CO882-(6-8) — Page 94

PUBLIC RECORD OFFICE

זון זווווווד

6

Reference :-

C.O. 882

7 PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-

COPYRIGHT PHOTOGRAPH—NOT TO

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Robinson in 1863 pointed out the absurdities of a system by which rupees were used for Government accounts, whilst the real monetary transactions of We do not both the Government and the public were conducted in dollars. think that the community would take to the rupee much more kindly now than they have done in the past, and if the dollar and cents system is continued, as we recommend, it is obviously more convenient that rupees should not be in circulation and that the dollar should bear a fixed ratio to the sovereign. and should not be quoted in terms of the rupee.

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54. If the cost of a change to a gold standard is to be faced we consider it advisable that the Straits Government should maintain a gold standard themselves, incurring the initial cost and receiving any profit which may ultimately ensue from their own currency. We believe that the flourishing condition of the Settlements and the Malay States, and the profit on over- valued coins will, with careful management, enable them to maintain it. is true that the trade returns (see Appendix 18 (12), Return No. 19), shew a large excess of imports over exports in the case of the Settlements, but it is agreed that those returns are only partial, and we do not believe that there is anything in the trade balance of the Colony to make the maintenance of a gold standard specially difficult.

55. There are various methods which might be adopted for the establish- ment of an independent gold standard in the Straits Settlements. The first which we wish to mention is that of which the leading idea originated with a Sub-Committee of the Singapore Chamber of Commerce, and is Under that proposal explained in its Report of 6th November, 1897.

the Straits Government would obtain a supply of notes of small denominations, especially of one dollar notes. This supply would require to be amply sufficient to cover the whole number of Mexican and British dollars circulat- ing in the area of the Colony and the Malay States in which it is proposed to establish the gold standard. The object of obtaining these notes would be temporarily to substitute them for the Mexican and British dollars as the currency of the country, and, later on, to exchange these notes for coins of a We have new currency special to the Straits and issued on a gold basis. considered the details of the measures by which this could be carried out, but as, for reasons given below, we do not see our way to recommending the plan, we have not thought it necessary to include them in this Report.

56. If the procedure above indicated could be successfully followed the question of introducing a gold standard into the Straits Settlements would be solved in the speediest way, and solved in a form which would not impose any cost on the Government. But the question whether the general population would quietly accept notes for coin throughout the country is one in regard to which we feel great doubt. From what is known of India we have no hesitation in saying that no such plan could have been or could be adopted in that country, and although the proposal was made by a Sub-Committee of the Singapore Chamber of Commerce, and is supported by other persons who bave practical experience of the country, we consider that the risk of its failure owing to the possible suspicion and opposition on the part of the general native population is so great that on the evidence before us we cannot recommend its adoption.

57. The plan which we recommend is gradually to introduce a special Straits dollar of the same weight and fineness as the British dollar at present current in the East to be substituted for the Mexican and British dollars, the latter dollars being demonetized as soon as the supply of new dollars is sufficient to permit of this being done with safety. Under this plan it will be necessary for the Straits to obtain a considerable supply of the new dollars. and as soon as this is received, the new dollars should be made full legal tender concurrently with the Mexican and British dollars, and steps should be taken to put them into circulation. The first supply of new dollars might be obtained (with the consent of the Indian Government) by remitting to one of the Indian Mints a portion of the coin reserve of the Currency Commis- sioners to be melted down and converted into the new Straits dollars, and

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this process might be continued until practically the whole of the coin reserve is converted into new dollars. If it was found that this was a slower process than was desirable the Government could consider the expediency of purchasing silver for coining purposes.

58. Simultaneously with the arrival of the first supply of the new dollars, and with the making of them legal tender, the import of Mexican and British dollars should be temporarily prohibited and the export of the new dollars should also be prohibited. As there is ordinarily a large import of Mexican and British dollars into the Straits, and subsequent export of them, we think it likely that when their import is prohibited there would be a tendency towards a considerable drain of these coins from the Straits Settlements, and if the new dollars are freely supplied, the change of currency might be completed without any great delay.

59. When the currency is so largely composed of the new dollars as to justify the measure, the Mexican and British dollars should be finally demonetized and the Straits Settlements would then be in the position in which India was when the change of standard was undertaken in that country, with, however, the very important advantage that there would not be an enormous proportion of the new coins either hoarded or circulating in foreign countries, which might, by being thrown into circulation, indefinitely delay the establishment of the gold standard.

60. After the Straits Settlements had arrived at this stage, the procedure might be exactly the same as it was in the case of India, i.e., after sufficient Straits dollars had been coined to meet the requirements of business in the Colony and the adjoining States, the coinage of dollars would cease until the exchange value of the dollar had reached whatever value in relation to the sovereign might be decided on by the Government as the future value of the Straits dollar. After this stage is reached the Straits Government would issue the new dollars in exchange for gold, and at the fixed rate.

61. When the gold standard is established, it would not be indispensable that any gold coins should be made legal tender in the Colony and the States. But the Government should be prepared not only to give in exchange for a sovereign such number of dollars as are hereafter declared equivalent to a sovereign, but also to give sovereigns in exchange for dollars at the same rate so long as gold is available, or to give bills on the Crown Agents in London based on the fixed rate of exchange.

62. The above method would be rather slow in operation and would involve some, though not very great, expenditure, but it would be a perfectly safe, and, we believe, sure method of establishing a gold standard involving no risk and creating the minimun of disturbance, while we do not anticipate that any very serious delay would occur before the gold standard became effective. If the time within which the gold standard becomes effective is unduly prolonged, the matter might be expedited by establishing a gold reserve, and in any case we think that the profit made on the coinage of dollars after the establishment of a gold standard should be set aside as a gold reserve, the whole or any portion of it being, if thought desirable, invested in gold securities.

63. There remain two matters on which we think it expedient to offer some observations. It has been represented to us that the trade of the Straits Settlements is accompanied and facilitated by a large import and re-export of silver dollars, and it is feared that that trade might be injured if either the import of Mexican and British dollars were prohibited, or if Mexican and British dollars ceased to be the legal currency. As regards this matter we desire to point out that the prohibition of the import of Mexican and British dollars would only be a temporary measure and that simultaneously the exchange of the new special Straits dollar for the existing currency would provide a supply of Mexican and British dollars more than sufficient to meet the wants of trade, while after the completion of the exchange, and on the demonetisation of the British and Mexican dollar, the prohibition of impor- tation would be withdrawn and Mexican and British dollars might continue