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22. ALL IN ALL, THE POSSIBLE COST TO GOVERNMENT IS STRICTLY FHNUTE, WITHIN A TOLERABLE BOUND.
POLITICS AND PRESENTATON.
M
23. THERE SHOULD BE NO POLITICAL PROBLEM IW :HMPLEMENT:ING THIS SCHEME. CHINA HAS CONTINUALLY BEEN CALLING FOR ACTION ON THE EXCHANGE RATE AND CAN HARDLY BE CRITICAL OF THE FUXING OF THE CIK RATE BY REFERENCE TO THE U.S. DOLLAR AND BY IMPLICATION AGAINST OTHER CURRENCIES - SINCE CHHA HITSELF QUOTES MOVABLE PEGS AGAINST THE U.S. DOLLAR AND OTHER CURRENCHES. HT CAN BE EXPLAINED THAT · THE U.S. CURRENCY S USED SIMPLY AS A VEHICLE AND REFERENCE POINT, AND NOT IN ANY CONSTITUTIONAL SENSE: IF NECESSARY AT CAN BE ARRANGED THAT THE EXCHANGE FUND WOULD ACCEPT OR PAY ANY OF A NUMBER OF LEADING CONVERTH:BLE CURRENCHES AGAINST KCS, AT PREVAILING RATES BASED ON THE ANNOUNCED U.S. DOLLAR RATE.
24. IT HAS BEEN SUGGESTED THAT THE PEG SHOULD BE SET AGAINST STERLING, FOR CONSTITUTIONAL REASONS, BUT THIS DOES NOT SEEM NECESSARY AND MIGHT BE MASHANTERPRETED POLATICALLY.
25. THE SCHEME WOULD HAVE TO BE VERY CAREFULLY PRESENTED SO AS TO ACHIEVE MAXIMUM KMPACT ON CONFIDENCE. AN OBVIOUS POINT OF EMPHASIS WOULD BE THAT THE FOREIGN CURRENCY RESOURCES AVAILABLE TO THE EXCHANGE FUND ARE VASTLY GREATER THAN THE LIABILITY NOW BEING EXPLICITLY ACCEPTED IN RESPECT OF CIAS, AND THAT THESE RESOURCES ARE IN VERY LIQUID FORM. IT HAS BEEN SUGGESTED THAT, ADDITIONALLY, THE BANK OF ENGLAND SHOULD VOICE SUPPORT TO ASSIST WITH PROVIDING LIQUIDHTY, HE NEEDED. POLITICALLY FEASIBLE, THIS WOULD CERTAINLY HELP, BUT IT IS NOT ESSENTIAL.
26. THE ANNOUNCEMENT WOULD HAVE TO STRUKE A CAREFUL BALANCE BETWEEN EMPHASESING THE CONVERTIBILUTY AND ASSET-BACKHANG OF THE HK DOLLAR AND AVOLDING ANY ENCOURAGEMENT FOR PEOPLE ACTUALLY TO CONVERT: AND PT WOULD HAVE TO BE MADE CLEAR THAT THE EXCHANGE FUND CONTINUED TO DEAL ONLY AN C:15 WAHTH THE NOTE¬KSSUING BANKS, SO THAT THE RATE OF EXCHANGE TO THE PUBLIC WOULD NOT NECESSARILY BE DENTICAL TO THE PEGGED RATE (THOUGH WT WOULD IN ALL LIKELIHOOD BE CLOSE).
27, AS NOTED EARLIER THE SUCCESS OF THE SCHEME HN RESTORING THE STABILITY WITH THE MINIMUM OF MONETARY SQUEEZE DEPENDS ON ATS CREDIBILITY, THUS THE UTMOST CARE HAS TO BE TAKEN INI MITS
PRESENTATION.
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