THE SILVER STANDARD AND THE DISLOCATION OF ITS PARITY 387
which the poor could not refuse and yet could not cash.* Besides the hardship involved in the want of encashability in the notes, the Legislature feared they would prove a “ fugitive treasure” in the hands of the Indian peasant. Not being able to preserve them from rain and ants, he might have had to pay a heavy discount to be rid of the notes he could have been forced to accept †. So opposed was the Legislature to the economizing clauses of the Paper Currency Bill as contrived to drive out metallic currency that it gave the Government an option to choose between legal-tender notes but of higher denomination and lower-denomination notes but of no legal-tender power. ‡ And as the Government chose to have legal-tender notes, the Legislature in its turn insisted on their being of higher denomination. At first it adhered to notes of Rs. 20 as the lowest denomination, though it later on yielded to bring it down to
10, which was the lowest limit it could tolerate in 1861. Not till ten years after that, did the legislature consent to the issue of Rs. 5 notes, and that, too, only when the Government had promised to give extra legal facilities for their encashment.§ On the whole, the desire of the Indian Legislature was to make the Indian currency safer, rather than economical, and such it undoubtedly was.
How did the currency system thus constituted work ? Stability of value is one of the prime requisites of a good currency system. But if we judge the Indian currency from this point of view, we find that there existed such variations in its value that it is difficult to escape the conclusion that the system was a failure.
Taking the rate of discount as an evidence of the adequacy of currency for internal commerce, it was the opinion of such a high financial authority as Mr. Van Den Berg that the unexpected contortions and sudden transitions in the Indian money market were unparalleled in the annals of any other money market in any other part of the world¶. India is
*Cf. the speeches of the Hon. Mr. Forbes, dated July 13, 1861, S.LC.P. 1154.
† Cf. the speech of the Hon. Mr. Forbes, dated July 13, 1861. Supreme Legislative Council Proceedings, Vol. VII, p. 768.
‡ Cf. speech of the Hon. Mr. Scone, September 22, 1880, S.L.C.P., Vol. VI, p. 1151.
§ For such extra facilities, and measures adopted to materialize them, Cf. the interesting speech of the Hon. Sir Richard Temple on the Paper Currency Bill dated January 13,1871, S.LC.P., Vol. X, pp. 22-25.
¶ The Money Market and Paper Currency of British India, Batavia, 1884, p. 3.