CO882-(8-9) — Page 149

PUBLIC RECORD OFFICE

NETLENGO, 882

9

PUBLIC RECORD OFFICE, LONDOES

ALLY WITHOUT PERMISSION OF THE BE" RANDOLCED BEFOGRAPHIC»

| COPYRIGHE PHOTOGEN-NOT

66

Enclosure in No. 87.

MEMORANDUM by the ACTING COLONIAL TREASURER, Straits Settlements.

One of the objects of Ordinance IV. of 1904 was to give the Government power to provide against any undue inflation of the dollar. By Section 3 of this Ordinance (now Section 7 B (1) of the principal Ordinance), the Commissioners of Currency are enabled to issue notes in exchange for gold received by them locally or by the Crown Agents in London at a rate to be fixed with the consent of the Secretary of State.

2. The demand rate of the Straits dollar is 2s. 1/8d. to-day, and it is generally believed, owing to the revival of the produce business, that it will rise to 2s. 1d. before the end of the year. The time has, therefore, come for considering how and when the provisions of Section 3 of Ordinance IV. of 1904 should be put into force if, after some time, it is seen that the dollar is going to maintain the rate of fixity the Government desires to adopt.

3. I forward a statement showing the rates of exchange of the Straits dollar (demand), the price of silver, and the Hong Kong rates (TT.) from the 1st of September, 1904, the date on which the British and Mexican dollars were demonetized.

4.

One of the recommendations of the American Commission was that the ratio to be adopted in the countries, such as the Colony, Indo-China, which were intending to change their monetary systems, should be as uniform as possible, and the ratio adopted in the Philippines was 32 to 1. This is also very nearly the ratio on which the Japanese yen is based. The term "coinage ratio" is the relationship between the weight of the gold unit and that of the silver coin. Thus, if the weight of the dollar was 1 oz., or 480 grains, the weight of the dollar in gold would be or 15 grains. Working out this rate, for the Straits dollar (418 grains) and the sovereign as unit (123.27447 grains), the value of our dollar comes to 28. 1d. approximately.

The advantage of falling into line with other Governments in adopting as nearly as practicable a uniform rate of coinage cannot be over-estimated.

(1) There will be no danger of countries giving a higher value to silver than we are, continuing to purchase bullion above our limit of value.

(2) The purchase of silver bullion would be automatically suspended at practi- cally the same point.

(3) When all the countries interested stop purchasing the tendency to a rise in the value of silver will be effectually arrested.

(4) The demand for silver would be so distributed that it would be possible to regulate the price of silver and maintain its stability.

It is confidently expected that if this ratio were adopted, purchases would be stopped whenever the price of silver rose to 28d. or 29d.

The Secretary of State should, I think, be informed in the steady rise in the value of the dollar, and advised that, in the opinion of this Government, the rate of exchange should not be higher than 2s. 14d. whatever happens.

With regard to Mr. Huttenbach's memorandum, I have only the following observations to make:--

(1) The "external circulation of the dollar is a very disturbing element, and the remedy seems to be to restrict the coinage of dollars and to issue notes, but I see no object in the Government tying its hands by declaring that no more dollars shall be coined or issued.

The Government should avoid all interference with trade, and be always prepared to meet a demand for dollars if it could do so without disturbing the fixity of exchange.

(2) I do not think that a gold loan will be required. The banks are prepared to tender gold in exchange for our notes, and I feel confident that the gold will come from the public, and that there will be very little demand for gold from the Government.

28th July, 1905.

J. O. ANTHONIAE,

Acting Treasurer.

Rate of Exchange sid (Straits dollars).

67

Bar Silver.

British and Maxican T.T.

Hong Kong rates

Highest.

Lowest.

Highest.

Lowest.

Highest.

Lowest.

September, 1904 ..

1/117

1/107巷

2011.

26d.

1/10/

1/9

October, 1904

1111

111

261

201

1/10

1/914

November, 1904

1/11

271

264

1/10

1/201

December, 1904

1/11

J11

287

27€

7/11

1/109

1/11

271

201

1/11

1/11

27

1/1111

1/10

111

1/101

1/11

1,10

1911

1/11

110H

1/10

111

267

1/104

1/10

January, 1905 February, 1905 March, 1905 April, 1905 May, 1905. June, 1905

33489

(Secret.)

SIR,

No. 88.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 18th September, 1905.)

[Copy to Treasury, 17th November, 1905. L.F.] [Answered by No. 90.]

Government House, Singapore, 23rd August, 1905. WITH reference to my secret despatch of the 18th of August current* on the subject of the currency, I have the honour to bring before you, for considera- tion, the question of the condition of the subsidiary silver coinage of the Colony and the Federated Malay States.

2. Ever since the Straits dollar has been at a premium compared with the ordinary silver dollar, our subsidiary currency, which was in circulation in large quantities outside the Colony, has been steadily returning, and the merchants have had to accept large quantities of this coinage of which they find it difficult to dispose.

3. With a view of relieving the market we have for some time been taking payment from the opium farmers in small silver to the extent of 15,000 dollars a month at Singapore and to the same extent in Penang

The result is that at the present moment we have in the Treasuries $567,000 in small coin, which, of course, the banks will not accept, and the amount has been steadily growing, as the sums required for payment to the coolies of the Public Works Department, the Police, and other subordinates are insufficient to make any serious reduction on the monthly receipt.

4. There are large sums in the hands of some of the firms here, and also in the Hong Kong and Shanghai Bank, which has pursued a liberal policy towards its customers in this respect.

5. A short time ago I consulted the Chambers of Commerce as to the advisa- bility of relieving the market to some extent by raising the limit of tender from two to twenty dollars, but they both deprecated this course and maintained that it was the duty of the Government to redeem the redundant coins at their face value.

That obligation I am not, of course, disposed to dispute, though I think the Government is entitled to consult its own convenience as to the manner in which it should do so, and I think also that they have failed to appreciate the fact that the dollar itself has now become a token coin, and that practically, therefore, there is now no difference between it and the half dollar and other subsidiary coins.

6. The extension of the limit of tender will to a considerable extent relieve the market, and will also prove a convenience to the general public, and I recom mend that in the Order in Council declaring the sovereign legal tender the oppor- tunity should be taken of increasing the legal tender of subsidiary silver coins to twenty dollars.

• No. 87,

31104