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tender in the Straits Settlements by Sir A. CLARKE'S proclamation of 1874, although, as stated in Sir W. JERVOISE'S despatch of the 2nd of November, 1876, the Japanese Dollar had only been introduced to a limited extent.
Their Lordships will have noted the statement made in the same despatch that the legalization of the American Trade Dollar had, in August, 1875, proved a great convenience to the community in a time of considerable difficulty, but they will on the other hand perceive that, if the coinage of the American Dollar is to remain suspended, and the supply of Japanese Yens does not exceed that of past years, the legalization of both coins in both Colonies will probably only aggravate any evil which may, from time to time, arise from a want of sufficient coinage for mercantile operations by fostering illusory hopes of a supply which will not be forthcoming.
I should incline, therefore, to the opinion that for the present it would not be desirable to admit either coin to circulation in Hongkong.
I do not perceive in the papers now under consideration that any complaint is made of an insufficiency of coinage either in Hongkong or the Straits Settle- ments, but should any apprehension exist as to a deficiency of coin at some future time when the Chinese trade may have revived, I would beg leave to refer their Lordships to the considerations urged in my report of the 20th of April, 1877, on this subject. In that report I pointed out that in the early part of each year, the local Banks might, as a rule, prepare themselves for the "China Season" by purchasing in London all the Mexican Dollars which may arrive there at a fraction above the refining value, and thus not only procure an adequate supply of coin, but also secure themselves against paying the heavy premium to which Dollars rise when the demand comes. While such a course is open to them, I cannot but think that complaints as to a scarcity of coin have not much force.
I observe that, as regards the suggested issue of One Dollar Notes by the Government of Hongkong, the Secretary of State raises the question: "whether the retention in the Government vaults of the whole amount of silver exchanged for notes should be insisted upon." With reference to this question, I may perhaps venture to point out the danger that, if a part of the amount of silver received for notes were disposed of, and the proceeds invested in Consols, and it became necessary in times of emergency to realise considerable sums in specie, the bills drawn for that purpose might probably command a large premium, and that the sums paid as premium might well exceed the interest received from the investment.
I have, &c.,
C. W. FREMANTLE.
The Secretary to the Treasury.