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| PUBLIC RECORD OFFICE
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18-NOT TO
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ALLVILLE,
PUBLIC RECORD OPR
Short title. Ord. iv. of 1899.
1903.
61
Enclosure 2 in No. 85.
B.
A BILL intituled An Ordinance further to Amend "The Currency Note Ordinance
1899."
1. This Ordinance may be cited as "The Currency Note Ordinance 1899 Ord. xiii. of Amendment Ordinance 1905 No. II. It shall be read and construed as one with "The Currency Note Ordinance 1899* (hereinafter called "the principal Ordi- Ord. iv. of nance"). Any copy of the principal Ordinance printed after the commencement of this Ordinance may be printed with the amendments and additions made by this Ordinance.
1904.
Ord. iii. of
1905.
Amend-
ment of
of the
2. Section 10 (3) of the principal Ordinance is amended by inserting after the words "Revenue of the Colony" the words "provided that the amount of such defi- Section 10 ciency does not exceed the sum payable to the revenue of the Straits Settlements under Section eight (4) (c) of this Ordinance but if such deficiency exceeds the sum Ordinance. 30 payable the Governor may with the sanction of the Secretary of State suspend the payment of such excess to the Note Guarantee Fund for such time as he may think fit."
principal
29020
No. 86.
THE SECRETARY OF STATE to THE GOVERNOR. (Sent 30th August, 1905.) TELEGRAM.
Referring to your despatch, 312, 15th July,* paragraph 5, matter left to your discretion.-LYTTELTON.
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SIR,
(Secret.)
No. 87.
THE GOVERNOR to THE SECRETARY OF STATE.
(Received 11th September, 1905.)
[Copy to Treasury, 17th November, 1905. L.F.] [Answered by Nos. 90 and 94.]
Government House, Singapore, 16th August, 1905. I HAVE the honour to transmit, for your consideration, a copy of a memo- randum by the Acting Colonial Treasurer on the subject of the present position of exchange, and the point at which exchange of the dollar with gold should be fixed.
2. The price of silver to-day is 27 d., and the rate quoted for bills at three days' sight, which I have just drawn on the Foreign Office in London, is 2. 1,d., on India the rate for T.T.s_is_1541d., while the Hong Kong rate is
per cent. discount. The T.T. rate on London is 28. 7/8d.
7
3. I am advised that the higher rates are entirely due to legitimate business activity, especially in the tin market, and to an improvement in the China trade, to which the higher quotation for silver would seem to point.
and, How far this rise in exchange is likely to continue I am unable to say, though the general impression in business circles is that it will be maintained, I am inclined to think that there will be considerable fluctuations, and that any early action is out of the question.
4. With regard to the Acting Treasurer's suggestion that the rate might be fired at 28. 14d., I am inclined to think it is too low.
It must be borne in mind that the expense of coining dollars is 2 per cent. for mintage, besides interest, freight, and insurance, amounting to at least 9 per cent. more, and that we cannot, therefore, maintain our currency without risk of loss unless it is at least 4 per cent. above its bullion value.
6. In January and February last, when there was a great demand for specie in China, some 15 lakhs of Straits dollars were exported to Hong Kong before I
• No. 85.
65
issued the proclamation prohibiting the export. These dollars were not sent to China, but were used by the banks to replace temporarily Mexican and British dollars in their note issue and other reserves, and have all been returned since, and the same is liable to recur should the demand for silver in China be maintained.
6. I need not enlarge upon the point beyond saying that if silver should again touch 30 pence, as is not at all improbable, the bullion value of our dollar would be approximately 2s. 14,. and if, as is certain, there was a large export to China, it would cost the Government at least 2s. 24d. to replace each dollar exported.
7. While I think that 2s. 14d. is too low, it must be recognised that to force the dollar to a much higher figure would, for a long period, seriously hamper the trade and industries of the Peninsula, and inflict considerable hardship on all who draw sterling salaries and wages.
8. In spite of the rise which has already taken place since the end of 1902 in the value of the dollar, wages have not fallen, and have, indeed, in many cases risen, while the same is true of retail prices of all English goods.
No doubt ultimately prices will be adjusted, but custom is so rigid in the East that it will take a considerable period during which miners and planters whose produce has to find a European market will find themselves paying steadily increas- ing wages with a steadily diminishing dollar price for their produce.
9. I think, therefore, that it is better that the Government should run some risk than endeavour to force the dollar to a point above the absolutely necessary margin of safety.
At present I think that that margin would be secured if the dollar is fixed at an exchange of nine dollars to the sovereign.
Such a ratio would not be so convenient as either ten or eight, but, as I have already indicated, ten is distinctly below the margin of safety, and to reach eight would take an unduly long time during which trade and commerce would undoubtedly suffer heavily, as it is improbable that wages and prices will be readjusted until the fixed ratio has been attained for some time.
10. I am aware that at even nine dollars to the sovereign, the Government will run some risk, but, as both in Mexico and the Philippines the dollar of the same content and fineness is fired at a lower figure, the risk will not be great, and, if there should be an extraordinary rise in silver, our risk would be still further diminished if from the outset we declare the sovereign legal tender for nine dollars. There can be no doubt that in the large towns of the Peninsula a gold currency would prove very convenient, and would be largely used. It would then be easier at any time to limit the amount for which the dollar is legal tender, and to replace We should, in any the existing stock with dollars of less fineness and content. case, by making gold legal tender, render it unnecessary to add to our existing stock of dollars for many years to come, as any required expansion of the currency could be met by gold or by the issue of notes against gold.
11. It is not improbable that the banks will shortly apply for the issue of notes for exchange for silver on deposit of gold in London at provisional rates. I should not be prepared to grant such an application, at any rate, until exchange has risen to the point at which I recommend firing the ratio, and even then only at such a rate as would lower the cost of remitting sovereigns to Singapore, as I do not think it desirable that for some time after the ratio has been fixed any part of our gold reserve should be kept in London.
12. If you concur in my view as to the point at which the ratio should be fixed, I would recommend that an Order of His Majesty in Council should be passed at an early date, declaring that from and after a date to be fixed by proclamation the gold coins of Great Britain, the sovereign and half sovereign, should be legal tender, without limit, for nine dollars and four dollars fifty cents respectively.
18. Legislation in the Colony would be unnecessary, as if gold is made legal tender, the Currency Commissioners would be able to accept it in exchange for
notes.
The Order in Council should, of course, be kept secret until it is proclaimed, as its earlier publication would lead to speculation in exchange, and possibly lead to the premature issue of the proclamation.
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I have, &c.,
JOHN ANDERSON.
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