638 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES
that he may disturb the price level materially. There is nothing to prevent him from doing that. May I give, for instance, an illustration : suppose a government was bankrupt government and it wanted to finance certain of its departments, then it can very easily issue for instance, a token currency of any sort and add to the existing volume of currency as almost all the belligerent countries have done.
Now let us assume a country with a currency of a certain amount of gold in circulation, supplemented by notes in circulation; that is one proposal, I understand, in regard to the point to which you are leading up ?—Yes, in a certain way.
And, on the other hand, a currency based upon a gold exchange standard. Will you expand your recommendation by helping the Commission on this point : why this possibility of what is really inflation is more impossible when you have gold in circulation than when you have a pure exchange standard ?— It is this : the fact that you have the liability of converting your paper currency into gold under a gold currency with paper in circulation is a means whereby the paper currency is kept within limits. You cannot add more paper currency to your circulation than what your reserves for convertibility would permit. But where under the gold exchange standard, as we have had in India, there is no liability upon you to convert your circulating media into gold you are free to issue as much as you like.
Supposing (I start with a supposition) that you were to accept an obligation to convert your internal currency under an exchange standard into gold or the equivalent of gold in a foreign currency, would that, in your opinion, put the two systems in the same position as regards their capacity for resisting inflation?—It depends upon what kind of convertibility you adopt.
I am supposing the acceptance by the currency authority, whatever it was, of a legal obligation to convert the internal currency on presentation into gold or the means of obtaining gold in a foreign currency in a gold standard country ?—If your obligation is to accept to pay gold on tender without question then I think that would be sufficient. If I may say so, I mean that convertibility is like conscience and it might