CO129-523-12 Currency situation 17-2-1930 - 9-7-1930 — Page 13

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my

about four days the exchange rate had fallen

to about bullion point, where it has apparently

remained.

Enormous sums in silver dollars are

on the way to Hong Kong or have already arrived

and, while it may be anticipated that this

movement will cease, now that the exchange has

readjusted itself, immediate difficulty is

arising owing to (1) shortage of storage

facilities (2) the fact that the newly coined

silver dollars are squeezing more notes out of the

banks. The Banks of issue are not anxious to

see their vaults filled with silver dollar,

while they pay out increasing amounts of

paper, since (1) they can only increase their

issue if they deposit silver (dollar for dollar)

as security, with no obvious profit in return,

(2) when, as is anticipated, circulation again

contracts, the Banks will be compelled to take

back the notes, but will only be able to get

rid of the silver cover by exporting it and

paying the costs of shipment, melting down etc.

There is, moreover, the possibility

perhaps

the probability that silver has not reached

the lowest point of its depreciation.

This review of the situation would

be incomplete if it did not mention the fact conditions

that, apart from present abnormal nainen

there are various circumstances which suggest

that the note issue may be insufficient for

present needs. The fall in silver and

consequent