CO129-504-10 Currency system- premium on bank notes as compared with British silver dollars 10-1-1927 - 30-8-1927 — Page 27

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exchange, in order that the amount of currency in circulation may

adjust itself to the requirements of the Colony, the lower bullion

point being the discount on the silver parity of the dollar at

which it becomes profitable to ship British dollar coins

from Hong Kong to other silver using centres, this provides for

removal of redundant currency when the Colony is over-supplied;

the upper bullion point being the premium over the silver parity

of the dollar (including seigniorage) at which British dollars

may be minted from bar silver and brought to the Colony without

loss. The lower bullion point automatically providing for

removal of redundant currency is already established as the Banks

must pay British dollars in exchange for their notes when they

are tendered but there is no upper bullion point and it is

submitted that herein the currency system is faulty. There is no

upper Bullion point because there is no limit to the discount at

which the Bank will receive British silver dollars in settlement of obligations which the convention of the market agrees should be settled in Bank notes.

Figures are appended which show that Hong Kong currency is at a premium of over 131% which is over 10% higher than would be possible if an economic upper bullion point were in existence, naturally this existing premium on the currency is reflected in the price level of the Colony making for lower prices and

accentuating the present depression.

It is submitted that the limit of premium economically

just/