CO129-462 - Governor Sir Stubbs - 1920 [7-10] — Page 45

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POLONIA

43495

CONFIDENTIAL.

REC

! SEP 20

My Lord,

GOVERNMENT HOUSE,

HONGKONG. 19th July, 1920.

40

Gr

I have the honour to acknowledge the receipt

of Your Lordship's telegram of the 16th June, 1920," regarding the question of the grant of a local allowance in counter- action of the fluctuations in exchange.

2.

When the members of the Salaries Commission recommended the adoption of an exchange rate of 2/- to the $1, it is doubtful whether they realised the full effect of this departure from the former arrangement, whereby salaries were paid as to 4/5ths at 18.9d. and as to 1/5th at the rate of the day. When the dollar is worth 48.8d., £100 becomes $1,000 under either method of calculation, but as the exchange value of the dollar falls the former system becomes increasingly advantageous. For example, with exchange at 3/-, that system gives g1,048 for £100, and £1,114 for £100 when exchange is at 2/-, an advantage in the one case of 5 and in the other of 11 per centum.

3.

The Commissioners estimated that the cost of living had increased by at least 30% since the beginning of the war, and in the year that has elapsed it is probable that that cost has advanced by quite a further 10 per centum. Pricee would undoubtedly have advanced much further, as they have done in other parts of the world, but for the counteracting factor of the rise in the value of silver; and as the exchange price?

RIGHT HONOURABLE

VISCOUNT MILNER, G.C.B.,

&c..

80..

&c.

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