COMMITTEE ON STRAITS BETTLEMENTS CURRENCY.
117
No. 8.
No. 5.
RESIDENT COUNCILLOR, Penang, to COLONIAL OFFICE
(Received, 17th December 1902.)
TELEGRAM.
General Meeting, Chamber of Commerce, Penang, 16th December, resolved: that it is the unanimous opinion of the Penang Chamber of Commerce that the placing of the Straits Settlements on a gold basis has become a necessity.
Please convey to Straits Currency Commission,
No. 6.
Governor Sir F. A. SWETTENHAM to the Earl of ONSLOW (for the Secretary of State),
(Received, 25th December 1902.)
TELEGRAM,
l'enang Chamber of Commerce favours gold standard. Petition very numerously signed by all principal Penang Asiatic traders asks for gold standard. Federated Malay
No. 7.
States planters same opinion, but Federated Malay States miners prefer present currency, with the exception of Perak miners, who favour gold.
Governor Sir F. A. SWETTENHAM to the Earl of ONBLOW (for the Secretary of State).
(Received, 28th December 1902.)
TELEGRAM.
Just received from Singapore numerously signed pati- tion favouring silver standard currency; signatures almost exclusively Chinese. I consider question urgent. The immense majority of intelligent opinion favours fixity on gold standard, and I recommend adoption of overeign standard with fixity of dollars at as nearly a
posible the market rate at date of conversion. Sarawak is anxious to join, and it is important to know how Siamese gold currency will affect their Malay States, whose trade is wholly with this Colony, and their cur- rency should follow ours.
•
Governor Sir F. A. SWETTENHAM to Mr. OHAMBERLAIN.
Government House, Singapore,
December 4th, 1902. Sir, In continuation of my despatch, No. 490, of the 27th alt., I have the honour to enclose further cor respondence on the subject of the Currency question.
I have, etc.,
F. A. SWETTENHAM.
losure in No. 8.
EXTRACT FROM STRAITS TIMES" OF DECEMBER 18T, 1902.
THE CURRENCY QUESTION.
The question as to whether or not a gold, or fixed, standard should be adopted for the currency of the Straits Settlements and the Federated Malay States divides itself into two heads :-
(1) Is a gold standard, or fixity of exchange,
desirable?
(2) Is it possible to establish a gold standard, or fixity of exchange, at a cost which is not pro- hibitive, and if so, what form should the cur- rency take?
It is not proposed to discuss the question from the standpoint of trade statistics, because exchange is only one factor out of many, such as supply and demand, tuli or short crops, alterations of trade routes, competition, atc., etc., which influence the volume and value of trade. These factors so confuse the result that it is impossibl to say how much of an increase or decrease in a given trade is due to exchange, and how much to the other factors. Consequently it is usually impossible to prove anything in connection with exchange from trade statistics. One side will hold that a given result is due to the influence of exchange, while the other will main. tain that it has come about in spite of that influence, neither' proposition being capable of proof.
Is Gold Desirable?
With regard to the first head, "Is a Gold Standard Desirable1" looking at the question from the broadent point of view, it is generally admitted, and is the ex- perience of most of the grest trading countries, that a sound and stable currency, by encouraging the im- portation of capital (where needed), and by securing capital against loss by depreciation of the currency, en- courages trade generally.
It is also generally admitted that capital is required, both for the Colony, and for the development of the Native States, and that the uncertainty as to the future of silver keeps it away.
These premises being admitted, it follows that the adoption of a fixed currency, by attracting capital, would have a favourable effect both on the general trade of the country and on the revenue.
The F.M.S. may to some extent be compared with India, inasmuch as both are producing and exporting countries. The most obvious difference is that the F.M.S. import the bulk of their food supplies, while India produces nearly the whole of hers.
The Fixed Rupee.
It has been alleged that the fixing of the value of the rupee at considerably over its silver value has adversely Affected the export trade of India, and the present con- dition of the tes and indigo industries of that country has been instanced as an example of the evil effects of an approximately stable currency or rather of the artificial maintenance of the rupee at a value above ita silver value. It is open to question whether the present condition of these industries is not due, in the case of tes, to increased production and competition of other countries, and in the case of indigo to the competition of the artificial dye, as much as, if not more then, to the raising of the rupee to the value of 1s. 4d. It would he interesting to inquire into the condition of these in. dustries at the time when the actual silver value of the rupee was 18. 41.
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But, granting that the fixing of the rupee has diminished the dividend-paying power of tea and indigo concerns in India, their capital is secured at a fixed value. This is a very considerable set-off against diminished dividends, if, indeed, it does not more than compensate for such diminution. Take, for instance, capital laid down in 1881, at about la. 6d. each. That capital laid own in 1891, at about ls. 6d. Exch. That rupee been allowed to follow the fortunes of silver, the depreciation, taking silver at even 23d., would have been 47 per cent., equal to over 4 per cent. per annum. Has the difference in dividends amounted to this? Even if it has, other causes, already mentioned, have accounted for at least part of the difference.
The fear of such losses on capital undoubtedly scares investors away from any and every country using a silver currency.
Prosperity of India.
But, taking a wider view of the state of affairs in India, it is well known that the financial and economic condition of that country is to-day much improved, compared with the period immediately preceding the closing of the mints, and this in spite of years of plague, pestilence, and famine. For proof of this see Lord George Hamilton's reply to questions on the Indian Budget ("Straits Times," November 21st, Wire News), in which he dwelt on the revival of prosperity in India, as indicated by the increase in revenue, and stated that estimated surplus for the current year was £1,800,000 (one million eight hundred thousand pounds sterling).
the
It can hardly be doubted that this improvement is due, in a great measure, to the fact that India now possesses a practically stable currency.
It is a well known fact that, before the closing of the mints, the Government of India was in such financial straits that it had serious difficulty in meeting its home charges, a sterling liability, and therefore, in the framing of estimates in a silver currency, an unknown quantity. (A local instance of the effect of exchange fluctuations on silver estimates occurred recently, viz., the supplementary vote for the loss in exchange on H.E. the Governor's salary.)
To enable the Government of India to make both ends meet there were two alternatives:
(1) A fixed exchange.
(2) Increased taxation.
Increased taxation, more especially coupled with a' steadily falling rate of exchange, would have brought about one or both of the following results:-
(a) Decreased purchasing power of the population. (b) An increase in cost of labour, and consequent
increase in cost of food and of raw products. Either result would have reacted on both the import and export trades, and on the manufacturing industries, and, by diminishing, or preventing the expansion of trade, would have brought about the opposite of the desired result. Consequently the Government of India was compelled to adopt the other alternative, viz, fixity of exchange, the results of which have been, as already shown, satisfactory. Whether the methods adopted to secure fixity were the best that could have been devised is a matter on which experts disagree, and which need not be discussed here.
The Case for Fixity.
The case of the Colony is less analogous to that of India than in the case of the F.M.S., the chief differ ence being that the Colony is little more than an entrepôt, importing the produce which it afterwards exports: like the F.M.S., the Colony imports the balk of its food supplies.
These differences, however, make the case for a fixed standard stronger, for, the more our currency depre ciates (and it is impossible to my where it will stop) the more the Colony has to pay for its food supplies, for its clothing, for everything: in other words, the cost of
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