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Hongkong & Shanghai Why berpn. London.
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small as to nullify the prospect of any substantial addition to
the import of commodities; finally, the check on exports is
rendered inoperative by the urgency of the war demand for food and
raw material in China, which must be satisfied, irrespective either
of price or of the rate of exchange.
In these circumstances it seems impossible to set any
limit tệ the rise in the China exchange. There is no need to
emphasise the danger of the reactive effects which this might
produce in our own Dependencies, where the gold exchange standard
prevails, or the embarrassment which it might cause to those whose
duty it is to carry out the provisions of the Pittman Act in the
United States.
We have also to consider the effect upon British trade.
There is a limit to the extent to which an adverse balance of
trade can be financed by the Banks, and that limit has now been
reached. Unless the Banks can secure a moderate amount of silver
as cover for their operations they can no longer buy exchange
for forward delivery, with the consequence that the merchant would
be unable to protect himself against loss in exchange.
The export
trade would tend, therefore, either to be reduced to a speculation
in exchange or to come to a standstill.
The actual amount of silver required is estimated at
about 10,000,000 ounces for the remainder of the year, an amount
which I submit is out of all proportion to the dislocation of
trade and to the menace to the gold exchange standards of other
countries, to which I have referred,
The situation is serious, but it is not yet out of hand,
and if it could be made known that silver were available for China