4.
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SECONDLY: THERE IS A POINT ABOUT THE ARRANGEMENTS FOR
ADJUSTING THE LEVEL OF OUR HOLDINGS OF STERLING IN THE EVENT OF FURTHER FALLS IN THE PRICES OF GILT EDGED SECURITIES. UNTIL THE MONTH END VALUATIONS HAVE BEEN MADE WE WILL NOT KNOW WHETHER THE TOTAL VALUE OF OUR STERLING HOLDINGS IS MORE OR LESS THAN THE AMOUNT HELD AT 26TH SEPTEMBER 1973 (78.85 PER CENT). IT USUALLY TAKES ABOUT A MONTH TO COLLECT ALL THE INFORMATION NECESSARY TO COMPLETE THE MONTHLY RETURN TO THE BANK OF ENGLAND AND WE SHALL NOT KNOW FOR CERTAIN, UNTIL THIS RETURN HAS BEEN COMPLETED, WHETHER OR NOT OUR STERLING HOLDINGS ARE ABOVE OR BELOW THE MINIMUM. ALL PARTICIPANTS WHOSE ACTUAL STERLING HOLDINGS AT THE 24TH SEPT- EMBER ARE CLOSE TO THE AGREED MINIMUM AND WHO HAVE A SUBSTANTIAL PART OF THEIR RESERVES IN GILT EDGED SECURITIES, WILL HAVE THIS PROBLEM. WE ASSUME, THEREFORE, THAT YOU ACCEPT THAT, FROM TIME TO TIME, THE MONTH END RETURN MAY SHOW OUR STERLING HOLDINGS TO BE BELOW THE AGREED LEVEL.
5. AS REGARDS PRESENTATION: WE WOULD NOT BE ABLE TO GET BY FOR LONG WITHOUT PUBLICITY. THE RECENT FLURRIES ON THE INTERNATIONAL EXCHANGES, TOGETHER WITH THE RISE IN INTEREST IMPLCATIONS FOR THE LONGER TERM FUTURE OF STERLING OF THE RATES IN LONDON, HAVE PROMPTED FURTHER QUESTIONS LOCALLY ON HONG KONG'S STERLING RESERVES. SO FAR,
SO FAR, IT HAS NOT PROVED DIFFICULT TO SIDESTEP THESE QUESTIONS SO LONG AS WE HAVE BEEN KNOWN TO BE IN DIALOGUE WITH H.M.G., BUT IT WOULD BE IMPOSSIBLE TO GIVE EVASIVE ANSWERS ONCE AGREEMENT HAD BEEN REACHED. AND WE WOULD BE EXTREMELY LUCKY TO ESCAPE WITH YOUR SUGGESTED LINE IN THE FINAL SENTENCE OF
PARAGRAPH 6 WITHOUT SUPPLEMENTARIES.
6. WE CAN SEE THAT A REFERENCE TO THE EXCLUSION OF THE COMMERCIAL BANKS SHOULD SATISFY OTHER PARTICIPANTS IN THE GUARANTEE.
WE ARE
SO FAR
AS VOVERNMENT BALANCES ARE CONCERNED, HOWEVER, GOING TO BE SUSPECTED AND CRITICISED IF WE ARE NOT MORE FORTHCOMING
THIS COULD CERTAINLY THAN THE FINAL SENTENCE OF YOUR PARAGRAPH 7.
BE OUR OPENING GAMBIT, BUT WE SUGGEST OUR LINE MUST ALSO BE THAT, BECAUSE OF DEPRESSED GILT EDGED PRICES IT WOULD NOT BE IN HONG KONG 'S INTEREST FOR US TO SELL ANYWAY, AT LEAST FOR THE NEXT FEW MONTHS: AND THE RECENT RISE IN INTEREST RATES IN LONDON GIVES US INCOME BENEFITS. WE WOULD ALSO WISH TO DRAW ATTENTION TO THE FACT THAT FUTURE ACCRUALS MAY NOW BE INVESTED IN OTHER CURRENCIES WITHOUT ANY LIMITATION ARISING FROM THE TERMS OF THE GUARANTEE (THOUGH WE WOULD NOT ATTEMPT TO EXPLAIN THE ''LIMITED M.S.P.' CONCEPT AND THE WAY IN WHICH IT BITES WHEN THE TOTAL OF
17. WE WOULD OFFICAL EXTERNAL RESERVES IS FALLING).
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