FROM A DOUBLE STANDARD TO A SILVER STANDARD 365
Now it will be seen from the figures given that all the import of silver was coined and used up for currency purposes. Very little or nothing was left over for the industrial and social consumption of the people. That being the case, it is obvious that a large part of the coined silver must have been abstracted from monetary to non-monetary purposes. The hidden source of this monetary stringency thus becomes evident. To men of the time it was as clear as daylight that it was the rate of absorption of currency from monetary to non-monetary purposes that was responsible as to why (to quote from the same authority)
“notwithstanding such large importations the demand for money has so far exceeded……..that serious embarrassment has ensured and business has almost come to a stand from the scarcity of circulating medium. As fast as rupees have been coined they have been taken into the interior and have there disappeared from circulation, either in the Indian substitute for stocking-foot or in the smelting-pot into bangles.”*
The one way open was to have caused such additional imports of silver as would have sufficed both for the monetary as well as the non-monetary needs of the country. But the impors of silver were probably already at their highest. For, as was argued by Mr. Cassels,
“the annual production of silver of the whole world does not exceed ten million sterling. During the last few years, therefore, India alone has annually taken, and to a great extent absorbed, more of the metal than has been produced by the whole world. It is clear that this cannot long continue without producing serious embarrassment. Either the European markets will be unable or unwilling to supply us, or the value of silver will rise to an extravagant extent. Under such circumstances it is not difficult to foresee that the present crisis must continually recur, and the commerce in this country must be periodically, if not permanently, crippled by the scarcity of the circulating medium.”†
Had there been any credit media the contraction of currency
- Minute on Gold Currency for India, dated December 1, 1863. Report, op. cit. p. 184.
† Report, op. cit. p. 189.