CO129-370 - Governor Sir Lugard & Public Offices - 1910 [12] — Page 518

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unduly high and an adequate Depreciation Fund is established out of the income on the investments, the dangers arising

from possible appreciation in the gold value of silver

could in normal circumstances be adequately provided for.

On the other hand, the danger of loss in the event

of an arbitrary value being given to the local dollar by restricting its issue, would, provided that the dimensions of the Note Issue did not exceed the internal requirements

of the Colony, be apperent rather than real, since apart from any appreciation in the gold value of silver, the gold securities would suffice to purchase the silver bullion necessary for the coinage of the dollars required

to redeem the notes.

It is not improbable, however, that the issue would attain a considerable circulation outside the Colony and this in the event of currency alterations in China might create embarrassment. The necessary safeguards also viz: the maintenance of a high proportion of specie in the reserve and the establishment of an adequate depreciation fund for the gold investments would probably absorb the greater part of the profits of issue for a considerable period, while the Colony would lose the present yield of the 1 per cent tax on the private notes displaced.

This last is a consideration of some importance in view of the present unsatisfactory state of the finances

of the Colony.

For these reasons My Lords agree that further consideration of the proposal should be deferred until the financial outlook of the Colony and the future of the currency arrangements of China generally become clearer.

In