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APPENDIX:

In the absence of index numbers of prices of commo- dities in the Straits, the figures in Col. III. giving the silver prices of 45 leading commodities in London may be taken as the index numbers of the Straits and of all silver money countries. Figures in Col. II. are ap- proximately very accurate for changes due to monetary causes in London, and, converted into index numbers of silver prices of commodities at the current value of silver, they must closely resemble the movement of silver prices in the Straits, though in a limited popu- lation with restricted trade other causes may produce modifications.

An examination of the first two columns in the above table will show how steadily the gold value of silver and the gold value of commodities fell together. Twenty years after 1873, in which year France took the first step towards the closing of its Mint-namely, in 1892- the silver index number stood at 65:4, and that of com- modities at 68, and silver prices at 104, as compared with 100 in 1867-77. The figure 104 is obtained thus as 65.4: 100:68:104. The change was therefore not in the silver prices, but only in the gold values of silver and of commodities. But from 1883 till the present time the ares over which silver money circulated has been diminished, while the production of silver has increased, with the result that the index num- ber of silver was 447 (27 3-16d.) for the year 1901, and 39-6 (24 1-16d.) for the year 1902, while the silver prices of commodities for these two years were 157 and 174 respectively, as against 104 in 1892. At the end of December, 1902, the index number of silver was 36-6, the equivalent of 221d. Gold, as shown in the

Gold prices of Commodities

prices of commodities, was thus appreciated by 45 per cent.—that is, the increase in purchasing power corro- sponded to the fall in gold prices from 100 to 69. This increased purchasing power was due to the scarcity of gold when it had to supply the needs of a larger number of countries using gold money, and to provide for in- creased population and trade.

A glance at Table I, will show that, notwithstanding the adoption of the gold standard by Germany, the United States, the Netherlands, Sweden and Norway, etc., the production of gold in the world, which in 1873 was £19,240,000, was only £23,770,000 in 1890. The consequence was that in the latter year the index number of commodities had fallen to 72, and in 1896 it fell to 61, the lowest point in a century, the supply of gold being quite insufficient to maintain prices at the former level of 100. Silver was largely demonetized in Europe at the very time when it was needed for expanding popula- tions and trade, and the gold money countries had there- fure to submit to all the evils of contracting currencies s.d falling prices,

Up till 1892 the silver money countries had had reason- ably steady prices, and in that year the index number of silver prices was 104, as against 100 as the average of

1867-77.

But after 1882 the gold value of silver fell continu- ously until it reached 30-6 for the year 1902, while the gold value of commodition, which had fallen to 61 for 1896, had on account of increased supplies of gold risen to 69 for 1902.

The following figures give some important compari-

Bona :-----

TABLE III.

Gold and Silver Index Numbers.

In 1887-77 and

in 1853-77.

In 1902. Average of Year,

Decrease

per cent,

Increase per cent.

8

60

31

1

74

45

100

Silver prices of Commodities

100

174

Purchasing power of Gold

100

145

l'urchasing power of Silver

100

57

43

Gold price of Silver

100

30'6

00:4

Silver price of Gold

100

253

153

The purchasing power of silver for 1902 is obtained by taking the index number of gold prices, namely, 60, and then as 69:100:39 6:57. By this formula the gold index number of silver, namely, 39-6 is increased by the difference between 60 and 100, the former of which repre- sents the fall in gold prices, and thus the effect of the change in gold is eliminated, and the actual purchasing power of silver over commodities for 1902 is found to be 57, against the former 100. It will be seen, therefore, that the purchasing power of gold over commodities has in- creased by 45 per cent., while the purchasing power of silver over commodities, leaving gold out of consideration altogether, has only diminished by 43 per cent., and not by 60 per cent., as 306, the gold index number for the year 1902, might perhaps load one to believe. The whole of this fall in the purchasing power of silver over commodities has taken place since 1892.

It is evident, therefore, that the currency troubles from 1873 to 1892 were solely due to the inadequacy of the supply of gold to meet the increased demanda for it and maintain the price of silver and the prices of com- modities at their former level. Since 1892 the fall in the gold index number of silver has been more marked than in the 20 years from 1873 to 1892, but silver prices of commodities have been affected only by supplies of silver in excess of the uses for it, and not by gold, and the natural result has been that silver prices have been raised to the figures given in Table II., Col. III. In 1892 the index number of silver prices was 104, against 100 in 1867-77, while in 1902 it was 174, the rise being dus

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solely to changes affecting silver and entirely uncon- nected with gold.

Silver Currencies Introduced by European Governments Outside of Europe.

It may be well to enumerate some of the different silver currencies outside Europe that have been intro- duced by European Governments. In French Guiana, Madagascar, Reunion, Martinique, Tunis, French Congo, and other West African colonies of France the gold standard is the same as in France itself, but the only metallic money in circulation is silver and bronze, the silver five-frano piece circulating as five gold france, while the gold value of the silver in the five-franc piece is only about 1 franc 80 centimes,

In the five French establishments on the confines of British India, the rupee is legal tender, so that while the five franc piece is circulating in France and the above-named colonies at 60-84d. per standard ounce of silver, the rupes is circulating in the French colonies of India at 43d. per ounce.

In Indo-China the Mexican dollar is current at the price of silver; that is at present about 221d. per standard ounce.

There are therefore three different standards of value for silver coins in the French colonies; one at 60-84d. per standard ounce, the second at 43d. per standard ounce, and the third of varying gold value, bub at present at 221d. per ounce. Yet before 1873 there was but one standard jointly of gold and silver in France

COMMITTEE ON STRAITS SETTLEMENTS CURRENCY.

and within its jurisdiction, and the silver was coined at 15 to 1 of gold, the silver coins beng unlimited legal tender.

In our colonies and dependencies we have also three systems of silver money, though we have no silver of unlimited legal tonder within the United Kingdom. Our token money is coined at 66d. per standard ounce, that is one of gold as the equivalent in value of 14-28 of silver. In Australia and other colonies the money system is the same as in this country, in India there is the rupee at 43d. per ounce with unlimited legal tender, and in the Straits and Hong Kong there are Mexican dollars and British dollars circulating at the value of the silver they contain. In addition to these, there is the currency of the West Indies and British Guiana, which consists of our British silver money, namely, crowns, half-crowns, florins, shillings, six- pences, and fourpenny pieces, together with our bronze coins. There are also bank notes in circulation. It is an anomaly, however, that these token silver coins, which are only legal tender in this country for 40s., are the only unlimited legal tender there. The money of account in these colonies is a nominal dollar worth 4s. 28., that is 50d., or d. for one cent, but there is no coin representing 4s. 2d. When one buys an article that costs $5, the amount in sterling is £1 s. 10,, and that is paid in British silver money. There is no gold in circulation, so they have a gold standard without any gold reserves or coins.

In Java, the Celebes, Dutch Guiana, and other Dutch colonies, the principal currency is the silver money of the Netherlands, which is unlimited legal tender in these colonies, as it is in the mother country. The ratio in the Netherlands is 1 of gold to 15% of silver, and is so close to the French ratio of 1 to 15 as practically to be the same.

In the Philippines the principal currency is Spanish, Mexican, and British dollars, circulating at the value of silver.

The Value of the Dollar in the Straits.

The great mass of the population of Asin are relatively exceedingly poor, and silver and copper have been the principal moneys of those countries which were suf- ficiently advanced to have a metallic money system, Gold there is undoubtedly over the whole Continent, but the transactions of the vast majority of the people are for such minute amounts that gold would be quite unsuitable for currency, and the whole Continent of Asia ought naturally to be on money systems of silver and copper with perhaps the addition of nickel.

The money of the Straits belongs to the third cate gory referred to above as under British jurisdiction, namely, to the system of the Mexican dollar and the British dollar circulating now at about 221d. per standard ounce of silver. Before 1873 the Mexican dollar circulated at 60-84d. per standard ounce of silver, and gradually the ounce has fallen to 224d. But the pence of the time before 1873 are not of the same value as the pence of to-day. To-day 60 pennies or pounds are worth As much as 100 pennies or pounds were on the average of prices in 1857 to 1877, and also in the 25 years from 1853 to 1877, so when silver is at 221d, of the money of the present day it is worth 321a. of the money of 1853 to 1877. The gold index number of comau dities for December, 1902, is 69, and as 60 is to 100, the former gold number, so is 224d. to 321d. And as 306, the gold index number of bar silver for 1902, is to 69, the gold index number of commodities, so is 100 the former bar silver index number to 174, and that is the index number for silver prices in 1902.

It is commonly supposed that silver prices of com- modities have risen in proportion to the fall in the gold value of silver, but this is not the case. Up to 1802, when silver had fallen in gold value from 100 to 654, silver prices, which were at 100 for the period 1867-77, were at 104; that is, they were practically unchanged, as the fall was not due to anything affecting silver, but was entirely due to the increase in the purchasing power of gold, owing to its scarcity, and now although the gold value of bar silver was for 1902 at 24-1/16d., as against 60-84d. in 1867-77, silver prices did not rise in the proportion of 24-1/16 to 60-84. If they had risen in that proportion the index number of silver prices would have been 253 for the year 1902, against 100 in 1867-77, whereas it has been shown that the real index number is 174 for 1902, and this is becauso silver prices have not depended on the gold prices of bar silver, but have followed a course, due solely after 1882, to excessive sup- plies of silver as compared with the demands for it.

68-49.

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The demands were not sufficient to keep the silver prices of commodities at or near the lovel of the 20 years, 1873 to 1892, and therefore silver prices rose in proportion to the excessive supplies of the metal, together with the diminished demand for it at former higher prices. The movements in silver prices were due solely to causes affecting silver, and had nothing to do with gold except in so far as gold was in some countries being substituted for silver, and thus the demand for the latter metal was being diminished.

The Straits Government are anxious to protect their people from the further fall in the gold value of the dollar. But there are two distinct causes that may produce a fall in the gold value of the dollar, one in excessive supplies of silver, and the other is an increase in the purchasing power of gold. These two causes may operate either separately or together. Within the near future, when the Transvaal mines shall be in full operation, more gold will be produced than at present, and therefore it may be expected that these larger supplies will tend to diminish the purchasing power of gold, and thus will tend to produce a higher gold value for the dollar and higher gold prices for commodities. So far as gold is concerned, therefore, the gold value of the dollar is more likely to rise than to fall. But as regards supplies of silver no forecast whatever can be made. It is probable that the present low gold value of silver is due to some extent to fears for the future of the metal, in consequence of the recommenda- tions and proposals for all the remaining silver money countries to adopt the gold standard. They are not all official recommendations, but exaggerated statements in tho Press affect the public mind, and it is to be ex- pected that there will be a reaction in the price of silver when it becomes clear that the Straits and the Philip pines either will or will not pass on to the gold standard, that Mexico will not adopt the gold standard, and that China cannot pass on to a gold standard, while Hong Kong will most probably find ita interest to be in con- tinuing to use the same cufrenoy sa China. Even if the Straits and the Philippines adopt the gold standard, their chief money will still be silvor, and so their adop ton of gold will modify but very little the conditions affecting silver, though, of course, such influence as they may exert will be in the direction of a lower gold value for the dollar. Then it is almost certain that the low price of silver will curtail the production of that metal. On the whole, therefore, it seems highly probable that there will be no further material fall in the gold value of the dollar, and indeed the tendency now ought to be upward.

Attention may here be called to the alleged intention of the Straits Government to reduce the proportion of the dollars in the reserve against notes issued from two- thirds to one-half. It is highly probable that they could reduce with comparative safety the proportion to a quarter. But is it wise for a Government interested in arresting the further fall in the gold value of silver to throw a large amount of dollars on the markets of the Straits, and thus aggravate the very evil for which this Committee is expected to find a remedy! Currency Proposals for the Straite and the Federated Malay States. (1) The Government might continue the present system of currency-that is, the Mexican dollar and the British dollar--and thus keep their trade on a pear of exchange with Indo-China, the Philippines, Hong Kong, and China There are good reasons for supposing that the gold value of silver will not fall much further, as at the present price supplies from the mines must diminish, while the increased supplies of gold expected from the Rand mines will tend to raise the price of silver. Then the Straits and the Malay States have no gold debt prossing upon them with increasing burden. It is therefore a defensible policy to allow the present cur- rency to continue.

(2) The rupee system has been so frequently recom- mended that it may be well to explain how it could be worked out. The Government might adopt the rupee system, and thus give the Straite par of ex- change with India, Ceylon, Mauritius, and East Africa, while also securing a par of exchange with the gold countries, and loring the par of exchange with the silver countries. As has been already shown, if they had adopted the rupee system in June, 1803, at 1 24d. when the rupee and the Mexican dollar were circulating at their bullion value, they could have done so without any real difficulty and without any material change in the prices of commodities in the Straite. The Mexican dollar at 43d. per sunce would have been

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