PUBLIC RECORD OFFICE
Reference :-
LITICO. 882
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
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8 The Treasurer considers it unlikely that there will be any demand for some time for Straits dollars in exchange for notes, although there may be a small demand for silver in exchange for the notes taken by Behn Meyer and Company on account of the German bank, the establishment of which in Singapore is said to be contemplated The gold taken from them against notes was a small amount. being only £28,497
have
notes
9 Apart from the question of the effect on our currency of a rise in the price of silver, it seems, having regard to the large public works in contemplation by the Government and municipalities and to the probability of a speedy revival of trade, that it is not unlikely that a demand for dollars might be created which would cause a run on the silver portion of our Note Guarantee Fund and deplete our silver reserve The question,, therefore, arises as to what precautions should be taken to prevent such an occurrence. It is obviously dangerous that the Com- missioners should go on issuing notes without limit in exchange for gold when
these refuse silver in exchange for to no option they when tendered to them. It is true that the Currency Commissioners have dis- cretionary powers under the Currency Ordinances as to the issue of notes against gold, but any arbitrary exercise of this discretion, without reference to any well- defined and publicly known method of procedure, is certain to interfere with the automatic working of our currency system, and is to be deprecated. It does not seem to be desirable to fix an arbitrary limit by statute to the amount of gold which should be held by the Currency Commissioners, but it does seem desirable, and I would be disposed to fix a limit below which the silver reserve should not be allowed to drop.
The Treasurer advocates that measures should be taken to prevent the silver reserve from falling below one-third of the total value of the notes in circulation, and that when that point is reached the Commissioners should have the option of redeeming their notes in gold. I recognise that the Currency Commissioners may be forced, before this stage is reached, to take action on the same lines, viz., to give out gold here or sell their telegraphic transfers against their investments or any gold reserve they may possess in London for the purpose of contracting the currency with a view to maintaining the parity of exchange, but this seems to be a different question.
I have, &c.,
W. T. TAYLOR.
P.S.-I am informed that the demand for notes is not entirely due to the con- traction of the currency and that the importations of gold have been in some cases intended to cover banking transactions unconnected with the Colony.
20396
No. 130.
THE CHARTERED BANK OF INDIA, AUSTRALIA, AND CHINA to COLONIAL OFFICE.
(Received 8th June, 1906.)
[Copy to Treasury, July 10th, 1906. L.F.]
[Answered by No. 133.]
SIR,
Hatton Court, Threadneedle Street, London, 7th June, 1906. WITH reference to the shipments of sovereigns which we have made and may continue to make from time to time from Australia to Singapore, we beg to draw your attention to the arrangements made by the Secretary of State for India in Council for shipments arranged on account of our Indian Agencies, and to enquire if you can adopt a similar procedure for shipments to the Straits, by payment at the rate of 60 Straits dollars for seven sovereigns.
The sovereigns are shipped to London, and the bills of lading made out to the order of the Secretary of State for India in Council and forwarded direct to the Under-Secretary of State, India Office. Ten days after departure of the steamer from Freemantle, the India Council grant telegraphic transfers at the rate of is. 4d. per rupee on Bombay, Calcutta and/or Madras in our option.
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All charges for freight and insurance are borne by us. Awaiting the favour of your reply,
19952
No. 131.
I am, &c.,
CALEB LEWIS,
Manager.
MR. A. E. COLLINS (COLONIAL OFFICE) to MR. L. ABRAHAMS (INDIA Office).
[Answered by No. 132.]
DEAR ABRAHAMS,
Downing Street, 11th June, 1906. MAY I come to you for information and advice on two points in connexion with our Straits Currency?
Firstly, I enclose a copy of a letter from the Chartered Bank, asking us to give them telegraphic drafts on Singapore against gold on the way from Australia to England. As we are building up our gold reserve at Singapore, I see no reason for accepting the arrangement. I presume that you oblige them in the way he mentions because you want your gold in London rather than in India, where the bank would otherwise send it?
The second point is a question raised by the Officer Administering the Govern- ment of the Straits Settlements as to the amount of our reserve against the note issue which should be held in silver dollars at Singapore. He mentions a sugges- tion that the amount of the silver reserve should not be allowed to sink below one-third of the total note issue. I believe you have some such arrangement, and that when the rupee reserve sinks to a certain point you buy silver and coin rupees to replenish the silver reserve. Can you give me information on the matter?
Yours, &c.,
A. E. COLLINS.
Attached to 19952
No. 132.
MR. L. ABRAHAMS (INDIA OFFICE) to MR. A. E. COLLINS (Colonial Office).
DEAR COLLINS,
India Office, Whitehall, S.W., 12th June, 1906. 1. If you want (and will always want) your gold at Singapore and not in We London, there is no reason why you should do what the Chartered Bank asks. used to find that our stock of gold in India grew too fast, and we had occasionally to bring some of it home (paying freight and insurance) in order to buy silver and for other purposes. By receiving it in London direct we save the freight and insurance.
The only question in my mind regarding your position is whether you may not also find, in course of time, that you have too much gold in Singapore. When that contingency occurs, or seems imminent, it would be to your advantage to do what the bank asks. But from your letter I gather that you do not regard it as imminent, or even as a distant possibility.
2. In dealing with our currency reserve our main object is to be able at all times to meet all demands for rupees that may be made upon us. We undertake to give rupees in exchange for sovereigns and notes; and the demand is always heavy throughout the winter. We therefore take care that at the beginning of the winter we start with a good, large stock; and, even when we have done so," we sometimes have to make large purchases of silver all through the busy season. This is the explanation of our regular appearance in the silver market as buyers. There is no rule that the silver portion of our reserve is to bear a specified ratio to the whole reserve. I should say that in your case it is better to decide for your own guidance to have a fixed minimum of silver in the reserve than to maintain a fixed ratio between the silver and the total reserve.
observations on your two questions. I will ask you
3. I have now made mollation of your two.
a third, which arises from
* No. 130.
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