48
X
rather the
double uncertainty
in a normally constituted currency system, would have been
corrected by an import of currency (or its usual
equivalent, bullion).
4. Disadvantages of the Premium.
It is generally accepted that the existence of
the premium reacts unfavourably on Hong Kong trade.
reason generally given is that the higher exchange on
(1) silver valve which Hong Kong renders it harder for Hong Kong to compete
is shared with Shanghai
(2) premium of the hole, from which shan, hai
Tis free onl
with Shanghai in "services" (financial, merchanting,
shipping etc.)
This is, of course, the result of a
If the rate rising exchange, not of a high exchange.
remained steadily at a high figure comparative charges
in Hong Kong and Shanghai would adjust themselves.
Nevertheless in times of rapid changes in rates this
The
net. ikunst bara may be a serious disadvantage. (Since the uscant, H. K. caes not sep a complementem vantay. over A more permanent disadvantage is the uncertainty
Shanybai when siever is.
rising)
of the premium.
It is, as already shown, essentially
unstable, as the value of the Hong Kong note rests
on no legal or physical basis but is purely psychological;
i.e., it is valuable because it is accepted as valuable and
The "pramine" the moment people begin to question its value is in
danger of disappearing altogether.
Finally the present Hong Kong system seems to
combine the disadvantages of both a gold and a silver
currency; it is stable in terms of neither and every
transaction through Hong Kong is subject to two risky
exchange operations (incidentally the fact that it is not
stable in terms of silver largely discredits the usual
argument in favour of sticking to silver as long as
China does). The Hong Kong note acts in some ways as
I don't think so. The argument is the partial mustucking has shown how desirable it is to stick it
more
securely.
ins
a