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HISTORY THE BALANCE OF ADVANTAGE SEEMS TO BE FIRMLY IN FAVOUR OF ACCEPTING SUCH PRESSURES ON THE ECONOMY AS A LINK TO THE U.S. CURRENCY MIGHT BRING, AS AGAINST ACCEPTING THE CONSEQUENCES OF A CONTINUING FLOATING RATE, THE BOUNDS OF WHICH APPEAR TO BE VIRTUALLY UNLIMITED. WHILE THE FALL OF THE HONG KONG DOLLAR EXCHANGE RATE MAINLY RESULTS FROM LACK OF POLITICAL CONFIDENCE, THERE WILL BE NO CONFIDENCE WITHOUT A RELATIVELY STABLE DOLLAR. IT S A CLASSICAL CHICKEN AND EGG SITUATION.
18. A CASE CAN BE MADE FOR FIXING ON A TRADE-WEIGHTED BASIS. THIS WOULD BE BOTH COMPLICATED, SHINCE THE RATE AGAINST ANY INDIVIDUAL CURRENCY WOULD NEED TO BE CONTINUALLY ADJUSTED, AND UNNECESSARILY REFINED GIVEN THE SCALE OF THE HONG KONG DOLLAR'S RECENT SLADE AGAINST VIRTUALLY EVERY MAJOR CURRENCY. WE MUST SEEK PRESENTATIONAL SIMPLIC-HTY. IT IS ALSO ABSOLUTELY CRITICAL THAT THE RATE BE REGARDED AS FIXED INDEFINITELY. ANY STATEMENT WHICH CAN BE INTERPRETED AS HINTING AT THE POSSIBILITY OF DEPRECIATING THE ANNOUNCED RATE WOULD SABOTAGE THE SCHEME FROM THE OUTSET. IT WILL BE ACCEPTABLE TO INDICATE EVENTUAL POSSIBLE APPRECIATION IN THE EVENT OF CONFIDENCE RETURNING TO SUCH A DEGREE AS TO PRODUCE UNDULY RAP:ND MONETARY EXPANSION, BUT SUCH AN INDICATION MUST CARRY COMPLETE CONVICTION THAT THE RATE WOULD ONLY EVER BE ADJUSTED MAN THAT DIRECTION.
CONSULTATION
19. DETAILED DISCUSSIONS, BOTH AS TO THE ADVISABILITY OF THIS SCHEME AND ON THE MECHANICS OF ITS IMPLEMENTATION, HAVE BEEN HELD WITH THE TWO NOTE-ISSUING BANKS. 50TH ARE AWARE OF THE BENEFITS WHICH THE SCHEME WOULD BRING OF SUCCESSFUL, AND THE PROBLEMS THAT WOULD LOOM IF IT WAS BADLY RECEIVED. THEY BELIEVE THAT THE GOVERNMENT HAS ANYWAY WORKED WTSELF INTO THE POSITION OF HAVING TO DO SOMETHING AND THEY HAVE TOLD THE ADMINISTRATION THAT THIS SCHEME APPEARS TO BE THE BEST, IF NOT ONLY, IMMEDIATE OPTION. THEY HAVE UNDERTAKEN TO CO-OPERATE FULLY SHOULD A DEC ISHON BE TAKEN TO PROCEED. THEIR APPROACH HAS AS ALWAYS
BEEN RESPONS:IBLE AND HELPFUL.
20. SELECTED ACADEMICS AND OTHERS HAVE BEEN CONSULTED, DISPLAY ING AS MIGHT BE EXPECTED SOME POLARISATION OF VIEWS BETWEEN EXTREMES
OF ENTHUSIASM AND SCEPTICISM.
21. SENIOR AND ABLE MONETARY EXPERTS FROM THE BANK OF ENGLAND AND UK TREASURY VISITED HONG KONG LAST WEEK TO STUDY THE PROPOSAL. THEIR CONCLUSION WAS THAT THE SCHEME WAS TECHNICALLY FEASIBLE AND IN MANY RESPECTS DESIRABLE. THEY UNDERLINED THE RISKS INVOLVED, SHOULD THE PRESENTATION FAIL TO CARRY CONVICTION. THE DECHSHON IS OF COURSE ONE FOR THE HONG KONG GOVERNMENT, BUT THEY LEFT US IN NO DOUBT WHAT THEY WOULD DO F IN OUR SHOES. THE GOVERNOR WILL MENTION HIS DISCUSSIONS WITH THE CHANCELLOR.
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