CO129-523-13 Currency situation 16-6-1930 - 16-6-1930 — Page 33

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movement would be downwards,

It is obvious that nothing that the

Secretary of State, or the Hong Kong Government,

or the Banks can do, is going to prevent silver from fluctuating.

The question for decision, therefore, is whether anything should be done to cut the Hong Kong dollar altogether adrift from silver.

This could be done either by placing the currency directly on a sterling exchange basis or by making some special arrangement by which the dollar would be prevented from dropping further in terms of gold if silver depreciates still further but would not be prevented from appreciating if silver appreciates.

It would seem premature to discuss suggestions regarding the methods by which these various ends could be attained, until it is decided which end is the most desirable.

It is therefore suggested that the Committee should be asked:-

(1) whether in their opinion it is desirable to alter the currency arrangements at present existing in Hong Kong?

(2) if so whether the alteration should be in the direction of

(a) linking the dollar more closely to silver; or (b) placing the dollar upon a sterling exchange basis, or

(c) pegging the sterling exchange value of the dollar in such a way that it cannot depreciate but may

appreciate