Xsay
minor quantity
only
when
extraneous condon, such ag an am-
-bargo on the export of silver, supervenes ·
only the HK's Banking
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The question diade
the amount of silver cover which
can otřil,
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joxx
X280. They are in demand both from China & from the nest of the world. Their valore is thenngon duce mined by the dimand from both Sources. The relative of ability to the fact that the volume of the two demands es but varies in such a way that at any time the seal dimand
omes from the sih lewend which the existing rate is
45-
value (measured in gold)'. On the other hand, the value of
silver is and has been subject to violent fluctuations.
When silver is falling the premium therefore tends to
increase; (cf. the period up to 1914 and since 1926)
when it rises, the premium decreases and alterately
disappears (cf. the period during and immediately after
the war). As already explained the premium can never
become a minus quantity.
x
The history of the premium since 1926 is well
explained in Professor Robertson's memorandum (pp. 65 - 67)
This demonstrates incontrovertibly 1) the comparative
steadiness of the Hong Kong note in terms of gold (As
Professor Robertson says, it behaved in many ways like a
gold currency)
2) the rise or fall of the premium in sympathy.
with the fall or rise in silver.
There are, however, factors tending to diminish
the premium. (a) The banks (or at any rate the Hong Kong
and Shanghai Bank) can issue an unlimited quantity of
notes (on terms) and when the premium gets large enough,
ily it ultimately profits them to do so, however onerous
the terms. (b) The convention of accepting the notes
is probably not equally strong in all parts of South
China, where it also circulates and notes will tend to
be withdrawn to Hong Kong where the convention may be
expected to be stronger. (c) There is always a fear
(which had begun to be justified last year) that the
convention will be discarded and people will return
to the use of legal tender. (a) The fear of (c)
and sentiment based on the still nearly universal belief
that Hong Kong is on a silver currency lead to a demand
1
that