CO882-(6-8) — Page 144

PUBLIC RECORD OFFICE

།༴། ། ། ། །

Reference :-

C.O. 882

7PUBLIC RECORD OFFICE, LONDON

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

98

APPENDIX:

The net imports of gold in the 19 years from 1858 to 1876 were £4,575,053 per annum, while in the 21 years from 1877 to 1897 the net imports of gold only amounted to £2,086,500 per annum. Then it must be remam. bered that about the year 1886 Soetbeer estimated the consumption of new gold in the arts in the United Kingdom at £2,108,000 per annum (see Appendix to First Report of the Royal Commission on" "Gold and Silver, 1888, page 171), so that the arts absorbed more than all the net imports of gold. The result of this scaroity of gold becomes apparent in the index number of 1896 at 61. the lowest in a century—that is, £61 then purchased of the average of 45 commodities what had been worth £100 in the period from 1867 to 1877. The Director of the United States Mint estimates the consumption of gold in the arts in the United King- dom in 1899 at £3,033,760, and the average net im- ports of gold for the 26 years from 1877 to 1902 were

only £3,181,176 per annum-that is, including the large net imports of the last five years, as shown in Table IV.

By the process of contraction in the currencies of the gold money countries, thousands of millions sterling have been transferred from the producing clears, and the landed and propertied classes, etc., to the holders of Government and other securities, to banks, annui- tants, mortgages, etc.

The stocks of gold and silver money in the world in the gold countries were in 1896 deficient by 39 per cent., ss compared with normal supplies in the period from 1867 to 1877, and in 1902 with the gold index number at 69, they are still deficient by 31 per cent. The fol- lowing table shows the stocks of gold and silver in the principa gold money countries as calculated from a table in the Report of the Director of the United States Mint for 1901:-

TABLE V.

Stocks of Gold and Silver Money in the principal Gold Standard Countries as at 1st January 1901.

000's omitted.

Unlimited

Limited

Legal Tender.

Ratio 1 to

Legal Tender. Ratio 1 to

Gold.

Silver-

Silver- Unlimited Legal Limited Legal

Tender.

Tender.

£.

£.

£.

United States

15'98

14.95

222,160

113,780

17,380

France -

151

14:38

102,120

72,380

11,800

Germany

15

13:96

144,220

16,160

25,520

Netherlands-

13

15:13

6,580

9,700

740

Russia.

23:24

144,860.

20,500

Austria-Hungary

13'69

45,880

14,760

Belgium

15

14:38

3,560

6,120

Italy

151

14'38

19,800

3,200

880

5,580

United Kingdom

14'28

102,200

23,300

£.

851,180

221,340

120,580

£. 851,180,000 341,920,000

| ིི ལྦ |

TOTAL STOCKS OF GOLD

SILVER

#

The stocks of gold and of silver passing as gold in the principal gold money countries as stated above are £1,183,000,000, and as Mr. Sauerbeck'e index num- ber is 69 for 1902, it is evident that to raise prices of commodities to their former level of 100 would require an addition of metallic money of about £536,000,000, If the par of exchange had continued at 1 to 154 during the last thirty years, it is doubtful if enough gold and silver would have been provided to maintain the level of prices at 100, and it may be regarded as certain that gold will never be produced in sufficient quantity to raise prices to 100 again.

It is important also to observe that considerably more than one-quarter of the metallic money in the western gold countries consists of silver, namely, £342,000,000, of which £221,000,000 are unlimited legal tender. The intrinsic value of this present does not exceed £120,000,000, so that its value as money is about £222,000,000 greater than its bullion value. This is a most unsatisfactory position for such an enormous amount of money, and the leading statesmen of the west have allowed their currencies to drift into it, bəlieving that silver would right itself, even when most countries were discriminating against it But in this they have been entirely mistaken, and their failure to act has worked incalculable injury, not only to the Asiatic countries, but to the gold countries së well.

£ 1,193,100,000

But

In considering the currency of the Straits and the Malay States, the only thing that can be done now is to devise a special remedy for that particular case. though a gold standard may be adopted in the Straits and Malay States, that settles nothing beyond their boundaries. The Philippines may also adopt a gold standard but there is no universal par of exchange be. tween gold and silver. China cannot adopt the gold standard, because it cannot get rid of its surplus silver, and this great lone land seems destined to bear the burden of the failures of Western statesmanship. The nations of the West can hardly feel satisfied at having discriminated against silver, and at having now saddled Chine with the difficulties arising from their desertion of the white metal, when they themselves could easily have derived great advantages from it by its assistance in counteracting the disastrous results of the contrac tion of the currencies of the gold money countries. To China they owe a duty which nothing can adequatel▾ fulfil but the establishment on an equitable basis of a par of exchange between the two metals.

If some plan to open the Western mints to silver at

a ratio with gold were adopted, there would be no need for a gold currency or standard in India, which is naturally a silver money country, or in the Straits, or in the Malay States, or in the Philippines, or Hong Kong, or China The tie between gold and silver would be affected in the West, and the teeming millions of

COMMITTEE ON STRAITS SETTLEMENTS CURRENCY.

Asia would never know that there was a tie, because silver would maintain the par with gold, and gold money would be unnecessary in Asia.

But

This, however, is here only a suggestion in connection with this Committee, as the proposal is hardly at pre- sent in the field of practical politica and finance. the necessity for it is always staring us in the face as a final and complete solution, and it is not creditable to our civilisation and our statesmanship that in the last 30 years a par of exchange has not been established. Recommendations. I recommend in the first place Proposal (3), and in the second place Proposal (4).

Note to Memorandum of January 27th, 1903. In the course of my examination on the 27th January on the details connected with proposal (3) in my memorandum, a brief discussion arose as to the method by which the currency of the Straits Settlements could be kept on a gold basis without the use of gold in the currency reserve. It was suggested in the memoran- lum that a gold rate of exchange should, as a be ginning, be fixed at about 5 per cent. above the price of silver, and that might, for instance, be at la. 8d. per new dollar, though I favour the plan of having the gold value of the dollar rise in case of increased supplies of gold on the world's markets. If a rate of exchange were fixed, it would tend to rise by the process of con- traction, and if it was desired to keep it at 1s. 8d., a method must be found of adding new dollars to the circulation to keep the rate down to 1s. Bd.

If, however, gold was adopted, the only use of it would be to exchange for new dollars, and when the gold increased too much in the currency reserve in pro- portion to the dollars held there, it would be sold for silver in order that the new dollars might be coined and placed in the reserve. Gold would not be coined and would not be legal tender. The question, then, is what would be the best method of adding new dollars to the circulation, so as to maintain a given rate of ex- change without the use of gold in the currency reserve? The plan I propose for accomplishing this object is to authorise the Agents-General for the Straits to sell orders for dollars on the currency reserve in Singapore at the fixed gold rate plus the expense of shipping silver or dollars to Singapore. No bank or merchant can afford to pay this price, unless the exchange is at a rate that will give a profit over and above 16. 8d. and the expenses. In fact, they will offer in London to buy ordera for dollars to be received in Singapore when the exchange is at the shipping point of gold, though, of course, no gold will be shipped. By this method all the advantages of a fixel gold rate of exchange will be gained by the two Colonies, and whatever profit the banks would derive from sending gold from London and tendering it at Singapore, in order to obtain possession of so many new dollars, they would equally obtain by taking the money which they would, under a gold system, invest in gold, and pay this money to the Agents-General, and receive an order on the currency reserve for the dollars they desire to obtain.

It would then be the duty of the Agents-General to purchase silver and send it to the Mint in London to be coined for transmission to the currency reserve, or, if a Mint were to be established in Singapore, they would ship the silver to the Straits Government to be coined there.

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On the other hand, the same result might be ob- tained in a simpler manner. An arrangement might be made by which the banks or the merchants in London, when they wished to receive dollars out of the currency reserve in Singapore, would offer a price for the orders for dollars based on 1s. 8d., and the price of the day for silver, and the banks would undertake the purchase of the silver and ita delivery either here or in Singa pore, or its transportation in dollars, if the latter were coined here. The Agents-General acting for the Straits Government would get the difference between the price of the day for silver and 1s. 8d. to the dollar, and they would pay the expense of coining. To the banks would be left the same margin of protit as under a system where actual gold was sent out, because their profit would lie solely in the fractional rate above 1s. 8d., just as is the case with gold shipped to India to exchange for rupees out of the currency reserve. There would be a quotation in London for orders for dollars to be received at Singapore whenever the exchange rose to the shipping point above ls. 8d., as that would be a proof that new dollars ought to be added to the currency to keep the rate at 18. 8d.

If the Mint was established in Singapore, the silver would go out at the same time as the orders for dollars, to be coined into dollars to take the place of those that would have been withdrawn from the currency reserve. If the dollars were coined here, they would be taken as part of the currency reserve, to which they would be sent with as little delay as possible. From the moment an order for dollars was issued, the silver for an equal amount of dollars would be under the control of the Agente-General, though the banks might effect the pur- chase and transportation as their agents.

This method could be adopted in my Proposal (4) also. When the rate of exchange rose above 25., the Agents-General could sell orders for dollars at 2s. per dollar, plus the expenses of transporting silver or dol- lars to Singapore, and the banks could purchase the silver and transport it on the same terms as are above set forth for Proposal (3).

If a mint was established at Singapore, silver could be taken in there and dollars given out on somewhat similar terme as those explained for Proposal (3) in London.

It may not be out of place to point out that the above method would be exceedingly well suited to India, where too much gold has already accumulated in the currency reserve, and part of it has had to be withdrawn and sold for silver, so as to substitute rupees for gold withdrawn. In the future, gold may be expected to be sent to India in considerable quantities for the purpose of obtaining rupees from the currency reserve. and it would seem simpler for the India Office to sell orders for rupees on the currency reserve at the rate of 18. 4d. and the expenses of transmitting the silver, than to withdraw gold from Europe unnecessarily only to encumber the currency reserve, and then re- quire the gold to be withdrawn and rupees to be sub- stituted. There is enough gold there for all purposes of a fixed gold reserve, and not an ounce of it need be withdrawn, nor indeed can it be withdrawn unless it is by the deliberate choice of the Indian Government. All additions beyond this fixed amount of gold ought to be in rupees,

J. BABE ROBERTSON.

Oriental Club, London, W.,

January 27, 1903.