CO129-523-13 Currency situation 16-6-1930 - 16-6-1930 — Page 47

XNo, I agree

main caval

J

with the tin that it is the because nearly all prerchoves of H. K. Currency are purphodes of Bank credits, & the scarcity of moles is due to the Banks

amo requindy Ammans bi at my opening audits to Loo Compe an

e to owe th

4

47

due to a chronic excess of "invisible" exports in the

shape of remittances from abroad.

This seems to me a

case of diagnosing a minor symptom as the cause of the disease. In the first place I do not know how, in the absence of

any trade a tatistics, anybody can tell that there is an excess of exports (visible and invisible) but I am willing

to believe that the recent decline in the Hong Kong exchange, vis-a-vis the gold-using world, has had the usual effect of stimulating all exports including these

"invisible exports" or remittances.

But of course there can be no such thing as a

permanent incorrected excess of exports.

After taking accant

of all visible and invisible imports and exports, (including short-period indebtedness) any balance must be adjusted by import or export of the currency of the place concerned. Granted that exports increased, then the account could

be balanced in two ways:

1) by an increase in visible and invisible imports;

2)

by an actual import of Hong Kong currency.

2) took place to some extent; there was an influx

of silver ( which is still semi-currency in Hong Kong) and possibly some influx of notes from South China.

But the

Banks refused, at first, to put in operation the only possible mechanism for a large-scale influx of Hong Kong's effective currency, by the issue of notes against silver in London. Instead they accumulated gold credits. they adopted method 1) since the accumulation of credits The reasons why abroad constitutes an invisible import.

i.e.,

they did this have been explained already and have nothing to do with the alleged excess of invisible exports, which,

in