COMMITTEE ON STRAITS SETTLEMENTS CURRENCY.
97
PUBLIC RECORD OFFICE
Reference :-
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C.O. 882
7 PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-
COPYRIGHT PHOTOGRAPH-NOT TO
96
APPENDIX:
the new dollars would be taken out of that reserve and put into circulation. As often as there was a profit gold would be shipped, and the profit would be solely owing to the fixed price of 18. 8d. in gold for a new dollar.
This process of shipping gold would tend practically to keep the gold value of the dollar from rising, except fractionally, above 18. Bd., and, as is seen in the case of India, it causes the rate to fall also fractionally below the fixed rate, so that the Singapore exchange would be The sometimes above and sometimes below 18. 8d. Indian average rate for Council bills was for the years ending 31st March, 1s. 3-8781. in 1899, 1s. 4-068d. in 1900, s. 3-973d. in 1901, and 1s. 3.987d. in 1902, with a rate of is. 44. in gold for a rupee in the Currency Reserve.
When, therefore, the Singapore exchange rose above 18. 8d., it would be a proof that new dollars were getting scarco relative to a 1s. 8d. rate for gold, and gold would be sent to keep the rate down to 1s. 8d. by increasing the volume of the currency in the Straits. It would therefore be the exchange banks and the bullion dealers whose action would determine that the Straits should have more currency, and gold would be sent, because that would release dollars and put them into circulation. If gold were to become too abundant in the Currency Reserve and dollars too scarce, the Government would buy silver with part of the gold, and coin now dollars and place them in the reserve.
The solo effect of gold supplies in the colonies would be to increase the circulation of new dollars so as to secure the la. 8d. basis in gold. That is the only real object that it would accomplish, because the gold itself would not be desired for circulation, and when it was in the reserve it would be under the exclusive control of the Government. What, therefore, would be done by the exchange banks would be of the most elementary kind, and there is no reason whatever why it should not be done by the Government of the Straits. When exchange rose above 1s. 8d., the Government could coin dollars at a profit and issue them. There cannot be any mistake made, because the basis around which the whole currency pivots itself would be a fixed gold rate such as ls. 8d., and the rate of exchange would be adhered to as closely as possible.
This method, therefore, would give all the benefits of a gold standard at 1s. 8d., without irrevocably com- mitting the colonies to that or any other rate. Reasons in favour of it can be found in the practice of this country. The Bank of England gives £3 17%. Od. in money for every ounce of gold delivered to it. That fixes the basis of our exchanges with all other gold countries, and gold may be abundant or may be scarce, but that does not change the Bank price. Then the Bank is a legislative body. It fixes that the reserve it ought to hold should vary between 40 and 50 per cent. of ite liabilities. When the figures tend towards 40 per cent. it decides to raise the rate of discount so as to attract gold, and when they tend towards 50 it decides to lower the rate of discount, so as to get rid of gold, the amount of which is then becoming inconveni- ently large. A few years ago, for a period, it raised its limits from 50 to 60 per cent., and they held about £5,000,000 more of gold than it would do now for a similar amount of liabilities. This is the practice of the Bank, which holds the reserves of all the other banks, and the £3 17%. d. for the standard ounce of gold, and a gold reserve of from 40 to 50 per cent, of its liabilities, which reserve is maintained by raising or lowering the rate of discount, are the means by which the supplies of gold are regulated and distributed in this country. Similarly the Straits Government could coin in dollars and put them in circulation when the rate of exchange rose above the fixed gold point for the dollar. They could, of course, raise the gold rate of the dollar to a higher point by automatic contraction, if that policy was decided on by the colonies and the Secretary of State for the Colonies. This system would give them a gold standard at a rate to be decided on, but they would not be irrevocably bound to that rate, and they would not have any gold currency.
(4) If it was thought desirable to contract the currency up to a higher figure than 18. 8d. for the new dollar, such as 2s., the new dollar would first be established at
1s, 8d. as explained in (3). The method adopted in India would then be acted on. The rate at which Government would receive gold and give a dollar in exchange would at once be fixed, at 2s., and the expansion of trade and growth of population, aeting of themselves, would raise the dollar to that rate, though very slowly. Judging by the experience in India, it would take about six or seven years for the new dollar to rise to a gold value of 28. There is every probability, however, that there will be an increase in the supplies of gold in the world, and this increase would raise the gold value of the new dollar, and of course it would raise the gold value of silver also. Any such change affecting gold would hasten the time that the new dollar would take to rise to 25. When the rate of exchange in London, or Australia, or India, or Singapore reached 25. 01d., or perhaps a rate slightly higher, gold would flow into the Straits Treasury in exchange for new dollars at 2s., and afterwards the flow of gold to the Treasury and the cessation of that flow would be determined automatically by the rate of ex- change. Gold would flow to the Straits when there was a profit on sending it, and it would not flow when there was no profit. When the gold in the Treasury became so great that the proportion of silver dollars was reduced beyond a reasonable limit, the Government would sell part of the gold (1) for new dollars, or (2) for silver, and coin new dollars out of it, in either case the dollars to be placed in the reserve,
Following the Indian precedent, the sovereign would be legal tender for dollars at the declared gold value of the dollar, though it might be found perfectly practicable to dispense with the legal tender of gold, and thus keep the currency in circulation solely of silver. Government would have a very strong position, namely, that of giving dollars in exchange for gold, they could not be taken at any disadvantage.
In this case also it is impossible to forecast the price of dollars when the Government might decide upon the introduction of a new dollar, but they could adopt a rate 5 per cent. above the current rate for the old dollar, and exchange new dollars for old in a corresponding proportion.
TABLE IV.
THE UNITED KINGDOM.
INDEX NUMBERS of Commodities, and Net Imports and Net Exports of Gold for 19 years from 1858 to 1876, and for 26 years from 1877 to 1902, with the Estimates of Consumption in the Arts.
*
Mr. Sauerbeck's Index
Years.
Net
Imports.
Net
Exports.
Number of
45 Commodities.
Years.
Average prices
Net
Importa.
Net
Exports,
of
1867-77 = 100.
Mr. Sanerbook's
Index Number of 45 Commodities. Average prices of 1887-7100.
1 1
I
T
1858 -
1859
£.
10,226,086
4,216,559
£.
£.
91
1877
-£.
4,919,401
94
94
1878
5,902,903
87
1860
3,056,894
99
1870
4,210,143
83
1861
1R82.
925,565
3,891,741
98
1830
2,373,961
88
101
1881
5,535,831
85
1883
3,830,386
103
1892
2,352,755
84
1984 ·
3,621,212
105
1883
664,435
82
As the
1885
5,992,238
101
1884
1,268,431
76
1866
10,787,582
102
1885
645,743
72
1867 -
7,911,129
100
1886
832,800
09
1868.
4,427,869
09
1887
631,712
88
1869.
5,297,113
99
1889
843,445
70
1870 -
8,793,207
96
1889
3,458,721
72
1871.
920,849
100
1890
9,261,361
72
1872.
1,279,474
109
1891
6,107,695
1873 -
1,599,945
111
1892
6,751,110
1874-
7,439.288
102
1893
5,332,454
1875 -
1876-
4,492,539
96
1894
11,933,375
6,960,227
95
1895
14,738,715
1896
6,665,588
1897
287
1808
7,132,910
1899
10,997,445
1900
7,798,414
1901
6,780,363
1902
6,219,961
(5) There is, however, a proposal that is more impor tant than all the others, and that is the establishment of a fixed par of exchange between gold and silver, so sa to settle, I was going to asy for ever, but at least for an indefinitely long period, that all the nations who use, or who may use, gold or silver money may carry on all trade and exchanges, both domestic and foreign, either in gold or silver indifferently, without the shadow of a fear that the fixed par of exchange will vary more than within the ordinary bullion points by means of which gold or silver is automatically moved from one country to another. If the French ratio of 1 to 15) had been maintained since 1873, the prices of the world would have differed very widely from those that obtain to-day. A standard ounce of silver would to-day under that system be selling at 60-84 pance, and the rupee basis would be 22-8d., instead of 16d., and the Mexican dollar would be 51'65d. instead of 19d.
While the subject can only be discussed vary briefly, the first important point is that when the Western countries had demonetised silver and adopted the gold standard, it was evident, from a very early date after- wards, that there would not be enough gold available to maintain the former level of prices. There was a Select Committee of the House of Commons appointed the subject, presided over by Mr. (now Lord) Goschen, as early as 1876, and a Monetary Commission in the United States in the same year. As early, there- fore, as 1876 the question of the deficiency of gold had begun to attract public attention.
on
The latest figures show that in 1902 the index number of the gold value of 45 commodities was 69, as against 100 in the period 1853 to 1877 and 1867 to 1877. That is, that owing to the scarcity of gold as compared with › the demands for it, £60 now purchase as many com- modities as £100 did in the former two periods. In support of the statement that the fall in prices was due to the deficiency of gold, the following table gives i portant figures regarding the United Kingdom, a typical gold money country:-
Doduct.
1
91,282,334
4,336,368 Average of 19 years 100,
Total Net
Net Exports -
Total Net) Imports for
4,338,388
86,925,966
19 years
82,710,589
11 1
Imports J
Deduct Net
Exports -]
Net
Total
Imports for 86 years
Annual Not Imports for 21 years 1881-1897 -
Annual Net] Imports for
28 years
1877-1902 J
107,516,804 24,806,215
24,806,215
2,088,500
3,181,176
Consumption of Gold in the Arts in the United Kingdom.
Estimate by Soetbeer in 1886, 2,108,0007. per annum.
Estimate by Director of United States Mint in 1899, 3,033,760/. per annum.
Annual Net
Imports -J
4,576,053
72
68
03
RNN 2 3 8 8 8 5 % 3 8 2 2 3
6:2
61
62
64
70
69