MINUTES OF EVIDENCE 663
Just one more point as to the usefulness of that reserve. It will be within your knowledge that in the period of the world’s depression in 1908 that had it not been for that very reserve we could never have maintained our external parity; you admit that ?—Yes.
Thank you ?—Although, of course, something has gone in to which I ought to take exception—by saying that I am in favour of increasing the gold standard reserve by investments. If a reserve is invested there is no reserve at all.
(Sir Reginald Mant.) I understand your chief desideratum is stability of internal prices ?—Quite.
And you hold that that stability will then be linked to gold prices, will they not ? They will vary with the gold prices ?—Yes.
Internal prices will then be linked to gold prices, will they not ? They will vary with the gold prices ?—Yes.
Now a gold exchange standard without a gold currency has been recommended by several people with the same object in view ; but I understand you to hold that it will not achieve that object ?—I think it has not, so far as India is concerned.
I was not speaking of what has been done in the past; it has been represented to us that if a gold exchange standard were made automatic it could secure those objects ?—I do not know ; there may be some people who hold that view, but I cannot see how it could be held.
I want you to explain why a gold currency would achieve it and the gold exchange standard would not ?—My first ground is this : that the exchange standard depreciates gold and makes it therefore useless as a standard of value. A gold exchange standard causes a redundancy of gold by its economy.
Ought you not to put it the other way, and say that if we introduce a gold currency here we shall appreciate gold ; would not that be a more correct way of putting it ?— You might put it that way, yes. Therefore under the present circumstances gold would behave as a better standard of value. My next submission is this, are we really effecting economy by the exchange standard ?
I was not raising the question of economy. I was trying to get at the reason for your holding that nothing but a gold