CO882-(8-9) — Page 424

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PUBLIC RECORD OFFICE

Reference :-

C.O. 882

9

PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-

COPYRIGHT PHOTOGRAPH-NOT TO

Japan there and the Philippiás keep theirs in New York Pop.

long as Loudon remains always maintains a large gold balance i London, and so

aks the gold market in the world and the international clearing house, it is at our zoid which is only 1squared for international dearing purposes should The Indian Finance, Secretary states recently that the small stock of gold Tuity a would only be given out in support of exchange values where the people That is vete genuinely willing to take it into circulation as a substitutę tor silver mapossible here and there is therets re no need to keep any gold here for that pet pose

In the summoranchim of the nottural Members on the amendment of the Varrena. Note Ordiname great stress was laid on 2 4 being the insdelle point in the That would cease to be the case, if our gold was kept Wacthaitons qa Adange

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here and trable to be drained to India, and our producers would be deprived of part est tha ja veempatisation for high rates of exchange

43 Theta roms Commissioners with gold in London are moved automatically when ex latige reels the paint where it pays to move gold to or from London. Dans part of the gold is kept here they will have either to refuse to part with their gold until that point bas been rea hei!, a course which would be highly objectionable, or else give it to the first comer, andsgive a grievance to those who come later and have to take transters on London

++ It must be remembered that the sole duty of the Currency Commissioners With the rate of exchange they have is to maut ann the parity of our standard

That is the notinng to do or with the liquidation of international obligations function of the Exchange Panks, and the Currency Commissioners only come in when exchange reaches a point which indicates that our circulation is inadequate or redundant That is, when it reaches the point when it would pay to import gold from, or export gold to, London.

45 That is not an infallible test, it is true, as exchange may touch the gold import point with plenty of currency in cirenlation or the export point when there is Many factors go to the determination of the rate of exchange which

no real exec -

which have nothing to do with the condition of our currency supply.

46 It is obvious, therefore, that the Commissioners may on occasion be asked to take gold in London for currency here to meet a mere temporary difficulty which In that case, may be due to the distribution of our circulation, not to its deficiency

as soon as the temporary difliculty has been adjusted, the currency issued will tend 19 flow back to them Similarly, they may be asked to give gold in London for currency when there is no redundancy, but in both cases this is likely to happen to a very limited extent, and a million dollars either way is an outside figure to meet such emergencies

47 I have spoken throughout of our reserves, but, as I have already pointed out, our currency is entirely fiduciary, and for the purpose of contracting the To lahel one part of it gold Circulation the reserves must be treated as one standard reserve and the other note issue reserve and set up two separate funds for the same purpose can only lead to misunderstanding and confusion.

44 Whether notes or coin our currency is under the control of, and is issued only by, the Currency Commissioners in exchange for gold in London or Singapore, and can only be redeemed by them. When silver is presented to them they have to If gold or gold in give notes or gold or gold in London as the applicant desires. London is desire it has to be found from the note issue, reserves so called and the The silver is passed into the silver reserve or notes withdrawn from circulation gold standard reserve is not drawn upon. If it is to be drawn upon, the question at to what extent is this to be done, to the full amount of the silver redeemed or to the extent of the difference between its face and bullion value or to a fixed thirty per cent? Whichever course is adopted means an extensive book-keeping and liability to confusion and error.

once arises

It is surely safer and sounder to treat our circulation as a whole and to have only one set of reserves against it.

49 If that is done then the Currency Commissioners should, as at present, publish a monthly capital account showing on one side notes outstanding and legal tender silver in circulation, and on the other gold in Singapore, gold in London, cash at call, investments, legal tender silver in reserve, and silver bullion, if any.

50. They should also publish an annual profit and loss or income and expenditure account showing on one side income from investments, from money at

call. profit on sale or purchase of telegraphic transters, profit on silver coined (if any), and profit on sale of investments (if any), and on the other, expenses of management, printing and issue of notes, loss on sale of bullion, loss on sale of

Jnvestments

51 The balance on this account should be invested every year, unless the reserve in gold and money at call is below twenty per cent of the total circulation. in which case it should be transferred to that part of the reserve.

52. When our reserves gold, cash at call, and investments--reach the total of our abilities, that is to say, notes outstanding and the difference between the face and bullion value of our legal tender in circulation, we might safely resume the practice of crediting a certain porportion of the annual net income to general revenue, and investing the remainder till our total reserves equalled the whole of our circulation, or might even be continned till the reserves show a margin of, say, ten per cent above the amount of our circulation Subject to the maintenance of that margin the whole net profit might annually go to revenue

30183

SIR.

No. 48.

COLONIAL OFFICE to TREASURY. [Answered by N. 52.]

Downing Street, 17 October, 1910.

I AM directed by Mr. Secretary Harcourt to acknowledge the receipt of your letter of the 24th of September,* on the subject of the currency in the Straits Settle- ments, and to transmit to you, to be laid before the Lords Commissioners of the Treasury, a copy of a despatcht from the Governor enclosing a memorandum in which the whole question of currency reserves is dealt with.

2. Lord Crewe would be glad if he could be favoured with their Lordship's observations on this despatch and memorandum.

9770

(No. 97.)

SIR,

No. 49.

I am, &c.,

H. BERTRAM COX.

THE GOVERNOR to THE SECRETARY OF STATE.

(Received 25 March, 1911.)

[Answered by No. 51.]

Government House, Singapore,

2nd March, 1911.

1 HAVE the honour to invite attention to Section 11 (3), Ordinance IV. of 1899, as amended by Ordinance I. of 1905, and I., V., XXIII., and XXVI. of 1906, and XXVII of 1908, in which it is stated that " It shall be lawful for the Commissioners to invest the whole or any portion of the Gold Standard Reserve in such gold securities as may from time to time by approved by a Secretary of State."

gold I presume that, in view of the fact that India has a fixed rupee and a standard. 'Indian Government 31 per cent. rupec paper may be regarded 98 equivalent to a gold security, and I propose, subject to your approval, to invest part of the earnings of the Gold Standard Reserve in it.

2

8 This Government is always a debtor to India, and it is, therefore, obviously desirable to increase our holding of Indian securities, and to some extent reduce the possibility of a drain on this Government for gold for that country.

I have, &c.,

JOHN ANDERSON.

⚫ No. 46.

↑ No. 47.