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been due almost entirely to the fall in the price of silver which has necessarily upset Hong Kong, the meeting place of the gold and silver currency systems. It cannot be denied that the non-note-issuing Banks have been to some extent embarrassed by the "note premium but (1) it was largely their own fault and (2) these embarrassments had nothing to do with the "exchange premium". The exchange premium has fluctuated seriously only when the price of silver has fluctuated still more seriously and it has in fact acted as a sort of shock absorber, the Hong Kong dollar as a currency unit being something between silver and gold. If it fluctuates at all when the gold price of silver is steady, the fluctuations are only slight and apparently due to the sterling position of the Banks.
If this is so, then it is difficult to resist the conclusion that the principal argument against the desirability of a note premium, viz. that it creates & double uncertainty, falls to the ground.
It is true that if a merchant, who wishes to
import a consignment of goods from overseas via Hong Kong to be sold in china, buys his sterling credit to finance the transaction with Hong Kong dollars, he cannot be certain that, when the consignment arrives and is sold in China on a pure silver bullion basis, the silver bullion will be convertible into a sufficient number of Hong Kong dollars to show a profit on the transaction. That however is the fault of the
instability of the gold - silver exchange.
The
existence