undefined interval of disaster and ruin, a certain new stability of standard established upon the sole gold or sole silver basis, might be attained, but even then such stability, based on one metal only, must inevitably be wholly inferior to that based upon the two metals in correlation, because the compensating influence would be absent, and every fluctuation would operate upon a much smaller volume of material.*

It was believed that if America, France and India were to unite in an international monetary agreement, the desired reform might be effectually and permanently accomplished.

Sir John Strachey, then Financial Member, estimated the loss to the Government of India at £2,500,000 a year, but considered the present loss insignificant in comparison with the future damages to which India was exposed.

The Viceroy expressed the opinion that it would be of unquestionable and quite incalculable financial benefit to India to enter into a monetary convention with France, America and Germany for the common adoption of a bimetallic standard.

In 1881 the Monetary Conference again met at Paris. The British delegate explained that his government would not enter the conference as supporters of the principle of the double standard, and that his instructions had been to furnish all information that might be required, but did not permit him to vote.

* The manner in which demand fixes the relative value is as follows: Under the law of the double standard those who have to make any payment have the choice of metal-in other words they are the persons who give rise to a demand for either metal. Of course they will not be so foolish as to select the dearer metal or that which costs the most. They naturally select the cheaper metal to satisfy their obligations. In other words the demand sets in for that metal which is below the ratio and falls off for that which is above the ratio, however small the difference may be. With the demand the cheaper metal rises in price and with a cessation of demand the price of the dearer metal falls—the tendency in each metal being constantly to approach the ratio which has been fixed as legal tender. It is impossible that it should be otherwise and this automatic adjustment is extremely sensitive; for the slightest divergence is carefully watched by bullion brokers all over the world. It is not therefore the law which fixes the price; it simply fixes the ratio of legal tender, and when this is fixed, the demand keeps the equilibrium at that ratio as surely as water finds its own level.

There was a general consensus of opinion that the rehabilitation of silver was necessary, some of the delegates believing that time only was required for matters to right themselves, while the bimetallist members were of opinion that the situation would pass from bad to worse in default of a return to the double standard which existed before 1873.

The delegates of Great Britain were authorized, if necessary, to agree that, for a period not exceeding ten years, the Government of India would not suspend the free coinage of silver, and that one-fifth of the metallic reserve of the Bank of England should consist of silver, only, however, on condition of the formation of an international agreement by the other powers on a bimetallic basis at the old ratio of 1 of gold to 15% of silver, thus desiring to impose upon the shoulders of the other nations a risk of which the British Government was unwilling to take its fair share.

The Paris Conference adjourned without arriving at any definite conclusion and did not meet again.

The Indian delegates, Lord Reay and Sir Louis Malet, in reporting on the proceedings, stated that between 1871 and 1881 the "limping" standard had been generally adopted in Europe and the United States; that the population of States using a gold standard had nearly quadrupled; that the foreign trade using a gold standard had nearly trebled; that the disturbance in the relative value of gold and silver was due to an appreciation of gold;* that the rupee in India had apparently retained its former value and that with a

*It is a very common fallacy in England to attribute the fall in gold prices to improved manufacture, production and transport; but it is absurd to suppose that these causes should affect in so marked a manner one standard of value (gold), and yet leave the other (silver, which is the standard of two-thirds of the world) unaffected; for though gold prices have fallen heavily, silver prices have remained very steady throughout the world. Moreover, these alleged causes have been in continuous operation during the greater part of the century, and therefore the fall of prices, if due to such causes, should have been spread gradually over the whole period subjected to such influences; but, on the contrary, both gold and silver prices have risen considerably during the fifteen years preceding 1873, and were steadily rising. It was only after 1873 that gold prices suddenly fell to an extent that has been perfectly appalling. The accompanying diagram (No. 1) shows this

YEAR

balance of trade always so large in her favor there was every reason to believe that by adopting the gold standard and suspending the coinage of silver she could, in a few years, obtain a supply of gold sufficient for the purposes of currency, but such a policy would aggravate appreciably the scarcity of gold, and on this account was to be deprecated.

In January, 1886, the question had assumed so serious an aspect that the Government of India expressed the opinion that the interests of India "imperatively demanded that determined efforts should be made to settle the silver question by international agreement," urging that "they did not, and could not, admit that the fluctuation in the relative value of gold and silver was beyond control, or that it was impossible by international agreement to confine their fluctuations within the limits that prevailed up to 1873"; that “if it were possible to secure a stable ratio between gold and very clearly, and the wonderful coincidence between the fall of silver and that of commodities (both measured by gold) is too close to have been accidental.

FLUCTUATION IN THE PRICES OF Silver & CommoDITIES

MEASURED BY GOLD.

Commodities based on Soet beers Index Nos of 100

Hamburg Articles & 14 of British export.
Prices of 1873-Zero

10

15

The

Söetbeers Index Nos do not extend beyond 1890. The Diagram is
completed from the Economist' Index Nos

diagonal dotted line indicates the direction which prices should have taken if the fall had been due to these alleged causes.]

The other diagram completely disproves the fallacy that over-production has been the cause of the appreciation of gold. It shows that whilst production of

silver, a serious responsibility would rest on the Government of India and the Home Government if they were to neglect any measures to bring about this result"; that the position in which they were placed by the fluctuation of exchangewas "intolerable"; that any further progress in substituting gold for silver would be productive of widespread injury, which would increase in magnitude the further the process was carried; that the establishment of a fixed ratio between gold and silver was not beyond the possibility of human control and that there was strong justification for taking the

commodities has increased in a remarkably steady manner between 1860 and 1892, the tendency of gold prior to 1873 was rather to depreciate, yet after 1873 it has appreciated forty per cent.

Relative fluctuations in the production of Commodities and in the value of Gold as measured by Commodity prices. Based on Mr. Sauerbeck's table p. 5 of paper read before the Royal Statistical Society, April, 1893. Index Nos. of 45 wholesale articles. Zero assumed in years 1874-1876.

PER CENT BELOW YEARS 1874-76.X PER CENT ABOVE 1874-76

The periods given in Sauerbeck's table are 1859-61, 1869-71, 1874-76, 1879-81,-188426, 1889-91, and 1892. The connecting lines between these periods in the diagram merely indicate the general tendency; and the period 1874-76 being the nearest to. 1873 has been taken as zero for the purposes of comparison.

initiative in promoting a conference for considering remedial

measures.

The Government of India also pointed out that the immediate cause of the wide departure from the old ratio of exchange between gold and silver was the abandonment of the free coinage of silver by the Latin Union in 1874,* that this had led to a rapid and heavy fall; the average rates observed in successive years of the bills drawn on India being as follows:

Years . 1872-73 73-74 74-75 75-76 76-77 77-78 78-79 79-80 80-81 Rate-Pence. 22.81* 22.35 22.22 21.64 20.49 20.79 19.76 19.96 19.96 The burden thus occasioned to Indian finance was enhanced by two famines and the Afghan War, and the period was marked by increased taxation, large reductions in public works, and a heavy addition to the gold debt in England.

On the cessation of the war, and the close of the great famine, this increased taxation, followed by a very abundant harvest-had caused a full exchequer which imparted to the finances a fictitious semblance of sound prosperity; and Lord Ripon deceived by this appearance, foolishly launched out into lavish remissions of taxation, at a time when it became necessary to make provision against a future famine and when the movements of Russia involved, not only enormous additions to frontier railways and defences, but a very large increase to the European and native army. These heavy drains on the finances of India accompanied by the fall of the gold value of the rupee, which in 1886 had fallen below eighteen pence, seriously embarrassed the government.

The Government of India expressed the belief that there was no guarantee that the burden of £2,000,000 sterling due to the fall of the gold value of the rupee might not at any time be increased twofold by any action the United

* The first restriction of mintage of silver was really in 1873. The par of exchange at 15 to 1, under the French monetary law was 20.67 pence, so that in 1872 73 the rupee was slightly above par, which was fully accounted for by the fact that the wants in India could only be satisfied in one metal-silver-and the price was raised by speculators trading on the bank's known requirements.