MINUTES OF EVIDENCE 637
In so far as your opinion is based upon experience, can you refer to any instance in which a country has had a gold standard system with a large proportion of the circulation consisting of gold coins ?—I may refer for instance to a country like Germany, and barring for instance the deposit of currency in England I should also cite the case of England.
In both those cases we must recognise that the actual proportion of the circulating medium which consisted of gold was comparatively small ?—May I say just one thing ? What I want to emphasise there is that the new additions to the supply are so small in comparison with the existing volume in circulation that the new supply does not make much difference to the price level. That is what I really want to say there in that paragraph : but when you have a currency which is merely regulated by the will of the issuer, the issuer may add a new supply to the existing stock of such an amount that he may disturb the price level once established.
The new conditions there referred to are, I take it, the increment of currency rendered necessary by the regular expansion ?—No; I simply say productions of the mines when I talk of new additions to the gold supply.
Then you are dwelling there upon the feature that the annual additions to the quantity of gold in the world are so small ?—That it does not cause any upheaval in the price level to any appreciable extent.
In what respect does that serve to distinguish between any form of currency where the internal unit is related in stability to gold ?—I do not quite follow.
In what respect does the circumstance as to the small proportionate annual addition to the world’s gold supply to which you refer serve to distinguish, as regards this matter of stability, between a currency based upon gold in circulation, and a currency based upon the gold exchange standard ? That is the second part of your paragraph ?—There I say that when you start with a certain given price level and if your issue of new currency is entirely dependent upon the will of the issuer, then he may add such a volume of currency to the existing stock