CO882-(8-9) — Page 158

PUBLIC RECORD OFFICE

Reference :--

C.O. 882

9

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC

| COPYRIGHT PHOTOGRAPH—NOT TO

84

rise in silver would result in the drain of silver dollars from the Colony. That this danger exists is incontestable, having regard to the present condition of the silver market and the recent upward tendency of silver. I have endeavoured to guard against it as far as possible by approving of a 23. 4d. rate instead of the rate of nine dollars to the £ which you proposed. I am aware of the disadvantages attend- ing a high rate of exchange, and I should have much preferred to wait until a fall in silver allowed of a lower rate being declared without undue risk. But in the circumstances I could not agree to a smaller margin of safety.

Your proposal to make the sovereign legal tender would only operate to prevent a drain of dollars from the Colony (in case the bullion value of the dollar rises appreciably above the fixed value) so far as the holdings of the Currency Commis- sioners are concerned, and then only if the Commissioners were empowered to refuse silver in exchange for notes. As the notes were originally issued in exchange for silver dollars the refusal of silver in cashing them seems to me a scarcely justifiable measure. And even if it were taken it would be futile, since five-dollar notes, for example, must be cashed in silver, and no great ingenuity would be required to draw out the Commissioners' dollars in this manner.

With regard to paragraph 4 of your despatch of the 14th of December,* it is not clear to me why the success of the note issue should point to a demand for gold as a medium of circulation. Gold is more cumbrous than notes, and I cannot see why the European community and the well-to-do Chinese should wish to carry quantities of gold about with them. If the want of a half-sovereign could easily have been met as you say by issuing notes for 4 dollars, the want of a sovereign could equally easily have been met by an issue of 9-dollar notes. As the dollar has now been fixed at 7/60ths of a sovereign it would obviously be inconvenient to use the sovereign for circulating purposes, but I see no reason to regret the impracticability.

As you mention the circulation of gold in India and Ceylon, I enclose a Ceylon sessional papert containing correspondence on the subject. The experience of India is stated in Mr. Chamberlain's despatch of the 11th of August, 1903 (No. 2 of the Print), and the experience of Ceylon has been much the same.

The argument in paragraph 5 of your despatch* as to the utility of having gold in circulation as a means of facilitating international payments appears to me unconvincing. It would be more convenient that the gold required for this purpose should not be in circulation, but collected at a central institution, such as the Currency Commissioners' reserve. There it can be drawn out for export to Australia or India when the requirements of trade demand it. However, I need not labour the point, as the rate now fixed for the dollar makes the sovereign quite unsuitable for circulation.

This being so, I see no advantage in making gold legal tender at all. The public can always obtain notes, and therefore dollars, in exchange for gold, while the Government could not, in my opinion, refuse dollars and insist on paying gold instead, while it would not be to their interests to dissipate their gold reserve.

It appears to me that the Government should only pay out gold for the purpose of maintaining the fixed rate, when it is specially applied for.

As regards paragraph 7 of your despatch, Mr. Adamson's opinion, which my predecessor quoted, was that the rise in exchange was due to other causes rather than to a shortness of the circulating medium. Your opinion that the rise was largely due to the high price of tin, to speculation and other causes, appears to be in harmony with his view.

I notice, with some surprise, that you have taken 300,000 dollars in subsidiary silver from the banks and placed it with the Currency Commissioners, who have issued notes against it. I am advised that this action is not in accordance with the law. The subsidiary coin cannot be issued in payment for a single note issued against it, and there is a deficiency in the note reserve, in one sense to the whole amount of the holding of subsidiary silver, and at best to the extent by which the silver would fall short of providing for the coinage of 300,000 dollars 900 fine. I would ask you to remedy this matter without delay.

I have, &c.,

ELGIN.

6608

(No. 31.)

ან

No. 115.

THE GOVERNOR to THE SECRETARY OF STATE.

(Received 24th February, 1906.)

[Answered by No. 128.]

MY LORD,

Government House, Singapore, 31st January, 1906. I HAVE the honour to confirm my telegram of the 29th instant, reporting that the Currency Note Ordinance 1899 Amendment Ordinance providing for the issue of notes against telegraphic transfers on London had been passed by the Legislative Council, and that an Order of the Governor in Council had been issued declaring that the Currency Commissioners were prepared to issue notes against payment of gold in Singapore at the rate of sixty dollars for seven pounds sterling. 2. I have every reason to believe that this rate can be maintained without difficulty, though any serious fall in the price of tin would lead to a temporary depression.

3. At present the market is firm, but I would point out that in the event of its falling away the easiest and most effective manner of maintaining it would be for the Government to purchase notes with gold, so far as its gold reserves extend. It is for this reason that I think it would be unwise in the Government at present to The only invest any part of the gold which it may receive in exchange for notes. other way in which the Government could maintain the rate in the event of a fall would be by withdrawing part of its balances from the local banks and so losing interest for the time being. It has been announced that for the present the Govern- ment will buy but will not sell gold, and so long as this continues exchange will have an upward but not a downward limit, and therefore fixity is not assured. As our total circulation is fifty million dollars only, of which seventeen and a half millions is in Government currency notes, it is obvious that the Government has to its hand an easy and effective means of steadying the rate by increasing or diminishing its note issue. It has now power to buy telegraphic transfers in favour of the Crown Agents, and if it had the power to sell such transfers to the extent of £100,000 in sums not exceeding £50,000 in any week, fixity would be definitely and finally assured. The Crown Agents could easily meet such a demand by pledging the securities of the Currency Commissioners, and the boon to the community of finality in the matter of exchange would be very great.

4. I do not at all apprehend that it will be necessary to take any such action, but if exchange should drop, say, to 2s. 34d., I should be glad to be empowered to sell any gold in excess of £100,000 that may be in the hands of the Currency Com- missioners or to sell a telegraphic transfer on. the Crown Agents not exceeding £50,000.

I have, &o.,

7599

No. 116.

JOHN ANDERSON.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 3rd March, 1906.)

[Copy of Ordinance to Board of Trade, 12th April, 1906. L.F.] [Ordinance sanctioned, 6th April, 1906. No. 74. L.F]

(No. 39.)

MY LORD,

Government House, Singapore, 8th February, 1906.

In continuation of my despatch, No. 31, of the 31st ultimo,† I have the honour to forward Ordinance No. I of 1906, entitled “An Ordinance further to amend 'The Currency Note Ordinance 1899.'"

2. I also enclose a copy of the Attorney-General's report on the Ordinance.

I have, &c.,

JOHN ANDERSON.

• No. 97.

↑ No. XXVII, 1903 not reprinted.

• No. 110.

↑ No. 115.