CO882-(8-9) — Page 182

PUBLIC RECORD OFFICE

Reference :--

C.O. 882

6

PUBLIC RECORD OFFICE, LONDON! ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

47226

132

No 187

THE GOVERNOR to THE SECRETARY OF STATE

(Confidential.)

(Received 22nd December, 1906.)

[Answered by No. 196.]

MY LORD,

Government House, Singapore, 29th November, 1908. IN connection with the decision to coin a dollar of the same fineness but of only three-fourths of the weight of the existing dollar, I desire to invite your Lordship's consideration to the question of the future of the metallic reserve to be held against our note issue.

2. At the present time our metallic reserve against the note issue of $25,053,105 consists of gold £513,681, or 4,402,980 dollars, and silver dollare 10,307,489.66.

3. It will be obvious to your Lordship that, for the purpose of retaining our parity of exchange with gold, our silver dollars are only good for the amount of their bullion value, and that in the future their value as part of the reserve will be proportionately reduced.

4. The real state of the case is that we are now dependent on our note issue reserve for the maintenance of the fixed rate of exchange not only of our notes, but also of our silver dollars. The metallic dollar is now a mere token and will, under the new conditions, te still more so. The only additional means available for maintaining the rate is the control of Government balances, and I am glad that during the present transition period you have agreed to waive the rule as to the maximum amount of such balances to be held locally.

5. In the circumstances, it appears to me essential that the bulk of our metallic reserve should, in the future, be kept in gold and not in dollars, if we are to main- tain with absolute security our gold standard.

That is the case in Canada where the circumstances are exactly similar to those prevailing here.

The silver tokens in our reserve ought not, I think, to be more than such an amount as may be required for two, or at the most three, years in advance, to provide for the necessary and usual expansion of the circulation. Judging from past experience the greater part of this expansion will be in notes and not in dollars, and I am satisfied that a million a year is the maximum outside limit of the demand for silver dollars in addition to the present active circulation.

If I am right in this estimate and in my view as to the proportion of silver dollars which should be held in the reserve, the whole of our metallic reserve, except, say, three, or at the outside five, million dollars should be held in gold.

8. The present circumstances appear to me to afford an extremely favourable opportunity for effecting this change. The active silver circulation is at present under twenty-five million dollars and, with the issue now in progress of our dollar notes, this will shortly be reduced by about five millions.

The ten-and-a-half millions in the reserve will then be at least fifteen millions, and this, when re-coined, will yield twenty million dollars, or nearly the total amount of our active circulation of metallic dollars. An additional four-and-a-half million dollars would, on re-coinage, yield six millions and bring our total supply of dollars to twenty-six millions, an amount which will, I am satisfied, be ample for the requirements of metallic circulation for years to come, in view of the decided preference of our population for notes.

7. As our new dollars are received I propose to invite the banks to bring in existing dollars and to exchange them for new ones, and, to facilitate this, I would ask your Lordship to allow me, if it should be found desirable, to offer them a com- mission of, say, per cent., to compensate them for the trouble of bringing in and exchanging their dollars.

8. In regard to the dollars received in excess of the nineteen-and-a-half millions required to yield the twenty-six million new dollars, which is all that is necessary for circulation and reserve, I would propose to send them home to be melted and sold for their bullion value.

133

9. In any case it will, I think, be found advisable, to prevent confusion in the minds of the native population, to demonetize the existing dollar after a suffi- cient supply of the new dollar is available, giving, say, six months' notice.

This will avoid the danger contemplated by your Lordship of our existing dollars now in circulation outside the currency area, or exported in consequence of a further rise in silver, from being returned, in the event of a subsequent fall in that metal, in such quantities as to imperil the maintenance of our fixed exchange. 10. The result of my proposals may possibly be to sweep away any profit from the reduction in the weight of the dollar, but I am sure that your Lordship will agree that in this matter our sole aim must be the stability of our currency, and the absolute confidence of the public in the convertibility of our notes and tokens whether they are nominally and legally standard coins or not.

11. With regard to our existing subsidiary coinage, the replacing of it by a coinage of lower intrinsic value is a matter that does not press. In the case of that there is now a large redundancy, as the Treasury holds a million which has been withdrawn from circulation.

I anticipate that there will be some demand for this with the commencement of the harbour and other works next year, but it is improbable that the excess will be absorbed for many years to come, and, while I think we should commence re- coining as soon as possible after the new weight and fineness have been settled, it is certain that at least two million dollars nominal value of it will not be required and should be melted down and sold.

1

No. 188.

I have, &c.,

JOHN ANDERSON.

THE GOVERNOR to THE SECRETARY OF STATE. (Received 4.3 p.m., 31st December, 1906.)

TELEGRAM.

[Answered by No. 189.]

$850,000 subsidiary coinage in hand can be shipped immediately. Could they

be recoined without delay to dollar recoinage?—ANDERSON.

1

No. 189.

THE SECRETARY OF STATE to THE GOVERNOR. (Sent 5.10 p.m., 2nd January, 1907.)

TELEGRAM.

In answer to your telegram of 31 December,* await my despatch of 13 Decem- ber.t See no need for immediate action as regards subsidiary coinage.-ELGIN,

305

SI.

No. 190.

>

TREASURY to COLONIAL OFFICE.

(Received 4th January, 1907)

[Copy to Governor, 11th January, 1907. Confidential. LF.]

[Answered by No. 19]

Treasury Chambers, 3rd January, 1907.

WITH reference to Treasury letter of the 8th ultime,‡ I am directed by the

• No. 188.

† No. 184.

‡ No. 188.