CO129-523-13 Currency situation 16-6-1930 - 16-6-1930 — Page 55

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attempting to obviate a high premium on notes, there

is much to be done. The present low dollar is the

almost

result/entirely of the heavy fall in silver, and it

is beyond the power of Hong Kong to remedy this.

I agree with Mr. Champkin (on page 115 of the report) that the situation will remedy itself in time, and

that premature action is inadvisable.

9.

One great defect in the system, however,

is the fluctuating premium on notes, and it would undoubtedly be of the greatest advantage if this

could be avoided.

That there must be a small

premium appears to be inherent in the system, but it should, if possible, be maintained at a constant figure, or at all events be kept within narrow limits.

It is curious that no admittedly satisfactory reason has been given for the great variation in this premium. I think, however, that it must be regarded as an artificial, rather than a natural, state of affairs, and it is interesting to note (vide last paragraph on page 32 of Mr. Breen's memoranda) that the mere declaration that it was the

policy of Government and the three note-issuing banks to grapple with the problem, led at once to a fall in the premium to a more or less normal figure. Today it stands at about 7%.

10.

The following suggestions have been put

forward for controlling this premium:-

(a)

Government by order to limit the premium

to the equivalent of the estimated cost of

minting