CO129-365 - Governor Sir Lugard - 1910 [1-3] — Page 128

123

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exit

the discount. In any case so long as a separate and more

popular coinage exists and circulates at a discount the benefit

to the Banks from the rehabilitation of the Hongkong Coins is

dubious.

III.

This paragraph contains the scheme which

in brief is to obtain a loan of 12 million dollars in subsidia-

-ry coin at face value demonetized the coins at a loss of $1,800,000 and use the balance of $10,200,000 for further

redemption. On this process the Banks make a profit of the

full discount unless the terms of the loan are such as to

take into account this profit. I confess I do not appreciate

the advantage of this proposal over a gold loan obtainable

on easier terms in England, (and convertible at present rate

or

of exchange on favourable terms). With such a lean the Government could without divulging its intention buy up,

negotiate with a Bank (as proposed above) to demonetize,

sums from time to time as it desire d, and would obtain the

profit (or rather not incur the loss) of the discount.

such

IV.

I do not think that the assumption that the

*rush for redemption at par would soon be over is admissible. The Hongkong coins now circulating at discount throughout all

South China would dribble in for many years to be exchanged at

par.

V.

I do not see the necessity of a new issue

of Nickel coins. To begin with it necessitates the redemption

of 1 million dollars worth of additional coins which (according

to the data here assumed would remain incirculation at par

together with an additional quantity which might have been

held in reserve for the annual issue.

I do not think it legitimate to use the

profit on such an issue if made or the profit on a note issue for any other purpose than as a reserve fund against the issue. To do otherwise is to repeat the mistake which has led to the

present délemma.

VI.