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PUBLIC RECORD OFFICE

modo C.O. 882

Reference:-

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PUBLIC RECORD OFFICE, LONDON

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

2

36905

Steps are being taken to prepare the necessary Order in Council.

No. 146.

I have. &c.,

THE GOVERNOR to THE SECRETARY OF STATE.

(Confidential)

(Received 6th October, 1906.)

Answered by Nos. 148 and 169,]

ELGIN.

MY LORD,

Government House, Singapore, 13th September, 1906. I HAVE had before me your Confidential despatches of the 16th of February, the 31st of May, and the 6th of July,* on the subject of the currency of this Colony.

2. The amount of gold received in exchange for notes has now reached practically a million sterling, and considerable sums are held by the banks, but have not been presented owing to the recent slight drop in exchange.

3. As there were indications that the fall might continue, the draft of an Ordinance authorizing the Commissioners to pay gold in exchange for notes has been published in the "Gazette," and the result has been to restore confidence and arrest the fall.

The Ordinance has been read a first time and will be proceeded with at the next meeting of the Legislative Council.

4. As regards the question of the reserve, I propose to remit gold up to half the amount held in the chest, and do not propose to make any further investments on account of notes issued against silver dollars and to retain these dollars as far I see no reason for establishing as possible in the hands of the Commissioners.

any fixed minimum of gold to be retained in the hands of the Commissioners. Any considerable demand on them for gold would involve the withdrawal of notes of equivalent value, and a corresponding contraction of the currency and rise in exchange, which would again attract gold to us.

5. A remittance of gold for investment does not increase the circulation and, therefore, does not affect exchange, but a remittance obtained by selling silver dollars from the reserve could only be effected by exchanging the dollars locally either for gold or for a draft on London, and to the extent of the remittance increasing the current circulation and depressing exchange.

6. I regret that Your Lordship objects to my proposal to declare gold legal tender. I had hoped that you would share the view expressed by your predecessor in his despatch of the 17th of November, † that he saw no great objection to making gold legal tender. I would submit that the dollar of this place is a less awkward fraction of the sovereign than the Canadian dollar, and in Canada the sovereign is, I believe, legal tender. It is quite possible that gold might not become to any extent part of the active circulation, though it could easily be used for payments of $60 and upwards, but the great object is to impress the public, especially the Chinese, who are so conservative, with the fact that the essence of our action in regard to the currency has been to change our dollar from a silver dollar to a definite fraction of a sovereign. Gold is already used for payments between Singapore and many parts of the Dutch Indies, and the public would soon come to realize that it was our real standard, if once it was made legal tender, and it is impossible for us to remain indefinitely in the position which obtains in no other part of the world, that our only legal tender is a token, and that our standard is an artificial one.

7. The further rise in the price of silver brings us near to the point at which Now that the we may have to face a drain on our silver circulation and reserve. United States has resumed the purchase of silver on a large scale, and the produc- tion of gold has increased so enormously while the production of silver remains more or less stationary, the prospect of a further rise becomes almost certain. It may be some time yet before it reaches the point at which our dollar would be undervalued, but I need not point out to Your Lordship that if we have to take action in the direction of lowering the fineness of the dollar at a time when dollars

Nos. 114, 128 and 137.

↑ No. 90.

are leaving the Colony, suspicion will be created in the minds of the native popula tion, and our industries and commerce paralyzed.

8. Your Lordship has pointed out that we are under an obligation to redeem our notes in silver dollars, and that is undoubtedly the case, and is the main reason why I advocate making gold legal tender while our dollar is still overvalued and is in fact a token. It is only in this way that we can disabuse the minds of the population once for all of the idea that the value of the dollar depends on its silver contents and not on the fact that it commands a definite value in gold.

•

9. I would remind Your Lordship that the recoining of the dollar is an opera- tion which will take some considerable time. Our stock of thirty-seven million dollars took a year in coming, though the Bombay Mint did all that they possibly could to hasten the operation. As the Government of India

coining for itself,

it is improbable that the recoining could be done in so short a time.

At present only two-fifths of our note issue reserve is in silver, three-fifths being gold or gold securities. In the event of a rise in silver to the point at which the dollar would be undervalued, gold could be brought in here from Australia at a very small cost, and we should be denuded of every dollar and should have to refuse to cash our notes in legal tender, as, even if we then had authority to issue a dollar of 800 fine, it would certainly result in complete dislocation of our trade, and the attempt to issue a less fine dollar in such circumstances would only aggravate the evil.

10. The only possible alternative in that case would be to refuse to issue notes or dollars for gold and force exchange beyond 2s. 4d. to 2s. 6d. or 2s. 8d., with the result of again dislocating business and hampering our trade until the higher point was reached.

The community want finality and that they feel, in view of the state of the silver market, the present conditions do not afford them.

11. The real question to be considered is whether the rise in silver is likely

to continue, and within the next two or three years to reach a point at which our present dollar will be intrinsically worth more than 2s. 4d. If so, when that time comes, if no change has been made in the meantime this Colony will have to face bankruptcy, or repudiate its obligation to cash its notes in silver dollars; for, in the circumstances of this place, prohibition of export would be futile, and would only lead to the hoarding of dollars till they could be smuggled out, and an exaggerated premium on our silver currency, which would destroy confidence in our note issue.

Surely it is better to alter that obligation into one to pay in gold while it is still to the advantage of the holders of notes and dollars that we should do so, and when they are expecting and anxious that it should be done, than to wait until we can only do so when the advantage is the other way!

12. I have discussed the matter unofficially with all the leading bankers and merchants in the place, and they are in entire accord with me that the sooner gold is made legal tender, and that action supplemented by preparing to replace the dollar with one of less fineness, the better it will be in the interests of the community. It is only by these measures that an assurance of finality can be attained, and we can be secured against the risk of what has recently happened in the Philippines occurring here with far more disastrous results, as we are a trading rather than a producing community, and, therefore, immediately affected by any fluctuation of the currency.

13. I trust that in these circumstances Your Lordship will not refuse to have an Order of His Majesty in Council issued at an early date declaring the sovereign legal tender here at the rate of seven sovereigns for sixty dollars, and empowering the Government to issue a dollar of the same weight as the existing dollar but of .800 fineness, and distinguishable easily from the present dollar, which shall be The Governor should also be legal tender to any amount at the above rate. empowered to declare that from and after a date to be fixed by proclamation, the present Straits dollar shall cease to be legal tender.

I have, &c.,

JOHN ANDERSON.

37996

110

No. 147.

THE GOVERNOR to THE SECRETARY OF STATE

(Received 7.30 a.m., 14th October, 1908.)

TELEGRAM.

[Ansierol by No. 148.]