight silver dollars and adopted a light-weight token- two-ahiling dollar, silver might go up, and then the colony would really be in a sad plight. As many argu- ments can be brought forward for a probable recovery of silver in future ai for a continuous fall. There is not a tithe of that certainty necessary for venturing on a measure of such vital importance as changing to gold at the proposed low rate. Adopting the gold dollars scheme means writing down finally the whole wealth of the colony, viz., the gold value of all landed and other property, and all money invested and hoarded, by from 25 to 40 per cent of what it was 10 or 15 years ago; and shutting the door to any possibility of that property recovering its value thus lost. I have heard it stated with reference to town property that holders of such property are not affected much by the fall in exchange. because they can raise the rent in proportion. This is a fallacy, and the fact is that rent have risen very little, or not at all, except in such cases where the demand for certain premises (like houses for Europeans) exceeds the supply. Such a rise is natural and healthy, and has nothing to do with the fall of exchange. In the same way the value of property generally has appreciated somewhat, in growing cities like Singapore and Penang it should naturally appreciate; this has also nothing to do with exchange, and the appreciation would have taken place just the same had the dollar exchange remained high.
It surely cannot be maintained that property which was worth $6,000 when exchange was 3e. 4d. some years ago is now worth $10,000 owing to the dollar having fallen to do. It might just as well be said that pro- perty worth $10,000 now would be worth only $5,000
if exchange were suddenly to rise to 4s.
COMMITTEE ON STRAITS SETTLEMENTS CURRENCY.
All this shows that the value of landed property does not adjust itself to the rise and fall of exchange as marketable goods and produce do, and that it would be highly injudicious, after all property having so much depreciated in gold value, to shut out the possibility of a recovery by adopting a two-shilling dollar.
The same holds good with regard to all the money representing the capital, saving, and hoarding of the population, be it held in silver or notes or invested on interest. As long as it is represented by a full-weight silver dollar it carries with it the chance of apprecia tion, and our dollar will always be worth at least as much British or Mexican dollars circulating outside the colony. With the change to a gold dollar that chance is lost, and we may one day find that our gold dollar is worth only 50 or 60 cents in China and else where, which would be particularly unpleasant to our many Chinese friends, and very seriously affect Chinese
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immigration, cost of labour, and the general develop- ment of the colony.
The question whether the gold dollar would be advan- tageous or otherwise to the trade of the colony has been thrashed out by the Singapore Chamber of Commerce, and a resolution in favour of the gold dollar has been passed with only a trifting majority. Had the Penang votes been taken the majority would most likely have been on the other side, via., against the gold dollar.
From all this we can draw the conclusion that changing to gold at the present low silver value would be unsatis factory to the great bulk of the population, and might be of most harmful consequences. Further, that if our currency is to be reformed it must be done by some intermediate measure which will prevent further depre- ciation of our dollar and help it to a steady and healthy rise in value.
6949.
K