THE SILVER STANDARD AND THE DISLOCATION OF ITS PARITY 389
slack months when it should have been high enough to prevent the market from being demoralized, are unavoidable. But what made the contortions of the Indian money market so obnoxious was the circumstance that the seasonal fluctuations in the discount rate were so abnormal.*
The explanation for such a market phenomenon is to be . sought in the irregularity of the money supply of the country. In order that money may be had at a uniform price, its supply should be regulated according to the variations in the demand for it. It is well to recognize that the demand for money is never fixed. But it will avail nothing until it is realized that the changes in the demand for money which take place from year to year with the growth of population, trade, etc., belong essentially to a different category from the fluctuations in the demand for money which occur within the course of a year owing to seasonal influences. In any well-regulated currency it is necessary to distinguish these two categories of changes in monetary demand, the one requiring steadiness and expansibility and the other elasticity. On a comparative view it seems more than plausible that a metallic money is as especially adapted to furnish this element of steadiness and stability as paper money is to furnish that of elasticity. Indeed, so appropriate seem to be their respective functions that it has been insisted† that in an ideal system, these two forms of money cannot interchange their functions without making the currency burdensome or dangerous. The proof of the soundness of this view, it may be said, is found in the fact that, excluding the small transactions which take place by direct barter, the purchasing medium of any commercially advanced country is always a compound of money and credit.
*The rate of discount of the Bank of Bengal for private paper running thirty days and after was altered—
In 1876 16 times, with 6½ per cent, as minimum and 13½ per cent. as maximum.
” 1877 21 ” ” 7½ ” ” ” 14½ ” ” ” 1878 10 ” ” 5½ ” ” ” 11½ ” ” ” 1879 15 ” ” 6½ ” ” ” 11½ ” ” ” 1880 8 ” ” 5½ ” ” ” 9½ ” ” ” 1881 9 ” ” 5½ ” ” ” 10½ ” ” ” 1882 9 ” ” 6½ ” ” ” 12½ ” ” ” 1883 14 ” ” 7½ ” ” ” 10½ ” ” ( Van Den Berg, loc. cit. )
†Cf. Prof. R. P. Falkner in A Discussion of the Interrogatories of the Monetary Commission of the Indianapolis Convention, 1898, Publications of the University of Pennsylvania in Political Economy and Public Law, No. 13, pp. 25-26.