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PUBLIC RECORD OFFICE

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CO. 882

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PUBLIC RECORD OFFICE, LONDON

5120

No 33

THE GOVERNOR 12 TH SECRETARY OF STATE

Confidential :

MY LORD,

Received 19 February, 1910,

[Answered by No 36.]

Government House, Singapore, 27th January, 1910, 1 HAVE the honour to acknowledge the receipt of your Lordship's Confidential „despatch of the 26th November," transmitting to me a copy of the correspondence on the subject of the gold received in London against notes issued in the Colony and of the sale of old coins for gold.

に As regards the general question as to the disposal of gold received by the Crown Agents. I have to invite your attention to Section 11 (3) of the Currency Ne Ordinance (see Section 16 of Ordinance XXVII of 190, which enables the Pumissioners to invest the whole of the Gold Standard Reserve in approved gold urities Having regard to the provisions of this section and the representations made from time to time that while the silver remained unsold the Colony would be losing interest on its value. I consented to the sale of the old dollars at a price Liwer than 24d per az. It is desirable, therefore, that the proceeds of sale of all the old dollars belonging to the Gold Standard Reserve should be invested.

3. The question as to the gold in the custody of the Crown Agents on account of the Note Guarantee Fund is, however, on a very different footing. This gold may be required at any time to meet the payments in respect of transfers under Section 7 (e) of the Currency Note Ordinance, and it should, therefore, be kept in as liquid a form as possible. I agree that the Colony should encroach as little as possible on the general gold reserve of the United Kingdom, and I concur in the proposals of the Treasury that half of note issue gold should be held in actual Specie The other half Should be lent out on short loans or invested in readily réalisable securities. I am unable to concur in paragraph 6 of the Treasury letter of the 15th November, 1909,† that the power of investment should be of a general character, as I consider that the hall so invested should be readily available for the encashment of notes received in the Colony, and not regarded as part of the investment portion of the Note Guarantee Fund.

4 It would appear from the correspondence, and especially from paragraph 4 of the Treasury letter, that a misconception prevails as to the proper functions of the Gold Standard Reserve. The order in which the different funds would be affected by a demand for coin in exchange for notes will be as follows under the provisions of the Currency Note Ordinance :

(1) Coin portion of the Note Guarantee Fund.

(2) Investment portion of the Note Guarantee Fund.

(3) Depreciation Fund.

(4) Gold Standard Reserve.

(5) General Revenue of the Colony in the event of the insufficiency of the

Depreciation Fund and the Gold Standard Reserve.

5. The number of old dollars held in the Gold Standard Reserve now amounts to $3,347,544, and the arrangement made here and given effect to in the Currency Commissioners' Account was that out of the $4,000,000 shipped to the Crown Agents, $3,000,000 should be held on account of the Gold Standard Reserve and $1,000,000 The proceeds of sale of the three millions on account of the Note Guarantee Fund.

should be invested in approved gold securities; and as regards the proceeds of the sale of the remaining $1,000,000, I consider that they should first of all be applied to pay- ing off the debt of the Currency Commissioners, which now amounts to £48,100 5s. 3d., and I agree that the moiety of the remainder, which belongs to the Note Issue Gold Reserve, may be lent at interest, the other moiety being held in actual specie. The remittances made through the Crown Agents by Sir John Aird and Company which have, hitherto, been applied to extinguishing the debt of the Currency Com. missioners to the Loan Account, should now cease so far as the Currency Commis sioners are concerned, and should be taken up by the Colony and the Tanjong Pagar

↑ No. 23.

• No. 27.

Dock Board in order to keep the Crown Agents in funds. instructions to the Crown Agents to this elect.

I have given telegraphic

appear 6. With reference to paragraph 7 of your Lordship's despatch, it would desirable that the directions as to the allocation of the proceeds of sale of old dollars between the Gold Standard Reserve and the Note Guarantee Fund should be sent from here, as the amount of old dollars cannot yet be finally determined. Additions of old dollars are being made to both funds by the operations still going on of receiving old dollars in exchange for new at the rate of exchange on Hong Kong. I have, however, directed that this procedure shall cease after the 30th June next, and from that date they will be received at silver value, less the cost of sending them home. The amount now held in old dollars is $8,755,554, of which $347,554 belongs to the Gold Standard Reserve. If another $500,000 be collected, the addition to the Gold Standard Reserve would be about $120,000.

7.

As to the liability of the Gold Standard Reserve to make good to the Note Guarantee Fund the difference between the value of the old dollar at 2s. 4d. and its price as bullion, referred to in paragraph 5 of your Lordship's despatch, the Ordinance provides (see 7. A(6) -Section 9 of the Ordinance XXVII of 1908) that the loss on the sale shall be made good when funds are available, or otherwise at As the sale of old dollars proceeds the such times as the Governor may direct. liability of the Gold Standard Reserve to the Note Guarantee Fund should be ascertained after each sale and adjusted forthwith, or at such fixed periods as the Governor may direct. The adjustment should be made by a transfer of the securities in the Gold Standard Reserve to the Note Guarantee Fund. So long as the fixed proportion between the coin and investment portion of the Note Guarantee Fund remains undisturbed, I take it that the obligation of the Gold Standard Reserve to the Note Guarantee Fund can be satisfied by a transfer of securities, and that no payment need be made in actual specie. The margin available for investment is so large that it will admit of the transfer of the whole of the Gold Standard Reserve to the investment portion of the Note Guarantee Fund.

5120

No. 34.

#

I bave, &c.,

JOHN ANDERSON.

COLONIAL OFFICE to TREASURY. [Answered by No. 35.]

Downing Street, 12 March, 1910. SIR,

WITH reference to the letter from this Office of the 16th of December* and to previous correspondence on the subject of gold held in London on account of the Government of the Straits Settlements, I am directed by the Earl of Crewe to transmit to you, to be laid before the Lords Commissioners of the Treasury, copies of two despatchest received from the Governor of the Colony.

Lord Crewe agrees generally with the views expressed by the Governor, and he proposes, with their Lordships' concurrence, to instruct the Crown Agents to proceed on the lines indicated in these despatches.

I am to request the favour of an early reply to this letter.

13328

No. 35.

I am, &c..

G. V. FIDDES.

TREASURY to COLONIAL OFFICE.

(Received 5 May, 1910.)

[Anstrered by No. 45.]

Treasury Chambers, 5th May, 1910. I HAVE laid before the Lords Commissioners of His Majesty's Treasury Mr. Fiddes's letter of the 12th March last (5120/1910), with the enclosed copies of two despatches from the Governor of the Straits Settlements further respecting the Government note issue of that Colony.

SIR,

• L.F. transmitting copy of Nos. 28 and 30.

† Nos. 32 and 33.

* No. 34.

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