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PUBLIC RECORD OFFICE

Reference :-

C.O. 882

9

PUBLIC RECORD OFFICE, LONDON

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

44708

SIR,

38

No. 56.

TREASURY to COLONIAL OFFICE.

(Received 14th December, 1903.)

Treasury Chambers, 12th December, 1903. I HAVE laid before the Lords Commissioners of His Majesty's Treasury Mr. Lucas's letter of the 25th ultimo (No. 39735/03),* transmitting, by direction of the Secretary of State for the Colonies, the draft of an Ordinance proposed to be introduced by the Straits Settlements Government for the purpose of regulating the exchange of the dollar, and other documents relating thereto.

In reply, their Lordships direct me to state that they concur in the terms of the despatcht which Mr. Secretary Lyttelton proposes to address to the Acting Governor of the Colony, both as regards the objection taken to the scheme embodied in the draft Ordinance and also as regards the measure suggested for adoption.

My Lords observe that in paragraph 4 of the draft despatch provision is made for alternative methods of disposing of any gold which may be lodged with the Crown Agents in London in consideration for notes issued by the Currency Commis- sioners in the Colony. They agree that it is desirable that full freedom of action should be secured in this respect, and that it will have to be decided with reference to the circumstances at the time whether any gold which may be so received shall be invested or shall be remitted to the Colony either in gold or in silver dollars. In the event of this question arising, they will be glad to be consulted by the Secre- tary of State as to the instructions to be given to the Colonial Government.

Sir F. Swettenham's despatch of 30th September,‡ sent in original, is herewith returned.

No. 57.

I am, &c.,

E. W. HAMILTON.

39735

THE SECRETARY OF STATE to THE ACTING GOVERNOR.

(No. 423.) SIR,

[Answered by No. 61.]

Downing Street, 17th December, 1903.

I HAVE the honour to acknowledge the receipt of Sir Frank Swettenham's despatch, No. 414, of the 30th of September last, proposing to guard against the danger of an excessive rise in the exchange value of the dollar by empowering the Commissioners of Currency to advance notes or dollars against gold or gold securities.

2. I recognise the possibility that even before the demonetization of the Mexican and British dollars the current rate of exchange may rise, at any rate temporarily, to the point which it may hereafter be thought desirable to fix as the future value of the Straits dollar, and it may be expedient at once to give the Government power to take steps to prevent the rate of exchange rising materially above that point.

3. I do not, however, consider that the system of advances proposed in the despatch under acknowledgment would be desirable or convenient. All that is required is a provision empowering the Commissioners of Currency to issue notes at Singapore in exchange for gold tendered to the Crown Agents for the Colonies in London or to the Commissioners at a rate of exchange to be notified by an Order of the Governor in Council, to be issued with the previous approval of the Secretary of State.

4. It would have to be provided that the gold received by the Crown Agents should be regarded as part of the Currency Commissioners' Reserve, and should either be invested by them or remitted to the Colony, or used for the purchase of silver to be minted at Bombay into Straits dollars, according as they might be instructed from time to time. The rate of exchange to be notified in the Order in

↑ No. 57.

‡ No. 42.

• No. 50.

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Council would, of course, be approximately the rate of exchange at the time it is issued, but it would not be necessary to state this in the Ordinance.

5. It is of course possible that the rate of exchange would again fall after this step had been taken, as it is not to be expected that a gold standard can be established until the currency is so largely composed of the new dollars as to justify In that case no gold would the demonetization of the Mexican and British dollars.

be tendered under this provision of the Ordinance, and for the time being the currency would continue on its present transitional basis. The new Ordinance would, however, in the meantime have the effect of preventing the inconvenience resulting from an excessive rise in the rate of exchange.

6. There will be no need to make any provision for the issue of gold by the Currency Commissioners in exchange for notes, since, although the ultimate effective continuance of the gold standard will depend on the ability of the Commissioners to give gold or gold drafts on the Crown Agents, there will be no legal obligation on them to do so and they need not be empowered to give gold, since they will only issue it when desired.

42496

No. 58.

I have, &c.,

ALFRED LYTTELTON.

THE SECRETARY OF STATE to THE ACTING GOVERNOR. [Copy to Treasury, May 25, 1904. L.F.]

(No. 30.)

SIR,

[Answered by Nos. 61 and 71.]

Downing Street, 29th January, 1904. I HAVE had under my consideration your despatch, No. 475, of the 29th of October last,* regarding the amendment of Ordinance No. XIII. of 1903.

2. I am addressing you in a separate despatcht on the subject of the deduction from the gross revenue assessable to military contribution of the re- imbursements of the working expenses of the note issue. I am unable, however, to agree that any part of the cost of minting the new Straits Settlements dollars should be reimbursed out of the profits of the note issue, since the new currency in the Straits Settlements is quite distinct from the note currency, and the accounts of the note issue should be kept quite separate, as in India, from the new coinage accounts. 3. The expenses of the new coinage should be met from general revenue (a due proportion being charged against Federated Malay States funds, as suggested in Sir F. Swettenham's despatch, No. 351, of the 22nd of August). When the ratio at which gold will be received in exchange for dollars has been declared, the expenses of coinage should be charged against the gold so received, and the balance held to form a reserve fund to maintain the gold standard as indicated in paragraph 02 of the report of the Currency Committee. In course of time, it may prove possible to invest a part of such reserve, and the interest on investments should then be re-invested for the benefit of the fund, as is done in India. But the initial expense will be a final charge against revenue, and will not be reimbursed, at any rate so far as can be foreseen at present.

4. I enclose copy of a notifications published in India, on the lines of which the issue of dollars in exchange for gold might take place. Dollars would be issued in exchange for gold direct to the public, or to the Note Issue Department. It will probably be convenient that the Note Issue Department, though issuing notes in exchange for gold, should not hold the gold, but pass it on to the Coinage Depart- ment, in exchange for dollars. It would similarly rest with the Coinage Depart- ment to give out gold in exchange for dollars, or to take such other steps as may be necessary to prevent exchange from falling (see paragraph 61 of Currency Committee's Report).|||

5. I am of opinion that when the amending Ordinance suggested in my despatch, No. 423, of the 17th ultimo¶ is introduced, Ordinance 13 of 1903 should also be amended on the lines proposed in my predecessor's despatch, No. 317, of the

• No. 49.

1.No. BL

No. 57.

↑ Becretary of State, No. 27, 29th January/04; 1885 : not printed.

↑ [Od. 1556]. Not reprinted.