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COMMITTEE ON STRAITS SETTLEMENTS CURRENCY.

75

APPENDIX 7.

10, Pancras Lane, Queen Street,

London, E.C., 29th November, 1902.

Dear Bir,-I am in receipt of your letter of 28th inst., and in reply beg to say that I shall willingly appear before your Committee at the Colonial Office on Tuesday nert, the 2nd December, at 4.30 p.m.

The only evidence I can give is to show how the fall in value of the dollar has affected our business. It may be useful, as I think we are the only firm of importers in the Straits whose capital is on a sterling basis.

The enclosed memo will give you an ides of the evidence I am able to give.

I regret I have no scheme to suggest, but must leave hat to experts. A fixed rate of exchange is the only hing that can save us, and is more important than the ate to be fixed,

I am, dear Sir, yours faithfully,

B. R. CARE, To A. E. Collins, Esq., Colonial Office-

John Little & Co., of Singapore, turned into John Little & Co., Limited, 1st July 1884.

$

Capital, 67,0521. 98. Bd., at ex. 2. lid. =634,190.97

Same capital, 1st July 1902-

At ex. la. Bd. ↑

Loss

-780,247.08

146,066.11

The amount written off from P/Low Account to keep capital in sterling intact in sterling at 1s. Bd. = 12,6617, 134, 10d.

1st July 1901-

Capital in sterling, 67,0521. 9. Bd., at ex. ls. 11d. }}=

$679,370,87.

1st July 1902-

$

Same capital in sterling at la. 8d. costs 780,247.08

A loss for one year

In sterling at ls. 8d. =8,689/.

100,876.21

Our net profits for the year ending 30 June 1902 (and a fair year) amount to $86,929,44 at ex. la. Bd. 1-in ster- ling.

Amount written off

LOBS

£. ■. d. 7,470 10

-

8,669

1,198 10

so that we can pay no dividend, and carry over a deficit of 1,1984. 10.

APPENDIX 8.

MEMORANDUM BY MR. G. W. BUTT.

SILVER is undoubtedly the most suitable metal in dealing with the Far East; gold is not sufficiently divisible to supply the requirements; it is too expensive. The present system of currency in the Straits Settle- merta is very convenient for the trade, inasmuch as it both acts as legal tender and is accepted by places out ude the jurisdiction of the Straits, as coins representing in a precious metal their face value; the main point in which they do not fulfil the fundamental rules of coinage is their lack of stability of value.

The present decline in the value of silver shown an apparent loss to a great many (Europeans drawing fixed pay or investors in securities such as debentures and mortgages), but very little credit is given to the fact that the low exchange has stimulated production and made the Eastern trade what it is.

In the Straits, the amount of dollars imported to pay for produce comes to something over 20,000,000 of dollars annually; these find their way to Bdsm, Borneo, Celebes, etc. (Siam, by the way, is adopting a gold currency, which will affect the amount of silver hitherto taken).

A large quantity go to the Native States, and are paid away to Indian and Chinese coolies, who hoard them, or, more probably, take them away in small quantities to India and China, where they are melted. This, I think, accounts for the disappearance of the stream of dollars regularly imported.

Even if a gold basis were fixed for the Straits, the amount of silver would still be required either in bar silver or British dollars, to supply this demand on our renoy; it is obvious that token coins would not dis- appear in the same way that dollars do now.

The change to a gold basis is a dangerous one, par- ticularly in a country prospering under silver, and may lead to trade being diverted to the neighbouring silver countries. Were it not that trade might be diverted, the Straits would be in a better position to do it than other places, sa the produce is chiefly peculiar to the place, and prices would adjust themselves to the new

currency.

A token currency gives a large inducement to counter- feiters; Java has experienced some trouble in this way.

APPENDIX 9.

PRELIMINARY OBSERVATIONS by Mr. E. M. UNDERDOWK, K.C., upon the question of Exchange generally, and upon the desirability, or otherwise, of establishing a Gold Standard in the Straits, or of introducing some system which may remedy the Monetary and Mercantile complications now existing there.

I have been connected with the cultivation of sugar- cane, production of sugar, and other matters connected therewith in the Straits and India for more than forty years, and I was myself in Penang for some 12 months

many years ago.

I have also had very considerable experience in questions of exchange with foreign countries in nearly all parts of the world, and have witnessed the results of most extraordinary fluctuations.

The most extreme instance that I know of is Para- guay (where I am chairman of the Central Railway), in which country last year the premium on gold had reached 1,200 per cent, and is now about 1,000; the result naturally being the paralysis of all sorts of business, and the ruin of English enterprise in that country.

In all cases of working of railroads or other mechani- cal businesses, a large portion of the working expenses must be provided at home in gold, while the earnings if they reach England at all, must be remitted in billa or in some other form negotiated by the use of a depre- ciated currency. Similar remarks apply to businesses in the Argentine and other South American Republics, Havana, Spain, etc. These countries all suffer from a deficiency of gold which (by the Gresham Law) is driven or kept out of the country by the depreciated money in forced circulation there. Of course the Straita Settle- ments do not suffer from over issues of paper money, nor from compulsory circulation of depreciated silver. To these it is unnecessary to refer except generally; but it is well to note that in the Argentine Republic, when the Civil code was drawn up, there was not, strictly speaking, any natural coinage at all, and the law per- mitted and legalised the promise to discharge the in- debtedness in respect of contracts and loans in any form of foreign money, provided that at the period of payment such obligation could be met by making the payment in the currency of the country, at the then existing exchange, in lieu of the foreign money made the basis of the stipulation.

It is not necessary to say that in the U.S.A., some years since, when attempts were made to pay gold debts in currency at its normal figure, the Supreme Court decided that an obligation contracted in gold or upon a gold basis, must be discharged in gold or by the equivalent in currency at the rate of exchange of the day of payment. Older jurisdictions had recognised the principle that the rate of exchange prevailing on the date of the contract should be the rule.

It is not too much to say that the depreciation in the currency and the consequent uncertainty attached to all monetary operations involving relations with other countries has led to great abuses in the form of repudia- tion, national bankruptcy, and to general demoralisa- tion brought about by heedless speculations in exchange.

But the instances above given can hardly be con- idered in the same light as those which affect business in the Straits.

The monetary relations between the colony and this country, those with British India, with China, and with other places, where much confusion and uncer- tainty exist with regard to the currency question, give rise to many difficulties and complications.

In considering the matter generally, we must study the effects of the present anomalous state of things upon Various classes of interests:---

The Settlements generally.

Their population, English, foreign and native.

The assessment of property for taxation. Estimates of income.

What interests suffer: In what way and to what

extent, from the present state of things; and what loss and inconvenience if any would result from a change?

The agricultural interest in view of local consump

tion and export.

The mercantile body, as importers and exporter. The Services.

English salaried employees.

The Fall in Silver.-This has reached a level hitherto unheard of, say, from twenty-one to twenty-two penos per ounce.

Until comparatively recently, this price was thought to be regulated mainly by the cost of production from a silver mining point of view, and doubtless this is the leading factor now. But recently metallurgy has BO developed that silver has become considerable by- product from other processes, and is constantly being thrown upon the market as such at a very low price.

I am myself chairman of a railway in South America, some 30 per cent. of whose traffic is in silver ores. Silver can be produced very cheaply there at prices which might not permit many mines elsewhere to be profit. ably worked. The closing of these mines would to certain extent check the fall in the price of the metal, but inasmuch as the yield of silver as a by-product must continue, the mining production cannot be regarded as a ruling definite fact,

Among the great elements of change in this respect during the last 40 years, are first and foremost, tele- graphic communication, which has to a certain extent eliminated time, and has done away with the necessity on the part of merchants of the holding of large balances to meet possible drafts, etc. This seems to tend more or less to the reduction of all the operations of the world to barter or the exchange of commodities, coin and bullion being only required for the settling of balance or difference in prices or values everywhere. Thus, less coin and bullion is required for the world's commerce, and the relative value of the largest element of exchange, vis., silver, necessarily falla

So far as I have heard the discussions upon the state of things in the Straita, no very clear idea seems to pre- rail as to the measures which might be adopted.

Doubtless the Committee is fully acquainted with all 'he forms which these important questions assume, but I may be excused for reviewing as shortly as possible some of the projects for ameliorating the difficulties re- ferred to.

These include:-

(1) The adoption of sterling contracts, that is to BAY, agreements to make payments in sterling or its equivalent at any agreed date irrespective of variations in the change.

COD-

(2) Gold contracts, which, though apparently the same, differ slightly from sterling tracta (It was & gold contract which was enforced in the American case above men- tioned; that is to say, the obligation to pay so many gold dollars could be satisfied by the handing over of a certain amount of silver or paper currency calculated at the exchange of the day.)

(3) Contrasta in currency which may be either

silver or paper, or other metal. (Thes generally prevail in the Settlemente.) The idea of a legal tender in a very old one, the stamp on the coin indicating its value, and the creditor being bound to take it in discharge of debt. The English long ago protested against this, and gave as an illustration

PUBLIC RECORD OFFICE

Reference :-

TITLE C.O. 882

بائيا

7 PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE COPYRIGHT PHOTOGRAPH-NOT TO BE REPRODUCED PHOTOGRAPHIC-