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. PLEA FOR AN EFFECTIVE GOLD
STANDARD IN INDIA

BY

Prof. P. A. WADIA, M. A.

AND

Prof. G. N. JOSH I, M. A.

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IBombap:

ated at the "Bombay Chronicle" Press by S. A. Brelvi and Published by P- A. Wadia

,T,A'V

A PLEA FOR AN EFFECTIVE GOLD
STANDARD IN INDIA

BY

Prof. P. A. WADIA, M. A.

AND

Prof. 0. N. JOSH I, M. A.

IBomftap:

Printed at the " Bombay Obroniolc " Press by S. A. Brelvi and Poblishpd by P. A. Wadia

PREFACE.

Sir Purshotamdas Thakordas has given notice of his intention to introduce two
bills in the September (1924) Session of the Legislative Assembly. One is intended to
amend the Indian Paper Currency Act of 1923 with the object of substituting 7. 533W
grains in the place of 11.33011 grains of gold per rupee, and the other to amend the
Indian Coinage Act of 1920 changing the relation of the rupee to the English Sovereign
from 1/10 in statute now existing to 1/15. If these two bills pass through the Legis-
lature they will restore the pre-war currency system of India— a gold exchange standard
with Is — 4d gold as the ratio of exchange.

We think it our duty to place before the country a case for giving to India an effec-
tive gold standard, instead of a gold exchange standard. We think it disastrous for
our country that our own countrymen should ask for a gold exchange standard at
Ls— Id. gold even as a temporary measure or as a first step towards the realisation of
what is acknowledged to be the only sound system of money for every country in the
world. If legislation, proposed or finally sanctioned by the constituted authorities,
is the expression of the will of the nation, and if the national will of India can only
demand whatever promotes the ultimate welfare of the people, then no compromise
or temporisation with currency measures short of the effective gold standard is possible;
and we plead today as emphatically as we can for a currency reform, that is
acknowledged to be universally sound in theory and immediately practicable foi India.
What is theoretically sound is eminently practicable ; and those today who limit their
endeavours and their demands to any thing short of the effective gold standard are in
one sense falling short of supreme loyalty to truth and humanity.

HoRMAZD Villa, "] P. \. WAD] A

Malabar Hill, y Trxiwi'

Bombay, bth August 1921. J ^- ^- JObHl.

A PLEA FOR AN EFFECTIVB GOLD STANDARD IN INDIA.

INTRODUCTION.

A hundred years later when a future liistorian of India writes the story of the vicis-
situdes of the nation, ho will notice, if he is an Englishman, the rapid opening up of
the country by the Railway, the telegraph, the post office and the telephone, of the ex-
pansion of trade and the growth in the total volume of commerce which marked the last
quarter of the nineteenth and the first quarter of the twentieth century ; he will notice,
if he is an Indian, the rapid development of a common consciousness, born of common
sufferings under an alien rule and fostered by the common struggles towards the achie-
vement of national emancipation. But Englishman and Indian alike will notice, if
urged by the passion for truth, that during the fifty years ending with the first quarter
of the twentieth century, the economic life of India was subjected to a series of experi-
ments bearing on currency and exchange, which, though they were apparently discon-
uected and forced ou a lukewarm governjuent by the exigencies of the passing hour,
in their cumulative effect drained tiie cajjital resources of the countrv, deprived her
of tlie gold lialances which would have served as the foundations of her industrial deve-
lopment, and prevented the circulation of the Ufe blood which in the form of credit would
have built up her prosperity. It is significant that wliereas one hear.s .so much about
the Partition of Bengal and the incidents of the Jallianwala Bag and the bombing of
crowds from the air, about the evils of dyarchy and the persecution of a struggling press,
one hears so little of the effects of the experiments with the Indian Currency which
began with 1893 and of which we have not yet seen the end. Tlie reasons are not far to
seek. The effects of currency manipulations are subterranean and insidious ; a cut in
the flesh may at once attract notice and be followed up by a remedy ; but the rapid ad-
vance of anaemia may very often escape observation, and if not remedied in time may
end in the death of the organism. In the second place the importance of currency sys-
tems for the economic life of the body politic has been increasingly reahsed only in com-
paratively recent times ; with the marvellous development of credit and expansion,
of large scale production, currency has a more vital function to perform than any other
economic institution of our times ; and it was the war and post-war developments that
aroused a bewildered Europe into a vivid consciousness of the supreme importance of
currency. It is not to be wondered at if public opinion in India has hitherto been
supremely indifferent to the details of currency legislation, to the complicated mani-
pulations of her reserves by men trained in technical methods and possessing all the
resources of the administrative machinery for adapting statistics to the refrain of [)opular
economic shibboleth.';. Whilst the rest of the world at this moment is absorbed in
devising methods of currency reform as the one thing needed to save the countries from

ecoDomic rum, we in Imlu »it Vvitli foldeii Laud* aiid allow the Governiueiit lu violate
with iui|)UDity the olciiiciitary iiriiiciples of currency and linauce without a siugln note
of protoKt 01) the |wrt of our loadcrR.

IMPOKIAVCI. Of CI KRI.NC\.
Mxl:SiirV I OK A (iOI.D STASUAKU.
Tho worM today lian •;roM'n alive to thi- fact that all i-conoiiiic prosjierity dvpcads
ultiniatoiy on the |)iirch:isinf; |)<)wor of the jieo|ile, and this purcliaiing |>ower is con-
iiderably intlacnc-l for tho belter or for the worse l>y the monetary nyateiu of the coun-
try. Kvcr niiici' tJK' time of ih'- Uriisu'ls Monetary ("oiifort-ine the att>*ntion of liri-
li«ed inankiiiii has lu'eii o.-iitn-d on the economic |trol)ii>MU arisinj; out of the breakdown
of the fcir''ii;ii (■x>'han;|e^ and ol int('rnatioii:<l Iradc. induHtrial and trade deprcisiou
and uniMn|iloynipnl. All theso i-vils have lii'eu incroisiu'jlr traced to currencr, and
their remi-dy soiiulil in r.form of ciirroriiv .

Tin- hi.slory of lUiriii'V |ioliiV in llif tivilised world during t!ie last few ceu-
luriiM h H b ■■•n tii" hi.il irv of .i n •:[<■* of att-'inpt.-i to .loouro relative atability of purehas-
ini! |M>wer by the :dlernale nsi> of the two precioUA metaU, ijoid and ailrrr. u<< the ntan
diirdn of -.line and m ' lii of I'xiliaii'^e. L'nreijiulat" I bimetillinMi of a kind may be
8aid t I hav • prev ille I i:i jvintpi- up t) lli" enl ol the eiv!liteent !i century, it was iu
I8I(J thit i^reil Hrit lin ailopted a gold standard, an^l i)y the end of the nineteenth cen-
tury the re-tt of the world with the exception of China either deiiionetiiied silver or rele-
gate 1 the silver ciirreney to a .subiidiary [m^ition. So far as India wai concerned,
t'ioU',di notninilly the .Vei of l>".l'.> place! it on a -lold ba-ii:". a.i we !«hall jioint out later
on, th" «old wai to be used only for atabili.sing her foreign exchanges. Hefore the out-
break of the war I'.'.jiiomic opinion and economic |)olicy as manifested in the currencies
of all civilise, I countries re.sted alike on the undisputed assumption that tliough absolute
stability of purchu.sing ])Ow.t of the monetary unit in terms of cuiumoditifs could not
be BecureJ, relative stability could be ol)tained only by the us« of th- gold standard.
Now an effective gold Ktandird implies in the first jilace that all values are to be uiea-
Bured in tvrms of a standard unit of gold delinei by law, and neeoiidly that all other
media of e.ichange which arc siniultineou.sly in use, whether they arc token coius, paper
money, bills of evhange or die pics, arc ultimately convertible into the standard 'oiu.
Such ultini'ite convertibility of all substitutes intu the standard coius requires free aud
open mint.'*, and a rescr\e of goM readily available for converting all other luedia of
exchange into (he stiiiilard curreney f<ir internal pur{K)8es and for shipmeut
abroad in case of external liabilities. The preference attached to a gold curreacv by the
civilised world is bised on the experieuce gained through centuries by a process of trial
and error that gold i.i the uioaI suitable metal for money. t)\ring to its peculiar ingre-
dientA and ( liara< terulie ;. owing to the largi- stock of the metal in existence aud its
•m«ll anriu.ii production, gohi was found to fulfil all (he-functions of souud money, and
to aecure relative stability in the purchasing |i«)wer of the monetary unit iu terms of
(,uuiiuo<liii< 1. liwn tie ('aniltridge ec^JiiouuKt who is now iiK lined to question thu

value of gold for the purposes of curroncy admits in his "Tract on Monetary ReforDi"
that "th« metal gold might not possess all the theoretical advantages of an artificially
regulated standard, but it could not be tampered with and had proved reliable in ])rac-
tice." The growth of organised banking has during the last hundred years economised
the use of gold for the purposes of internal currency to a phenomenal extent bv the
substitution of cheques for gold. The resulting expansion of credit has led to increased
production, increased wealth and increase in population. This economic prosperity
rested ulrimatply on such relative stability of the purchasing power of the monetary unit
as was secured in practice by the use of gold as the ba.sis of currency. Before the wa'
gold had become an international currency by reason of the fact that everywhere in the
world people want gold, and as a matter of fact are ready to acccept gold under any cir-
cumstances. As the result of the war, however, two new conditions have come into
exi8tence^. Firstly each of the belligerent countries, with the exception of the United
States, has been compelled to issue an amount of paper money which is far in excess
of the gold which would bo required to make it redeemable. In the second place, in all
the countries of the world ctcejit in the United States and in Sweden after April 1924
there exists a legal prohibition on tlie export of gold. These conditions have brought
about phenomenal fluctuations in the foreign exchanges, a complete dislocation of trade,
and violent disturbances in the internal level of prices in each country. The necessity
of securing stability in the purchasing power of the monetary unit has been vividly
brought home to all economic thinkers and to a suffering humanity by the international
trade situation after the war.

Owing to the fact that most of the European countries have lost posseasion of the
gold backing to their paper money which has become inconvertible, it is not surprising
that economic experts should endeavour to formulate all kinds of measures, like the
gold exchange standard and international loans. It has been seriously urged that the
world today has given up its faith in gold, that this precious metal is no longer neces-
sary as the basis of a sound sy.stem of currency, that "the gold standard is already a
barbarous relic", and that the United States are playing a very foolish game in bottl-
ing up huge amounts of the metal which is no longer precious from an economic point
of view, and that for the purposes of internal trade at any rate the use of gold is to
be regarded as out-of-date and economically wasteful. It is true that in countries like
France and Italy, as well as in South-Eastern Europe a return to an effective gold
itandard is out of question in the near future, and that these countries will have to be
satisfied with an economically halting currency system ; but it is not true that a policy
forced by circumst-ances is economically desirable and intrinsically sound. Whilst we
admit that the variations in the purchasing power of gold have been duiing recent
years so great as to lead a few people to doubt the advantage of using gold as a stan-
dard of value, the violent ftuctuationa in prices resulting from the use of inconvertibl*
paper and the failure of the attempts at regulating the standard of value by legislation
have in their tura made economic thought and public opinion welcome with eagerness

the possibilitv of rcturninc oven to h had pold stnndnrd. Nay. wc may go further, and
urj;.r that iK-rhaps it was the abandomi..-m of th.- poU stan.lard durinfj the vf-riod of
the war owing to th.- exiRencies of tlie situation that is resf^miibk- for such fluctuations
as we notice in the foreign exchanges ami in the internal price levels. The pos.sihility
of a definite return to the gold standard is almost in sight in countries Ukc (Jrcat
Britain, llollLind and Scandinavia. As early as 1920 the Cunliffe Committee recom-
niended a ikjUcv of calling in and cancelling of currency notes until the pound sterling
had been brought to it.^ par value as m.-asur 1 by the dolhir-exehangc. The Brusnels
Monetary fonferenc- as far back as l'J2<) uiiiiiimously reeomm.-nded that it was high-
ly d.-sirubie that the countries that had lapsed from an elTective gold standard should
■return to it. Prof. Oustav Cassel speaking in May Um b.fore the Institute of Bank-
ers in London observed that though he was no doctrinaire sup])Orter of gold as a
monetary standard, he believed it to be th- only standard which the world would in
practice acLvpt at tha pre.ient tint'. He ple.adcd that Britiin s'loald set an example
to the re.st of the world by restoring its currency to a gold basis at the earliest possible
moment. In Great Britain banking opinion is in favour of as early a return to the
cold standard as jws.sible ; and government have specifically declared their intention to
carry out the Cunliffe Committee proposals. Even the enemies of Germany now recog-
nise that the onlv way of making Germany pay is to ])ut her currency on a gold basis.

Proi. KFVNnS' VIHWS.

The one prominent if not solit iry e.vceplion to this universally acce|ited princijjle
of a gold standard as the one sound monetary svstem is Prof. Keyne.s. But even, Prof.
Kevnes wrote in 1022 in the Manchester Guardian Reconstruction Number that if the
gold standard could be reintroduced throughout Europe this would )>romote as nothing
else can "the revival not only of trade and of production, but of international credit
and the niovement of capital to where it is n:"eded most." Sj)eaking of the problem of
stabilisation he maintained in the sam • nuni');T that "hitherto only one good solution
has been found, a world wide gold standard. I .see no other solution of stabilisation
now except this traditional solution, namely a gold standard in as many countries as
possible."' iSince writing the above in 1',I22. Prof. Keynes has been a convert to a now
method of regulating the currency, to a "more scientific" standard than the gold stan-
dard. In his "Tract on Monetary Reform" he cm|ihatically assi-rls thai in the |)a9t
stability of foreign exchanni's was the ain\ of the monetary systei\( of the civilised world
and that this was secured by an effective gold standard. Hi- also admit -i that in pre-
war days the effective gold standard securi'd not only stability in the foreign exchanges
but also Biability in int.ernal price level. B;it he ludieves that gold now no longer re-
tains Its importance and hi" would conccntrat • attention on the di'sirahility of .seeurmg
int4«ninl stability by regulating un>l managing the currency, leaving the foreign M-
rhanges to take care of themselves, (iold is not to be,employed in circulation at all —
its onlv use being that of a store of value tti b ■ held as a war chest acain-it emergencies'.
J'rof. Keynes assumes that stability of ])rii' ■ level is intriusiciklly desiraliU*; whilst we

grant this position generally, we may well ask if a slow rise in prices spread over a num-
ber of years is not equally desirable in the interests of trade and industry. But our
fear is that stability of price level that does not rest on a gold basis is so hypothetical
in its character as to justify its being regarded as beyond practical politics.

It is conceivable that hereafter when the preference for gold to which mankind is
hitherto attached is given up, a more scientific standard of values and medium of
exchange may come into operation ; and no one donlrts even today the dcsirabilitv of
employing such a standard in the place of gold. But keeping in view the jiassionate
love of gold amongst mankind at the present day, and tiie suspicion which attaches to
any substitute for the precious metal, the only practicable standard of values for the
civilised world is gold.

The civilised world is thus practically unanimous in recognising that the primary
condition of economic development is stability of price level, and that this stability
can be secured only by an effective gold .standard. The increasing commercial inter-
relations between different parts of the world make it eminently desirable that every
country thus linked up should have a common monetary substance for internal and
external trade — for internal prices have become linked up with external prices, and
we cannot experiment with foreign exchanges without very seriously affecting the in-
ternal price level. Now the policy of the Government of India ever since ISOO has been
based u]ion the fundamentally wrong assumption that the primary want of this country
in the matter of currency is the fixity of exchange between the silver rupee and the gold
pound.

THE HISTORY OF INDIAN CURRENCY.

India had in very many parts a gold standard and a gold currency in the pa.st.
These were replaced by a silver standard and currency in the first half of tlie 19th cen-
tury by the East India Company. The violent fluctuations which followed in the pur-
chasing power of silver in terms of gold after 1870 led the Government of India to close
the mints to the free coinage of silver. Their budget calculations especially in view of
the Home Charges were violently upset in the years preceding 1893 ; with every fall of
a penny in the value of the rupee the Government had to provide an additional crore
of Rupees. The expansion of trade and the flow of capital to India were liami)ered by
the uncertainties of the foreign exchanges. The members of the services who had to make
remittances from time to time were seriously aiiected. These evils, the Government
of India believed, could be obviated by the closure of the mints as a temporary measure
and as the initial step towards the introduction of an effective gold standard. When
' after five years in 1898 the exchange rose to Is — 4d, as contemplated in 1893, the Fowler
Committee recommended the introduction of the British Sovereign as "a legal tender
and a ciurent coin in India," and the opening of Indian mints to an unrestricted coinage
of aoM. The committee further observed : "Looking forward as we do to the effective
establishment in India of the gold atandard and currency on the principle of the

Uc<' inflow an-l outflow o( roI.J. wo r.'rommond tlirsp mPMures (or adoption". Theoo
rccomin.'nJations wor.- arropt^'d by the Covcrnment of India in tht-ir entirety : and by
the coinage Act of l><99 the 80vor<-i(;n waj« made logal tendor. with the token silver
coins in circulation as unlimited \off\\ tender. Arrangenientn were made for opening
n mint. Rut. soon after, owiii;; mainly to the ho.itility of the flritish treasiiry, the pro-
ject was shelved. It wa^ specifically recommended by the Fowler Committee that
no further coiiinsie of rii|»ees wa-i to be resorted to till gold occupied a predominant
position in circulation. The profit on the further coinag.- of rupees was to be set apart
an a separate fund. The Covernment of India instead of scrupulou-ly adhering to these
recommendations discovered a fruitful source of profit in the further coinage of silver
Ions before gold could be said to have occupied a predominant position in the currency.
Instead of adopting an effei'tive gold stindird. the Oovernmcnt f junl in Mr. Lind-
say's schenie— a .scheme which was carefully examined and rejected by the Fowler Com-
mittee as undesirable and unsound -a remarkably convenient method of regulating
the currencv. It was a startling discovery by which sold could be economised,
the dues of India coulil be settled, ami the gold thus oconoinised could be conveniently
used bv the frovernment. This was the gold c.tchange standanl. which has been in
operation in India ever since that time.

One great advantage which the Governnit-nt of India discovere 1 in the exchang*
standard was the facility with which it could build up from year to year from the pro-
fits of the coinage of silver a reserve in goM. Originally it wjus kept in India; but it w««
.subsecMientlv transferred to London on the ground that in case of an adver*' balance
India would be saved the cost of transmitting gold to London. This rcj^erve is invested
to a farthing in sterling .securities ; and it now amoimts to 10 million i>ounds. Whilst
public opinion in India has been clamouring for an effective gold standard, Government
has continued to abide by the Gold E.xchange Standard in practice, whilst professing to
bolievc in the virtues of the simple gold stamlard. Th\is as late as 1912 the Government
of Imlia wrot^' to the Secretary of State : "It is. we think, an undi-^puted fad that th«
eJttublishment of a gold currency was regarded as the logical and natural sequence of the
closing of the mints to silver aiul the necessary accompaniment of a gold standard. Such
a measure will mark a .step along the path which has been authoritatively aceept<^ M
the line on which our currency must dcvelopc. and in time it will be of great a.ssistance
in maintaining tin* staliility of <iur curi.'>ncy system." Persistent a<;itation in India
li-il the (iovernmenl to apjmint the Chamberlain Commission which rejjorted in 1914.
The Commission delinitely advised the. Government to abandon the idea of an eflectire
gold standard, and sanclitied the then existing gold exehange st^indanl. "To sum up,"
the CommiHsionerM ubsy/ve, "our view is that India neither demands nor re<|uire» gold
coins to anv consiiii-rable extent for purposes of circulation, that the most geuorallj
iuitable ijiedia of iiitiTUil circulation in India are at present rupFi-;) and nutvs, and that
the tlovernmenl should, as oppnrlunity may offer, eiKoimgo noli-s, while providing —
and this is th« cardinal feature <>( the whole at ystem- absolute security (or the coavet-

tibilit.y into sterling of so much of tlie internal cmreucy as may at any moment be
required for the settlement of India's external obli^^ations"'.

Whilst the Chamberlain Commission was thus solemnly endorsing what it then
believed to he the one scientific currency system for India, the war broke out, and led
to the complete break down of the exchanges. India found herself a creditor on an
enormous scale from year to year, and the rate of exchange rose from Is— 4d in 1914
to 2s— 4d in 1919. The enormous obligations of India had to be liquidated ; the C4o-
vernment went on purchasing silver and coining rupees till the price of silver reached
43d an omice. But this easy expedient failed when the piice of silver rose above
43d ; any additional coinage would have involved the Government in heavy losses.
The rate of exchange broke loo ;e from its [r.iil moorings; and l)y special ordinances the
Hduciary portion of the Paper Currency Jleserve which was only 14 crores of rupees be-
fore the war was increased til! it reached nearly lUO crores in 1919. As the backing to
his reserve Government showd investments in British Treasury Bills. In other words
Indian exports during the war to the extent of nearly 7.5 crores of Uujjees which .should
normally have been paid for in gold or in silver were paid for by the i.ssuo of jjaper
money; and the gold that should have come to her was invested in British Treasury
Bills. This was one expedient adopted l)y the Government when the Gold Exchange
Standard broke down. But e^en this was not sufficient to liquidate India's obligations.
The Government of India went to the rescue of the Government of Great Britain by
asking India to make a gilt of £ 1U0,UU0,()00. To this extent India's balance was
reduced. Among.st other expedients to adjust the balance during the war may be
mentioned the is'sue of nickel coins, of one rupee and two and a half rupee uote.3 and
the resort to the "cover system" which compelled every exporter of Indian goods to
find cover for his exports before he was allowed to send his goods abroad.

The complete break down of the foreign exchanges led the Government at the end
of the war to appoint the Babington-Smith Conuuittcs which once again snnct.hed
the Gold exchange standard, but this time at the rate of 2sh to the rupee, instead of the
earlier Is-Jd; but in the same breath that they recommended the gold exchange stan-
dard they also recommended the o],cning of a mint for the coinage of gold. Ihe ratio
was accordinglv altered to 2sh by the coinage Act of 1920. Shortly after the price o
silver fell below 2 shillings; the Government of India endeavoured to mamta.n the legal
rate by the sale of reverse bills. Taking advantage of this situation all those in this
cotmtry who had been unable to remit money during Ihc war tendered rupees to
the Government, at the 2 shilling rate, and bought a claim -m (lie Secretary of State
which the latter met from the hquidated Treasury Bills and other balances of India in
Loudon. This process went on for some time involving Government in a loss of nearly
40 crores of Rupees. At last the Government of India gave up tiie attempt to main-
tain the rate of exchange, on the ground that she was not prepared to fritter away India s
„old resources. Though the legal rate of exchange remains at 2 sh the market rate has
been left to itself and is determined by the volume of currency. The history of the

le

8

foreign oK-Langrs in fli*- las* Ibrce years is a history of the failure of Govrrunient to
iuuiiiluiii lixityof i'.u-liaii;;e by a systi'iu wLicb they have always claimed to be Btieii-
lific.

l)iiririK ihf war Imlia had (.•iiortiioUH balajicos in her favour, hkc thu Unilvd States
of Aiui-riia. Huil Iiuiia Ix'cn a st'lf-goveruiiig couutry, free to euforee her dues, she
eould hke the United States of America, have wiped out her claims on Great Britaiu
by asking Britain to transfer securities held by EngliKhmen in India, as the United
Stattf^ asked (Jreat Britain to mobiliKe American Securities held by Eughshiuen and
truu>-fir tliemto the United States tJovernmenl in exchange for her exi>orts. But the
difference between India and the United States is a difference between a de|H;udent
country and a self-governing, autonomous jwwer ; with the result that whilst the United
States today is in jiossession of (j2"u of the world's gold stock, and financially and in-
iluKtrially a strong nation, India stands today with her finances crijipled, her debt in-
creased and her iiidutitrie8 struggling.

ini; (iOl.U liXCMANfil: STANDARD LXAMIMiD.

laa\in;4 tliis story nf tlic gold e.xelmnge standard aKi<le fur a luuinent, let us exa-
mine the claims that have been made for its Houndn<-ss geni-rally, and sjK'cially in its
application to India. The only economist of reputation who 8Up|K)rtcd the gold
exchange standard before the war was I'rof. Keynes. In his "ludiau Currency and
Finance"' he indicates tlf [undunient:'l principle of a sound Rvstem of currency aa
below. "The currency problem of each country is to eiLSure that they shall run no risk
of being unable to put their hands on international currency when thev need it, and to
waste as small a proportion of llieir resources on holdings and actual gold &b is compa-
tible with this. " So ahso he contends that "a.s long as gold is available for payments of
international indebtedness at an approximately constant rate in terms of the national
currency, it is a matter of comi)arative indifference whether it forms the actual national
currency." It is the same principle that the Uhnnilirrlain t'ommiwion. of which Prof.
Keynes was a member, lays down as the cardinal feature of the gold exchange standard
in Lidia- namely "absolute security for the convertibility into sterling of so much of
tho internal currency an may at any moment be required for the settlement of India's
external obligations." It may be noted however, that so far as India is concerned, this
cardinal feature of the gold I'Xehange standard does not exist, for there is no legal ob-
ligation on the part of the Government of India to convert the rupee into sterling.

If Prof. Keynes is to be taken at his word, the only purpo.sc of a .<$ound currency
is to sei iiri- the fixity of foreign exchange'*, and to |>rovide facilities for payment of foreign
debtH. Now any one who is familiar with the elementary principles of currency knows
that a sound system of currency fulfils certain indispensable objects and satisfies a few
basic needs of economic life. It supplies a standard of values, offers a universally accep-
table ineilium of exchange, serves as a standard for deferred payments and as a store
of values. All these objects can be summarised in the statenient that a sound system
of ctirrency secures relative stability in ilir level of priee,«, or relati\e stability in the

s

purchasing power of the mouetary unit in terms of commodities. In the work to which
we have referred Prof. Keynes makes fixity of foreign exchanges and an adequate pro-
vision to meet foreign obligations the be-all and cud-all of a sound monetary system.
But in his "Tract on Monetary Reform" lii> rightly gives up the earlier view and now
maintains : "Stability of exchange is in the nature of a convenience which adds to the
efficiency and prosperity of those who arc engaged in foreign trade. Stabihty of prices,
on the other hand, is profoundly important for the avoidance of the various evils"
which he describes elsewhere. The one merit that is claimed for the gold exchange
standard is that it secures stability of foreign exchanges, and now Prof. Keynes admits
that this is only a convenience to those engaged in foreign trade and not of intrinsic
importance to the soundness of a monetary system. What is even more startling is
the confession by one on whom Sir Basil Blackett so explicitly relies that the gold
exchange standard is useful in India only to those "who are engaged in foreign trade."
Ho the monetary system of this country exists for the convenience of the
foreign trade. But what about the other [unctions of good money ? Assuming that
the gold exchange standard secures stability of foreign exchanges, does it secure sta-
bility in the internal level of prices ? Prof. Keynes points out himself that internal
tramiaetions arc as important, if not more important than, external transactions in the
economic life of a country ; and il the gold exchange standaid secures stability of foreign
exchanges it leaves out of account altogether a vital portion of tlic economic life of em-
country. •

Is it claimed on behalf of the gold exchange standard that it secures stability in the
internal level of prices ? Nobody can assert this in view of the history of prices in
India between 1900 and 1914, when there was a rise in the i)rice level of a character
which has nothing analogous to it in the history of the price levels of other countries.
Even Prof. Keynes in 1909 (Economic Journal) admits that "a comparison with Sau-
erbeck's index immber for the United Kingdom shows that the change in India is
much greater than can be accounted for by changes occurring elsewhere." In brief
the gold exchange standard makes the whole internal currency inconvertible, with all
the accompanying evils of over-issue and inflation of prices. Prof. Keynes, however,
claims that India has secured, after the war, the advantages of a relatively stable level
of internal prices. In the first place Prof. Keynes himself admits that this was brought
about more jicrhaps by chance than by design. In the second place this relative sta-
bility of prices in India is a misleading statement, as it is the result of a comparison with
countries that had overissued paper money and suffered from violent fluctuations in
price level. And whatever relative stability of price level India possessed during the
years after the war was due to the restriction of currency by the Government with a
view to maintain a higher rate of exchange.

To sum up, the gohl exchange standard sacrifices the fundamental objects of a
sound monetary system to the desire to secure fixity of exchanges. In practice it has
disastrously failed to secure this fixity of the foreign exchanges. It makes the internal

to

oiirrency incoiivcrtiblf, niiJ tluw briiign about instabilitv m tlie intoriuil Iev««l of prices,
through ov<r-is8ue uiiil inilutiun. Thus it ilofi-ats flic ono objwt of a sound mone-
tary sysU'in —namely relative stability in price level. There could be no more trea-
chant oritiiisiu of the gold exchai\<ie nystini »han the verdict of the Cuuliffe C!oiniuitte«
in the final report. "We have found nothin" in flic experiences of the war to falsify
the Icsions of previous experience that the adoption of a currency not convertible at
will into ^old or other exjwrtable cxiin is likely in practice to lead to over-issne and so
to drstroy the measure of exchaiij;eable valu"' and cause a general rise is all prices and
•B adverse movcinent in the fori-jjin exchange."

THt EVILS OP THi; (jOLD EXCHANGE STANDARD IN INDIA.

(1) If wo now turn t) the (iractical operation of th>' ^;iil<I exchange standard in
India we cannot help noticing a few salient fejtnroi of th>' «jrttetn, and their adverie
effects on the welfare of this country. In thf first i>l.ice under this system the rupee
has been reduced to the position of an inconvertible note printed on silver ; the printing
of these notes is at the discretion of the government, and it is well known that the
Government of India w.'Ut on cuiniii^ rupees bjiweeii IIXJII and l'.«>5 irr-'spective of all
considerations of the actual demand for monej. Every student of economics
knows that the one danger of inconvertible fiat monev is over- issue ; and the Govern-
ment of India have \-ieldcd to this temptation like any other hnman p;overnment. Thu
one tangible proof of the over-issue of our rupee rurrencv is to l>e found in Ih' conti-
nuous rise in the level of prices in India from \'JV() to our own days, whilst the Ifvel rf
prices in the rest of the civilised world remained comparatively stesdy. If the belligerent
countries found themselves faced with abnormil ttuctuaiions in the period of the war,
the jx-riod that has followed has been markel by an i-.ijually noticeable downward ten-
dency in those countries. The reasons for this inflation of prices in India are obvious.
The additions to the rupee curreucy made from time to lime owing to the nurmalij
favourable balance of trad'- are incapable of being withdrawn ; the rupee currency ad-
mits of e.vpansion but not of contraction. The rupee does not permit of being melted;
people will not hoard it. because its value is arbitrary : and it has no use as a coin for
export. Wherea-i undrr an automatic HVslem of currency with an ofx-n mint and a
standard com there is a mechanism for the expansion and contraciion of currency
according to the needs of commerce, under the gold exchange sy.iti-ni their iji ample
pro\-ision for expansion, but not for contraction.

(-) .\s a result of this one side Iness of the currency mechaiiiiiii. »r lind th< « lureiu v
inelastic and incapable of readily responding to the <leinands of the market. In a coun-
try like India where- there is ,i m-asonal demand for currency, and hanking facilities
are either unknown or undev.doped. the eviU of an inelantic curreiuv are accentuated
by a system which makes the exp.insion of nirr<Muy di'p.iid ex<ln»ivelv on the s«,et
will of the GoviTiiinent. which it ii.it in Muih wiili ihe d.iv i^.div r.i|iiirement>< of ili.-
oomniirrial coniinunity. This inil.ivli.il v is indiciird by the violent lliictu.itiuns in
the bank rat« lU between dill.r. nt iii.iiiili. <.| il,,' v.«r. A .studv of th-.se fluctuation-

11

dftring the last thirty r«ar« is a SHilicient condemnatioa nf a monetary systPin, whose
Biaiii parpose (•.in ouly be to supply money to the people when they want it ; and the
!tit«l Rtrikiiij: illustration of the want, of elasticity of our currency wan ulYonled during
tk« early monlhs of thin veur »-|ieii the rati' of disi'ouiit rose from 5 to 8"^ at a time
when the country had an onf-itindiiic; hilance of sever.il crores of rupees in her favour
from week to week.

(3) Thirdly, the liistorv of recent fluctuations in the foreign exclianwe.s has been a bi^i-
tory of heavT deficits in the Government of India hud!Te''i, owing to the discrepancies
between the calculated rate of exchange and the actual inirket rate. Thp.^e. deficits
kave amounted to 90 crores of rupei>s during three yearv and n considerablo portion
of, these deficits was due to loss iu erchange. A measure which was primarily
devised for giving stability to the Indian budget and eliminating the element of uncer-
tainty due to exchange fluctuations has after thirty yearis been attenleil by the same
ttncert^iunties and losses.

(•1) la the fourth place the main ostensible purpose of the gold exchange standard
i« to stabilise the rate of exchange ; the mechanism by which this is efleeted is the
sale of Council Bills by the >Secretary of St^ite to an unlimited extent in normal times
when the balance is in favour of India, and by the sale of reverse bills in exceptional years
when the balance turns against India. There was no fear of exchange falling below ls-4d,
as long as India had a favourable balance, and the price of silver below 4.3d. But it must
b« remembered that it is always profitable to the Secretary of State to go on selling
Council Bills to an unUmited extent to meet the demands of trade and increasing the
profits on the coinage of rupee-s. But it is not e<]ually jjrofitable for the Government of
India to sell reyerse bills in case of an unfavourable balance, as this involves a deple-
tifin of the gold reserve in London. Thus the mechanism by which under the gold
exchange standard stabilisation of exchanges is sought to be achieved has broken down
whenever rt. has been seriously tested. If the mechanism worked smoothly for so many
years, it was because the balance of trade was almost always in favour of India. The
mechanism for stabilising exchanges can only be effective, if there is a legal obligation
«n the Government of India to convert rupeea into gold. So long as this legal obliga-
tiou does not exist, the mechanism Ls one-sided and can never bo effective. We must
never lose sight of the fact that «o long as this legal obligation does not exist in India,
the present currency aystenv of India is not even a gold exchange standard strictly so
called. It is a hybrid mechanism specially adapted to suit the convenience of
th«se engaged in foreign trade in liquidating India's dues, and not even ft "scientific"
gold exchange standard.

(g) But this mongrel gold exchange standard has not merely a convenience for
thos« engaged in foreign trade : the attachment of the Government of India to this
beloved child which has now grown up into a well-built youth is founded on emotions
el a more subtle type, which cam? into existence long after the closure of the mints

12

in 1893. The Fowler Coiniuiilee in 1899 emphntirally pronouncod itsolf in favour of
introducing u gold Hlnn<lard ; the Ouvorninoiit of India honestly accepted therecom-
nieiidiition, and the Act of 1899 was evidence of ihejr intentions. It waH only after
the project of a mint was shelved, and when the piiK.tibiiities of building up a liirg*
gold reserve out of the profits of coinage ivore revealed, that the thxircticiil advant*-
gM of the gold exchange standard first dawned on the mind of the tlovcrninent. The
fundarnentiil advant.i'jc of such a sy.sti-m was that arisini^ from l!i.' location of the
gold ri'.scrve in l/)ndon. The gold in the gold reserve Fund in London could be caiiily
invested in Sterling securities thus ea.sing the London market and .strengthening the
centriili.sed gold reserve of the Bank of England. Appreciating these advantages the
Chamberlain Commission in 191 1 gave a .scientific apologia for th.- prevalent sv.steni.
One can well understand the ch])tli of affection for the .system on ilie part of Govern-
ment when one remembers I hat the Hold Reserve Fund now amounts to more than
£40,0(K1,(X<() in addition to the cash balances of the Secretary of Slate and the sU-rling
investments of the Paper (. urrency Reserve -all amounting to iiearlv £70,00(1,000. The
location of £70,00<),(XJ(J in London may be an immense advantage to England where
the centralised liquid resources of the Bank of England do not exceed £150,000,000.
What is, however, to the advantage of th.- London money market, is not necessarily
to the advantage of this country. Gold does not, like the things of the spirit, mulliplv
by being shared ; and the gold that is kept in London is lost to India. If the currency
system of India is devised primarily for the needs of India, then no system could be
clumsier than the present for the satisfaction of those n.-eds. For, India under the
system is deprived of that immense .juanlity of gold which if it w.re kept in the countrv
would sutHceto build up a credit structure .sound and .secure, for the floating of her
industri.'s. for the develojmient of her trade and for the relief of agricultural indebtwl-
ness which is so largely responsible for the backwardness of the countrv. And vet a
system that hami.ers the economic and indastri.il life of the countrv 1^ ii..|,i upas th--
only sound monetary system for this countrv.

But it has been urged that the gold reserve should be located in London, because
in case of an adverse balance India will require gold in Lond.>n ; London is the clearing
liouse of the world ; and gold in Lr.ndon means saving freight chari-es. and interest'
and payment on sjwt. This case for the location of the reserve in London is nowhere
so clearly put as in a speech delivered by Sir Basil Blackeft in December 192.3: "For
foreign debts must be pai.l in international curreitcy. If India is called upon to nie-i
her in.iebtedness at a tin.e when she is unable to provide goods in sufTieient .piantitv
or in sulTiciently short time to satisfy her ere lif.r.s. she must find c .sh at short notice
-Normally, an adverse balance could be met by borrowing cash : but borrowing .nbroad
m not desirable in it.elf. an.l in a .r.sis may become impossible. It is. therefore neces-
•ary to keep reserves of rea.ly cad. f.,r the purpose. I, j, essential tb.u „ur extern.!
rcMtve^ should be available in c:,se .,f ne.nl without .leh.y at an iniern...>,.nHl finatKiaJ
.■entr«."

In the first, plaoft India is normally not a debtor, hnt a creditor country. She har.
to receive, and not to pay gold. Even if there is an adver.?e balance it can be adjusted
by the operations of the bank rate or by the floatation of a temporary loan abroad. If
these expedients fail, gold may be shi])ped abroad to meet jicr forciu;!! obligatioiiH. But
it may be urged that India has to pay every year home charges to the extent of nearly
£30,000,000 and in case of an adverse balance there will be difficulty in the adjustment
of accounts as India has a silver currency. Normally tlie home charges are met by the
export of ponunodities covered by the Stjcrel.ir}' of State's Bills ; and th(>so (Council Bills
are sold all throughout the year. In any case the balance of dues may be met by the
shipment of gold in the last resort. One might ask Sir Basil how many countries, which
do not compare so favourably with India in the matter of their international indebted-
ness, keep their reserves at an international financial centre? What would Sir Basil
Blackett and the Bank of England say if it was proposed that the gold reserves now
in the Bank of England should be transferred to New York to secure the solvency of
Great Britain in the international market ? Well might an eminent economist of the
type of Prof. Cannan observe, "The possibility of a gold exchange system being perver-
ted to suit some corrupt purpose is very considerably greater than the possibility of
the simple gold standard being so perverted."

ARGUMENTS AGAINST THE USE OF GOLD.

The Chamberlain Commission in defending the gold exchange standard urges that
gold will be hoarded in a country like India and will not be available for .shipment in a
crisis, that India is too poor a country to have such a luxury as a gold currency, that
India is a land of small transactions and that gold in circulation is wasteful.

If by "gold in circulation" the Chamberlain Commission meant that every transac-
tion was to be settled in gold, no economist will ever favour the use of gold. Every
one now recognises that notes and cheques increasingl)- take the place of gold in the
settlement of by far the larger number of commercial transactions. A gold standard with
a gold currency docs not mean any such absiu'dity as that every tran.saction .should be
settled in gold. But if tJie Commission mean that no gold at all is to be used as the
basis of a currency system, and that any amount of gold is wasteful, however small,
that is a position which we have already controverted when pleading for convertibihty.
On the contrary, as Sir James Begbie observe i in his not-,^ attached to the Chamberlain
Commission Report, the present .sy.stem of currency tends to drive gold out of circulation,
makes people hoard gold because there is no guarantee of converting token coins
into gold when necessary. ''The token currency not only prevents the holders of tha
o-oM ffoiu utilising it to some advantage, but the country as a whole loses the benefit
that should accrue bo it from the jj.issession of great w.'slth. . . . If therefore the gold
held in India is to be attracted into useful enploymsnt, it can. I think, be done only
by providing security that when if. is inveU^d the investments will continu.- to repre-
sent "old and be convertible into gold, by me.uia of a gold currency policy in which the
public will havii confidence."

u

A* (or the argument ili.it gold will not l>r MvaiUlil)- I't ilii|)iiiriit in tiiii<'« o( h»-
oMsity, on account <i( tlw lioiiniin^ llil^>il^ <•( tin- |>cinjlo, wo liavt- tli>' r^-i-t-nt (xprrieu<-»
of the frco outflow nf j;ol.| in lli.- (•.xt>-iit «( lu-aily i;l<(,t.Kitt,(Mi. from a i-ounlry whii)i
lias neither a f;ol>l curri'iirv nor a coiitralJHpd national rciwrv in thr country itself.
This gold could only Imvc com.- from tlit" cofT<Ts of the p<'0|i|p and tlierr can h>- no mora
effective reply to the fonrH of those who siiy th.n ;jold will not he availalile for export.

If India is a country of Kninll transactlonH all that iK n<*cesuary i^ tb« provi«iou of
A lampr volume of subt-idiary tolicii coiiin. and the raisins; of the Ifjiul i.-iider limit of the
token coin to a hijjher level than oht.iins in other conntriei*.

If to hoard gold in a iriiijf. India linJn bernelf in good company, in the luited
States of America. In the next place- if iiKlia is too poor to use gold (oina, there can ba
no possibility of h.r hoarding them. Kveu if she doeK 1 oard. this is a conseijuenctr «(
the ^old exchange .standard, and not a rea.son for introducing it. 'I'he remedy af^aiust
hoarding i.s restoration of pnMic confideme by the introduction of * gohl currency.
India get* her gold as her <lii>.s for exjjoris ; she can do .*hat .ihe likes with her own:
and no one can question her in the use of her property. The reason why India haii a
silver currency today and not a gold currency has luen suggeKti-il by I'rof. C'annau whru
he observes "Europeans like it (gohl) so well that iht-y cannot bear to part with any
of it."

THr ONLY SOIND WOM-TARV l'(H IC\ Ktk IM»i A.

The only sound monetary puliiv fur the novernment of India from 18it3 waa the
introduction of a gold standard and < uireiicy. Tlie balance of trade i« normally in
favour of India from year lo year: intiia cm therefore like the Unit<-.1 Stati-s of Ame-
rica demand the import of immense (|niinlities of the precious metals, if her foreign ex-
changes were left to themselves. These might be made the basis of an effective gold
standard securing the stabilisation of price level su vital not only to India but to tli<i
civilisi^l world. With a free market for gohl, and the free import aiicl export of tho
metnl, India would be in a position to save the rest of the world from tho atji^'nalion
and d<>])resHion that now threaten it— firstly in ho far as auub a fren market would releaaa
for circulation the amounts hitherto hoarded or kept back from monetary uae, aud
(MTondlv in so far as on the basis of a gold reserve in the country a credit super-it ructur*
on a larger scale ntiglil be erected to stimulate trade ami industries, to promote agricul-
tiu-al production, and to quicken the |>roceH« of ec^onninic development. The greatest eco-
nomic need of India to-dny is cai)it.al ; and if India had the gold standard which her
foreign rulers have not yet given her this gohl would be used for the creation of cre<ii«
both int.-rmilly and ext.Tnally. enabling the country to buy from abroad the techniqn*
and the equipment necessary for her industrial ilevelopment and also enabling her
to relieve her agricultural |Kqiulation from Ihe iuculiUK .d iudebtBdne»». Th» econoiui»
prosp.-rity of India m.-ans today the prosperity of the Kuropean count ues. Thtf tru«
rsm.-dy (or uneniplorm.-nt in (ireat Britain does not lie to much in the ahortsightrii

IS

policy of using Indian gold for fostering nidu-itrial enterprise at home without the <Tua-
ranteea of a ready market abroad, as in giving to India the gold lurrency for which
8b« has been clamouring ,so long— a policy which hv stinnihiting Indian economic life
will increasi! th*" purchasing pjwor of the people and create a demand for lingUsh com-
moditicB. There in nothing so tragical in tiie economic history of India as this short-
sighted policy of her rulers which has made them sacrifice the most elcuientary axioms
of economic science in the desire to regulate foreign exchanges, in the desire to raise the
rate of exchange to la— 4d and even higher. There could be no more eflfective method
of killing economic enterprise, of smothering trade than the currency policy of our
rulers and it is ju.st this method that the rulers pride themselves on having devised
as " a scientific " policy. Ex n as late as May irj21 tlie Undersecretary of State for
India in reply to a question mide a .statement whi'-li is either meaningless or mis-
leading. He observed that '"while effective restoration of the gold standard w.n the
objective of Government pnlii\-, economic conditions throughout the world had not yet
reached the degree of normali'y which wouM justify at present an attempt to slabilise
the gold value of the rupee."

If the phrase "effective restoration of the goM standard ' has a precise moaning
it is that of giving to India a ','old standard with convertibility of all substitutes into the
standard metal ; and yet it only means stabilising the gold value of th^' rupee, — a per-
sistence in that fatal jjolicy of regulating the exchanges which has repeatedly broken
down in the past. But. «lmt i.s still more tragic for India, is that in so far as this policy
has succeeded, it has throttled the very sources of economic prosperity by violent fluc-
tuations in the }iriee level and bv drving up the fountain of credit.

The Gold Exchange Standard has been tried and failed. Economic thought and
policy alike have pronounced themselves definitely in favour of the gold standard. The
restoration of the gold standard is regarded as the most pressing of economic measures
for the restoration of world prosperity. ]n<lio by her position as a creditor country
can command nmeh more gold than she would require for the c.-stablishment of un effec-
tive gold standard. The present time is exceedingly opportune for the purpose, with a
favourable balance and the steady and increasing world demand for India's food produce
and raw materials. Instead of doing the one thing so vital to her prosperity, — giving
an effective gold standard to the country,— the Government of India resort to the short-
sighted, ill advised measure of limiting the volume of currency with a view to pushing
•till further the rate of exchange. With a favourable balance and limitation of the vo-
lume of currency, any rate of exchange can be artificially achieved and maintained. But
»uch an achievement can be l)rought about only at the cost of all other factors of healthy
economic hfe ;— it has meant, and can only mean the prolongation of trade depression,
of unemployment and st<irvation. of tliat monetary .stringency which is so fatal to the
rise and development of industries in a country lacking in banking facilities and orga-
nisation of credit. Tlie Government of India are fond of constantly reiterating their
paternal interest in the development of the material resources of the country and their

16

concern in foslorin;; ln-r industrial welfare ; they point to their readiness of late to give
up their traditions of fr..> (ra'lo und 1^) endorse a ]iolicy of protntion I'v import duties
of key industries. Bui ;<!! litllc of protection 18 nieaningh-sM, and all ini|'ort duties are
futile, in |.»n;; M with a fav.(uralil«- Inidn l)alanep tjiift country is arti(i< ialiy eubje<jted
to audi iiHin.tarv K(riii">niv :ik !•! indicat'-d by a bunk rate of 7 to «"„ for mouthi to-
gether.

If tlir monetary policy of India is to be managed by her foreign rulers, thU country
is entitled to the claim that it should be managed primarily with a \ iew to her own in-
terests ; this policy for the last thirty years has, however, been managed ostensibly
with the sinylu object of stabilising the rate of exchange : the jirimary function of sta-
bilising price level lias been ignored, with the result that her trade, her industries, her
agriculture,— her economic life in general has been throttled, the sources of her life blood
are drii'd up; instead of having an automatic machinery which would secure the expan-
sion and contraction of the volume of currency according to her needs slie finds herself
at the mercies of a Govenmieut that starves the country of its niouctarv requirements,
for the sake of regulating the rate of exchange.

The (jiovernment of Iiidiii still persist in the worn nut, discredited, fatal policy of
stabilising the exchang.s. f>ir Basil Bluckclt spoke in IJoc-mber lifJo of "our aim"
being 'to reach a gold stitii.l.iid lor tin Uiipce. " The I'lider Secretarc of .State for
India in May 15(24 conlirms this intentimi of the tiovernuic!! "lo stabilise the gold value
of the Rupee". In July IDil Sir Basil Blackett said : 'Our policy is to reach Is— 4d
gold at the carlie.sl pos.sible moment.'' The tioveriiiii>iit of Ir.dia are more out-s|xjkcn
in favour of the Clold Exchange Standard than they ever were before The question
is once more brought to the fore by the Bills that stand in the name ol Sir I'urshotamdas
Thakordas ; and those friends of India who sec the economic salvation of their country
only in the adoption of a gold standard pure and siiii|>le are faced with the alternatives
■' nnw iir iieviT .''

r. A. WAUIA,
G. N. JOSHI.

*For the information of .Sir I'urshotamdas and Ih'- Indiiui Mcrchant.-i Chamber and
other Chambers a-l ho: we nuote the follo\riiig resolution (lasj-cd by the Brussels Mone-
tary Uonfcrence :

■'Attem )ta to limit lluctualion.s in exchange by impo.sing artiticial control on ex-
change operations are futile and mischievous. In so far as they are eUcclive they fal-
sify the market, t<Tnd to remove natural correctives to such fluctuations and iuterfere
with free duiiling:t in forward .■xchaii;;c which are so necessary to enable traders to cil-
iiiinatc from tlirir rakulalioiiN a margin to cover risk of exchange, wliicii would other-
wisu contribute to the rih.- in prircs. .Moreover all (iovernmeiit interference with
trade, including Kx<'liaiigf, tends to impede that improvement of the economic condi-
tions ol a country by which alone a healtliy and stable exchange can be seuured."

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