Mr. Daggett to Mr. Frelinghuysen .
Honolulu , January 14, 1885. (Received January 30.)
Sir: A brisk and somewhat forced holiday trade has been followed by a general business depression, which is beginning to severely test the financial standing, not only of the retail dealers of Honolulu, but of many wholesale houses of reputed strength and responsibility. The large indebtedness under which the sugar and other industries of the islands have, with few exceptions, been laboring during the past three or four years, together with a very considerable decrease in the price of raw sugars, has resulted at last, as might have been expected, in very general financial distress. A number of mercantile failures have recently occurred, and others of greater magnitude are predicted in the near future.
This business stagnation has been rendered somewhat more depressing by the unsettled and unsatisfactory condition of the currency. It is claimed that the amount of Hawaiian silver in circulation is too great, and as a means of possible relief the Government has been asked to withdraw a portion of it from the channels of trade. Under an act of the last legislative assembly, all the silver in the Kingdom, aside from that of United States and Hawaiian coinage, has been received, exported, and sold at its bullion value for gold, by the Hawaiian Government, leaving in circulation here at the present time the million of dollars coined for the Government by Mr. Spreckels, together with a small amount, probably not to exceed $50,000, of American silver. Both have a legal-tender value to the limit of $10.[Page 470]
As American gold is scarce, and there is not a sufficient amount in the Treasury to redeem the gold certificates outstanding against it and payable on demand, and as merchants and others cannot meet their foreign obligations in Hawaiian silver or sell it for exchange, except at a discount of 15 per cent., the Government has been appealed to for relief. It has been asked to retire from circulation $200,000 or $300,000 of Hawaiian silver.
This the Government has consented to do, and on the 12th instant gave orders to the collector general of customs to receive Hawaiian silver without limit, until further notice, in the payment of customs duties, the purpose being to thus rapidly withdraw from circulation, and retain in the Treasury such amount as may beseemed to be in excess of the necessities of trade.
Although this action by the Hawaiian Government seems to be somewhat in derogation of it£ concession of the 5th of June, 1884, that a close adherence to the spirit of the treaty of 1875 called for the collection of customs duties in gold, as noted in my dispatch of June 14, 1884 (No. 157), I have not deemed it either friendly or advisable to officially question the propriety of its temporary departure in this instance from the strict line of treaty agreement and the unquestioned requirements of its own laws.
The Government is sorely pressed by complaint, and if the speedy retirement from circulation of the amount of silver mentioned will result in relief to the merchants of the Kingdom, American citizens in business here will be the first and largest class to be benefited.
Very respectfully, &c.,