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intended to discontinue the issue of notes as
scarcely necessary to reply to it in detail, but I will point out some leading objections. He wishes to confine the Govt. note
issue to the amount of the deficiency in the
value of the subsidiary coins redeemed. He omits
to point out that such an issue will be inconver-
tible, except in so far as appropriations are made
from revenue year by year! And even these appro-
priations will not be available for cashing notes
if we adopt his further proposal to invest them in
silver securities ( difficult to find suitable
ones) and the profits added to the fund. I cannot
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believe that my Lords would find their objections
to our scheme removed by the issue of not more
than 2 million dollars worth of inconvertible
paper. It is true that Mr. Thomson proposes to re-
in the dim and distant future deem them eventually from the guarantee fund, but
this will not satisfy their Lordships.
His remarks about Gresham's law are not in
point, since that law does not apply to two coins
circulating at different values. It is true however
that if our proposals for a note issue were adop-.
ted and the circulation of Chinese coins were not
probhibited many of the hardships entailed by the
present situation would continue, even though H.K.
subsidiary coins themselves approached or reached
par.
Mr. Thomson is wrong in expecting an over
issue of notes under our proposals, since it was
གམ་
2
Howert
N's wh?
thi
inth safer im upset if Chines
first,
prevent over
frachitited/ they might,
un y como
reaching, for at ths normal point of finfinity.
soon as our subsidiary coins rose to par. They would natuarily rise to par as soon as there were
not more than sufficient for legitimate purposes.
On the other hand there is no reason to suppose
that when they rose to par (and the note issue ceased) there would be an insufficiency for legi-
timate purposes.
It appears from the letter from the Chamber of
Commerce ( encl. 3) that in their opinion prohi-
bition of Chinese coins would of itself result in
our subsidiary coins rising gradually to par or
nearly so. I am inclined to share this view unless
the Chinese authorities take vigorous action against
our coins circulating in China. Our coin is preferre
in China as being a better and more valuable coin
than the Chinese imitations, and the possibility
of the Chinese authorities taking action is made
less by the dearth of coin in the neighbouring
Province of China Woing to the reckless issue of
unsecured and inconvertible paper.
I would therefore try prohibition first, and
postpone the question of a Govt. note issue. We
shall obviously be in a much better position to
judge of the advisability of a note issue when
the Chinese coin is got rid of, and the success
of such an issue would be far more assured.
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could also then rely on the issue effecting its
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