ABSTRACT
The problem of organizing monetary relations between England and India on a rational basis could be solved by the system of gold money with regulating silver token as follows. Disregarding fractional currency for reasons of simplicity, letQo be the quantity of money existing in England, Qa the quantity of money existing in India, w the present ratio of the value of gold to silver. Let us imagine that after first suspending free coinage of silver in India, a quantity x of silver from India is taken to England to play the role of regulating token as an addition to gold money, at the legal ratio of w′ of the value of gold to silver, and on the other hand, a quantity y of gold from England is taken to India to play the role of money together with the remaining silver, changed into regulating token on the basis of a legal ratio w′′ of the value of gold to silver. So that the value of money may be the same in England as in India, the new quantities of money and token evaluated in gold must have the same ratio as the old quantities similarly evaluated; that is to say, we must have:
Qo − y + x w′
: Qa − x
w′′ + y :: Qo : Qa
w
[160] from which we can obtain:i
x = (w − w ′′)QoQa + w′′(wQo + Qa)y wQo + (w′′/w′)Qa
It may be seen that w′, w′′, x and y are not quite determined and three of these four quantities may be chosen arbitrarily. Let us now suppose, just to fix our ideas, that the quantity Qo of gold in England be 750,000 kg and that one-third of this quantity (hence y equals 250,000 kg) is to be transferred to India, where the quantity Qa of silver is supposed to be 25 million kg. Suppose that the present ratio w of the value of gold to silver be 20. Let us further suppose that it is thought reasonable to let the regulating token in India coexist with the present rupee – ten rupees to one sovereign – so that Indian habits are not disrupted. This would bring w′′ to a level of about 14.60. Finally, let us suppose that it is thought reasonable, for whatever motive, to let the regulating token in England coexist with the four-shilling coin, which has the same weight and fineness as the five-franc écu in the Latin Union. This would bring w′ to about 15.36. Under these conditions, the quantity of silver to be transferred from India to England would be 6,378,500 kg.
