Page:Indian Journal of Economics Volume 2.djvu/402

 886 HINTON msrket very regulsrly within the limits fixed by the melting dollsrs into syeee in Shsnghsi price, which fluctuates consideraMy and not cost o! and of coining dollars at Bombay. Nevertheless there is at any moment a par for dollars, and one would expect specie points beyond which the a matter of fact those specie rate cannot go. As points are not effec- five because of the small amount of silver available in Hongkong for the arbitrage and the lack of a mint at Shanghai and Hongkong. The Chinese min. t does not affect the question. Movement of specxe therefore takes place but it only checks the move- ment o! the tael rate, it does not absolutely stop it. The last diagram Fig. 4 opposite shows the movement of the tael rate. It falls below parity on the fifth of April. On the same day Hexican dollars reached par (Fig. 2) and two days' later went to a premium. The price of taels in Mexican dollars in Shanghai, which is not shown on this diagram rose to its highest point on April 4th, and thereafter fell away to the end of the period under consideration. This is consistent with the movement o! dollars rom Honkong to Shan- ghai, which would be called for by the tael exchange moving so untavorably for Hongkong. The conclusion lhal lhe untorlunale varialions in lhe ralio o! exchange' of lhe silver and paper dollars was at least partly due to the use of dollars to arbitrate differences between the sterling rates at Hongkong and other silver centres, especially Shan- ghai, is confirmed by the effect of the prohibition of the export o! silver in 1916 and 1917. The pro- hibition at first extended only to the Hongkong dollar, but as the Mexican dollar at once went to a premium it had also to be included. The consequence is that the notes and silver now exchange practically t par, but the sterling rate departs from parity