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PUBLIC RECORD OFFICE

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PEPERFIC.O. 882

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PUBLIC RECORD OFFICE, LONDON

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7. The total redundancy is probably not less than a million dollars, but as soon as we are in a position to commence our harbour works at Tanjong Pagar and in the Roads, this will be reduced, and, in the meantime, I propose to send three lakhs of small coin to be coined into dollars. The remainder I propose to retain, as in ordinary circumstances, if trade is normal, an addition of some two lakhs a year should be required to our subsidiary coinage.

४. I should add that exchange still continues to rise steadily, to-day's demand rate being 2/17-

40231

No. 89.

I have, &c.,

JOHN ANDERSON.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 11th November, 1905.) [Answered by No. 93.]

(Confidential.)

SIR,

Government House, Singapore, 19th October, 1905. WITH reference to my Secret despatches* noted in the margin, on the subject of the currency of the Colony, I have the honour to 16th August, 1905.

submit that when once we have attained our fixed ratio 23rd August, 1905.

of exchange with gold, any further expansion of the currency required should be by the means of the issue of one dollar notes against gold and dollars.

2. The dollar is an extremely awkward coin, owing to its size and weight, and its transport for the purpose of wages payment is always bound to attract attention, and leads invariably, especially about the Chinese New Year, when large sums change hands in the annual settlement of accounts, to a crop of gang robberies.

3. In Hong Kong the one-dollar notes issued by the banks are extremely popular, and dollars are found mainly in the reserves of the banks. Our note-issue is now so firmly established and is found so convenient that there can be no doubt that both in the Colony and the Federated Malay States an issue of dollar notes would be readily taken up.

4. As the dollar is already only a token and will become so to a greater extent, I think that, with the thirty-five and a half millions already coined, we have ample for all time for the only purpose for which they would be required if one dollar notes were available, and even for that in a short time notes would probably

serve.

I refer to the quasi-international payments for imports from the surrounding countries the Northern Malay States, Sumatra, and Borneo. Our notes already circulate to some extent in these countries, but, as a rule, payments are made in Straits dollars, and since the Straits dollars were allowed to be exported to these countries the British and Mexican dollars have been ousted.

5. As the one-dollar notes would to a large extent be in the hands of a lower class of society than the five-dollar and other notes, it should be a rule that no one-dollar note should be re-issued if it comes to the Treasury after it has been a year in circulation.

The danger to the public health from filthy notes would thus be minimized. 6. If you agree to this proposal, I should be glad if you would cause a design to be prepared and sent to me as soon as possible. It should be shaped differently from the other notes and should have the figure "1" clearly printed upon it to avoid any possibility of its being confused with the higher valued notes.

The signatures should be lithographed, and the first issue should be not less than two millions. It will in all probability be necessary to increase the issue largely at an early date, as the note will certainly be popular.

7. With regard to the proportion of coin to be held against the issue of our one-dollar notes, I suggest that it might be fixed at two-thirds.

• Nos. 87 and 28.

I have, &c.,

JOHN ANDERSON.

32616

(Secret.)

SIR,

69

No. 90.

THE SECRETARY OF STATE to THE GOVERNOR.

[Copy to Treasury, 17th November, 1905. L.F.]

[Answered by No. 97.]

Downing Street, 17th November, 1905. I HAVE the honour to acknowledge the receipt of your Secret despatch of the 16th of August* regarding the present position of exchange, and the point at which exchange of the dollar with gold should be fixed.

I note that at present you are inclined to think that an exchange of nine dollars to the sovereign is one that might reasonably be aimed at, and may also be con- sidered to provide a sufficient margin of safety. I see no reason to differ from your view on this point so far as I am able to form an opirion at present.

3. As regards the method of fixing exchange when the time is ripe for that step, you propose that an Order in Council should be passed by His Majesty declaring that from a date to be fixed by Proclamation the sovereign and half sovereign shall be unlimited legal tender for 9 dollars and 44 dollars, respectively.

4. I am inclined to the view that the more convenient form of effecting the change of standard will be by proceeding under the Currency Note Ordinance No. III. of 1905.

By so proceeding and notifying by an Order of the Governor in Council, approved by the Secretary of State, the rate at which notes will be issued in exchange for gold, the necessity of deciding the rate of exchange will be postponed until the time when the notification is issued. There are great advantages in having a free hand till the moment of making the change, and this course avoids the possi- bility of disclosure of the Government's intentions more surely than the step you propose.

5. There would be no great objection, so far as I can see at present, to making the sovereign legal tender in the Colony by Order in Council subsequently to the action taken under the Currency Ordinance, though I am not clear as to the utility of this measure. Gold is scarcely suitable for circulation in an Eastern country where the needs of the community are sufficiently met by the present coinage with currency notes. The expense of the sovereign is considerable and falls on the British taxpayer at home. I could not in any case ask the Lords Commissioners of the Treasury to legalize the half sovereign, since on the ground of its expensive- ness they recently declined to legalize it in Ceylon.

6. The suggestion in paragraph 10 of your despatch of the 16th of August* with regard to limiting the tender of the dollar and replacing the present stock by dollars of less fineness and content is a matter for future consideration.

7. As regards the question of subsidiary silver currency dealt with in your Secret despatch of the 23rd of August, I see no objection in principle to your proposal that the present very low limit of tender should be raised to 20 dollars. I observe that both the Chambers of Commerce are opposed to the change, and, in view of paragraph 7 of your despatch, there seems no present need for coping with the difficulty, which, moreover, is not likely to recur. I shall be prepared, however, to consider the matter hereafter if you find it necessary to raise the question again. I may observe that the extension of the legal tender of subsidiary silver coins will, so far as those coins displace dollars and notes, add pro tanto to the volume of the circulation and so militate against a contraction of the currency.

8. The same remark applies to the remittances made for investment on account of the Note issue. I observe from the latest statements of the Commissioners of Currency that rather more than half a million dollars have recently been remitted to the Crown Agents for investment, and I would call your attention in this con- nection to my predecessor's despatch, Secret, of the 27th of March, 1903. The drafts drawn by the Crown Agents for this purpose and provided for either by freshly issued notes or by dollars from the reserve against the note issue must result in an addition to the local volume of currency.

9. In the opinion of Mr. Adamson, Chairman of the Straits Settlements Association, nó contraction has yet taken place at Singapore which can be felt by

• No. 87.

↑ No. 88

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|PUBLIC RECORD OFFICE, LONDON

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the business community I commend this opinion to your notice, since, if the premium on the Straits Settlements dollar is at the time of the change largely due to speculation or to confidence in the Government's intentions in the matter of raising the price of the dollar and maintaining a higher level of value, the Government may find itself compelled to give very substantial support to the dollar immediately after the value has been fixed in sterling. The element of specula- tion cannot, of course, be entirely avoided, but the danger arising from it can be minimized by delay, and by a real contraction in the circulation.

In deciding when to issue the suggested Order in Council you will, of course, not lose sight of the effect of such action on the amount of the compensation payable under the Tanjong Pagar award.

I have, &c.,

41121

No. 91.

ALFRED LYTTLETON.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 10.51 a.m., 18th November. 1905.)

(Paraphrase.)

TELEGRAM.

[Copy to Treasury, 25th November, 1905. L.F.] [Answered by Nas. 92 and 93.]

Referring to my secret despatches of August the 16th, 23rd, and October 19th* as to currency. To-day's exchange for telegraphic transfer 29. 2d., and is steadily rising Silver also rising rapidly, and if, as seems not improbable, it reaches limit which I have proposed for fixity of exchange. I think that in public interest we should adhere to that limit and withdraw existing dollar, substituting 800 fine dollar and dollar notes as proposed in last despatch. Desirable, in view of this con- tingency, to accumulate dollars in hands of Currency Commissioners and pay for notes in gold as far as possible when gold is made legal tender. If you concur in this course, Crown Agents should sell as soon as possible Currency Commissioners' securities for £150,000, and arrange for the shipment of gold from Australia.

The present indications point to our reaching the proposed fixed exchange by Christmas.-ANDERSON.

41121

No. 92.

THE SECRETARY OF STATE to THE GOVERNOR. (Sent 12.38 p.m., 21st November, 1905.)

TELEGRAM.

[Copy to Treasury, 25th November, 1905. L.F.]

Your telegram of 18th November,† Currency, regret cannot approve proposals contained therein. I can see no reason for early action. See my secret despatch of 17th November. Further despatch§ will be sent shortly.-LYTTELTON.

41121

(Secret.)

SIR,

No. 93.

THE SECRETARY OF STATE to THE GOVERNOR. [Copy to Treasury, 25th November, 1905. L.F.]

[Answered by No. 101.]

Downing Street, 24th November, 1905. I HAVE the honour to acknowledge the receipt of your confidential despatch

See No. 93.

• Nos. 87, 88, and 89.

↑ No. 91.

↑ No. 90.

11

of the 19th ultimo and of your telegram of the 18th instant* with regard to the currency question.

2. I have replied to your telegram on the 21st instant, regretting my inability to concur in the course which you proposed to take, and referring you to my secret despatch of the 17th instant, and to a further despatch that would be sent. will now explain my reasons for not accepting your proposals.

I

3. I do not feel able, except on the strongest grounds, to depart from the recommendations of the Committee appointed by my predecessor, which were accepted by him and by the Government and community of the Colony. It would certainly be necessary to seek further expert advice and to arrive at a general concurrence before adopting so wide a departure from the accepted scheme as your telegram suggested.

4. I could not agree to the withdrawal by the Government of the Straits Settlements dollar coined and circulated in the Peninsula on the Committee's recom- mendation except on the most cogent grounds. Moreover, I do not quite under- stand your suggestions for replacing them. You mention that the point in exchange at which you propose to act will probably be reached by Christmas, but it would take at least a year to obtain dollars of 800 fineness to replace the present stock, and it would be equally impossible to obtain sufficient supplies of one-dollar notes within a month or so.

5. I would, moreover, point out that the project of forcing one-dollar notes into circulation, even temporarily, in exchange for the existing stock of dollars, was considered and deliberately rejected as unsafe by the Committee (paragraphs 55 and 56 of Reports). So far as concerns the introduction, for general con- venience, of one-dollar notes to circulate side by side with the dollar, I see no objection to an experimental issue, and I am instructing the Crown Agents to have a design prepared and sent to you, as you desire.

6. Under the Currency Note Ordinance, 1899, these one-dollar notes will not be legal tender for more than 10 dollars. You will, no doubt, inform me if you consider that the Ordinance should be so amended as to make them unlimited legal tender. I agree to your suggestion that a dollar note which is presented at the Treasury after having been in circulation for a year should not be re-issued, but your proposal that a larger reserve should be held in coin against one-dollar notes than against the rest of the note issue might be deferred for consideration here- after, when investments against the note issue recommence. As you are aware, I consider that no further investments should be made until fixity is attained.'

7. As regards the circulation of gold and the issue of dollars of 800 fineness, I would refer you to my secret despatch of the 17th instant. There is no evidence before me to show that gold would be suitable as a circulating medium in the Malay Peninsula, nor am I convinced of the wisdom of placing it in circulation. would seem more prudent to hold all the gold that comes into the hands of the Government as security for the gold value of the dollar to be hereafter fixed.

It

8. The question of dollars of 800 fineness cannot be considered till the gold value of the dollar has been fixed. But whether, when that value has been fixed at something more than the bullion value of the present 900 fine dollar, the holders of the present dollar would be ready to exchange it for a dollar of the same gold value but of less metallic value, is a matter requiring careful investigation and thought.

8. I would add that the present position of the currency question, though complicated by a great rise in the value of silver, is nothing more than the situation contemplated by the Committee, against the dangers of which the scheme which they recommended was intended to guard. Nothing has yet been done to dissociate the currency from a silver basis, beyond the cessation of the coinage of dollars. The appreciation of the dollar owing to the rise in silver would have happened if no scheme had been initiated, and with a rising market in silver no step to fix exchange can be taken. The time for action will come when a decided fall in the price of silver sets in again, and it will then be possible, by observing the relative rate of fall of the Straits Settlements and the Mexican dollar, to arrive at a surer judgment as to whether contraction has taken place in the currency of the Straits

[Od. 1536].

• Nos. 89 and 91.

↑ No. 92.

‡ No. 90.