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73

No. 96.

32616

No. 94.

ALFRED LYTTELTON.

THE SECRETARY OF STATE to THE GOVERNOR. [Copy to Treasury, 19th December, 1905. L.F.)

(Confidential.)

[Answered by No. 99.]

SIR,

Downing Street, 15th December, 1905. I HAVE had under my consideration the provision of the Currency Note Ordi- nance, Section 7 (B), to the effect that notes may be obtained for gold tendered either at Singapore or to the Crown Agents in London at a rate of exchange to be fixed by the Governor in Council with the sanction of the Secretary of State.

It appears from paragraph 11 of your Secret despatch of the 18th of August,† that it is desirable to hold at Singapore the whole of the gold reserve, and apart from this there appears to be very considerable difficulties involved in the provision As the Ordinance stands at present, the that gold may be tendered in London. same rate would have to be fixed at London as at Singapore, and this is clearly undesirable, since it would enable all who wished to remit from London to Singapore at the par of exchange. Advantage would, of course, be taken of this facility for remitting to the East generally, and the loss to the Government might be very great.

On the other hand, any attempt to fix a special rate, either definitely or from time to time, at which the Crown Agents would accept gold in exchange for notes at Singapore, is attended by great objections. It involves interference by Govern- ment in the course of exchange-a policy which has generally been considered undesirable, and which the Government are not in a position to pursue with advantage to the community.

The only sound course appears to be to fix the rate at which notes will be issued for gold at Singapore, and exchange between this country and the Straite will then fluctuate in the normal manner within the limits imposed by the cost of shipping gold in each direction.

The Crown Agents will thus only enter the market as at present when they are instructed to draw on Singapore for the requirements of the Government, and they will continue to sell their drafts at the best obtainable market rate.

If you concur in these views, I shall be glad if you will take an early oppor- tunity of introducing an amending Ordinance to delete the words referring to the tender of gold to the Crown Agents in London.

421

No. 95.

I have, &c.,

ELGIN.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 7.25 p.m., 3rd January, 1906.)

(Paraphrase.)

TELEGRAM.

[Copy to Treasury, 5th January, 1906. L.F.]

[Answered by No. 98.]

Rate of exchange is now approximately 25. 3d. to the dollar. Will you autho- rise the issue of currency notes for gold at 9 dollars to the pound ?——ANDERSON.

* No. 92.

↑ No. 87.

THE SECRETARY OF STATE to THE GOVERNOR.

(Paraphrase.)

(Sent 6.5 p.m., 4th January, 1906.) TELEGRAM.

[Copy to Treasury, 5th January, 1906. L.F.]

Referring to your telegram of 3rd January,* cannot authorize action at present. See my predecessor's despatch of 24th November,† last paragraph. See also my deepatch of 15th Decemberț as to necessity of amending Currency Note Ordinance.

-ELGIN.

698

SIR,

(Secret.)

No. 97.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 8th January, 1906.)

[Copy to Treasury. 22nd January, 1906. L.F.]

[Answered by No. 114.]

Government House, Singapore, 14th December, 1905.

I HAVE the honour to acknowledge the receipt of your despatch, Secret, of the 17th of November ultimo, § on the subject of the steps to be taken in regard to fixing the exchange.

2. So far nothing has occurred to change my view that the parity should be fixed at nine dollars to the sovereign, and I am glad to learn that you do not dissent from that proposal.

I cannot, however, donoeal from myself the possibility of silver rising to a point beyond that, and the liability which we should be under in consequence of having our silver drained from us. It was mainly in view of that possibility, which the early development of China renders not unlikely, that I recommended pro- ceeding by Order in Council instead of under the Currency Note Ordinance.

3. Under that Ordinance the Commissioners can accept gold in exchange for notes, but cannot compel note holders to accept gold. In the event, therefore, of a rise in silver beyond the parity of exchange, this Government would be liable to lose the amount of such excess on the whole of its note issue, including that part of the issue against which the Commissioners of Currency hold gold or gold securities.

4 The opinion expressed in paragraph 6 of your despatch,§ as to the un- suitability of gold for circulation in a country like this: we have a considerable and growing European community and a still larger community of well-to-do and even wealthy Chinese and other nationalities to whom the extremely oumbrom nature of our existing currency is a constant anmoyanoe. The fact that within so short a space our note issue-although no notes of less value than five dollars are issued-has grown to over seventeen million dollars, more than one-third of our total circulation, appears to me to point to a demand for a convenient medium of high value like gold, and the fact that India and Caylon have found it expedient to make gold legal tender points in the same direction.

5. I appreciate the argument against making the half-sovereign legal tender, and do not seek to press that suggestion. The want can easily be met, if found necessary, by issuing a note for four and a half dollars, but in view of the expan- sion of our trade with Australia and India, and the circumstances mentioned above, I venture to urge that we do not stop at the half-way house provided by the Cur- rency Note Ordinance Amendment of last year, but that the full step of declaring gold legal tender be taken when parity is fixed.

• No. 95.

† No. 98.

↑ No. 94.

No. 90.

81306

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