46
For the first 23 millim oft ibig d. proit of coin
scavities with the fr. Agents. Thif Covers 30million
notes the notes
that the Government or the Hong Kong and Shanghai Bank
(so far as the two can be distinguished) should "do
something about it". At such times the Banks have to
take account of other considerations than immediate
profit (this was what happened last autumn).
All the above tend to lower the value of the
note. Hence it does not remain entirely stable in terms
of gold but moves sympathetically with, but less violently
than, the price of silver.
It must be noted, however, that all these factors
and especially (a) do not become fully operative until
silver ceases to fall. I am not clear about the
mechanism of the issue of notes by the Hong Kong and
Shanghai Bank, but an essential feature of the transaction
have to be covered by is the laying down of silver in London (or less probably
→
coin or baltion & bousted-arith the H. K. Gost locally undise the Gornothinne
Su 4.21.
in Hong Kong). The Bank has got to use gold credits to
buy that silver and will clearly prefer not to do so while
it expects silver to fall still further. (An outstanding
feature of the recent crisis seems to have been the
accumulation by all the Banks of gold credits which they
were unwilling to realise) Therefore the premium is
primarily a phenomenon of a falling price of silver and
I don't think it we its amount is probably conditioned by the rate rather than
the amount of the fall.
disappears, Out L. think it does comme down to the convenience
differential!
With silver steady, the premium
disappears or is at any rate reduced to a much lower
figure representing the real advantage of notes over
silver as a circulating medium (This was probably the position
in 1926 - 1928).
The Committee's Report explains the premium as
due
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