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existence of the Hong Kong dollar as a separate entity makes it possible for the importer, if he is faced with a very severe slmp in silver at the time of the arrival of the goods, to dispose of his stock in Hong Kong itself at a less loss than he would have incurred if the Hong Kong dollar had gone down the full amount on the fall in silver. Similarly bank-balances and other immediately realisable dollar credits are more secure in the present state of affairs than they would have been if Hong Kong had not been a buffer in these matters.
There is a further point in favour of the "exchange premium" as a standing institution.
1
The Kemmerer Commission point out that if China ever went onto a gold exchange basis it would be highly desirable to do so at a rate higher, indeed they say 33% higher, than the gold value of the silver content of the dollar, because if this was not done and silver appreciated in value, all the current coin necessary for every day needs would go into the melting pot. It is unnecessary to go into elaborate detail regarding e.g. the point that, as the fineness of the subsidiary coinage is lower, that coinage would outlive the dollar in such a crisis, but broadly speaking the "exchange premium" would be a substantial asset if conversion to a gold basis was 'in the wind'.
If this is so, the only thing that is likely
to cause trouble in future is further fluctuation in
At
the price of silver, particularly downwards. present it rather looks as if any further substantial
movement
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