236
Treasury Chambers,
Whitehall SM
July 1915.
Dear Beckett,
Fraser has passed on to me your note of the 20th about the premium on bank notes for silver dollars in Hong Kong saying that you find some difficulty in understanding why the bankers might have "to face a possibly extravagant loss upon the silver dollars deposited against notes". I think the explanation is something to this effect. It is always possible that there may be in the future a contraction in the amount of currency used in Hong Kong, If the bankers now issue a great many more notes, they would have these notes returned for cancellation as the amount of currency contracted, and they would have left on their hands the silver which they had set aside as cover for them. If at the time the value of silver had depreciated still further they would lose to the extent of the depreciation. In any case the attempt toget rid of
that