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York overshadows to-day all others in importance. If gold were purchased in both countries against the issue of 'Goschen notes,' and if these were circulated, as Mr. Goschen thought possible, to a maximum of a pound per capita, a 'war-chest' in Washington of five hundred million dollars of un-earmarked gold, and in London of forty million sovereigns, might go far to protect the two communities against extreme speculative excesses. The silver purchased to secure these notes, even were the purchases spread over the next fifteen years, would amount to nearly a thousand million ounces, and under conditions of such demand the rates of exchange with Asia would be restored presently to something like their old gold point." The early purchases of the half-sovereign would be with a note for ten shillings; the silver in a shilling being now worth only fourpence, the half-sovereign would cost three-and-fourpence. But I have come to see, both at Washington and Westminster, that this measure of safety for trade and finance is quite past praying for. In England the bankers will never agree with the merchants; while in America, I am told on all hands, that no Secretary of the Treasury could withstand the determination of Wall Street to raid the new cash reserve. But both in America and in England, and particularly, I am assured, in Germany, there is a rapidly growing recognition of the disaster which has followed the silver slump of 1907-8, and in both countries, or in all three, it would now be possible to attract the public ear if the proposed small note currency would both liquidate the cost of some great national undertaking, giving a huge profit to the revenue, and at the same time patch up the rate of Eastern exchange, and so stimulate our export trades as to bring back employment to our workers. Such great national undertakings there are at the present time: in England oldage pensions, and in America the Panama Canal. If we earmarked the profits of the proposed small note issues as to which there are no economic objections,' for these national objects, their carriage, both in Great Britain and America, would seem a national duty. The pension payments lend themselves perfectly to the proposed note currency; they cannot be paid in standard money, and if the Treasury were to issue to the post-offices throughout the country' crown notes the public convenience would be subserved, and the profit at the present price of silver would be the entire difference between twentythree and a half pence and sixty-six pence on each five-shilling pension paid. The profit is so enormous that the note issue should be treated very liberally. It should be a beautiful note, and should be burned, never reissued. To enlarge the field of currency for these notes the halfsovereigns, wasteful coins with a large friction surface, should be

"In 1907 the Government of India purchased eighty million ounces of silver out of a total production of 150 million ounces, of which the silversmiths take fifty; but in 1908 that Government purchased a merely nominal amount, and silver accordingly fell more than 8d. an ounce.

10 The mint issue price is 66 pence per ounce.

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gradually collected as they come into the post-offices; and it might be well also to reduce the pound note issues in Scotland and Ireland, in this way creating a void, to be filled by the crown notes. Probably in a few years the custom would obtain, as in every other country enjoying a small-paper currency, of carrying more crown notes and less gold; thus much of the gold now in our pockets and tills would gravitate to the bank reserves, which was the chief aim of Mr. Goschen's proposal.

I hope the reader follows that the proposed notes are not legal tenders; that they in no respect differ from sixpences, shillings, or halfcrowns; that sixpences, shillings, and half-crowns already circulate at a value 150 per cent. higher than their metal value and to the amount of some twenty-five millions sterling; and that the only reason the Mint does not coin more small change is, that the people will not overweight their pockets. Not only, then, are there no economic objections to this most profitable note issue, but there are great incidental advantages: it would be very convenient for remittance, saving bankers the annoyance of myriads of very small cheques and their ledger and pass-book entries, while taking the place of small money orders, and thus saving the time of the public and of the Post Office staff; again, to the extent they increased the gold reserves, so also would they increase the loanable capital, and thus the profits of the banks. In times of crisis and panic, too, a large volume of this currency, unlike gold not exportable, but remaining in the pockets and tills of the citizens, would do money's work, when gold had gone into hiding. Had the United States in the panic of 1907 possessed five hundred million dollars of these fractional currency notes her sufferings would have been greatly mitigated, and her drain on our gold reduced.

In the preparation of this paper the chief difficulty remains, and I propose to shirk it, to the extremest limit possible. That is the more perfect way for one who, like the writer, regards the work of England in India as perhaps civilisation's brightest page of all.

But there has been a blunder, amounting to one of the great accidents of history, and its consequences both to China and India, and also to the West, have been monumental. I refer, of course, to the closing of the mints and the establishment in India of a so-called 'gold standard.'

If the Goschen plan' was workable without reference to the present managed' currency of India I would omit all reference to India; but the first effect of silver purchases by two great nations, or three, on the scale contemplated would be to bring silver sharply to forty-three pence an ounce, at which point the artificial rupee of the Government of India goes to the melting-pot. The Secretary of State for India dominates Eastern exchange from the Victoria Nyanza to Vladivostock, from Borneo to the 'Roof of the World'; never was such an autocracy as his. And if he still sells his rupee bills for sixteenpence, then, when silver has touched forty-three pence

per ounce, by no conceivable means can silver rise farther, or the rates of exchange with China advance beyond that point. That is an axiom of exchange to-day. But if he will agree to reopen India's mints when the bullion price of silver reaches forty-three pence, then it becomes worth while to persevere through that sad and sun-baked desert, which may yet lead to the green oasis of higher exchanges with all Asia.

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At Washington a Monetary Commission is in session. Since our Bullion Committee reported early in the last century no body of men have been freighted with a greater responsibility. But this Western Commission is in the matter of silver absolutely at the mercy of the Government of India. What will Calcutta do should the metal content of the rupee equal its rate of exchange? Is it possible to procure through the Indian Government some reply to this question? Because we are quite certain to meet an almost insuperable obstacle in the attitude of that Government, and at the very outset of our inquiry.' With these words Senator Teller, the Nestor of that Commission, concluded a letter to me last October. Recall that in 1897 the Governments of the United States and France had, by the mouth of the Wolcott Commission, asked this same question of the Government of India. It was no bimetallic pact, as some people were led to suppose. France said to India: We admitted silver to free coinage before 1873, and you before 1893; will you do it again if we do?' The other points in the proposal were mere surplusage, matters to concede. The two great republics had said: 'We recognise that for you, India, to revert to open mints and free automatic exchange singlehanded would be difficult, and resumption is always painful; but will you do the honest thing by your people, and again coin any 180 grains of silver for bearer into a rupee if we jointly intercept the load of arriving silver by opening our mints to all comers?' Such was the offer of the republics. It said to India, Can we assist you back to the paths of honest money? All white workers are concerned to secure a rise in the rates of exchange with China. In tampering with your currency you have tampered no less with that of the Philippines, China, and Cochin China, and you have frightfully subsidised a competition which alarms us the competition of the Mongolian ant-heap in our markets. Will you, who belong to the polity of Locke and Newton, to the homeland of honest money, come back into the fold if we make the gate easier of access?' Such was the proposal of the republics. The courage of it! The comity of it! And the reply was the reply the world has been familiar with in the years gone by in the mouth of the Treasurer of some bankrupt South American State. We dare not have recourse to honest money,' says the River Plate, 'for how should we export our wheat?' Or our coffee or rubber?' says Brazil. And over the signatures Elgin,' George White,'' James Westland,' the civilised world read the reply

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with amazement: No honest rupee for India; the rise in exchange would kill our export trades.'11 Such is the official view of free exchange for India. India's export trades live because of an inconvertible token currency; she is to continue to buy ninepennyworth of silver, coin it, and call it sixteen pence. We will sell in two financial years, 1906 and 1907, over four hundred millions of these assignats; we will make such a profit by selling them to our people that we shall have no more revenue difficulties.' Such is the dispatch made memorable by a British Viceroy's autograph. But why, Burra Lord Sahib, pay ninepence for silver, and call it a rupee, and sell it for sixteen pence a mere profit of sevenpence? Why not buy tons of lead, and stamp them, and sell lead rupees at your rating? What point is there in a full legal-tender coin unless it is meltable, and is thus the money of exchange, the money that assists to keep its country on the same price level as its neighbours? Why be at the expense of silver when lead will do? It cannot be to secure a trickster's confidence in dealing with three hundred millions of our wards, nearly 90 per cent. illiterate. Forced elevation of the value of money is fraudulent bankruptcy,' so wrote Jeremy Bentham, dear to Radicals. When in May 1898 it had become evident that the gold standard might be imposed, Sir Robert Giffen concluded a letter to the Times with these memorable words:

The highest political issues are also involved. One of the most dangerous things for a Government to do is to tamper with the people's money. Is it certain that the Indian Government can go on long with its present ideas regarding money without producing the gravest complications in the government of India itself?

Let me get away from this very dangerous ground, from the famine-breeding rupee,' from the rupee which, although now depreciating by reason of the inflations of 1906 and 1907, yet costs nearly two tolas instead of one tola, with all the 'little loaf' consequences in time of famine. We had better turn down that page. But let any intending official apologist just ponder first on those words before coming to the defence of the gold standard. It is greatly to be desired that the issue shall never be argued in print. But the official ignorance in high places which led to it-this is matter for fair comment.

Announcing the gold standard for India in the House of Commons, Lord George Hamilton said (Times, 19th of May 1898):

...

Believer as I am in bimetallism, having been a convert twenty-five years ago, I had a good deal to do with the organisation which has since developed itself. . . . What is the plea upon which bimetallists have appealed to the working classes of this country? Is it not that the constant fall in the price of silver raises prices in those countries where silver is the standard, and that in consequence an impetus and bounty is given to the export trade ? Everyone who exports produce from India likes a falling rupee, for the reason that it raises prices.

"Simla, 16th of September 1897, C. 8667.

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VOL. LXV-No. 386

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It would hardly be possible to pack more valuable misinformation' into half a dozen lines. At the time Lord George spoke all the official index numbers' issued by his Department show (1) that rupee prices were lower than in 1873; 12 (2) that this is the cause of the impetus and bounty; (3) that just as nothing stimulates a country's exports like a fall in its prices, so nothing checks them like a rise. These points are the mere alphabet of exchange, and yet they are beyond the ken of a statesman who has since left his party because of economic doubts. Well did Mr. Gibbs entitle his Bimetallic Primer 'A Book for Babes and M.P.s.'

Let us now watch our Alice at work in that Indian Wonderland. Sir James Westland, perfectly in the twilight as to currency questions, allowed himself, not unnaturally, to be controlled by certain civilian influences. The rupee had fallen because of the closing of the mints to a fraction over a shilling; how were his commercial advisers, after a life of prosperous export trading fostered by shrinking exchange, to return home bringing their sheaves with them? Clearly a few years of a gold standard was the remedy, and then let some other fellow 'carry the baby.' Melt up the rupee currency, sell it for gold, India's prices will fall; thus you will both create a currency vacuum and also increase her balance of trade; to take the place of the melted rupees and to liquidate the trade balances sovereigns will rush in. Such was the policy. So the word went out to official India to declare the Indian currency redundant '-a nice mouth-filling word, like unto Diana of Ephesus. The sign, and the only sign, of a redundant currency (the sign in India to-day) is a rise of prices, whereas all the official ' index numbers' in 1898 showed that prices were falling. Manchester was to be 'squared' by an artificially high exchange (an exchange to-day 90 per cent. higher than the bullion point); this would protect her cottons from the general fall of prices at hand. It would have been well for Lord George had he pondered the magnificent reply of the Treasury in November 1879 to a previous appeal from the Government of India to permit a gold standard; the reply should be printed in letters of gold on the walls of the India Office:

It appears, too, that the Government of India, in making the present proposal, lay themselves open to the same criticisms as are made upon Governments which have depreciated their currencies. In general, the object of such Governments has been to diminish the amount they have to pay to their creditors. In the present case the object of the Indian Government appears to be to increase the amount they have to receive from their taxpayers.

My Lords fail to see any real difference in the character of the two transactions. . . . The Government scheme may relieve the Indian Governme... and others who desire to remit money to England, but this relief will be given at the expense of the Indian taxpayer, and with the effect of increasing every deb due by ryc ́s to moneylenders.

12 See B 253, 261, 26.

ok, Prices and Wages in India, 1907, pp. 147-155, 218-239, 252,

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