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can be little doubt that it will either put an end to them altogether, or alter their contents if it finds that they interfere with the currency legislation of the United States. On the other hand, the Japanese Government does not appear to understand as yet the principles of sound currency, and there can be little reliance placed on the decisions of the native authorities of the Japanese Mint.
The correspondence now before my Lords shows how easily the Japanese Government are induced to alter the contents of their coins, seeing that at the close of 1877, or beginning of 1878, they substituted a trade dollar containing 420 grains of fine silver for the Yen till then in use containing 412 grains, and they asked the Hongkong Government to accept the new dollar as legal tender; but in January, 1879, they withdrew that request, gave up their trade dollar, and reverted to the old Yen of 412 grains; nor must it be forgotten that Japan is not to any extent a silver producing country.
These considerations induce my Lords to agree with the Deputy Master of the Mint in his opinion that, for the present, it would not be desirable to admit either the American Trade Dollar or the Japanese Yen to circulation in Hongkong.
My Lords entirely agree with the Secretary of State that it would be better not to attempt to prohibit by law the passing of dollars current in the neighbouring Chinese ports.
As regards the issue of a state note, my Lords advise that, at the outset, the whole amount of silver received in exchange for notes should be kept in the
Government vaults.
It is most important that the Government of Hongkong should understand that they are to manage such issue not as a source of profit, but solely as a means for supplying the inhabitants of the Colony with a paper currency, convertible in all emergencies into silver, and becoming therefore the shadow of the silver which it
represents.
It may indeed be the cause of some expense at first, but that would be a slight drawback to set against the benefit of firmly establishing the principle for which my Lords contend.
As soon as the state note issue is firmly established and accepted, my Lords will be ready to consider the question of investing a certain amount of silver in Government securities, but they will always advise the greatest moderation in fixing the proportion to be so invested. Before leaving the subject, they would draw the attention of the Secretary of State to the testimony given by the bankers, traders, and professional men of Hongkong in their memorial enclosed in Mr. J. PopE HENNESSY'S despatch of 8th June, 1877, to the value of the dollar notes issued by the Hongkong and Shanghai Bank. My Lords consider with that evidence before them, that a carefully managed state issue could not fail to be accepted, that it would