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16. AS REGARDS OTHER PRELIMINARIES, FIRST IT WOULD BE NECESSARY
FOR THE NOTE-ISSUMING BANKS TO AGREE ANY REVISIONS TO THE IR
ARRANGEMENTS FOR PROVIDING NOTES TO THE OTHER BANKS.
17. NEXT IT IS PARTICULARLY HARD TO PREDICT PUBLIC REACTION, SO ALL POSSIBLE CONTINGENCIES HAVE TO BE PROVIDED FOR. THE
PUBLIC MIGHT SEIZE UPON THE ASSURANCE OF THE CONVERTIBILITY OF
HKD NOTES INTO FOREIGN CURRENCY, BUT FAIL TO APPRECIATE THE
CONTINUING CONVERTIBILITY OF DEPOSITS INTO NOTES. IF THIS HAPPENED THERE COULD BE, SOMEWHAT PERVERSELY, AN INITIAL, ALBENIT SHORTLIEVED, SURGE IN DEMAND FOR HKD NOTES. ADEQUATE SUPPLIES WOULD NEED TO BE AT HAND.
18. MORE PROBLEMATICALLY, THE PUBLIC MIGHT TEST THE CONVERT HBILITY, AS THEY PERCEIVE WTS MEANING, OF THE HK NOTES BY DEMANDING FOREIGN
NOTES IN EXCHANGE. THIS COULD BE DISCOURAGED TO SOME EXTENT BY PERSUADING THEM OF THE ADVANTAGES OF A FOREIGN CURRENCY DEPOSIT AS OPPOSED TO A BANKNOTE, AND BY DRAWING ATTENTION TO THE LAW CONCERNING THE USE OF FOREIGN NOTES IN HONG KONG. NEVERTHELESS, IT WOULD BE DESHRABLE FOR BANKS TO HAVE PLENTY OF U.S. NOTES AVAILABLE. HT WOULD BE IMPORTANT FOR THE SCHEME TO WIN MAXIMUM CREDIBILITY: ANY STORIES OF BANKS NOT BEING ABLE TO HONOUR THE SUPPOSED CONVERTIBILITY, AS INTERPRETED BY THE MAN IN THE STREET, WOULD BE MOST UNFORTUNATE.
COST TO GOVERNMENT.
19. AFTER ANY SHORTLIVED INITIAL SURGE, T S LIKELY THAT THE NOTE-USSUE WOULD CONTRACT (OR AT LEAST BE LESS THAN HT OTHERWISE MIGHT BE) DURING THE PERIOD OF ADJUSTMENT TO THE NEW RATE. THE WORST SCENARIO WOULD BE FOR THIS CONTRACTION TO CONTINUE, IMPLYING A CONTINUAL LACK OF CONFIDENCE IN THE STABHUNTY OF THE CURRENCY, UNTIL (IN THEORY ANYWAY) THE HKD MONEY SUPPLY (FOR WHICH CASH IS THE ULTIMATE RESERVE) DISAPPEARED TO ZERO, ALTHOUGH SUCH DEMONETISATION MIGHT BE NO BAD THING OF CONFIDENCE WAS INDEED SO PERSISTENTLY POOR.
20. THE COST OF ANY REDUCTION IN THE NOTE ISSUE IS THE LOSS OF SEIGNORAGE, WHICH HIS ACCEPTABLE FT REFLECTS A RETURN OF MONETARY DISCIPLINE: ANNOYING, BUT ACCEPTABLE, IF IT SIMPLY REFLECTS MORE ECONOMICAL USE OF CASH: AND STILL MORE ANNOYING, BUT NEVNTABLE, IF IT ARISES FROM A SHIFT TO USE OF OTHER CURRENCHES AND HENCE DIVERSION OF SE HGNORAGE TO ANOTHER GOVERNMENT (UNLIKELY UNLESS THE PROHYBUTION ON USE OF FOREIGN NOTES 4S REPEALED).
21. ADDITIONALLY, GOVERNMENT MAY RESENT REDEEMING CHS FOR FOREIGN CURRENCY AT A RATE LESS FAVOURABLE TO GOVERNMENT THAN THE LAST PRE-SCHEME MARKET RATE. HOWEVER, JUDGED OVER A LONGER PERIOD, GOVERNMENT WOULD PROBABLY FIND THAT IT HAD MADE HANDSOME EXCHANGE GAINS FROM INVESTING CM PROCEEDS.
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