CO129-508-3 Minting of silver dollars 5-1-1928 - 3-5-1928 — Page 17

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1.

Answer:

ail

What is the cause of the premium on Hongkong exchange?

Although the legal tender currency of the Colony of

Hongkong is British dollars and/or Mexican dollars and chopped

Mexican dollars, for many years past the silver dollar has

ceased to circulate in South China and the Bank note has com-

pletely taken its place, all business transactions being con-

ducted in the Bank note. Consequently, rates of exchange are

based on payment in Bank notes and exchange is therefore, to

a certain extent, divorced from silver. When export business

exceeds import business the tendency is for the rate of ex-

change to advance and increase the premium on the Bank note

compared with the silver dollar. The heavy remittances of

Chinese abroad to South China are all financed through Hong-

kong and tend to keep the exchange firm. Chinese will not

accept silver dollars, preferring the note as being more

convenient. Under the circumstances, dollars cannot be

imported by Banks to cover exchange transactions as that

would only mean adding to already overflowing treasuries.

There is no outlet for silver dollars unless exchange declines

to export point and that could only happen if the import trade

exceeded exports.

The premium on Bank notes is also partly accounted for

by the expense connected with a note issue.

Is there any scarcity of Mexican dollars, or any

interruption of their supply?

Answer:

Mexican dollars are gradually disappearing as the coinage