MINUTES OF EVIDENCE 643
own interests and the interests of the rest of the world at the same time. Do you agree with the not uncommonly held opinion that a gold currency is an expensive system ?—Yes, it is.
So that we have to consider, in the first place, the possible disadvantage to India of the expense involved. What are the advantages to India to set against that expense ?—It is that you get a more stable standard, which as Professor Cannan says is knave-proof and fool-proof.
Now, as regards the prospect. The force of this contention would depend, would it not, upon the realisation of your anticipations as regards the supply of gold in the world at large ?—Yes.
Would you agree that, supposing on the other hand there was to be a relative decrease in the world’s gold supply such as might tend to a general rise in world prices, that then it would be to the advantage of India, as of other countries, to economise in the use of gold ?—Well, my reply is that we need not be afraid of an indefinite contraction. We have always got methods for increasing currency. We must guard against indefinite expansion which is always possible.
If you have pegged the Indian currency definitely to gold through the gold standard and there is a relative diminution in the world’s gold supplies, then any general fall in prices which must result would make itself felt in India also ?—Yes, but that could be guarded against by increasing our paper currency or otherwise by manipulating the paper currency.
Is not that sacrifice very characteristic of the gold currency system, for which you yourself have selected that system ?—No, I am making gold the currency simply because I want to avoid the possibilities of indefinite expansion. As I say, you can always guard against an indefinite contraction. Falling prices can always be prevented.
Now let me ask you a question as to the opinion you have formed that anything that would tend to appreciate gold would be to the good. Have you been able to arrive at any statistical estimates as to what the future of the relation between the supply and the demand of gold will be in the course of years