A RETURN TO THE GOLD STANDARD 571
committed in attributing the extraordinary rise of prices in India to the existence of a gold standard, when, as a matter of fact, it should have been attributed to the want of a gold standard.
How can she become a gold-standard country ? The obvious answer is, by introducing a gold currency. Prof. Kenyes scoffs at the view that there cannot be a gold standard without a gold currency as pure nonsense.* He seems to hold that a currency and a standard of value are two different things. Surely there he is wrong. Because a society needs a medium of exchange, a standard of value, and a store of value to sustain its economic life, it is positively erroneous to argue that these three functions can be performed by different instrumentalities. On the other hand, as Professor Davenport insists.†
“all the different uses of money are merely different aspects or emphasis of the intermediate function. Deferred payments …… are merely deferred payments of the intermediate. So again of the standard aspect; whatever is the general intermediate is by that fact the standard. The functions are not two, but one ….., Clearly, also, the intermediate may be a storehouse of purchasing power. The second half of the barter may be deferred. The intermediate is generalized purchasing power. Delay is one of the privileges which especially the intermediate function carries with it.”
Thus the rupee by reason of being the currency is also the standard of value. If we wish to make gold the standard of value in India we must introduce it into the currency of India. But it may be asked what difference could it make to the price level in India if gold were made a part of the Indian currency ? To answer this question it is necessary to lay bare the nature of the rupee currency. Now it will be granted that a standard of value which is capable of expansion as well as contraction is likely to be more stable than one which is incapable of (such a manipulation. The rupee currency is capable of)‡ easy expansion, but is not capable of easy contraction by reason of the fact that it is neither exportable nor meltable, nor is it
- Op. cit., p. 29.
† Op. cit., pp. 255-56 ; cf. also F. A. Walker, Money in its Relation to Trade, p. 27 ; and C M. Walsh, The Fundamental Problem in Monetary Science, p. 304.
‡ The portion in the bracket is missing in the Evolution of Provincial Finance —Ed.