170
It is, therefore, be realizable at some price or other in a time of panic is consols. necessary, in our opinion, that the funds should always hold a considerable amount of consols.
8. The necessity for acting upon this principle has recently been brought home to us in a very forcible manner. When, early last autumn, a great demand for monetary accommodation began to be felt throughout the world, and the Bank of England rate of interest was rapidly raised from 4 per cent. to 7 per cent. in a period of one week, the effect was instantly to draw gold and credits to London. As a result the banks at Singapore presented to the Commissioners of Currency all the notes they could collect and spare from their businesses, and the Commis- sioners were confronted with the alternative of meeting such notes in coin or by The latter course was giving telegraphic transfers upon us of equivalent amount.
resorted to with the result of enabling the Commissioners to retain their coin, but the effect was to pass on the pressure to us. The arrangement was, of course, very popular with the banks, as it enabled them to pass on their credits to London in the course of a few days instead of incurring a delay of about a month in shipping specie. These transactions totalled up to the amount of £487,000 in the course of four weeks in addition to £96,552 drawn a few weeks previously, and in ordinary circum- stances would have had to be met by the realization of securities or by our obtaining advances against such securities. We were, however, in possession of considerable balances remaining over from the Straits Settlements Loan raised last spring, and these balances we have utilized in meeting the telegraph transfers. The result has, therefore, been that the only expense to the Colonial Government over the trans- action has been the loss of interest involved in the Government making use of its own money instead of lending it out at interest.
9. There is, however, another side of the question. If loan monies had not been available securities might have had to be realized, as there are at times condi tions of the money market when banks are unwilling to lend even against the best of securities. In such circumstances there would have been no alternative but to realize securities, and the only security which could have been realized to such an extent as £487,000 with the money and stock markets in their then conditions with per cent. bank rate would have been consols. To have attempted sales to a large amount of any other securities would simply have had the effect of knocking the bottom out of the market, and would have had the most disastrous results.
a 7
10. I enclose statements showing the holdings of securities in the two funds, and would point out that although the funds are in a very strong position experience We are, of course, has shown that they are not at all stronger than is desirable. aware that the note issue in the Straits Settlements was in a somewhat inflated condition at the time of the recent crisis, owing to the large issue of notes made in connection with the purchase of the Tanjong Pagar Docks which had occurred not long previously. It may, therefore, never occur again that the Commissioners of Currency will have to meet so large and sudden a reduction in their issue. Sudden demands for gold and credits must, however, always be counted upon as a contin- gency against which a note issue must be prepared, and this contingency can, in our opinion, only be properly guarded against by holding such an amount of consols as may be fairly expected to be adequate to meet any sudden demand in a time of crisis.
11. I beg to add that the delay in answering your letter has been due to the rumours which have from time to time appeared in the financial newspapers that £500,000 in gold was being sent home from Singapore. This we have now learned to be incorrect, and that the gold referred to was, in fact, the telegraph transfers to the extent of £487,000 given upon us in favour of the banks. The possibility of so large an amount as £1,000,000 being moved within a few weeks from Singapore to London appeared, however, to us to be so serious that we felt it desirable to defer replying to your letter until we had acquainted ourselves with the full facts of the
case.
171
Enclosure 1 in No. 227.
RETURN OF SECURITIES held in trust on behalf of the Government of Straits Settlements Commissioners of Currency Investment Fund on the 30th September, 1907.
Sir Francis John Stephens Hopwood, K.C.B., K.C.M.G. Sir Ernest Edward Blake, K.Č.M.G.
Major Maurice Alexander Cameron, C.M.G. William Hepworth Mercer, Esquire, C.M.G.
Consols
India
Description of Securities, &o.
National War Loan
Transvaal Guaranteed Btock ... Zanzibar Guaranteed Debentures
Guaranteed Stock
INSCRIBED STOCK.
British Guiana
Canada
Cape Ceylon
Gold Const Hong-Kong Jamaica Jamaica ... Natal
***
***
即申曲
...
111
New South Wales, (1924) New South Wales. (1985) New Zealand
Queensland. (1922/47)
Sierra Leone. (1929/54)
Bouth Australia Consolidated. (1916 or after) Bouthern Nigeria
Trinidad
Victoria (1921/6)
Victoria
---
Western Australia. (1915/35)
Western Australia. (1927)
Cardiff Corporation
Croydon Corporation
Liverpool Corporation
Liverpool Corporation
***
Newport (Mon.) Corporation Gold Coast Government Scrip
Trustees.
Per cent.
Amount
of of of ce so of
en en en en en en en en en la ed so se dá en 25 en 20 en en en en só cá đà en
£ J. d. 410,805 10 2
10,000 0 0 10,000,00
200,000 0 0 25,000 0 0
100,000 0 0
3,000 0 0
10,000 0 0
10,000 0 0
20,000 0 0 20.000 0 0
10,000 0 0 10,000 0 0
3,000 0 15,000 0 0 20,000 0 0 10,000 0 0
10,000 0 0
18,000 0 0 30,000 0 0 12,000 0 0 40,000 0 0 22,000 0.0 2,000 0 0 20,000 0 0 16,000 0 0
3,000 0 0 20,000 0 0 9,000 0 0
15,000 0 0
Bank rate
6,000 0 0 18,000 0 0 165,351 0 0
1,294,156 10 2
Enclosure 2 in No. 227.
RETURN OF SECURITIES held in trust on behalf of the Government of Straits Settlements Commissioners of Currency Depreciation Fund on the 30th September, 1907.
Sir Francis John Stephens Hopwood, K.C.B., K.C.M.G.
Sir Ernest Edward Blake, K.C.M.G.
Major Maurice Alexander Cameron, C.M.G. William Hepworth Mercer, Esquire, C.M.G.
Trustees.
I have, &c.,
E. E. BLAKE.
$1104
Console
Description of Becurities, ko.
Per cent.
Amount
Be
ยุ
£ . d. 57,327 10 5
TI
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