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 THE GOLD TREASURE OF INDIA
 
 THE GOLD TREASURE 
 
 OF 
 
 INDIA 
 
 AN ENQUIRY INTO ITS AMOUNT 
 
 THE CAUSES OF ITS ACCUMULATION 
 
 AND THE PROPER MEANS OF USING IT AS 
 
 MONE Y 
 
 BY 
 
 CLARMONT DANIELL, B.C.S. 
 
 FELLOW OF THE CALCUTTA UNIVERSITY 
 
 LONDON 
 KEGAN PAUL, TRENCH & CO., i PATERNOSTER SQUARE 
 
 1884
 
 rights of translation and of reproduction art reserved.')
 
 HC T 
 1 '■ ' 
 
 CONTENTS. 
 
 PAGE 
 
 Introductory ... ... ... ... ... ... i 
 
 Mines of the Ancient World ... ... ... ... 7 
 
 Distribution of the Precious Metals ... ... ... ... 10 
 
 Phoenician or Tynan, Jewish, and Babylonian Trade Routes 13 
 
 Egyptian Trade Routes ... ... ... ... ... 22 
 
 Italian and other European Trade Routes ... ... 25 
 
 Indian Trade Routes in Asia ... ... ... ... 31 
 
 Character of the Indian Trade ... ... ... ... 3S 
 
 Gold in Ceylon ... ... ... ... ... ... 43 
 
 Gold in Northern Asia ... ... ... ... 45 
 
 Gold in Southern India ... ... ... ... ... 47 
 
 Causes attracting the Precious Metals to India ... ... 51 
 
 Drain of Gold to India ... ... ... ... ... 52 
 
 Causes regulating the Exchange Value of Money. The Stability 
 
 of Value of Gold ... ... ... ... ... 55 
 
 Cost of Production, its Influence on the Value of Money ... Co 
 
 Law of Supply and Demand ... ... ... ... 70 
 
 Bimetallism and the Fixed Ratio ... ... ... ... 78 
 
 Ratio of Gold to Silver in the East and '\\\.,t compared ... S3 
 
 Gold Coin formerly Current in India ... ... ... 96 
 
 Desire of People of India for Gold Coin ... ... ... 101
 
 vi CONTEXTS. 
 
 PAGE 
 
 Plan for circulating Gold Money ... ... •• 104 
 
 Argument for First Proposal ... ... ... ••• 106 
 
 Argument for Second Proposal ... .. ... ••■ m 
 
 Argument for Third Proposal ... ... ■•• ••• 116 
 
 Relative Value of Gold and Silver ascertained by this Measure 123 
 
 Silver will become more, not less Stable in Value ... ... 125 
 
 Question of a Common Measure Examined ... ... 130 
 
 Alterations in the State Rate of Conversion would seldom occur 142 
 
 Loss by Exchange is more Apparent than Real ... ... 151 
 
 Good Money is Consistent with an Unfixed Rate of Exchange ... 156 
 
 Case for an Alteration of the Rate of Exchange ... ... 164 
 
 Argument for F.ourth and Fifth Proposals ... ... ... 170 
 
 Effect of Displaced Silver on the Price of Gold ... ... 171 
 
 Stability of Silver Values in India ... ... ... ... 182 
 
 The Custom of Barter should be Discouraged ... ... 185 
 
 Reason why a Sudden Rise of Prices will not occur ... ... 192 
 
 Beneficial Effect of Enhanced Prices ... ... ... 195 
 
 Effect of the English System on Indian Commerce ... ... 200 
 
 Exclusive Use of Silver Coin a Restraint on Trade ... 211 
 
 Levy of Revenue in Gold ... ... ... ... ... 213 
 
 Results of the Scheme ... ... ... ... 215
 
 THE GOLD TREASURE OF INDIA. 
 
 INTRODUCTORY. 
 
 The tendency of the precious metals to accumulate 
 in Asia, has long attracted public attention, and 
 certain classes of people are described by economists 
 to have suffered a loss, not easily perceptible, but 
 nevertheless actual, and in the aggregate of con- 
 siderable dimensions, from an enhancement in the 
 value of gold as against commodities, during the 
 last few years. While the drain of gold from Europe 
 and America shows no sign of diminishing, the 
 Government of India is constrained to spend about 
 thirty millions more of its silver or rupee revenues, 
 in purchasing sovereigns for the settlement of its 
 liabilities in England, than would be necessary if 
 gold were lower or silver higher in value when 
 exchanging with one another than is the case at 
 present. 
 
 B
 
 2 THE GOLD TREASURE OF INDIA. 
 
 So far as the amount of this sum depends on a 
 remediable over-valuation of gold, it might be reduced 
 by additions to the stock of that metal available 
 for use as money. 
 
 So far as it depends on the depreciation of silver 
 in the gold valuation, any measure tending to bring 
 into use the discarded silver money of the European 
 world would tend to raise its value. 
 
 An endeavour is therefore made in the following 
 pages to sketch the history of the precious metals 
 in connection with the trade between India and 
 foreign countries from the earliest ages, to describe 
 the causes always in operation which directed the 
 course of gold and silver to India, to estimate the 
 stock of gold which has been under process of 
 accumulation in India during more than twenty-five 
 centuries, and to urge (not for the first time) on the 
 consideration of those interested in this subject the 
 importance of liberating the vast gold treasure 
 hoarded in India (which the following observations 
 will show to exceed considerably ^200,000,000- in 
 value), and, by making it available for use as money, 
 to reduce the value of gold as a purchasing agent 
 to its natural proportions. 
 
 For the scheme discussed in these pages there 
 is also claimed this effect, that it will provide a 
 stimulus to the use of silver by widening the foreign
 
 INTRODUCTORY. 
 
 market for the productions of India, and by increas- 
 ing the capacity of her people to purchase manu- 
 factured goods from the West ; and that it will 
 generally encourage the use of silver as coin by 
 making it interchangeable with gold on terms which 
 preclude either metal obtaining any advantage over 
 the other, the interchange of the gold and silver 
 current coin being strictly regulated by the intrinsic 
 value at which for the time being the one stands to 
 the other.
 
 PART L
 
 Mines of the Anxient World. 
 
 The sources from which the nations of antiquity 
 in Western Asia and Europe supplied themselves 
 with the precious metals, were the washings of a 
 few rivers principally in Spain and Asia Minor, and 
 excavations from below the earth by slave labour 
 in the same countries, and in Greece, Nubia, and 
 Northern Arabia. 
 
 The legend of Cadmus opening a gold mine in 
 Thrace in (if chronology can in such a case be relied 
 upon) the sixteenth century B.C., the myth of the ex- 
 pedition of Jason to Colchis on the eastern shore of 
 the Euxine and through the ^Egean sea to the islands 
 of the Mediterranean, and other similar adventures 
 of Phoenician gold-finders, are among the earliest 
 traces we find of the pursuit of this form of wealth. 
 
 Diodorus, writing in the first century B.C., speaks 
 of an inscription in a palace at Karnak, in Egypt, 
 recording the annual revenue of the king who placed 
 it there to amount in gold and silver to a value 
 equivalent to £6,000,000. The gold was probably
 
 S THE GOLD TREASURE OF INDIA. 
 
 obtained from Nubia, or sources still further south 
 in Western Africa ; and the rocks of Midian are 
 known to have yielded gold, and southern Arabia 
 gold and probably silver in small quantities. From 
 all of these countries the kings of Egypt doubtless 
 derived revenues of the precious metals. The ex- 
 plorations of the Phoenicians in Spain led to the 
 opening of mines by their Carthaginian colonists, 
 which, from the fifth to the second century B.C., 
 provided those nations in Europe who were sufficiently 
 civilized to use money, as well as the Phoenicians, the 
 Egyptians, the people of Babylonia, and the Indians, 
 with silver for that purpose. The silver mines of 
 Laurion, in Attica, appear to have been closed about 
 500 years B.C., while those in the island of Samos 
 were worked as late as the second century of the 
 same era. 
 
 That silver and gold were used as money at the 
 dawn of history is evident from the purchase by 
 the patriarch Abraham of the cave of Machpelah 
 with "shekels of silver current with the merchant." 
 A statement in the code of the Egyptian Menes 
 of a ratio of value existing between gold and silver, 
 and regulations in the institutes of Menu, the Hindu 
 lawgiver, for the payment of interest on money 
 lent under risk, and for the insurance of goods 
 against loss in transit, imply a recognized use of the
 
 MINES OF THE ANCIENT WORLD. 9 
 
 precious metals as money — by weight, at least, if not 
 in the form of coin — at a very early period in the 
 history of the three most ancient nations in the 
 world. 
 
 The Phrygians are said on an authority some- 
 what doubtful to have coined gold and silver between 
 the fourteenth and twelfth centuries B.C.; and from 
 an age not much later the Lydians are ascertained to 
 have done the same, their gold being obtained from 
 the Pactolus and other rivers of Asia Minor, and 
 their silver from the mines of Thrace and Attica. 
 
 Mr. Del Mar, the historian of the precious metals, 
 to whose work I am indebted for some of the 
 information on which the conclusions in this treatise 
 rest, is of opinion that gold and silver money first 
 came into Europe from India, through the interven- 
 tion of the Phoenicians. The commercial relations 
 which that people held with the Aryan inhabitants 
 of India, and the fact that a ratio of value in the 
 exchange of the two metals was recognized on the 
 shores of the Mediterranean so long ago as the fifteenth 
 century before our era, are in favour of this theory. 
 
 The use of token money by the Romans previous 
 to the middle of the third century, by the Greeks up 
 to the commencement of the fourth century B.C., and 
 by the Carthaginians at an earlier period, is an 
 incident in the history of this subject which is worth
 
 io THE GOLD TREASURE OF INDIA. 
 
 noticing, in proof of the antiquity of this method 
 of economizing the use of the precious metals, and 
 because it accounts for what is from other sources 
 known to have been the case, that silver and gold 
 were transported from the places of their production 
 as merchandise, and in that form were exchanged 
 by the Tyrians in their land and sea trade for 
 the commodities of India and the further East. 
 
 Distribution of the Precious Metals. 
 
 In the old world when commerce and the arts 
 of peace were in their infancy, one of the most cogent 
 motives to international wars is found to have been 
 the acquisition of mines, and the treasure accumulated 
 in the temples of the gods and the palaces of the 
 wealthy. To both Punic wars the Romans were 
 principally impelled by the desire to possess them- 
 selves of the precious metals which the Carthaginians 
 drew from the mines of Spain and the islands of 
 Sicily, Sardinia, and Corsica. After about sixty years 
 of warfare, the destruction of the Carthaginian power 
 was completed by Scipio, about the year 200 B.C., 
 and the treasures of the Carthaginian cities in
 
 DISTRIBUTION OF PRECIOUS METALS. II 
 
 northern Africa, and the mines of Spain, and those 
 three islands, were incorporated in the dominions of 
 the Roman Republic. 
 
 Alexander the Great obtained a treasure by the 
 invasion of Persia and India calculated at £50,000,000 
 by weight, and having a purchasing power vastly 
 greater than that of modern money. 
 
 The nucleus of this treasure was probably that 
 which Darius, about one hundred years before, had 
 plundered from the Phoenicians, whose cities were 
 filled with the wealth they had amassed in exchanging 
 the silver of Carthage for the silks and spices of 
 India, and from the spoil of Asia Minor and Egypt. 
 This monarch levied a tribute on his conquests to 
 the west of the Euphrates equal to £3,000,000; and 
 although his successors were unable to enforce its 
 punctual payment, the fact that the Tyrians, who 
 were amerced in the larger part of this fine, should 
 have undertaken to pay it, argues the highly profit- 
 able and extensive character of their trade with the 
 East, from which the wealth for which they were 
 famous was principally derived. 
 
 In every condition of the political world outside 
 Asia, whether peace reigned and commerce flourished 
 or war convulsed society and brought nations to ruin, 
 India continued to appropriate the metallic treasures 
 of the West ; and the movement of that stream of
 
 12 THE GOLD TREASURE OF INDIA. 
 
 gold, silvec, lead, tin, and iron, to that country, which 
 commenced nearly three thousand years ago, has 
 never been interrupted, but has constantly and pro- 
 gressively increased in volume and intensity. Our 
 own generation is, in consequence, witnessing such 
 an accumulation of gold in India as no nation of the 
 ancient or modern world has ever, at one time, 
 possessed. 
 
 Because (to borrow an aphorism from Edmund 
 Burke) the superfluities of a rich nation furnish a 
 better object of trade than the necessities of a poor 
 one, the frugal and industrious Indian exchanged 
 the silks, cottons, spices, and jewels of his own 
 country, for which he had little need, against the 
 overflowing treasure of silver in Tyre, Carthage, 
 and Rome, and of gold in Egypt, Arabia, and 
 Persia, in preference to seeking smaller profits with 
 greater toil on the sale of mere necessaries to his 
 poorer neighbours in Asia. 
 
 The climate of India, and the character of its 
 inhabitants, allowed of the production within her 
 own borders of every thing which her people required 
 for their own sustenance. She desired nothing which 
 foreigners could give her but the precious metals. Gold 
 and silver India was in need of for the fabrication 
 of coin and for purposes of luxury. These redun- 
 dant and therefore comparatively useless treasures
 
 DISTRIBUTION OF PRECIOUS METALS. 13 
 
 were necessarily willingly surrendered for merchandise 
 of that description, which India and the East alone 
 could supply. The pursuit of the arts, and habits 
 of luxury and ostentation, had for some centuries 
 before the Christian era made such progress among 
 the people of Western Asia, Northern Africa, and 
 those parts of Europe which had easy access to 
 the Mediterranean Sea, that fashion and caprice no 
 less than certain peculiarities in their religious rites 
 combined to invest these commodities with a factitious 
 value. These circumstances fully account for the 
 drain of the precious metals from all parts of the 
 ancient world, and from America in modern times, 
 into India. 
 
 Phcenician or Tyrian, Jewish, and Babylonian 
 
 Trade Routes 
 
 The history of commerce, both in the ancient and 
 modern worlds, presents us with the noteworthy fact 
 that, in the case of every nation which has at any 
 time engaged in trade with the East, the highest 
 point of development which its domestic civilization 
 and political influence attained has corresponded
 
 i 4 THE GOLD TREASURE OF INDIA. 
 
 with the period when that commerce was most 
 flourishing. 
 
 It will serve the purposes of this essay to give, 
 a brief account of the routes by which each people 
 in turn succeeded in giving this commerce a direction 
 to their own coasts, since the necessary result and 
 fruit of these efforts was, by supplying the people 
 of India with ample stores of the precious metals 
 for use as money, to give them the means of 
 creating a highly civilized system of social order and 
 an elaborate and extensive commerce, at a time 
 when the people of Greece and Italy had not 
 appeared as organized powers on the world's political 
 stage. 
 
 Solomon perceived that which has since become 
 more evident to mankind, that the trade with the 
 East speedily enriches the nation which for the time 
 succeeds in obtaining its control. Egypt, no doubt, 
 was to Solomon the visible evidence of this fact, 
 and he addressed himself to appropriate as large a 
 share of it as he could for the Jewish people, by 
 creating facilities for traders with the East on both 
 the land and sea routes. 
 
 Solomon's schemes to this end were evidently 
 designed in concert with the Phoenicians, for the 
 joint advantage of that people and the Jews. He 
 built Tadmor, which the Greeks afterwards called
 
 PHOENICIAN TRADE ROUTES. 15 
 
 Palmyra, at a distance of one hundred and twenty- 
 miles from the Euphrates, on the edge of the Syrian 
 desert, probably Baalbec (Heliopolis) also, and Hamath 
 (Epiphania), as store cities ; that is to say, to serve 
 as resting-places for caravans travelling from Persia, 
 Babylonia, and the head of the Persian Gulf, and as 
 emporia at which the camels' burdens were sorted 
 and arranged for distribution. From Tadmor part of 
 the merchandise would be carried to Palestine, from 
 Baalbec and Hamath to Tyre, Aradus, and other 
 Phoenician ports on the Mediterranean, to the cities 
 in the valley of the Orontes, and to the port at the 
 mouth of that river, subsequently named Seleucia, 
 or by way of Edessa and the valley of the Euphrates 
 into Asia Minor. The wealth of the inhabitants 
 of Lydia, and of other parts of the west coast of 
 Asia Minor, which five hundred years after the era 
 of Solomon excited the cupidity of Xerxes, was, 
 we may reasonably conjecture, partly derived from 
 the Eastern trade, especially as they held, in the 
 gold-bearing sands of their rivers, the surest means 
 of attracting its course into their cities. 
 
 Solomon's foresight in protecting these caravan 
 routes bore fruit in the creation of the great trading 
 centres of Mesopotamia. Babylon, Ctesiphon, Seleucia, 
 Ossis, and Borsippa, at different times between his 
 age and that of the Roman Emperor Severus, rose
 
 i6 THE GOLD TREASURE OF INDIA. 
 
 to importance, flourished and decayed on the profits 
 of their commerce with Asia. 
 
 The spoil obtained by Alexander the Great in 
 his victories over the Persians about 340 years B.C., 
 and that taken at the sack of Ctesiphon by the 
 Musalman, General Khaled, in the year 637 A.D., 
 consisting principally of the productions of India 
 or of such commodities as were exported to the 
 West by way of India from more distant countries, 
 testify to the source from which that part of Asia 
 enriched itself. The length of time during which 
 this commerce flourished gives us the means of 
 estimating the amount of the treasure which India 
 must have acquired in the exchange. 
 
 The power of Tadmor, or Palmyra as it was 
 latterly called, rested on foundations laid by Solomon, 
 and after the decline of the Babylonian cities, suc- 
 ceeded to their commercial and political importance. 
 
 Appian, writing during the first century A.D., 
 describes the Palmyrenes as buying commodities 
 from the Arabians and Parthians, and selling them 
 again in Rome. 
 
 Palmyra appears to have attained its highest 
 point of prosperity at a period corresponding with 
 the decline of the Roman Empire. In A.D. 260, 
 Odenathus, the prince of that city, and husband 
 of Zenobia, was sufficiently powerful to contend with
 
 PHOENICIAN TRADE ROUTES. 17 
 
 Sapor the Persian for the possession of his prisoner, 
 the Emperor Valerian. Thirteen years later, the 
 Emperor Aurelian, conquering Palmyra and captur- 
 ing its Queen Zenobia, found in the city an immense 
 treasure of precious stones, gold, silk, and cotton 
 eoods, commodities which could only have been 
 obtained by trade with Persia, India, Ceylon, and 
 countries still further eastward. 
 
 As Solomon used his power to promote the 
 success of the land trade of the Phoenicians, the King 
 of Tyre assisted him with shipwrights and sailors 
 to equip and man the navy of ships which he " made 
 at Eziongeber, which is beside Elath, on the shore 
 of the Red Sea in the land of Edom ; " that is to say, 
 in the eastern arm of that sea now called the Gulf 
 of Akaba. This fleet made periodical voyages, from 
 which it is inferred that it sailed at seasons when 
 the monsoon winds blowing off the coast of Africa 
 would serve for the outward voyage to the western 
 coasts of Asia. The region called Ophir — probably 
 a term of general application, taking its name from 
 a district in Arabia, and indicating, as the word 
 " Indies " in modern times, different emporia for 
 eastern productions — is described as the object of 
 its voyage ; but it seems unlikely that India was 
 included in that term. The merchandise of the 
 East having been conveyed to Elath, and thence 
 
 C
 
 1 8 THE GOLD TREASURE OF INDIA. 
 
 by caravan to Petra, was distributed — some to Egypt ; 
 some to a port on the Mediterranean in the angle 
 between that country and Palestine, which in Strabo's 
 time was called Rhino Colura, for the purpose of 
 exports to Europe ; and the rest was taken partly 
 to the Phoenician cities north of Palestine, and partly 
 into Palestine itself. Petra like Palmyra grew rich 
 as the emporium of this trade ; historians both 
 sacred and profane, describe its magnificence ; and 
 its monuments, which are of a late period of Greek 
 art, attest the length of time during which the com- 
 mercial system originated by Solomon preserved its 
 vitality. It was not until the reign of Trajan that 
 the importance of this city declined under the com- 
 petition of Alexandria. 
 
 The islands of Tylos or Tyros, and Aradus in 
 the Persian Gulf, which are now called Bahrein, and 
 are probably identical with the Daden of Scripture, 
 were believed by the Greeks to have been the cradle 
 of the Phoenician people. Tradition is hardly likely 
 to be wrong on this point, confirmed as it is by 
 the use of these islands as emporia for the Tyrian 
 carrying trade. That the Tyrians should have called 
 two of their principal ports on the Mediterranean 
 coast of Syria by the names of these two islands, 
 gives much probability to the theory, as colonists 
 ever love to call the new cities they found in strange
 
 JEWISH TRADE ROUTES. 19 
 
 lands by the familiar names of their distant homes. 
 There, and at the neighbouring port of Gerrha, on 
 the main land which the geographers describe as 
 one of the richest cities of its day, the Tyrians 
 collected the merchandise brought into the gulf by 
 coastine vessels from India. Arabian caravans 
 travelled by a road passing to the north of the 
 great desert, through the inhabitable tract now 
 occupied by the State of Nejd, and over the Djebel 
 Shomer to Petra ; but the Phoenicians organized 
 the transport of commodities by sea and river from 
 Gerrha and Aradus, to various points on the 
 Euphrates, whence they were taken by way of 
 Palmyra into Syria, as has been above described. 
 
 That Solomon's navy, with the assistance of these 
 people or in concert with them, since the Phoenicians 
 are described as making voyages from Gerrha round 
 Arabia into the Red Sea, sailed from the same port 
 touching at other places in the Persian Gulf, at Aden 
 (the Uddin of Isaiah), and the coasts of Western 
 Arabia, and so to Elath, can be a matter of no 
 reasonable doubt. It was only by voyages to these 
 parts that his ships could have collected the tribute 
 from the "princes of Arabia," or the revenues collected 
 by " the governors of the country," and that derived 
 " from the traffic of the merchantmen," which are 
 spoken of in Holy Writ as the principal means of
 
 20 THE GOLD TREASURE OF INDIA. 
 
 that monarch's magnificence ; and we need go no 
 further than the ports on the seas which washed 
 the coasts of Arabia for an explanation of the 
 voyages of the Jewish navy to Ophir. 
 
 The Phoenician race, considering the age of the 
 world during which they flourished, and the rudi- 
 mentary state of general knowledge on the subject 
 of astronomy, navigation, and the art of shipbuilding 
 which prevailed at that time, have been surpassed 
 by no modern nation in commercial enterprise. 
 They pushed their trade in new and unexplored 
 countries and ransacked the known world for mercan- 
 tile commodities. The Persian Gulf to this day 
 retains traces of their cities. In Africa, Carthage 
 Utica and less important provinces were colonized 
 by them ; they had visited Italy and established 
 themselves in Sicily, Crete, the Balearic and other 
 Mediterranean islands some centuries before the age 
 of Romulus ; beyond the pillars of Hercules Gades 
 (Cadiz) was one of their seats of trade ; and the 
 district of Tartessus, on the river of that name, which 
 the Arabs afterwards called Guadalquivir,* was a 
 Phoenician colony. A name of Aryan origin indi- 
 cating the possession of tin mines, which was after- 
 wards adopted by the Greeks, was probably bestowed 
 by mariners of the same race on the inhabitants of 
 
 * Wadi-'l-kebir is in Arabic, " the great river."
 
 TYRIAN TRADE ROUTES. 21 
 
 the Scilly Isles and the Cape of Cornwall. They were 
 the first of the nations of antiquity to link together 
 in one commercial system all countries sufficiently 
 civilized for trade which lay between Ceylon, and 
 perhaps China, in the east, and Britain in the west. 
 The territory of the different cities which comprised 
 the Phoenician power extended for only eighty or 
 ninety miles on the northern sea coast of Syria ; of 
 these Aradus, Tripolis, Berytus, Sidon, and Tyre 
 were the first in rank ; but so numerous along the 
 coast were the seats of Tyrian industry and commerce 
 that the inferior maritime towns presented the 
 appearance of an almost continuous series of 
 harbours, habitations, wharves, warehouses, and 
 temples. Phoenicia held the same place among the 
 commercial powers of antiquity that Venice held 
 in the Middle Ages and England holds now. Each 
 state in its turn has organized trade between the east 
 and the west, and carried most of it in its own navies. 
 By directing the main streams of commerce on to 
 its own shores, each has become for the time the 
 principal agent for exchanging the goods of one half 
 of the world with those of the other half, and has 
 thereby given its people the means of accumulating 
 vast wealth from the profits of trade with every 
 country lying between its own borders and either 
 verge of civilization.
 
 22 THE GOLD TREASURE OF INDIA. 
 
 The palmy days of Tyrian prosperity are believed 
 to have been attained under their King Hiram, the 
 contemporary of the Jewish kings David and Solomon, 
 whose era was probably iooo B.C. ; it waned under 
 the attacks of the Persian kings in the sixth century 
 B.C. Alexander's conquest of the city 332 B.C., and 
 the success of his scheme for diverting the Indian 
 trade through Egypt and the port of Alexander into 
 Europe, dissipated the commercial ascendancy of 
 Tyre. In the age of the Ptolemies it had ceased 
 to be of much importance as trading centre in the 
 Levant. 
 
 Egyptian Trade Routes. 
 
 The Egyptian monuments ascribed to the age 
 of Sesostris, which record his naval battles, are inter- 
 preted as illustrating the wars waged by that monarch 
 against the maritime tribes of Arabia, with a view 
 to appropriate for the benefit of his own people the 
 sea trade which they carried on between their own 
 coasts and those of Asia and Africa. This theory 
 derives support from the construction of a canal by 
 Sesostris between the Nile and Arsinoe, at the head 
 of the Gulf of Suez. This work, however, probably
 
 EGYPTIAN TRADE ROUTES. 23 
 
 from the difficulty of keeping it clear of silt, seems 
 never to have been much used by large vessels. 
 The Ptolemies reopened it, but at the same time 
 provided three other routes for the passage of 
 merchandise imported into Egypt from India and the 
 Persian Gulf, which would not have been resorted to 
 if the canal was capable of carrying ships of burden. 
 
 The most favourite route from the Red Sea started 
 from Berenice, the harbour formed by the promontory 
 of Ras Benass, and touched the Nile at a distance 
 of one hundred and seventy miles at Coptus, near 
 Thebes (Karnak). To the same point there was a 
 shorter but, passing through rocky country, probably 
 a more difficult route of eighty or ninety miles from 
 the port now called Kossier. A second led from Myos 
 Hormos (Aboo Shaar), a roadstead at the entrance 
 to the Gulf of Suez, which probably struck the river 
 at the modern town of Sioot. From these ports 
 goods were carried by land to the Nile. A third 
 route led through the desert from Arsinoe to a town 
 a little north of the ancient Memphis, built on 
 or near the site where modern Cairo now stands. 
 This would, therefore, be the same route as that 
 used for the conveyance of the Indian mails to 
 Europe before the railway between Suez and Alex- 
 andria was opened. 
 
 The people of Egypt flourished on the Indian
 
 24 THE GOLD TREASURE OF INDIA. 
 
 trade equally under the dynasty of the Ptolemies and 
 under the rule of the Roman emperors. The destruc- 
 tion in turn of the Phoenician, Jewish, and Persian 
 power in Western Asia gave to the seamen of Egypt 
 and Arabia a monopoly of this commerce for about 
 the space of nine hundred years, between the death 
 of Alexander the Great and the conquest and 
 occupation of Egypt by the Arabian followers of the 
 prophet under Amrou, the general of the Caliph 
 Omar, in A.D. 640. The discovery of Hippalus in 
 the first century A.D. (if the fact were not known 
 before), that a voyage could be made with tolerable 
 safety, and with a calculable certainty as regards the 
 length of time required for its completion, between 
 the entrance of the Red Sea and the western coast 
 of India, by utilizing the periodical winds which blow- 
 across the Indian ocean, allowed ocean sailing 
 vessels to dispense with the necessity of coasting. 
 Either this circumstance or some improvements in 
 the construction and navigation of ships during the 
 occupation of Egypt by the Romans gave an impulse 
 to trade and the mercantile marine of the Egyptians, 
 which in those days was regarded with wonder. 
 The statement which Heeren quotes from Strabo 
 (who was a contemporary of the Emperor Tiberius), 
 describing himself as having seen as many as one 
 hundred and twenty ships of burden engaged in the
 
 EGYPTIAN TRADE ROUTES. 25 
 
 Indian trade lying in the roads of Myos Hormos 
 at the same time ; and the incident recorded in the 
 history of the reign of the Emperor Aurelian, about 
 two hundred and forty years later, that after the 
 reduction of Palmyra he was obliged to turn his 
 arms against Egypt to suppress an insurrection which 
 was supported by Firmus, a merchant of that country, 
 with a fortune he had made in the trade with India, 
 are circumstances which argue that at this period 
 of the world's history, as in every other age, the 
 golden stream of commerce flowing from India 
 enriched every country whose shores it touched ; and 
 that in exchange for their productions, the people 
 of that country continued to appropriate a large part 
 of the metallic treasures of the civilised world, which 
 at that time had become the possession of the people 
 of Arabia, and of Egypt, and of the nations inhabiting 
 the shores of the Mediterranean sea. 
 
 Italian and other European Trade Routes. 
 
 For nearly two hundred years the Oriental trade 
 of Egypt languished under the dead hand of Musal- 
 man rule, until the Venetians, about the year 800, 
 allying themselves with the Turks, revived the use 
 of this route.
 
 26 THE GOLD TREASURE OF INDIA. 
 
 This people laid the foundations of the great 
 carrying trade, upon which the Italian Republics 
 flourished for seven hundred years between the 
 ninth and sixteenth centuries. The conquest of Con- 
 stantinople in 1204-5, by the Latin crusaders, to which 
 the Venetian fleet, under the command of the famous 
 Dandolo, mainly contributed ; the acquisition by the 
 Republic of territory on the mainland of modern 
 Turkey, of Crete, and other important islands and 
 places of advantage for trade in the Levant, made 
 her commercial supremacy paramount wherever 
 the sails of European merchantmen were seen. 
 
 The commercial history of Venice is much mixed 
 up with that of Genoa, and with that of Catalonia 
 in Spain, with both of which she was frequently in 
 rivalry ; and with that of Florence, whose port was 
 Pisa. Venice provided Germany through the inter- 
 vention of the merchants of Augsburg, and countries 
 lying nearer Italy, with Oriental productions, princi- 
 pally obtained by means of her navies sailing from 
 the coasts of India to Egypt, through which country 
 a system of land and river transport was organized 
 to Alexandria, whence they were re-shipped across 
 the Mediterranean. 
 
 Genoa, in the time of the Greek emperors, ob- 
 tained an influence at Constantinople which gave 
 her the command of the Bosphorus, and ensured
 
 EUROPEAN TRADE ROUTES. 27 
 
 her the monopoly of one branch of the commerce of 
 the East, which came by an overland route of great 
 antiquity from the direction of the Caspian sea. 
 
 This course of trade appears to have followed two 
 lines of country, one mentioned by Herodotus which 
 conveyed gold from the Imaus range and the western 
 frontier of China (Thina), and the peltries collected 
 by the tribes between those mountains and the 
 northern shore of the Caspian, through the country 
 of the Scvthians and Sarmatians to the north shore 
 of the Black Sea, where the Greeks had already in 
 his time placed trading stations ; the other to have 
 united at a pass situated under the thirty-fifth parallel 
 N.L., called the Caspian Gates, two caravan routes, 
 one starting from Western China and the countries 
 situated between the Himalayas and the southern 
 shore of that sea, and another travelling from India 
 in a direction nearly west from Kandahar. A third 
 route appears to have passed from India through 
 Media, or through northern Assyria into Asia Minor, 
 and to have supplied the wares of Asia to the colonies 
 which the city of Miletus had, between the seventh 
 and fifth centuries B.C., planted on the shores of the 
 Euxine, from Sinope to Dioscurias. 
 
 Heeren's researches leave no doubt that commercial 
 relations brought into communication with one another 
 in prehistoric ages the nations and tribes of northern
 
 28 THE GOLD TREASURE OF INDIA. 
 
 India, North-western (or, as it is commonly called, 
 Central) Asia, Persia, Mesopotamia, and the territories 
 now forming Southern Russia. In the Middle Ages 
 the Genoese transported merchandise conveyed to 
 the Black Sea by these long established channels 
 from a port called Caffa, on the sea of Azof, in their 
 ships to northern Europe, the Netherlands, and the 
 Baltic. 
 
 The skill and enterprise of the Medici raised the 
 Republic of Florence to a point of singular prosperity, 
 both commercial and political. 
 
 The basis of the gigantic fortune of that House 
 was a share in the trade of the East, coming probably 
 by some channel where its influence was supreme, 
 such as an overland route through Syria, or Armenia 
 and Asia Minor, which would have lost its exceptional 
 advantages when ships began to make voyages round 
 the Cape of Good Hope. 
 
 Ormuz, in the Persian Gulf, Aden, and apparently 
 Kossier in the Red Sea, were the principal stations 
 for the Venetian sea-borne trade with India, and 
 these they secured by a formidable navy of armed 
 commercial vessels. From Alexandria they re- 
 shipped the merchandise for distribution along the 
 coasts of the Mediterranean, or for transport to 
 Venice and Genoa, whence it was exported into the 
 interior of Europe. The Venetian occupation of
 
 EUROPEAN TRADE ROUTES. 29 
 
 Cyprus, for nearly one hundred years during the 
 fifteenth and sixteenth centuries, gave them facilities 
 for organizing another route for the conveyance of 
 the Indian trade by the Euphrates, and by land from 
 that river through Syria to the ports on the northern 
 coast of Palestine. The total destruction in the 
 Indian sea in the year 1508, by the Portuguese 
 admiral, of a combined Turkish and Venetian fleet, 
 which those two powers had equipped for the purpose 
 of extinguishing the rivalry of the Portuguese in the 
 Indian trade, and the appropriation by the same 
 people of the Venetian stations at Ormuz and other 
 places in the Gulf, deprived the Republic of her carrying 
 trade in Eastern waters ; while the greater security 
 and cheapness of the voyage round the Cape of 
 Good Hope involved a simultaneous disuse of every 
 overland route, either through Egypt, Syria, or the 
 country between the Caspian and Black Seas, and 
 reduced the commerce of the Italian and Levantine 
 cities to unimportant dimensions. 
 
 The appointment of Albuquerque, in 1506, as 
 Governor on the part of the King of Portugal in the 
 Indies, speedily confirmed the value of Vasco de 
 Gama's recent discovery of the sea passage round 
 Africa to India, by substituting that nation for the 
 Venetians as the carriers of the Oriental trade. 
 
 In the year 1595, the merchants of Amsterdam
 
 30 THE GOLD TREASURE OF INDIA. 
 
 fitted out their first India fleet of armed trading ships, 
 to contend with the Portuguese for a share of this 
 commerce. The destruction of the city of Antwerp, 
 ten years before, by the Duke of Parma, had driven 
 a considerable number of artisans, merchants, and 
 others interested in trade, from the Low Countries 
 to take refuge on the banks of the Thames. 
 
 It is from that time that England, as well as 
 Holland and Portugal, began to freight ships for the 
 voyage round the Cape with a certain amount of 
 merchandise, but with disproportionately large stores 
 of silver and gold, derived from the recently discovered 
 sources of supply in Central America, and to bring 
 to Europe in exchange cotton, pepper, silk, and other 
 rarities and articles of luxury from the coasts of 
 India. 
 
 This route has only during the last forty years 
 been partially given up in favour of the more rapid 
 means of transport which ocean steam ships, a rail- 
 way, and a ship canal through Egypt, now offer to 
 a commerce carried in the vessels of every nation 
 of the world which owns a mercantile marine.
 
 INDIAN TRADE ROUTES IN ASIA. 31 
 
 Indian Trade Routes in Asia. 
 
 Besides the inhabitants of the countries situated 
 to the west of India, those of Central Asia, Thibet, 
 China, the Straits of Malacca, and the countries on 
 the eastern coasts of the Bay of Bengal, traded with 
 her people : and as in ancient times the inhabitants 
 of those regions possessed gold and silver, it is not 
 only probable, but historically certain that they put 
 their treasure to its most profitable use, that of 
 effecting commercial exchanges, and thus contributed 
 an additional supply to the stores of the precious 
 metals accumulating in that country. 
 
 Ctesias, a Greek physician, who lived at the 
 Persian Court about 400 B.C., while (like many other 
 writers of an uncritical age of historical research) 
 he records much that is fabulous, may nevertheless 
 be considered an authority on such matters as modern 
 history has shown to be possible. He speaks of that 
 which is the oldest recorded trade route connecting 
 the countries lying between the Caspian and India 
 on the west, with Tartary and China on the east, 
 as being frequented by caravans of a thousand or two 
 thousand men travelling through a desert, which 
 must be that now called by the name of Cobi, and 
 returning in three or four years, their beasts being
 
 32 THE GOLD TREASURE OF EVE/A. 
 
 laden with gold. Ptolemy, the geographer, writing 
 in the second century of our era, speaking of probably 
 the same route as that described by Ctesias, says 
 that merchants travelling from Parthia and Bactria 
 followed a road which lay under the same parallel 
 of latitude as Byzantium (42 ) to the country of the 
 Seres (China), from the capital of which people that 
 metropolis was seven months' journey. This route 
 is traceable from the mention by Ptolemy of a certain 
 stone tower which Heeren believes to be identical 
 with a building mentioned by travellers as existing 
 in 1780 — a fortified caravanserai called Chahel Situn, 
 or the forty columns, placed to guard a pass 
 apparently in the Alai Mountains, about three days' 
 march south-east of Marjilan, on the road from 
 Khokand to Kashgar, and therefore near the town of 
 Ush or Oosh. This route is probably still used, as it 
 was more than two thousand five hundred years ago 
 by those visiting the countries beyond the sandy 
 desert which stretches eastward from Aksu and- 
 Khoten. Heeren identifies both of these towns with 
 places bearing Greek names in the itinerary of this 
 route. 
 
 The gold, silk, furs, and other commodities brought 
 on to the borders of India by these Caravans appear 
 to have been collected at Taxila, the modern Attock, 
 in the Punjab, and thence distributed throughout the
 
 INDIAN TRADE ROUTES IN ASIA. 33 
 
 interior of the country. One course of trade was 
 directed to a point on the Jumna, in the neighbourhood 
 of the modern Delhi, a district which, as the vast 
 extent of ruins in that neighbourhood attest, has from 
 remote ages surrounded a succession of populous 
 cities, built nearly on the same site. 
 
 Following the Doab of the Ganges and Jumna, 
 it probably descended the former river to Palibothra 
 (which is now known to be represented by the city of 
 Patna), the capital of the people whom the Greeks 
 called Prasioi. This city, the most magnificent of its 
 age, flourished for about one thousand years, from 
 500 B.C. to some date between 400 and 600 A.D. 
 
 At the height of their power, about the time that 
 Megasthenes visited their king Chandragupta (B.C. 
 300), this people had extended their dominion over 
 countries which are now included in modern Bengal, 
 between Sirhind and the mouths of the Ganges, and 
 between the Himalayas and Central India. To refer 
 to this circumstance is hardly a digression, as the 
 existence of so powerful a nation during so long 
 a period of time argues the maintenance of a strong 
 government and a durable and highly organiz 
 polity, which are ever found to promote the growth 
 and secure the extension of internal and external 
 commerce with the necessary result of attracting the 
 precious metals from foreign countries. As will 
 
 D
 
 34 THE GOLD TREASURE OF INDIA. 
 
 afterwards be seen, part of the merchandise so con- 
 veyed passed on to the mouths of the Ganges, and 
 thence to the Coromandel coast and Ceylon. 
 
 Another line of trade started from Taxila, and 
 went down the Indus to Patala on the delta of that 
 river, whence it was conveyed by the coast to the 
 sea ports in the Persian Gulf. 
 
 It appears likely that a land route for merchandise 
 passed from Taxila through North-western India 
 to Ozene or the modern Oojein in Malwa, and to 
 a city called Pluthana, and to another called Tugara 
 in Central India, whose sites are uncertain. The sea 
 port for that part of India was Barygaya (Broach) 
 at the mouth of Nerbudda, whence an active trade 
 was kept up with both coasts of the Persian Gulf in 
 correspondence with the commerce in the precious 
 metals from Europe, Arabia, and Egypt, which the 
 Phoenicians conducted by means of their trading 
 stations in the Arabian waters ; and with the inhabi- 
 tants of the Assyrian and Mesopotamian cities, who 
 forwarded their wares by caravan and river to the 
 mouths of the Euphrates. 
 
 The materials from which Ptolemy, the geographer, 
 compiled in the second century A.D. his itineraries 
 afford proof that in the age of Alexander, and 
 certainly during many preceding centuries, a great 
 commerce was carried on between India and Ceylon
 
 INDIAN TRADE ROUTES IN ASIA. 35 
 
 on the one hand, and Burmah, Siam, Malaya, and 
 the coasts and islands lying to the south and east 
 of the Straits of Malacca as far as China on the other. 
 Nearchos, exploring under the orders of Alexander 
 the coasts of the Persian Gulf, found a settlement 
 where Muscat now stands, in communication with 
 Limyrica (the Malabar coast of India) and Ceylon. 
 Commodities are described in the "Periplus" as being 
 conveyed down the Ganges and thence sent to 
 Limyrica ; and the author of that work (writing 
 circa A.D. 64) mentions a town called by the same 
 name as that river, situated near its mouth, which 
 served as a trade emporium. Merchandise from the 
 east coast of the Bay of Bengal would, at most 
 seasons of the year, be carried into or past the Ganges, 
 according to the part of India, eastern or southern, 
 which might be its destination, and two streams of 
 trade would thus unite on their way to the Coro- 
 mandel coast, the chief port of which was situated 
 at the mouth of the Cauvery. 
 
 From Ceylon commodities collected from the 
 mainland of India and from countries to the east 
 of the bay were distributed along the western coast 
 by vessels issuing from many different ports between 
 the southern cape of India and the delta of the Indus. 
 Heeren quotes Agatharcides, who wrote about one 
 hundred and fifty years before our era, as noticing the
 
 36 THE GOLD TREASURE OF INDIA. 
 
 importance of Patala near the mouths of the Indus 
 in the trade between India and Arabia. Calliene 
 (Callian near Bombay) is mentioned in the "Periplus " 
 as a port which had recently decayed after a long 
 career of prosperity. Barygaya, or Broach, has 
 already been noticed. Musiris, in Limyrica, where 
 stands the modern Mangalore, was resorted to by 
 Greek traders at the commencement of our era for 
 the purchase of silk. 
 
 Pliny describes the ships frequenting the ports 
 of Ceylon as square-built vessels, whose timbers 
 were not fastened with iron, but sewn together with 
 cocoanut or some similar fibre ; a description which 
 in one respect applies to the junks used by the 
 Chinese, and in another to the masulah boats which 
 ply on many parts of the Coromandel coast. The 
 "Periplus"* (quoted by Irving) describes silk as being 
 brought to that port from Thina (which is believed 
 to indicate North-western China) by caravans to 
 some point on the Ganges, and necessarily by that 
 river to the sea, and thence to Ceylon. This and 
 other commodities from the same region may either 
 have travelled round the sea coasts of Asia, via the 
 
 * The " P< ; of the Erythrean Sea" is believed to have been 
 written in the reign of rca \.:>. 64, by Arrian, an Egyptian 
 
 <;,. , i; not to be confounded with Arrian of Nicomedia, the 
 
 ion to India, who was Governor of 
 ,cia {temp. Hadrian A.D. 136).
 
 INDIAN TRADE ROUTES IN ASIA. 37 
 
 Straits of Malacca and the Bay of Bengal, to that 
 island, or have been conveyed by land and river 
 transport from Northern India to the mouths of the 
 Ganges, and thence have been taken by the Coro- 
 mandel coast, which was well provided with small 
 but convenient ports, to its destination in the 
 southern sea. 
 
 Cosmas Indicopleustes, an Egyptian traveller, 
 who in the sixth century B.C. compiled from the 
 narrative of one Sopater, who had visited India, an 
 account of the commerce of Ceylon, notices the 
 activity of the trade along the coast of Limyrica, and 
 describes it as issuing from Ceylon, which was the 
 principal emporium for that part of Asia, and being 
 transported in vessels belonging to numerous ports 
 on the coast, which he names — among which Nel 
 Kynda (identified by Heeren as the modern Neli- 
 ceram) and Arrhota (Surat) still exist — to the Persian 
 Gulf. 
 
 In this way the merchandise of China, Southern 
 Asia, and India, fell into the courses of commerce 
 through which the seamen of Arabia and Egypt 
 and the caravan traders of Assyria distributed it 
 throughout the Roman Empire. 
 
 That commerce between distant places within 
 India and adjacent countries was organized lono- 
 previously to those times which Greek accounts of
 
 38 THE GOLD TREASURE OF INDIA. 
 
 the country refer to, is to be gathered from ancient 
 books in the dead languages of India, from incidental 
 notices of the Tyrian trade in the Jewish scriptures, 
 and other historical sources, as well as from the 
 character of the commodities which were imported 
 into Western Asia and Europe from the East. 
 
 Character of the Indian Trade. 
 
 The social semi-religious code of the Hindus, 
 called the Institutes of Menu, which, if the age of 
 its compilation be much more recent than that 
 attributed to it by the people themselves, must be 
 held to contain regulations whose authority had 
 become confirmed by the acquiescence of many 
 generations ; speaks of a class of "men well acquainted 
 with sea voyages and journeys by land, and of ship- 
 builders, and of sailors, as many as navigate rivers." 
 To a particular caste of Hindus was assigned the 
 business of conducting trade, and upon them was 
 enjoined the necessity of making themselves ac- 
 quainted "with the productions and requirements 
 of other countries, with various dialects and languages, 
 and with whatever else has direct or indirect reference 
 to purchase and sale." * 
 
 * Irvine's " Commerce of India. "
 
 CHARACTER OF INDIAN TRADE. 39 
 
 The use of coined money and the practice of 
 insuring goods in transit against risk were, as we 
 have seen, common in India many centuries before 
 our era. The economy of coined money effected 
 by a system of banking and the use of bills of 
 exchange is also known to be of great antiquity in 
 that country. These circumstances add fresh cor- 
 roboration to the general evidence regarding the 
 length of the ages during which her inhabitants have 
 drawn from all quarters of the world a supply of the 
 precious metals for use as money. 
 
 Besides gold, the importation of which into India 
 will be noticed separately, there were collected from 
 foreign countries in Asia, or produced within her own 
 boarders for export to Europe, such merchandise as 
 could be easily transported on beasts of burden and 
 in the ships of small tonnage in use in ancient times, 
 but which was at the same time sufficiently rare to 
 command a high price abroad. 
 
 High Asia and the mountain range, called by the 
 Greeks Paropamisus, which is comprised in the 
 territories of Afghanistan, Badakshan, and Kashmir, 
 supplied wool from the fleeces of a breed of sheep 
 which were as famous in the time of Alexander as 
 they are now. This was carried to Borsippa near 
 the Euphrates, and there woven into material ; or 
 further still to Tyre, to be steeped in the dye of the
 
 40 THE GOLD TREASURE OF INDIA. 
 
 Murex. The ancient celebrity of the Milesian fleeces 
 is considered to be largely owing to a mixture of this 
 Indian wool with that locally produced. 
 
 From the Imaus range came the onyx calchedony, 
 and similar stones used for signet rings ; lapis lazuli 
 and jasper, regarded as precious stones by the 
 ancients ; and a resinous gum, deposited by an insect 
 on the bark of certain trees as shell-lac is formed by 
 the cochineal beetle at the present day in the central 
 Indian forests. 
 
 The mountains to the north and west of India 
 supplied,' as in our day, furs, asafcetida, and the 
 aromatic secretion of the musk deer. 
 
 The towns in the same region furnished em- 
 broidered woollen fabrics and coloured carpets, the 
 former of which were as highly prized in Babylon and 
 Rome as they are now in modern Europe under the 
 name of Kashmir shawls ; while the latter were used 
 more for decorative than useful purposes, as hangings 
 for the walls of palaces and temples, like the arras 
 of the Middle Ages. 
 
 The most valuable merchandise, however, from 
 Eastern Asia was silk, which, under the Persian 
 Empire, was exchanged by weight with gold. It is at 
 the same time little less than certain that silk of 
 Indian manufacture, as well as that obtained from 
 China, was sent beyond India, as the manufacture of
 
 CHARACTER OF INDIAN TRADE. 41 
 
 the fabric has long been indigenous in those parts of 
 the country where the climate permits the breeding 
 of silkworms. From Northern India were imported 
 cotton fabrics of many varieties, graduating between 
 the finest muslin and calico to the coarsest cloth. 
 Sindon was the name given by the Greeks to cotton 
 fabrics generally, some qualities of which are said to 
 have been esteemed by the Persians as hardly less 
 valuable than silk. Oils, brassware, a liquid prepara- 
 tion of the sugar cane, drugs, and dyes were procured 
 from various parts of the country. Gerrha, the Tyrian 
 emporium in the Persian Gulf, was famous for the 
 export of salt, which was doubtless procured from 
 India, where the manufacture and trade in the con- 
 diment has always flourished. 
 
 Of the Tyrian trade with India, surviving written 
 accounts are but meagre, and only incidentally met 
 with in a few Greek and Hebrew writers. The 
 prophecy of Ezekiel, which is partly taken up with 
 predictions of the destruction of the Phoenician polity, 
 contains an allusion to the Tyrian merchants trading 
 " in all sorts of things, in blue clothes, and broidered 
 work, and in chests of rich apparel bound with cords, 
 and made of cedar." These words are interpreted to 
 refer to the cotton stuffs dyed in indigo, and the 
 embroidered silks and woollens of China and India. 
 The latter would, no doubt, be distinguished by being
 
 42 THE GOLD TREASURE OF INDIA. 
 
 packed in chests of hard wood (which is pronounced 
 to be the only certain interpretation of the word 
 rendered by " cedar "), secured with cords of fibre, 
 a method still in use for merchandise from China 
 and the Straits, instead of being made up in 
 bales and fastened with ropes of twisted horsehair 
 for conveyance on camels and other beasts of 
 burden. 
 
 From Ceylon especially, as well as from other 
 parts of Southern and Western India, were imported 
 into Europe, Egypt, and Asia west of India, various 
 kinds of valuable spices, both for consumption as food 
 and to supply the demand created by the use of 
 aromatics in mortuary and sacrificial rites. Of the 
 former, cinnamon and pepper were held in most 
 account ; while sandal-wood from India and China, 
 and camphor from the latter country, were used for 
 the latter purposes. Cordage and canes for use in 
 the rigging of ships were productions of Ceylon and 
 of the islands of the Archipelago eastward of the 
 Malacca Straits. 
 
 From the export of these commodities, and from 
 that of the ivory of elephants which roamed wild in 
 the hills, of ebony from the forests, and pearls from 
 the shores of the island, the merchants of Ceylon and 
 those of the neighbouring mainland of India supplied 
 themselves with gold and silver, in addition to that
 
 GOLD IN CEYLOX. 43 
 
 which the hilly parts of the island undoubtedly 
 produced. 
 
 The trade which passed through the hands of the 
 'Singhalese during many centuries could only have 
 been organized by the Government of the island 
 having the control of ample supplies of the precious 
 metals, which its inhabitants are known to have pos- 
 sessed in great abundance. 
 
 Gold in Ceylon. 
 
 Although the age which produced the Ramayana 
 may be much more recent than that to which the 
 Hindus ascribe its composition, its antiquity is un- 
 questionable ; and the description in that epic of 
 wealth in gold both manufactured and in use as 
 money, possessed by the people of the countries 
 mentioned in it, among which Ceylon was the most 
 conspicuous, proves that the precious metals must 
 have been generally diffused among the nations of 
 India from a very early period of their history ; and 
 as the supplies from local mines were limited, they 
 can only have obtained their gold and silver from 
 foreign countries.
 
 44 THE GOLD TREASURE OE INDIA. 
 
 Megasthenes, who visited India about the year 
 300 B.C. and travelled as far east as the modern 
 Patna, describes Ceylon as producing gold ; and 
 Cosmas was informed that the traders from Ceylon 
 obtained the metal in exchange for merchandise at 
 the port of Adule on the Red Sea, and from Yemen in 
 Southern Arabia. 
 
 Pliny speaks of the people of Ceylon finding gold 
 among their hills ; and the ambassadors sent by the 
 King of Ceylon to the Emperor Claudius {circa 41-54 
 A.D.) excited curiosity and wonder by their descrip- 
 tion of the luxury and magnificence of their monarch, 
 to which a lavish use of gold, not only in personal 
 decoration, but in the enrichment of buildings, largely 
 contributed. 
 
 That both Southern India and Ceylon ^obtained 
 gold and silver from China may be certainly inferred 
 from the fact of that country having always possessed 
 and generally exported those metals, especially gold, 
 of which India has received from that quarter large 
 supplies ; while the Greek names of Chrysa and the 
 golden Chersonese, applied to the Burmah and 
 Siamese coast and to the Malayan peninsula, attest 
 that those regions were as famous for the production 
 of gold at the commencement of our era as they are 
 now for its possession and use.
 
 GOLD IX NORTHERN ASIA. 45 
 
 Gold in Northern Asia. 
 
 Only scanty notices indicating the particular 
 sources of gold supply in Northern Asia are met with 
 in ancient authors. 
 
 The gold of the Imaus and of a region (the 
 Thina of the " Periplus ") on the north-western border 
 of China, has already been noticed, as being the 
 basis of a caravan trade between Upper /\sia and 
 India. Herodotus speaks of a tribe on the banks of 
 the Jaxartes among whom utensils of gold were as 
 common as Pizarro found them to be among the 
 Mexicans on the discovery of America. Strabo and 
 Arrian describe what can be nothing else, when 
 stripped of the guise of fable, than the practice of 
 excavating gold from beneath the earth by a people 
 who inhabited the borders of the desert of Cobi and 
 wore clothing of hides, a peculiarity in which they 
 are imitated by a remote Himalayan tribe at this day. 
 As these gold-diggers were periodically robbed by 
 visitors using horses and carts to carry off their spoil, 
 we may conclude that they were armed traders from 
 India who relieved them of the fruits of their labour. 
 The satrapy of India, which included as much of 
 Afghanistan, Kashmir, and the Punjab, as the Persi 
 monarchs could keep in subjection, was esteemed
 
 46 THE GOLD TREASURE OF INDIA. 
 
 dependency of great importance, by reason, among 
 others, of the gold dust in which its tribute of three 
 hundred and sixty talents was paid, a fact which can 
 only be accounted for by the importation of gold into 
 that region from Central Asia, whence Ctesias and 
 Herodotus record that it was usually brought in the 
 age of Darius Hystaspes. 
 
 Travellers who have recently visited that part of 
 Central Asia lying nearest to India find that the 
 drain of two hundred and forty centuries has not 
 exhausted its beds of gold. The narrative of the 
 mission sent to the Amir of Kashgar by the Indian 
 Government in 1873-74, speaks of some of the 
 envoy's staff witnessing the annual arrival of tribute 
 at the capital, either presented in person or des- 
 patched by the governors of distant districts in the 
 province ; the tribute and offerings consisting of 
 the productions of each locality. Among them 
 the Governor of Khoten " led in a caravan of four 
 hundred and fifty camels laden with carpets, silks, 
 cottons, felts, tents, metal dishes, and other local manu- 
 factures ; two arabas (carts) each carrying isoojings 
 (equal to about 1 800 pounds) of gold and silver," and 
 some other contributions of less consequence.
 
 GOLD IN SOUTHERN INDIA. 47 
 
 Gold in Southern India. 
 
 While India was thus levying contributions of 
 the precious metal on every nation in Europe or 
 Asia with whom she traded, some considerable 
 quantities of gold were obtained by superficial min- 
 ing in the hills of the Deccan. The researches of 
 Mr. E. B. Eastwick into this subject have recently 
 made known to us such information of this source 
 of supply as the most ancient records contain. The 
 inscription on the great temple of Tanjore is quoted 
 to prove that in the eleventh century A.D. gold was 
 more common in Southern India than silver. 
 Mahmoud of Ghazin (1017-24) took away, as the 
 plunder of his frequent expeditions into India, a 
 considerable treasure from Mathura on the Jumna, 
 and from Somnath in Guzerat — in that age the 
 principal seats of the Hindu religion — and from 
 Kanouj on the Upper Ganges, the capital of a power- 
 ful state. The rise of the Mahomedan states of 
 Central Asia is probably attributable to these ac- 
 quisitions. 
 
 The Hindu princes, on the other hand, of the 
 Deccan, as masters of the country which had pro- 
 duced and, at that time, retained large quantities of 
 gold, fell victims to the cupidity of the Mahomedan
 
 4 8 THE GOLD TREASURE OF INDIA. 
 
 conquerors of Northern India, who, during and 
 subsequent to the fourteenth century, transferred 
 to their own capital of Delhi a considerable part 
 of this treasure. That empire reached its climax 
 of power in the sixteenth and seventeenth centuries. 
 In the year 1738, Nadir Shah, a Persian adventurer, 
 sacked the city, and is said to have appropriated 
 ,£6,000,000 sterling in specie, and to have levied a 
 contribution of ,£8,000,000 more on its inhabitants. 
 
 These figures, however, are of no statistical value, 
 because the modern equivalent of the standard of 
 value used by the annalists of these monarchs is very 
 uncertain, and because their object in compiling their 
 narratives was not so much to record history as to 
 glorify their masters by exaggerating the magnificence 
 of their conquests. The same author bases a theory 
 that the six hundred and sixty-six talents of gold re- 
 corded as coming to Solomon in one year (2 Chron. 
 ix. 3) was an annual tribute, and levied on the produce 
 of the mines of Southern India, on the assumption 
 that the Ophir of Scripture and India are the same 
 place ; and he argues that that monarch drew from 
 India some £160,000,000, or on an average £4,000,000 
 a year during his reign, which never returned to the 
 country at all. The question of the locality to which 
 the name Ophir was applied is fully discussed in 
 Smith's " Dictionary of the Bible," and the conclusion
 
 GOLD IN SOUTHER X INDIA. 49 
 
 • 
 
 to be drawn from all that is known on the subject 
 is, that that region comprised the gold yielding 
 districts of Arabia, and perhaps Ethiopia, where gold 
 was also found. The almug trees which the navy 
 of Hiram brought from Ophir have not been identified 
 with any timber known to us, and they cannot, 
 therefore, be assumed to have been grown in India. 
 The navy of Hiram, which in concert with that of 
 Solomon, brought gold, silver, ivory, apes, and pea- 
 cocks, once in three years into the territory of the 
 Jewish monarch, is not recorded as making the voyage 
 to Ophir, and it is not safe to assume that the apes 
 and peacocks were procured either from Ophir or 
 India. If the terms of 1 Kings x. 22 are to be 
 understood in their exact sense, it would seem that 
 Tarshish gave its name to this triennial voyage ; and 
 if that region was (as it probably was) the Tartessus 
 of the Phoenicians, it was situated in South-western 
 Spain : and the precious metals and the curiosities 
 mentioned in this passage were more likely to have 
 been brought ' from the coast of Africa and from 
 Madeira than from anywhere else. The argument 
 for India derived from the use of the word "peacocks " 
 is but of little weight, as commentators agree that 
 the word in the original implies a bird remarkable 
 for a long tail, a peculiarity which peacocks share 
 with parrots, pheasants, and other birds. This revenue 
 
 E
 
 50 THE GOLD TREASURE OF INDIA. 
 
 of six hundred and sixty-six talents cannot, therefore, 
 be assumed to have been furnished from Indian 
 gold. Nor is it certain that it was an annual 
 tribute, and therefore no safe reckoning can be 
 made of what it amounted to during the forty 
 years that Solomon reigned. There can also be 
 no doubt that whatever treasure was accumulated 
 in Palestine by the offerings of the kings* of 
 Arabia, the tribute collected by the governors of 
 provinces, and taxes levied on merchants, must have 
 gone into circulation as money among the people. 
 The trade of Solomon's subjects — in all ages a people 
 with the strongest commercial instincts — the mention 
 of which in Scripture proves it to have been of re- 
 markable extent and value, and the enormous ex- 
 penditure involved in the administration of a territory 
 extending from Anti-Libanus to the Red Sea, and 
 from Egypt to the Euphrates, could only have been 
 maintained by a general diffusion of the precious 
 metals among the people of those countries, and by 
 their constant employment as money in internal trade 
 and foreign commerce. So far, then, as the treasures 
 of Solomon may have been indirectly derived from 
 India, there can be no doubt that the share which 
 that country contributed to them found its way back- 
 to her merchants and producers in the ordinary 
 
 * 2 Chron. ix. 13.
 
 GOLD IX SOUTHERN INDIA. 51 
 
 course of business, and it cannot be held as probable 
 that India lost a single ounce of gold by reason of 
 her commerce with the Tyrians and Jews. 
 
 Causes attracting the Precious Metals 
 
 to India. 
 
 The simple habits of the people of India, a fertile 
 soil and genial climate, make them independent of 
 foreign nations for the necessaries and for most 
 of the luxuries of life. The list of commodities from 
 abroad, which could have at any time found a sale 
 in India, is a very short one. Tin, lead, and glass, 
 and probably amber, were imported by the Tyrians 
 in one age, and the Venetians in another, and the 
 latter may have supplied steel for arms, and medical 
 drugs, while frankincense for use in the temples was 
 procured from Arabia. There is good reason to 
 believe that slaves were for many centuries an article 
 of traffic in this trade. The large part that domestic 
 slavery played in the social life of the ancient world, 
 and the practice among successful generals duri; 
 the latter days of the Roman Republic and the 
 Empire of selling the people of conquered tribes into
 
 52 THE GOLD TREASURE OF INDIA. 
 
 slavery by the thousand, makes this highly probable. 
 The custom of dealing in human beings with the 
 people of Asia is believed to have prevailed up to 
 a late period in the era of Christianity. Besides 
 these commodities, there remained nothing that the 
 people of the country could want, except the precious 
 metals. However large the quantity of foreign 
 merchandise may have been which could be pro- 
 fitably imported into India, there must always have 
 remained a heavy balance due for goods exported 
 from India, which could only have been settled by the 
 surrender of those stores of the precious metals, of 
 which the indebted nations had an abundant supply. 
 
 Drain of Gold to India. 
 
 The drain of gold and silver from Europe to the 
 East has been a matter of complaint against the 
 Indian trade at all times. Carthage, in the fourth 
 century B.C., used to dispose of the silver and gold 
 which she procured from Spain by sending it to 
 India through the intervention of the Tynans. At 
 that time both that State and Rome used little or 
 no silver for money. The importation of Car-
 
 DRAIN OF GOLD TO INDIA. 53 
 
 thaginian silver into Italy and the importance of the 
 Indian trade were no doubt the exciting causes of the 
 Punic wars, two hundred years later. Pliny relates 
 that in his time (first century A.D.), while the export 
 of the precious metals was frequently and in vain 
 prohibited from the Roman Empire, a sum of money 
 equal to £3,000,000 was annually exported into India. 
 So well was this peculiarity of the trade known in 
 modern times, that in the charter granted by Queen 
 Elizabeth to the first English East India Company, 
 in the year i6od, it was stipulated that the associated 
 merchants were " to import, within six months after 
 the return of every voyage, as much gold and silver 
 as shall be equal to the value of the silver exported 
 by them." This regulation was, from the nature of 
 the case, but feebly enforced, and soon repealed. As 
 early as the year 1674-75, the accounts of the Com- 
 pany showed that out of their exportations to India, 
 to the value of ,£550,000, £400,000 was entirely 
 bullion. Del Mar is of opinion that in the three 
 hundred years between the middle of the sixteenth 
 century and our own time, £160,000,000 of gold and 
 £440,000,000 of silver were exported from Europe 
 and America to the East, which has never been 
 re-exported ; but as he obtains this figure by making 
 a deduction for treasure taken by the Portuguese and 
 Dutch from Japan, between 1545 and 1646, in the
 
 54 THE GOLD TREASURE OF INDIA. 
 
 amount of .£70,000,000, which was certainly indigenous 
 to that country, and for some other withdrawals of 
 treasure from the East which was not likely to have 
 been altogether obtained from the West in the first 
 -instance, and as this author's estimate does not 
 include the net importations of treasure into India 
 during the last seven years, an addition of £200,000,000 
 may safely be made to his estimate of £600,000,000, 
 as evidence of the drain of gold and silver to the 
 East in comparatively recent times. The value of 
 the vast treasure imported into India from foreign 
 countries, during the last two generations, is too 
 well known to need particular mention here. That 
 this current of the precious metals has set towards 
 the East, without intermission, for twenty-five cen- 
 turies, is a conclusion which is historically certain, 
 and which our knowledge of the ordinary operation 
 of the laws of trade make it impossible to deny. 
 To gold all the world is a home ; it is an unwelcome 
 strangfer nowhere. It flows into all countries where 
 it can be profitably used, however distant they may 
 be from the source of its supply, as surely as water 
 runs down hill. It has in. consequence, from a remote 
 antiquity, been employed in India as an instrument 
 for exchanging the productions of countries far distant 
 from one another. Its abundance has been evident 
 through all historical times, in its lavish use for
 
 DRAIN OF GOLD TO INDIA. 55 
 
 purposes of State and personal adornment, in the 
 magnificence of the public buildings and the palaces 
 of the rich in all parts of the country. It is still 
 retained as hoarded treasure by wealthy men of all 
 classes, and in the case of most bankers and traders 
 doing a large business, it serves as a basis to their 
 credit as merchants. 
 
 Causes regulating the Exchange Value of 
 Money. The Stability of Value of Gold. 
 
 As, however, the succeeding pages of this treatise 
 will be chiefly occupied with the discussion of a 
 proposal to circulate gold and silver coins in the 
 Indian currency at a varying ratio of exchange, 
 it will not be irrelevant to consider what the con- 
 ditions are on which the value of money, when used 
 to exchange commodities, depends. 
 
 Owing to the imperishable nature of gold, and to 
 the care which people ordinarily take of it, the stock 
 of the metal existing above the earth's surface is 
 liable to but little diminution in amount by attrition, 
 loss in manufacture, or accident. Its homogeneous 
 character allows of its division into parts, the values 
 of which are ordinarily in the same proportion to one
 
 56 THE GOLD TREASURE OF INDIA. 
 
 another as their weights. The rarity of the metal 
 permits a large value to be carried in a small bulk ; 
 and as its durability allows the same coin to be used 
 many times over, a smaller quantity of the metal 
 serves for the exchange of a vastly larger quantity 
 of goods than would be required if a more perishable 
 material than gold were used as money. The accu- 
 mulations made by previous generations are thus 
 maintained, but little impaired in amount, and the 
 total mass of metal available for money increases 
 yearly faster than it diminishes. While, on the one 
 hand, the producers and owners of gold are under a 
 constant inducement to add to the world's stock of 
 the metal in quantities limited only by the ability of 
 mankind to find it, on the other hand the continuity 
 of the demand for gold for use as money gives to it 
 a steadiness of value in the exchange with other 
 commodities, which no other production of nature, 
 or of human labour and skill applied to such produc- 
 tions, in the same degree possesses. Most com- 
 modities which come within the range of commerce 
 are produced for sale at some point of time in the 
 immediate future. They are either perishable in their 
 nature, or they may become wholly or partially 
 valueless by a change of fashion, or from supersession 
 by some other article of more use in the same field 
 of employment. In many cases, the owners of such
 
 STABILITY OF VALUE OF GOLD. 57 
 
 goods are under a necessity to sell them in order to 
 realize the profits of their business. But none of 
 these conditions affect gold. The demand for it in 
 the form of coined money is ordinarily in advance of 
 the supply ; any quantity hitherto produced has not 
 proved to be more than adequate to the work which 
 it has to do. As it requires a greater force to dis- 
 turb the equipoise of a large than of a small mass in 
 suspension, so, owing to the magnitude of the accu- 
 mulations already existing, the yearly increment of 
 fresh money to the stock in use has little or no 
 influence on the equilibrium of value which gold holds 
 to commodities. The owners of gold therefore feel 
 no apprehensions that the article they have to sell 
 will greatly decline in value, diminish in amount, or 
 be with difficulty put on the market when they wish 
 to dispose of it. 
 
 Another reason why gold alters less in value 
 against commodities than commodities alter against 
 one another is, that, except in the case of the acquisi- 
 tion of gold in river-beds and similar situations on the 
 surface of the earth — a source of supply which is soon 
 exhausted — increased quantities of gold excavated 
 from mines are obtained at a constantly increasing 
 expenditure in wages of labour and machinery. In 
 the manufacture of most articles, a continuity of 
 demand induces improvements in labour-saving
 
 58 THE GOLD TREASURE OF INDIA. 
 
 machinery, which reduce the prime cost, or increase the 
 out-turn, in direct correspondence with the increase in 
 the capital laid out on the machinery. This is the 
 case, however, in a less degree when improved and 
 more costly machinery is applied to the excavation 
 of gold. The use of the machine may facilitate 
 excavation of the ore, but the miner cannot be sure 
 that gold will be found where the machine is set up ; 
 nor is the quantity of the metal excavated increased, 
 or the cost of its production lessened, in any certain 
 ratio to the amount of capital invested in the enter- 
 prize. 
 
 Taking one mass of metal with another, each 
 ioo lbs. weight of gold taken out of the mines costs 
 more in every way to bring it to the surface than the 
 last ; and to secure to the miner the return of his 
 capital with a fair amount of profit, each fresh supply 
 of gold is put on the market in exchange for an 
 increasing quantity of other commodities. 
 
 These circumstances all contribute to secure to 
 gold money its characteristic steadiness of value. No 
 production or commodity is so rare and obtainable 
 under conditions which vary so little from time to time 
 as to secure to it absolute fixture of value ; but in the 
 case of the precious metals, the closest approximation 
 to this condition is reached by gold. 
 
 As silver possesses all the characteristics of gold
 
 STABILITY OF VALUE OF GOLD. 59 
 
 in a lower degree than that metal, it is proportionately 
 less convenient as a measure of value, and therefore 
 as a medium of exchange. While we say of any 
 merchandise, which may cost £$ at one season and 
 £6 at another, that it has risen in value 20 per 
 cent., the same could not be affirmed with certainty 
 if the price had varied from 500 to 600 pieces of silver 
 in a market where silver might be in use as money 
 in free circulation with "'old. In the latter case it is 
 
 o 
 
 the silver which would have fallen in value against 
 merchandise if the price of the latter in gold remained 
 unaltered. It is of importance to bear this in mind, 
 in considering the circumstances of the currency of 
 India, the greater part of whose exports, although 
 they are purchased with silver in that country, are 
 immediately after sold for gold in Europe or America, 
 and whose commercial balances, as those who reside in 
 that country know to their cost, are settled in silver 
 at a valuation based on the market price of that metal 
 in gold.
 
 60 the gold treasure of india. 
 
 Cost of Production, its Influence on the 
 Value of Money. 
 
 Gold, like other commodities, can only be con- 
 verted from its crude form to man's use by human 
 labour. (It will save repetition if in this place it is 
 stated that in the term labour are included the food 
 and wages of workmen, the cost of machinery, of 
 buildings, of carriage, and of anything else indis- 
 pensably necessary to placing gold as bullion or as 
 money in the market.) But the distribution of the metal 
 beneath the earth's surface, even in places where it is 
 comparatively abundant, is very capricious. Mining 
 adventures are in a large proportion of cases failures, 
 but the search for gold occasionally rewards the labour 
 of a few hours with such a quantity of the metal as 
 will exchange in the market for commodities manv 
 times exceeding in value those which the same efforts 
 could have procured in any other field of industry, 
 while the difficulties which the situations in which it 
 is found present to its excavation generally result in 
 the labour bestowed upon mining being much less 
 productive than it would have been if applied in other 
 ways ; nevertheless, the hope of a sudden and vast 
 return to a moderate amount of toil continues to 
 attract capital to an enterprise which is, on the
 
 INFLUENCE OF COST OF PRODUCTION. 61 
 
 average, comparatively unremunerative, and will con- 
 tinue to do so as long as the gambling spirit forms 
 a constituent of human character. If any given 
 number of sovereigns could be traced to their parent 
 nusreets. it would be often found that they had cost 
 more in labour than they could at the first exchange 
 have purchased. The failures in mining largely pre- 
 ponderate over the successes. As the bulk of the 
 metal is put on the market at less than the ordinary 
 profits on the employment of capital in commerce, 
 the exertions of the owners of the larger quantity are 
 always directed to keeping up its price — that is, to 
 exchanging it away for as large a share of the neces- 
 saries or luxuries of life as they can obtain ; while the 
 more fortunate owners of the smaller and more easily 
 acquired portion are equally unwilling to part with 
 their prize except on as good terms as other gold- 
 owners in the same market can command. 
 
 Gold, like iron or coal, is but a commodity. When 
 one man sells goods for gold, the purchaser sells gold 
 for goods, and as the gold is the equivalent of the 
 labour primarily bestowed on its production, the sale 
 is in effect a sale of those goods for the labour which 
 produced the gold ; and because traders exchanging 
 their wares for one another do so at such an estimate 
 of their relative values in each case as will com- 
 pensate each purchaser and seller for what he has
 
 62 THE GOLD TREASURE OF INDIA. 
 
 expended on his share of them respectively, it follows 
 that under a system of free competition in produc- 
 tion and sale all commodities, gold included, exchange 
 for one another ultimately, and, on the average, on 
 the basis of the cost of their production. Again, all 
 men in the pursuit of commerce, equally among a 
 primitive people exchanging their goods by the 
 method of barter, or among a civilized people using 
 the precious metals as money, seek to get something 
 of a higher value than that which they give in the 
 exchange. Thus, the seller of goods for money when 
 he spends it endeavours, if he is a trader, to make a 
 profit on its investment in the purchase of fresh 
 goods. In doing so he exchanges one kind of 
 commodity or produce for another, and the latter, in 
 some way or another, brings hirn more advantage 
 than he could get if he had retained the former. 
 Thus every increase in the quantity of commodities 
 produced, by being itself exchanged for some other 
 commodity still more in request, tends to excite in 
 its turn a still larger and increased production of the 
 objects of human desire. The gold which is the 
 medium of effecting these exchanges is of no use to 
 the persons in whose hands it may temporarily rest 
 until it is converted into some other commodity, 
 which can again be sold at a profit. Gold being the 
 machinery which keeps the current of exchange in
 
 INFLUENCE OF COST OF PRODUCTION. 63 
 
 motion, has the appearance of stimulating pro- 
 duction, but it is, in fact, the demand for increased 
 commodities which is the real stimulus. Gold being 
 itself a commodity produced by labour, exchanges 
 for other commodities of the same value as those 
 which were expended in its own production, and it 
 necessarily exchanges for them on the same basis 
 on which they in the long run exchange for one 
 another, namely, the cost of its production. 
 
 If in free competition gold or any other article 
 is exchantrincr for other goods which cost less labour 
 in their production than the quantity of it offered 
 for them cost, other producers seeking to obtain a 
 share of the excess of profit over the ordinary returns 
 to capital employed in trade will supply the market 
 with larger quantities of the article in question, and 
 thus by lowering its value tend to redress the balance 
 of advantage in favour of those who hold the mer- 
 chandise of inferior value. While this operation is in 
 process, the oscillations in the amount of profit which 
 those on either side of the exchange may earn may 
 be frequent and variable, but a force has been set in 
 motion which tends to correct the alternate elevations 
 and depressions that the values of the commodities 
 in exchange exhibit, and which ultimately reduces 
 them to the level determined by their common cost of 
 production.
 
 64 THE GOLD TREASURE OF INDIA. 
 
 The influence of the law of the cost of production 
 is exerted more directly in the case of that portion 
 of the precious metals used in the arts than that 
 which is used as coined money, and, as will be after- 
 wards seen, its operation is modified when the law 
 of supply and demand begins to act upon them in 
 the latter character; yet, even as money, gold and 
 silver are amenable to its regulation, as may be seen 
 in respect of the silver money of our own day. 
 While it is needless in this place to inquire into the 
 causes which have induced a fall in the value of 
 silver money in some parts of the world, it is sufficient 
 for the purposes of the present argument to remark 
 that a much larger quantity of silver must now be 
 excavated, at an increased expenditure of labour, in 
 order, when coined into money, to buy the same 
 quantity of goods, than was formerly necessary. The 
 production of the raw metal has diminished, because 
 the cost of extracting it from the mines which are 
 closed is not covered by the value of the commodities 
 for which it exchanges when used as money. Silver, 
 and the remark applies in a greater degree to gold, 
 cannot be indefinitely increased in quantity. These 
 metals cannot be obtained with as much case as 
 copper or iron. There is a point which, in comparison 
 with the case of the latter, is soon reached, at which 
 the labour required for the excavation of a given
 
 INFLUENCE OF COST OF PRODUCTION. 65 
 
 quantity will not exchange for the same amount of 
 labour bestowed on the acquisition of other commo- 
 dities. The metals cost in fact more than they fetch ; 
 their cost prohibits their production ; and however 
 active the demand for them may be in stimulating 
 mining enterprise by the hope of extraordinary 
 profits, the rarity of the metals, especially gold, and 
 the difficulty of extracting it from the earth, is 
 frequently so great that the cost of its production 
 cannot practically be surmounted. This condition 
 operates to limit the quantity available for use 
 as money, and necessarily prevents that quantity 
 fluctuating in value against commodities to the 
 same extent that commodities, which are capable 
 of increase in more extended quantities than gold, 
 fluctuate against one another. Thus, if there be two 
 classes of mines, A and B, and from A the return to 
 one day's labour is one hundred ounces of gold, and 
 from B the return to ten days' labour is only the 
 same quantity, the A class of miners will at first 
 obtain for their one day's labour ten times the 
 goods in exchange for their gold that the B class get. 
 The continued increment of gold from the A mines 
 will, the amount of commodities exchangeable for 
 gold remaining the same, lower its value, and more 
 and more gold will have to be given for the same 
 quantity of goods. In this event, the time will come 
 
 F
 
 66 THE GOLD TREASURE OF INDIA. 
 
 when the B class of miners will not find that the 
 goods which they get for their gold on putting it 
 into the market are of equal value to the labour 
 bestowed on the excavation of the metal from their 
 mines, and they will cease to work them in obedience 
 to the law of the cost of production. As the 
 difficulty of excavating gold from the B mines at a 
 profit increased, the owners will have endeavoured 
 to exchange their produce for as many commodities 
 as possible, and this, to some extent, would save the 
 A miners from the necessity of forcing a market for 
 theirs by offering it in increasing quantities for the 
 same quantity of goods, and the final expulsion of 
 the gold of the B mines from the market would 
 arrest the fall in the exchange value of the A gold. 
 Furthermore, as the gold at first from both classes, 
 and latterly from only one class of mines came into 
 the market, it would find an equilibrium established 
 between the existing stock of gold and commodities 
 in general. It would take a long time for the fresh 
 increments of gold to disturb the balance of 
 values existing between gold and goods in the 
 market, and as those who at each transaction in the 
 exchange of the fresh gold for goods would seek to 
 make a profit on exchanging the gold for a larger 
 quantity of any commodity than they had given for 
 it, increasing supplies of commodities would be offered
 
 INFLUENCE OF COST OF PRODUCTION. 67 
 
 for exchange against the fresh supplies of gold, and 
 in this way also the exchange value of the whole 
 mass of gold offered for all the goods in the market 
 would not fall in value so fast as it might, under 
 other circumstances. The maintenance of value, or 
 the fluctuations in value of the gold, has now become 
 regulated by the law of supply and demand. From 
 the time that the gold was merged in the general 
 circulation, its cost of production having been once 
 covered, the question of its value in exchange for 
 commodities became almost entirely one of quantity. 
 So far as its cost of production affected its value, that 
 consideration tended towards lowering it, because a 
 large part of the quantity was produced at a much 
 smaller expenditure of labour than that by which the 
 rest of the gold in the market had been on the 
 average obtained ; but, at the same time, the demand 
 for gold for use in exchanging commodities ranged 
 so high that the owners of the new gold were able 
 to get for it not much less, measured in labour, than 
 the owners of the existing stock had up to that time 
 procured. While, therefore, the cost of production 
 ultimately regulates the value of the metal, as we 
 have seen in the case of the B mines, the law of 
 supply and demand immediately and directly fixes 
 from time to time the exchange value of the gold as 
 against commodities.
 
 6S THE GOLD TREASURE OF INDIA. 
 
 Money can never vary much in its value in 
 exchange from the value imposed upon it by the 
 cost of its production (in the sense previously in- 
 dicated), since behind the money in use there is 
 always found a stock of bullion, which its owners 
 are waiting to put into circulation as coin, when by 
 doing so they can get a price for it which will some- 
 what exceed that cost and yield them a fair profit. 
 
 So far as this cost may be a low rather than a high 
 cost, or, in other words, to any extent to which the 
 owners of bullion convert it into coin, in order to 
 exchange it for a large rather than a small quantity 
 of goods (the labour expended in the production of 
 the gold being compared with that expended in the 
 production of the goods), money will be supplied 
 in correspondence with the high figure at which its 
 exchange value can be maintained, and prices will 
 continue during that time to be low. 
 
 Bullion, although it frequently and in individual 
 cases is, on its conversion into coin, put into circula- 
 tion at a loss, yet, on the average and in the long 
 run, the whole mass of money it provides must either 
 command its equivalent in goods on its first intro- 
 duction among commercial exchanges, or it will cease 
 to be excavated. The raw metal, in its latter and 
 artificial character as money, becomes liable to an 
 infinite variety of fiuctations in correspondence with
 
 INFLUENCE OF COST OF PRODUCTION. 69 
 
 the varying proportions between the stock of money 
 in use and the quantity of commodities which it 
 serves to exchange. That is to say, that the exchange 
 value of money depends immediately on the quantity 
 of it and the work which that quantity has to do, 
 and this is commonly described by the term, supply 
 and demand. But as the volume of money which 
 flows into the market depends on the greater or less 
 advantage attending the conversion of bullion into 
 coin, and that again on the cost of the production 
 of the former, it follows that that cost is the con- 
 sideration which ultimately and in the long run 
 regulates the supply of coined money. 
 
 It must be understood that in this discussion by 
 gold is meant gold money, since the principles which 
 regulate the exchange value of money apply directly 
 only to coined money in use, or reserved for im- 
 mediate use. The potential influence of uncoined 
 metal on the stock of money in use need not be 
 considered in an argument which is intended to 
 make clear the proposition, that the precious metals, 
 when coined into money and allowed to circulate 
 together without restriction on the quantity of either, 
 exchange for one another on the basis of their 
 relative intrinsic value, which itself is ultimately 
 governed by the cost of their production.
 
 7o THE GOLD TREASURE OF INDIA. 
 
 Law of Supply and Demand. 
 
 The precious metals being, when coined into 
 money, the most convenient vehicle for the transfer 
 of goods in commerce from one owner to another, 
 by doing that easily, surely, and quickly, which 
 without their assistance could only be effected by 
 the slow and uncertain method of barter, they have 
 acquired a monopoly of employment as a medium 
 of exchange ; and although money, as has already 
 been shown, is a commodity, this circumstance dis- 
 tinguishes it from other articles of commerce in a 
 very essential manner. Of the metals ordinarily used 
 as money, gold has, for the present, so far superseded 
 every other, among European races, that it will be 
 convenient to speak of gold alone in this place when 
 using the term money. One incident of this mono- 
 poly is, that coined money, while it excludes all other 
 articles from its own field of employment, is itself 
 of no use anywhere else, of no use, that is to say, 
 in a commercial sense. 
 
 The question of credit contrivances for mini- 
 mising the use of metallic money need not now 
 be considered, as they do not affect the principle 
 under discussion. 
 
 It follows from this, that although the cost of
 
 LA IV OF SUPPLY AND DEMAXD. 71 
 
 production of bullion may be reduced, that the value 
 of money, using the term in the sense of efficiency 
 for purchase, will not necessarily be diminished 
 likewise. Gold bullion, if cheapened, will probably 
 be used more extensively than before in the arts, and 
 if a market is forced for its employment as money 
 by a higher price being offered than before for the 
 same article, the owners of the surplus stock of gold 
 will either gain a smaller profit by employing it as 
 money than they would gain by converting it into 
 plate or jewellery, or the higher prices in money 
 offered for commodities will bring into the market 
 fresh supplies, and the previously existing equilibrium 
 between money and goods will be restored. That 
 which gives an increased value or purchasing power 
 to money is an increase in the whole of the com- 
 modities which are under exchange for one another 
 in the market, while the stock of money in use for 
 their exchange remains the same. 
 
 It is not irrelevant to remark in this place that 
 it is the proportion between commodities in exchange 
 and money (to the exclusion of bullion) which 
 exchange value depends upon. The presence of mere 
 bullion in any country has only an indirect and 
 prospective influence on the value of money, except 
 it be itself under exchange among other commodities 
 in the market, in the form of plate, ingots, or orna-
 
 72 THE GOLD TREASURE OF INDIA. 
 
 ments, in which case it increases the sum of those 
 commodities which the money itself is being used 
 to exchange, and by throwing more work on this 
 stock of money, bullion, in this case, raises the 
 exchange value of money and lowers prices. 
 
 If a reduction in the cost of bullion were to 
 occur at a time when new methods for cheapening 
 manufactures and produce were being invented and 
 employed, more money would be coined ; but in that 
 case commodities might be neither cheaper nor 
 dearer. If, on the other hand, commodities were 
 cheapened and offered for sale in increased quantities, 
 and no more money were for any reason coined, the 
 purchasing power of the money in use would be 
 raised ; and the contrary would be the case if more 
 money were issued while the quantity of commodities 
 under exchange in the market remained the same. 
 
 But changes in the relative value of money and 
 goods do not necessarily correspond with alterations 
 in the cost of the production of money. Let us 
 suppose that an equation of value exists between 
 two tons of coal and one quarter of wheat, and that 
 £2 serves to exchange them. If, owing to the cost 
 of the production of money being lessened, more 
 gold coin were brought into the market, £2 5s. 
 might be the sum of money necessary to effect 
 the exchange ; the value of money would have fallen,
 
 LAW OF SUPPLY AXD DEMAND. 73 
 
 but the fall would not necessarily have been in the 
 ratio of the cheapening of the cost of the production 
 of money. Its value would have altered in accord- 
 ance with the inclination or necessity of its owners 
 to force a market for their money, but for which 
 they might reserve their gold as bullion, and buy 
 coals and wheat at the same price as before. 
 
 Again, in the case in which no diminution in the 
 cost of producing money might take place, and the 
 stock of money in the market were to remain un- 
 altered, yet if a cessation in manufactures were 
 simultaneously to occur, and the quantity of goods 
 under exchange were to fall off, the purchasing power 
 of money would diminish : £2 5s., instead of £2, 
 might be required to buy the same quantity of coals 
 or wheat ; and this alteration would in no way corre- 
 spond with a diminution in the cost of the production 
 of money. The immediate, not the remote, cause 
 of fluctuations in the purchasing power of money, 
 that is, of prices rising or falling, is to be sought 
 in the varying proportions which from time to time 
 are found to occur between the amount of commodities 
 under exchange and the amount of money in use 
 for affecting the exchanges. 
 
 The exclusive function which money possesses 
 as a medium of exchange invests it with properties 
 peculiar to itself, which are not repeated in the same
 
 74 THE GOLD TREASURE OF INDIA. 
 
 degree and manner in any other production of nature 
 or art. While, as has been shown, its efficiency in 
 exchange is ultimately regulated by the cost of its 
 production, its value does not rise and fall week by 
 week against that of commodities, in correspondence 
 with variations in the cost of its production, nor does 
 it remain steady at one point because its cost of 
 production has not been affected in the same manner 
 that commodities, the supply of which is replenished 
 with ease, ordinarily rise and fall against one another. 
 The cost of putting money in the market having 
 been once covered, which must be assumed to be the 
 case on its first appearance as coin, its purchasing 
 power depends on the greater or less amount of work 
 which commerce may put upon it. For this reason 
 money has justly been compared to a machine, a 
 locomotive engine, or a cart in use for exchanging 
 the goods produced in one district with those of 
 another. The cost of the engine having once been 
 covered, its efficiency in use depends on whether 
 it has one hundred or two hundred tons of material 
 to drag. These machines may become cheaper, and 
 more of them be brought into use, but they will not 
 be more efficient for the whole work of haulage 
 required of them, if the quantity of material for 
 transportation is increased in consequence of their 
 number. This same characteristic "e converso," makes
 
 LAW OF SUPPLY AND DEMAND. 75 
 
 money useless when it has been withdrawn from 
 work and has been buried, as is often the case, in 
 India. The potentiality of wealth may be to its 
 owner a matter of pleasing reflection, but his money 
 is as useless to him, in a technical sense, as when 
 it lay buried as undiscovered metal in the mine. 
 
 Money being at once an equivalent and a measure 
 of value, it is only of use when put to work as a 
 machine for effecting exchanges, and in this respect 
 it differs from most commodities, which are best 
 employed when they are being consumed, and are 
 of least use in exchanging other things ; but those 
 qualities which invest money with its function to 
 exchange other things, at the same time bring it 
 within the scope of the law of the cost of its pro- 
 duction, and of the law of supply and demand in the 
 same manner, although under more complicated 
 conditions than those by which other productions 
 of nature and human labour are affected. 
 
 The principal factor regulating the action of 
 supply and demand is the necessity or inclination 
 of the purchaser, and this is equally true of money 
 and of goods. If an article cost only £1 to produce, 
 it will, nevertheless, fetch £2 if purchasers are able 
 and willing to pay that price for it ; but when the 
 supply reaches a point at which the demand ceases 
 to induce increased production, the law of the cost
 
 76 THE GOLD TREASURE OF INDIA. 
 
 of production comes into play. Where, however, 
 the line can be drawn which separates the action 
 of either principle, nothing but experience can in 
 each case determine. If the cost of production were 
 a constant quantity, this might often be possible. 
 In the case, however, of most productions of nature, 
 the cost of adapting them to men's purposes is but 
 little less variable than the demand for them. 
 
 The variations in the relative value of commodities 
 to one another from week to week are beyond 
 measure numerous and diversified, and they depend 
 on circumstances which are constantly changing. 
 Among these, not the least important are fashion, 
 caprice, and other motives which are included in the 
 desire of acquisition. The force, therefore, of these 
 influences, and the origin of these variations in most 
 cases baffle investigation. The daily experience of 
 those who succeed in business in proportion to the 
 accuracy of their observation is the only gauge of 
 the alternate depressions and elevations of value 
 which occur among different kinds of commodities 
 in respect to one another, and of money in relation 
 to all articles offered for sale. 
 
 The law of the cost of production and the law 
 of supply and demand are both at work together, 
 and each contributes to settle the respective values 
 of different merchants' wares ; but we can no more
 
 LAW OF SUPPLY A AD DEMAND. 77 
 
 state with certainty the influence of either factor 
 on the resulting price than we can say whether three 
 or two in a multiplication sum have most to do with 
 making six. That the cost of production must be 
 met on an average of transactions in any particular 
 class of produce, or the article will cease to be 
 produced, is at least certain, but since in regard 
 to objects of luxury and many of necessity, the price, 
 after the cost of production is covered, depends 
 largely on the relative force of two mental concep- 
 tions, the desire of acquisition on the one hand, and 
 a reluctance to give up the fruit of labour until its 
 utmost value is ascertained on the other, and these 
 involve a great variety of complex and associated 
 motives, their ratio to one another cannot be stated 
 in other terms than those of the money employed 
 in the exchange. These terms, being always used 
 in a relative sense, have no meaning sufficiently fixed 
 to be capable of expression in terms, as definite as 
 those used, for instance, in arithmetic. Thus, although 
 the shares in a coal mine may have cost ten years 
 ago £2 apiece, and to-day sell for £\0, yet we 
 cannot with so much certainty affirm that the scrip 
 has become five times as valuable as before, as we 
 can that twice five makes ten, because it is not at 
 once ascertainable what influences have been at work 
 to cause this alteration in price. If the coal selling
 
 78 THE GOLD TREASURE OF INDIA. 
 
 for £10 only procures the same amount and kind 
 of goods which ten years before cost £2, the coal 
 has not risen in value, although it may sell for more 
 money. 
 
 Bimetallism and the Fixed Ratio. 
 
 The effort to establish by law a fixed ratio of 
 value between gold and silver money, at which either 
 kind of coin shall be used indifferently as legal pay- 
 ment of debts, and which shall never be disturbed 
 by the interference of the natural ratio of value 
 subsisting between them has failed ; for one reason 
 amone others that in Asia there exists a continual 
 and insatiable demand for gold, and a silver treasure 
 of vast dimensions which would be employed in 
 buying up the undervalued gold circulating in the 
 currencies of Europe at the arbitrary rate of 1 5^ ozs. 
 of silver in exchange for 1 oz. of gold (instead of at 
 about 18 ozs. of silver, which is the natural and 
 market value of the latter metal) as fast as it were 
 coined and put into circulation. The bimetallists 
 hope that if all gold-using nations agree to use silver 
 in their currencies at a rate of exchange of 1 : 15^, 
 that 1 oz. of gold, which is now worth 18 ozs. of silver, 
 will fall to a valuation of 15J ozs. This result, they
 
 BIMETALLISM AND FIXED RATIO. 79 
 
 believe, will follow from their fixing the exchange 
 value of gold and silver money at the figure above 
 stated. In effect they argue thus, that the legal rate 
 of exchange will govern the market for gold and 
 silver ; that if the civilized world can, by international 
 agreement, make the gold and silver money of their 
 currencies exchange on these terms, then bullion 
 dealers, miners, and the inhabitants of semi-civilized 
 countries, who use in their currencies more than one- 
 half of all the silver coin in the world, and possess 
 besides a great treasure of silver bullion, will likewise 
 exchanee eold and silver at the same rate. To these 
 speculative economists the question may be put, Why 
 should they ? This question must be answered 
 before the possibility of such a contingency can be 
 admitted. 
 
 If it were one of the results of a fixation of value 
 for eold at 1 oz. for \<h ozs. of silver, that silver 
 were brought to the mints of the gold-using countries 
 in such large quantities for coinage, that very little 
 remained available for sale or use elsewhere, no doubt 
 silver would rise in value to the level fixed by the 
 Convention ; but it is evident that this can only occur 
 at the cost of the gold coin of those currencies into 
 which the silver would be coined. The new silver 
 would, in fact, be brought in excessive quantities, and 
 coined into money solely with the object of buying
 
 So THE GOLD TREASURE OF INDIA. 
 
 the gold out of those currencies and taking it to the 
 East, where it would be used to purchase 20 per cent, 
 more silver than that with which the gold had itself 
 been bought. The new silver would, in fact, be 
 substituted for the old gold, and the currencies of 
 mixed gold and silver would be converted into mono- 
 metallic silver currencies.* 
 
 The amount of metal now current in countries 
 using both gold and silver is probably not less than 
 is sufficient for the work it has to do : there may be 
 in some currencies too little gold, and in others too 
 little silver for perfect convenience, but no great and 
 sudden addition to these currencies can be made, 
 unless there occurs a correspondingly great and 
 sudden increase to the commodities brought to 
 market for exchange with one another, by means 
 of the coined money in circulation. It follows, there- 
 fore, that if any quantity of silver, much in excess 
 of that now in use, is coined into the currencies of 
 gold-using countries, it can only get into circulation 
 by expelling an equivalent value of the gold coin. 
 In any view of the case, therefore, the fixation of a 
 rate of exchange at I : \%\ would defeat its own 
 object ; either the new silver would expel the gold 
 from circulation, or, if it were coined anpl not used 
 
 * The reader will excuse the employment of arguments that the 
 author has more than once published on this subject. — C. D.
 
 BIMETALLISM AND FIXED RATIO. Si 
 
 as money, would remain surplus silver still. Its 
 market value would not be regulated by the rate 
 of exchange fixed by law. The owners of stocks 
 of silver would not hold them in the vain expecta- 
 tion of buying gold at the rate of I oz. for 15 \ ozs. 
 of silver, but would seek to realize the ordinary 
 profits of their business, by selling the metal at its 
 market value in gold — .18 ozs., or whatever it might 
 be. The inhabitants of Asia and other silver-usine 
 regions of the globe would continue to exchange 
 their gold and silver at its natural ratio of value, 
 uninfluenced by the law of the bimetallic Con- 
 vention, and as fast as they spent their stock of 
 silver in buying the undervalued gold coin of the 
 Western nations, they would procure fresh supplies 
 of silver at a price which, though lower than 15J ozs. 
 for 1 oz. of gold, would yet yield a profit on the 
 mining of silver, and repeat the operation. 
 
 No possible stimulus to the use of silver as coin, 
 which the bimetallic ratio can provide, will cause the 
 absorption of so large a portion of the metal easily 
 obtainable for conversion into coin as to invest the 
 remainder with a value which is about 20 per cent, 
 higher than it is reckoned at in the market, since 
 whatever the quantity may be which would be coined 
 into the currencies of bimetallic countries, its place 
 will be immediately taken by fresh silver excavated 
 
 G
 
 82 THE GOLD TREASURE OF INDIA. 
 
 from the earth at a cost so low as to be fatal to the 
 maintenance of the arbitrary ratio of value, which 
 the bimetallic Convention seeks to establish. 
 
 The fixation of a rate of exchange for coined gold 
 and silver money as a means of raising the market 
 value of silver in gold, or as a method for working 
 a mixed currency, in which either metal may be used 
 in unlimited quantities, can only result in failure. 
 The cause of failure is to be found in the departure, 
 which such a system makes, from the only true 
 principle upon which gold and silver can be made 
 to circulate together, in quantities regulated solely 
 by the volition of the people using the currency, 
 viz. that of the exchange of the coins on the basis 
 of their intrinsic value. 
 
 The scheme for fixing the exchange value of 
 money by law at an unalterable ratio ignores those 
 fundamental laws which govern the use of money 
 in trade. A deliberate violation of principles which 
 are true to the natural order of human affairs in 
 finance, as in morals, involves conditions of failure 
 which, if for a time their influence is suppressed, 
 will ultimately make themselves felt ; and the retri- 
 bution exacted will be out of all proportion more 
 grievous than the original inconvenience. But it is 
 not likely that any serious attempt will be made to 
 enforce such a system. The more it is examined
 
 RATIO OF GOLD TO SILVER. 83 
 
 the more apparent is its radical unsoundness, and 
 objections, which may almost be called physical 
 objections, to its practical application arise, which 
 are seen to be insuperable. 
 
 Ratio of Gold to Silver in the East and 
 West compared. 
 
 The relative value of gold and silver prevailing 
 in the East during the Middle Ages is evidence that 
 the principles above discussed are those upon which 
 the exchange value of money rests, when its circu- 
 lation is free, and the coins exchange at their natural 
 value in one another. In the East this has always 
 been the case. Token-money, or money circulating 
 at a conventional valuation, was unknown until the 
 era of the English rule ; and in the Indian currency, 
 copper coin and paper money corresponding to the 
 bank note of England alone circulate on such terms. 
 
 Japan was, at the time of its discovery by the 
 Portuguese in 1 545, entirely secluded from the Western 
 world, and apparently carried on but little commerce 
 with its nearest neighbour, China. Mines in the 
 islands supplied its people with such quantities of
 
 84 THE GOLD TREASURE OF INDIA. 
 
 gold and silver as they required for all purposes. 
 The ratio of value at 'that date was, in Japan, one 
 of gold to six of silver. Under these circumstances, 
 it is probable that the ratio of value between gold 
 and silver money depended almost entirely on the 
 relative cost of the production of either. From what 
 is known of Japan at the first visit which Europeans 
 paid to the islands, it may be inferred that the trade 
 customs of its inhabitants were even of a more primi- 
 tive description than those prevailing in Europe at 
 the same time. There was but little public revenue 
 raised in money. Public and private services were 
 paid for by assignments of land or produce. The 
 Japanese had no foreign commerce at all. Very 
 little com of either kind could have been in demand. 
 
 During the next eighty years the Portuguese, by 
 selling Japanese productions at an enormous profit 
 in China and Europe, and exchanging their silver 
 for Japanese gold, which in Spain and England was 
 rated at that time at from I : iof to I : 1 1 v>V» brought 
 the Japanese ratio under the influence of the stocks 
 of gold existing in other parts of the East and in 
 the West, and the value of gold as against silver 
 rose to at least I : 10, and is stated to have risen 
 higher. In 1624, the Portuguese were banished from 
 the Japanese islands, and the Dutch trade placed 
 under restrictions, which protected the currency of
 
 RATIO OF GOLD TO SILVER. 85 
 
 the country from foreign influences, and the ratio 
 fell, according to information quoted by Del Mar, to 
 its former figure of 1 : 6 or 7. Sir Rutherford Alcock 
 ("Japan," vol. i., p. 281) states that at the opening of 
 the ports to British commerce in 1859, the ratio was 
 1 : 3. Having regard to the large amount of gold 
 exported by the Portuguese and Dutch between 1545 
 and 1706, estimated by Del Mar at £35.000,000, and 
 to the fact that it was derived from sources which 
 probably did not yield increased supplies in corre- 
 spondence with the withdrawal of this treasure, the 
 latter of these two ratios seems likely to be the more 
 correct. The ratio of value was influenced during 
 the period that Japanese money was employed in 
 foreign commerce by the action of supply and 
 demand. When it ceased to be so used, the law of 
 the cost of its production seems again to have 
 asserted its ascendancy. 
 
 So in China, the ratio at the end of the sixteenth 
 century was 1 : 10 ; while in Europe, which was then 
 beginning to feel the influence of the importations 
 of American silver, it stood at I : 12. Silver and 
 gold, which are indigenous in China, would necessarily 
 find their way there from Europe only in small 
 quantities, and both the action of trade and the 
 somewhat indirect courses in which it was carried on 
 with China would not tend to induce speedy or large
 
 86 THE GOLD TREASURE OF INDIA. 
 
 importations of either metal into that country. As 
 late as 1776 the ratio was said to have been only 
 I : 12, while in England it stood at I : 1 5 i at nearly 
 the same time. 
 
 In Europe, on the other hand, which was earliest 
 exposed to the influx of the newly discovered silver 
 from America, and especially in Spain, the Nether- 
 lands, and England, which were the first countries 
 to appropriate this treasure, the ratio varied under 
 the alternating pressure of the cost of the production 
 of the new metal and of the demand for it, which 
 arose with the renascence of the commercial spirit 
 in Western Europe during the reigns of Henry VIII. 
 and Elizabeth. 
 
 The effect of the American treasure on the stocks 
 of the precious metals in Europe was not complete 
 until the beginning of the eighteenth century. 
 During the earlier years of Queen Elizabeth's reign 
 {circa 1 560), the ratio of gold to silver was 1 : 1 1|£. In 
 1600, the ratio calculated at the mint prices for 
 standard gold and silver was 1 : 11. In 1604 
 (2 King James I.), it had risen to exactly 1:12; and 
 in 1 7 17 (3 King George I.), to 1 : IStI*-* 
 
 The " Treatise on the Coins " informs us that 
 
 * The ratios which Lord Liverpool gives in his "Treatise on the 
 Coins " are somewhat higher than these, which are calculated from 
 MacCulloch's tables, and the Silver Committee's Report, 1876.
 
 RATIO OF GO ID TO SILVER. 87 
 
 during the sixty years following the accession of 
 King James L, silver fell in the gold valuation 32 
 per cent, and by the second year of King George I. 
 it had fallen 39 per cent, on its value one hundred 
 and fifteen years before. 
 
 The earliest record we have of the ratio of value 
 between these metals in India is connected with the 
 subjection of Phoenicia by Darius, B.C. 517. The 
 conqueror required the Tyrian tribute to be paid 
 in silver, which in Persia was T V of the value of gold, 
 while in India it was \ ; and thus obtained for the 
 Persians the advantage of exchanging this silver 
 for gold in their Indian trade, which the Tyrians 
 might have secured for themselves if they had paid 
 the Persian king in gold procured from that country 
 in exchange for their silver, and at the same time 
 have lightened the burden of their tribute. 
 
 That the ratio fell as increasing quantities of 
 Spanish and Grecian silver in ancient times, of silver 
 from Hungarian and other European mines in the 
 Middle Ages, and American silver from the beginning 
 of the sixteenth century onwards, arrived in India, 
 cannot be doubted. Our information on this subject 
 is somewhat obscure, but as the ratio of value between 
 the two metals in pre-Christian times recorded in 
 such reliable historical accounts as have come down 
 to us is found to have ranged in Europe between
 
 88 THE GOLD TREASURE OF INDIA. 
 
 I : 10 and 1:12, and to have remained at about that 
 value for the first fifteen centuries of our era — 
 allowance being made for abnormal perturbations 
 attributable to transitory and local causes — it is safe 
 to infer that the variations in the relative value 
 of the two metals which existed on either side of 
 the known world were progressively becoming less, 
 and gold and silver in India gradually approaching 
 the same value as against each other that they held 
 in Europe and Western Asia. 
 
 The principles previously discussed which govern 
 the exchange value of money involve this conclusion. 
 If the price of a commodity is high in one part of 
 the world, people who export goods to that quarter 
 will increase their exportations, in order to get 
 a larger share of the redundant money circulating 
 there, and by bringing it home exchange it for goods 
 costing more labour than those they had exported. 
 High prices in one of two countries trading together, 
 and low prices in another, indicate a difference of 
 level which is sooner or later rectified by the export 
 of produce to the dearer or the import of money 
 into the cheaper country, or by both means. The 
 price of commodities tends to seek the level of 
 common cost of production, and it has been shown 
 that money in a condition of absolutely free coinage 
 and circulation in the long run exchanges against
 
 RATIO OF GOLD TO SILVER. 89 
 
 commodities on the basis of the cost of the pro- 
 duction of both. This being the case, the money of 
 two countries trading together, is in respect of the 
 commodities which they exchange, always approxima- 
 ting to the character of a common measure of value. 
 Indian gold money will be of much the same 
 efficiency to purchase indigo in India, as English 
 gold money is in England for the same purpose. 
 English gold money will not go much farther in 
 purchasing iron in England than Indian gold will 
 in the purchase of English iron in India, the difference 
 being the amount of profit required by the trader 
 in either case. As when two kinds of money are 
 in free circulation together they exchange on the 
 basis of their intrinsic value, the ratio of value between 
 them obeys the same law, as the ratio of value 
 existing: between either of them and commodities 
 in commerce. It follows as a necessary consequence 
 that the use of both metals as a common measure 
 of value in effecting the exchange of commodities 
 in commerce always exerts an equalizing influence 
 on the relation which they bear to one another over 
 the whole area of their employment. This inference 
 agrees with the facts of the case. 
 
 Mr. Keene* has found it recorded in the "Aieen 
 
 * Author of "The Moghul Empire," and other critical and 
 historical essays on Indian subjects.
 
 90 THE GOLD TREASURE OF INDIA. 
 
 Akbari," that in the Emperor Akbar's reign {circa 
 1590) a gold coin weighing 91 tolahs 8 maashas 
 (i.e. 1 100 m.) was equal in value to 100 round gold 
 mohurs, each of which was worth 9 rupees, and 
 weighed 1 1 maashas (i.e. \}> of a tolah). The ratio 
 obtaining between gold and silver on these terms 
 was 1 : 9 T 9 T , assuming that the silver rupee weighed 
 a full tolah, which was likely to be the case, as at 
 that period a rupee and a tolah were names in- 
 differently used for the same weight. As in England 
 in 1600, the ratio was I : 11, the difference to a 
 purchaser buying a pound of silver with gold would 
 have been i T 2 T lbs. in favour of his doing so in 
 England rather than in India, and this proves that up 
 to that time gold had been accumulating in India rather 
 than silver, while the contrary had been the case in 
 Europe. 
 
 The cost of transporting silver from Europe and 
 coining it in India (a seignorage being charged in the 
 British mints in that country) is calculated to have 
 amounted at the end of the last century to 8 per cent., 
 and it is not likely to have been less one hundred years 
 previous, but at the same time 2 or 3 per cent, may be 
 deducted, as it is not certain what seignorage, if any, 
 was levied for coinage at the numerous mints of the 
 native princes, from which coin was issued. If to 108 
 tolahs (the weight of silver in 9 rupees) is added 6 per
 
 RATIO OF GOLD TO SILVER. 91 
 
 cent, for the cost of transportation, then the value of 
 this quantity of the metal would be to the importer 
 1 14 rupees (or tolahs) 7 anas and 8 pies ; and if 5 per 
 cent, were added, Rs. 113 6 a. 4 p. ; the former giving 
 a ratio of I : io^f, and the latter a ratio of 1 : I0 T W, 
 while, as has been seen, the ratio stood at 1 : 1 1 in 
 England at about the same date (1600). 
 
 On the other hand, if the cost of importing gold 
 to India were 5 or 6 per cent, on its value, a piece 
 of gold sufficient to make one of these round gold 
 mohurs, weighing 1 1 maashas, would, on its arrival, 
 for the purposes of the importer's business, take a 
 ratio to the silver in the country of 1 : 9ff if 5 per 
 cent, were the cost of transportation, and a ratio 
 of 1 : 9-1-f § if 6 per cent, were the cost. 
 
 More than a hundred years later, Sir Isaac 
 Newton, who was Master of the Royal Mint, and is 
 not likely to have been wrong, stated in the year 
 17 17 that "in the East Indies a pound weight of 
 fine gold may be worth twelve pounds of fine silver," 
 while in England it was worth I5 T | T pounds of 
 silver. 
 
 The diffusion of the American silver had evidently 
 reached India by the beginning of the eighteenth 
 century, but the existing stocks of gold which we 
 have seen to have been in process of accumulation 
 during many centuries, were still sufficiently large to
 
 92 THE GOLD TREASURE OF INDIA. 
 
 give silver a higher value as against gold in India than 
 in England, and to act as an encouragement to the 
 exportation of silver from the West to the East. 
 
 In Bengal, a gold mohur was issued by the Indian 
 Government in 1769, and ordered to pass as legal 
 tender payment for 16 sicca rupees. The intrinsic 
 value of this coin was estimated to be equal to the 
 nominal value of it, or as nearly so as was deemed 
 necessary to render it current at the prescribed rate ; 
 but from causes arising out of the state of confusion 
 which then prevailed in the Indian currencies, its 
 circulation was confined during the next twenty years 
 almost entirely to Calcutta. It was no doubt over- 
 valued in silver at the Indian rate of valuation, as 
 it was bought up by persons making payments to 
 Government, and used for that purpose in preference 
 to the silver coin. The ratio of value thus set up 
 between the pure gold in this mohur and the pure 
 silver in the sicca rupee was about 1 : i5iV- 
 
 The prevailing ratio in the north of Europe about 
 the year 1770 was 1 : 14^. In 1793, a new gold mohur 
 and a new rupee were struck, the former of which 
 was directed to pass for sixteen of the latter. As 
 the gold mohur contained 189,^';^ grs. of pure gold, 
 and the rupee contained I75ff£ grs. of pure silver, the 
 ratio obtaining between the coins was I : 14^";. In 
 Europe the ratio at the same date was 1 : 15?,/. In
 
 RATIO OF GOLD TO SILVER. 93 
 
 1S1S, another gold mohur and another rupee were 
 issued, the ratio of value between these coins was 
 almost exactly 1:15, while in Europe the ratio 
 was 1 : iSyVV A slight alteration was made in the 
 value of the rupee in 1833, which need not be noticed 
 here, as two years later the currency of the East India 
 Company's territories was remodelled and placed on 
 its present footing. 
 
 By reason of the superiority of value which silver 
 in India enjoyed over the same metal in England 
 inducing its importation into the former country, a 
 preference would be given to gold when a necessity 
 arose of exporting either metal from India. As, 
 however, the profits of traders depended on the sale 
 in Europe of Indian commodities, and the latter 
 ordinarily exceeded in value the goods sent in 
 exchange, gold must necessarily have been taken 
 from India to Europe in but small quantities. The 
 approximation of the ratios of value prevailing in 
 both countries to one another, depending principally 
 on an increase in the stock of silver in the East, was 
 only gradually effected, and its completion was more 
 definitely declared than at any previous time when 
 the Indian silver coinage was put on its present foot- 
 ing, and gold demonetised in 1835. 
 
 It has been estimated that, up to the end of the 
 eighteenth century, gold to the value of ,£100,000,000
 
 94 THE GOLD TREASURE OF INDIA. 
 
 sterling was sent from the West to the East, i.e. to 
 India, Malacca, the Straits, and China. After making 
 a fair deduction for such withdrawals of gold from 
 India as resulted from the sack of Delhi by Nadir Shah 
 in 1738, and for other occasions on which gold obtained 
 by plunder in the East has found its way back to 
 Europe, a balance of from £80,000,000 to £90,000,000 
 must have remained in those islands and countries. 
 The course of trade for centuries carried gold to con- 
 tinental India and Ceylon in much larger quantities 
 than to any other country still further east, and of 
 this estimated sum of £80,000,000 or £90,000,000, 
 £60,000,000 or £70,000,000 may fairly be credited as 
 the share which India herself appropriated and 
 retained. To this must be added the proceeds of her 
 own mines, and gold obtained by trade from Central 
 Asia, China, Burmah, Siam, and other Asiatic sources. 
 The sources of gold supply in Asia itself were in all 
 probability more fertile than those situated in Arabia, 
 Africa, Asia Minor, or Greece, and were more acces- 
 sible to the Indians. The ancient books of that 
 people, and occasional notices of their country in 
 classical writers, refer to their wealth (which in those 
 days meant stores of the precious metals) as exceed- 
 ing that of western nations. If, therefore, so large a 
 treasure as £60,000,000 of gold was taken from the 
 West to India previous to the nineteenth century, it
 
 RATIO OF GOLD TO SILVER. 95 
 
 is by no means extravagant to estimate the treasure 
 drawn by India from Eastern Asia at £40,000,000 
 more. 
 
 Looking also to the necessities of her people, their 
 industrious habits, the shrewd and enterprising spirit of 
 the trading classes, their numerous cities and towns, the 
 density of the population, the variety of their occupa- 
 tions and amusements, the large armies maintained 
 by their rulers, and the comparatively high degree 
 of organization which their political and social system 
 had attained to, we find all those conditions united in 
 India, which in all other countries are accompanied 
 with a plentiful use of coined money. This estimate 
 of £100,000,000 of gold as the treasure existing in 
 India at the beginning of the nineteenth century is 
 therefore, probably, much below the mark. 
 
 From the year 1835 onwards, we have reliable 
 statistics compiled by the Indian Government of the 
 movement of the precious metals to and from India. 
 Accounts brought up to April, 1882, show that there 
 has been imported into India, and never been re- 
 exported, a gold treasure which is valued in the 
 returns at upwards of £ 1 1 2,000,000. If this is added 
 to the estimate compiled on the facts and arguments 
 in the preceding observations of the stock of gold 
 existing in India at the end of the last century, 
 the country must contain a treasure which probably
 
 96 THE GOLD -TREASURE OF INDIA. 
 
 exceeds £212,000,000 in value, or* about two and 
 a half times the amount of gold which is believed 
 to be in circulation in the United Kingdom. 
 
 Gold Coin formerly Current in India. 
 
 General Ballard, the late Master of the Bombay 
 Mint, writing in 1868 of the stock of gold bullion 
 in India, remarks " If no mints existed, it would 
 be worth while building them on the chance of 
 coining a fraction of this immense treasure ; but the 
 mints exist. It is only the mint rules which require 
 alteration to allow of our solving the problem, whether 
 there is any desire on the part of the owners of this 
 bullion to have a portion of it converted into coined 
 money." The authors of the recently published work 
 " Finances and Public Works of India," after de- 
 scribing the introduction of the present silver currency 
 of India in the year 1835, an d the demonetization 
 of gold, speak of the gold mohur, which is occasion- 
 ally coined in the Indian mints. It contains exactly 
 as many grains of fine gold as the rupee contains 
 grains of fine silver, but, as by law it is not legal 
 
 * From ^80,000,000 to ^90,000,000.
 
 GOLD FORMERLY CURRENT IN INDIA. 97 
 
 tender, it is rarely seen. The writers go on to say, 
 that " the opinion has been expressed that gold 
 money is not used in India because the people 
 prefer silver by reason of the small amount of their 
 transactions. There is, however, no real evidence 
 of this, the fact being that for three quarters of a 
 century at least gold coin has either not been legal 
 tender or has been improperly valued, so that either 
 it could not come into circulation or could not 
 remain in circulation in competition with the silver 
 rupee which has always been the standard coin. 
 Towards the end of the last century, gold coins 
 circulated freely with silver in most parts of Bengal, 
 and about half the revenue was paid in gold. Forty 
 years ago, gold coins were still to be found in use 
 in some of the districts of Madras. Gold, however, 
 everywhere gradually went out of circulation, and 
 for a great many years has, for all practical purposes, 
 ceased to be employed as money. At various times 
 gold coins have been received in payment of govern- 
 ment demands, at varying rates, but under the law 
 of 1835 they ceased to be legal tender."* 
 
 The difficulty which the East India Company's 
 governors found, at the end of the last and the 
 beginning of the present century, in ascertaining the 
 relative value of gold and silver coin, arose from 
 
 * Pages 381, 3S2. 
 
 II
 
 98 THE GOLD TREASURE OF INDIA. 
 
 the multiplicity of currencies in use, which are stated 
 to have been as many as forty throughout the 
 country ; from the difficulty of communication, which 
 while it hindered an equalization of the values of 
 commodities in distant places had indirectly a similar 
 effect on the gold and silver coin in use ; from the 
 comparatively scanty supply of coin ; from the small 
 influence of the bullion market of the West on that 
 of India, and from the length of time it took for that 
 influence to be exerted in days when a voyage to 
 the East from Europe was of six months' duration. 
 All these conditions are in the present day exactly 
 reversed. Only one currency is used in India, with 
 which at least the British Government need concern 
 itself. The relative value of gold and silver money at 
 Calcutta would act in a day on the valuation at 
 Lahore and Bombay. Coin is more abundant, and 
 its efficiency in the exchange with England, which 
 is now for such purposes within momentary reach 
 of India, can be ascertained daily, or hourly if neces- 
 sary. The argument that in a bygone period (from 
 ninety to one hundred years ago) the intrinsic value 
 in one another of the gold and silver money of India 
 could not be accurately ascertained, is of no force 
 now, when every circumstance which bears on that 
 valuation combines to make it both certain and 
 notorious.
 
 PART II.
 
 Desire of People of India for Gold Coin. 
 
 Those who are acquainted with the facts know 
 that a gold currency would be highly acceptable 
 to the richer class of people in India. The Currency 
 Commission reported * " that the demand for gold 
 currency is unanimous throughout the country." 
 
 Gold coins of the Emperor Akbar's currency 
 ( 1 555-1605) are imitated and used for hoarding or 
 reserve by bankers, as they have a recognized value 
 in the Indian bullion market. In 1870, when the 
 rupee began to fall in value, several lacs of rupees' 
 worth of gold ornaments were brought to the Bombay 
 mint in a few months for assay and conversion into 
 bars, in order to be exported for the purchase of 
 silver. No considerable banker is without a hoard 
 of gold in coin or in the small blocks cast in a mould, 
 as a support to his commercial credit. People of 
 wealth who are not engaged in trade, are commonly 
 possessed of a store of gold treasure, the existence 
 of which appears to be no secret in the case of some 
 conspicuous persons. 
 
 * Printed for Parliament, 16th of March, 1S6S, para. 4.
 
 102 THE GOLD TREASURE OF INDIA. 
 
 Coins are hoarded in preference to ornaments, 
 as their value is more certain, and the seller generally 
 loses, both on converting bullion into ornaments 
 or when selling them for silver. The manufacturer 
 takes his profit in the one case ; and in the other, 
 the assayer and purchaser are generally the same 
 person. The sovereigns of the Royal and of the 
 Australian Mints are to be bought in every large 
 town in the country, and are daily quoted in the 
 exchange tables published at the capitals. The 
 amount of these coins in India may probably be 
 numbered by the million. Sovereigns can be said 
 to circulate in India in the sense that they daily 
 change owners. The gold mohur, on the other hand, 
 which is occasionally coined by the Indian Govern- 
 ment, is so rarely seen as to be a curiosity. In times 
 of pressure, French, Turkish, American, and Russian 
 Id coins are brought to the mints to be melted 
 and assayed. The Italian sequin, which came into 
 India with the European trade of the Middle Ages, 
 is obtainable without much difficulty in many parts 
 of the country, and is believed to be extensively 
 imitated and sold from its value being well known 
 to the class of people who keep gold in store. Such 
 men have no difficulty in discriminating between the 
 different qualities of gold in the market, and fixing 
 the relative value which one description holds towards
 
 DESIRE FOR GOLD CO IX. 103 
 
 another. For most uses to which gold may be put 
 in India, it will be more useful in the form of coin 
 than in any other, and in the form of the £1 sterling 
 of the realm more useful than if converted into any 
 other kind of coin ; because the certainty of its 
 present value and its future stability as against silver 
 and other commodities is more assured than if the 
 metal were cast in any other shape. There can be 
 no doubt that, when the state of the market makes 
 it profitable to do so, the natives of India export gold 
 to buy silver abroad for coinage into their own 
 currency, and that, in like manner, the gold imported 
 into India is partly used to purchase silver in India — 
 one hoard being substituted for the other — which is 
 then converted into coin. Gold is hoarded in pre- 
 ference to silver, for the reason already given, and 
 because it cannot be employed as coin. If the mints 
 were open to the coinage of an Indian sovereign, and 
 it were made legal tender, neither of these operations 
 would be necessary, and the sovereigns, if hoarded, 
 would be immediately available when required for 
 use in trade. But the currency policy of the Indian 
 administration at present forbids the* people to use 
 their gold as coin in their own country. 
 
 In the arguments which follow, an attempt will 
 be made to prove that gold can be introduced and 
 circulated in the currency of India as legal tender
 
 104 THE GOLD TREASURE OF INDIA. 
 
 coin at no greater cost to the State than the fabrica- 
 tion of the coins, a matter of a few shillings for every 
 hundred pieces.* 
 
 Plan for circulating Gold Money. 
 
 The first question that will be asked is, How is 
 a gold currency to be established in the Indian 
 Empire ? As an answer to this inquiry, the following 
 plan is suggested. 
 
 (i) That the Government of India shall coin a 
 gold coin in all respects identical with the £1 sterling 
 of the currency of the realm, out of the stock of 
 gold now to be found in India, to any amount, in 
 which the metal may be brought by its owners to 
 the mints for that purpose. 
 
 (2) That these gold coins shall be declared legal 
 tender for the payment of any sum of money due to 
 
 * What this may amount to, depends on the way the calculation 
 is made. If the mere cost of assaying, melting, and coining is con- 
 sidered, it would be very trifling, but would rise and fall as a smaller 
 or greater number of coins might be struck at one time. If to the 
 coinage of gold is attributed a part of the permanent expenses of the 
 mint establishment, salaries, repairs of buildings, renewals of machinery, 
 etc., on the ad valorem basis, the cost might be estimated at 2 per 
 cent, or more when work was slack.
 
 PLAN FOR CIRCULATING GOLD. 105 
 
 the Govern me ut of India, at the option of the party 
 making the payment ; and in other cases that they 
 should be legal tender for the discharge of any 
 obligation amounting to Rs. 5000 and upwards, at 
 the option of the party making the payment. 
 
 (3) That the Government of India shall from 
 time to time declare (but not more frequently than 
 may be necessary and convenient) the rate at which 
 the gold coin of its currency shall be accepted as 
 legal payment of sums contracted to be paid in 
 silver coin ; and this State rate of conversion shall 
 be strictly regulated by the market value of the 
 silver rupees of the British Indian currency in these 
 gold sovereigns. 
 
 (4) That the silver rupee shall still continue to 
 be legal tender for all kinds of payments, and in 
 any amount, at the option of the party making the 
 payment. 
 
 (5) That no person (the Government excepted) 
 shall be obliged to take payment in gold of a debt 
 due to be paid in silver, which may be less in amount 
 than Rs. 5000, unless he shall previously have agreed 
 with his debtor to do so.
 
 io6 THE GOLD TREASURE OF INDIA. 
 
 Argument for First Proposal. 
 
 The inducements to the owners of gold to bring 
 it for coinage to the mints are those which have 
 induced every nation, as its trade, both external and 
 internal, expands, to prefer gold to any other metal 
 for the settlement of large transactions. Its efficiency 
 as a purchasing agent is more steady than that of 
 silver, and therefore profits to be made on purchases 
 paid for in gold are calculable with more certainty 
 over long periods of time than when they are effected 
 with the latter metal. The £\ sterling of the United 
 Kingdom is a recognized standard of value in every 
 country with which India has trade dealings. It is 
 the single isobare by which an equilibrium of value 
 between different commodities in widely separated 
 regions of the globe can be quickly and surely 
 ascertained. To endow India with a gold currency 
 is to give her people, and those they trade with in 
 foreign countries, a new and efficient implement for 
 exchanging productions, to make a valuable im- 
 provement in the machinery of commerce. Politically, 
 such a measure would tend to bind by a fresh chain 
 the interests of England and her Dependency ; it 
 would be a distinct step towards making the two
 
 ARGUMENT FOR FIRST TROPOSAL. 107 
 
 countries commercially one. To the objection that 
 what a man can buy with gold he can equally well 
 buy with an equivalent value of silver, it is a sufficient 
 answer to point to the history of the coins of the 
 realm, and of the currencies of the civilized world 
 in modern times, of France, Germany, Italy, and the 
 United States of America. This teaches us that 
 the use of gold, as the standard of value, is the only 
 expedient for eliminating the risks and uncertainties 
 in which commerce is involved when conducted 
 exclusively with silver as a medium of exchange. 
 Various as the reasons may be why traders during 
 two centuries have gradually substituted gold for 
 silver as the basis of their transactions with foreigners, 
 they all point to one conclusion, that the metal which 
 experience proves to be most advantageous for 
 mercantile purposes in the rest of the world will 
 be of equal convenience in the Indian trade. It is 
 too obvious to require argument for its proof that 
 if the jute and indigo of the Calcutta market can 
 be bought by the London merchant with gold 
 current in that city, and exchanged somewhere else 
 against another commodity on a gold valuation, an 
 impulse would be given to the sale of the productions 
 of India, which is to be measured by the ease and 
 diminution of risk with which they are practically 
 exchanged for the goods of the last country which
 
 io8 THE GOLD TREASURE OF INDIA. 
 
 receives them, and the market for their sale is 
 actually enlarged by the Indian ryot being brought 
 into more direct communication with purchasers 
 residing in the most distant parts of the earth. It 
 is equally opposed to reason and experience to assert, 
 in respect of a trade which embraces the whole world, 
 that it is of no importance at all that the nations 
 engaged therein should possess a single measure for 
 the value of the commodities which they offer for 
 sale to one another, and one equivalent with which 
 they can all alike exchange the goods they traffic in ; 
 that it is preferable to use two, one of which is 
 itself but a commodity having a variable value and 
 a tendency to become gradually but constantly less 
 efficient as a purchasing agent. If the gold of India 
 were coined in a form identical with the sovereign 
 of the English currency, and were to circulate as 
 legal tender coin, the Indian trader is far too keen 
 not to perceive the advantage he would gain by 
 bringing his hoard of gold to the mint and con- 
 verting it into money, which would open to him 
 more widely than is now possible the markets of 
 the West, and allow him to buy and sell in Europe 
 and America with one and the same coin, and with 
 as much ease as in all parts of his own country. 
 
 If, at the same time, means were taken to attract 
 part of the gold supply of India to the Indian mints
 
 ARGUMENT FOR FIRST PROPOSAL. 109 
 
 in preference to that furnished by Australia and 
 California, every thousand sovereigns so coined would 
 be a clear addition to the stock of gold available for 
 the world's use. This might be effected by issuing 
 the coin to persons depositing gold at the mint free 
 of any charge, except such as is made at the royal 
 mint at the Tower on the fabrication of sovereigns. 
 By this means, gold imported from Europe, Australia, 
 or America, would be at a slight disadvantage to 
 that which is now held in India ; and as the latter 
 would be exposed to no competition at the mint, 
 and the public would be guaranteed against any 
 charge but a very small seigniorage on the conversion 
 of their gold into coin, it may reasonably be expected 
 that the metal would be brought to the mint in 
 just such quantities as could be profitably used as 
 current coin in the trade ; and this result is all that 
 is sought or need be attained by any plan for in- 
 troducing a gold currency into India. 
 
 The sole cost of the measure would be that 
 incurred in the assay of the metal and its fabrication 
 into sovereigns. As the Indian mints are inferior 
 to none in the world for completeness and perfection 
 of machinery, the expense incurred should not be 
 greater than that of coining sovereigns in London, 
 a very trifling price for the public to pay for so great 
 a benefit as a gold currency.
 
 no 
 
 THE GOLD TREASURE OF INDIA. 
 
 By coining the proposed Indian sovereigns on 
 exactly the same terms as those of the Royal currency, 
 their reduction into bullion would be discouraged ; 
 and as their exportation as coin to foreign countries 
 would in no way be restricted, they would be as 
 efficient for all purposes of trade as English or 
 Australian coins. It is of importance to encourage 
 rather than otherwise the exportation of sovereigns 
 of the Indian currency. The principles of free trade 
 apply to the exchange of coined money as fully as 
 they apply to the exchange of commodities, and to 
 the interests of India their observance in this 
 particular case is of essential importance, because 
 the efficiency of the new gold coins, in a currency 
 system under which they would exchange on the 
 basis of their intrinsic value against the silver coins 
 with which the bulk of the internal commerce of 
 India is carried on, depends on their easily finding 
 their actual level of value, when measured in the 
 gold coin of foreign countries as well as in the silver 
 money, and the productions of India itself. The 
 exportation of the gold coin of India should be free. 
 In the course of trade the exported coins will return 
 home again, or their place be taken by sovereigns 
 of the royal or colonial mints, which, from their being 
 of exactly the same intrinsic value as the Indian 
 coins, will be equally acceptable to the Indian trader,
 
 ARGUMENT FOR SECOND PROPOSAL. in 
 
 and therefore circulate as current money in the same 
 way that Australian sovereigns circulate in London. 
 
 Argument for Second Proposal. 
 
 It would, however, be to no purpose that gold 
 sovereigns were issued to the public from the Indian 
 mints, except they were at the same time made 
 legal tender for currency purposes in the country 
 itself. It is for this reason that the gold mohur of 
 the Indian Government is but seldom coined and 
 never used as money. These coins if brought to the 
 mint would be treated as bullion, and re-issued as 
 legal tender sovereigns. 
 
 The £i sterling of the Indian mint it is proposed 
 to make legal tender coin of the currency of the 
 country in all cases in which payment has to be 
 made to the State, if the payer choose to use gold. 
 In cases in which private persons or commercial 
 companies shall agree by advertisement or other- 
 wise to take small payments in sovereigns rather 
 than in rupees. 
 
 In all cases in which a payment has to be made 
 of Rs. 5000, or more.
 
 112 THE GOLD TREASURE OF INDIA. 
 
 In all cases the payment of sovereigns will be at 
 the option of the person making the payment, if he 
 prefer to pay in gold rather than in silver coin, and 
 such a payment would legally discharge a debt. 
 
 It is needless to prove that no coin can become 
 current as money except in so far as it is made legal 
 tender for the payment of debts. This is not merely 
 a theoretical but is an actual impediment to the 
 use of gold at present, and if this were removed, 
 the writer of these pages has reason to know that 
 the native bankers in India would have no objection 
 to use the new coins because they are gold rather 
 than silver in their business. 
 
 If the Indian Government is by law bound to take 
 its own sovereigns in liquidation of its own claims, 
 confidence is at once given to the natives of the 
 country to accept them ; and as the same coins would 
 always be readily taken by private persons in pay- 
 ments made by Government, a circulation of these 
 coins in the bazaars would be set up and maintained. 
 Private persons and trading companies might be 
 given a legal power to declare payments in gold of 
 small amounts to be valid payments of debts due to 
 them. The railway and shipping companies, and 
 probably many other firms and individuals engaged 
 in business, would find it highly profitable to them 
 to get payment of their receipts in gold coin, instead
 
 ARGUMENT FOR SECOND PROPOSAL. 113 
 
 of in silver coin eighteen or twenty times the weight 
 in metal, and so save risk and expense in bringing 
 their revenues together at the head offices of their 
 business. This is a consideration of no small import- 
 ance in a country where the centres of trade and 
 administration are separated from their subordinate 
 agencies by distances measured in thousands of miles. 
 Professional men would soon claim to be paid their 
 fees in sovereigns, and shops conducted on ready- 
 money principles would probably give a material 
 preference to payments made by their customers in 
 gold over those made in silver. 
 
 It is, however, necessary that the use of gold in 
 small sums should in no cases be made obligatory, 
 otherwise payments in gold might be demanded from 
 people who would be unable to procure, or might net 
 have sovereigns in their possession, from the character 
 of their business being of a kind which is usually 
 and more conveniently carried on with silver. Again, 
 as will be seen from what follows, the number of 
 rupees which may be the equivalent of a gold pay- 
 ment will vary from time to time. To take a small 
 sum by way of example. If Rs. 12 at one time and 
 Rs. 12^ at another are the equivalent of a sovereign, 
 to the uninstructed mind of the native of India a 
 payment with a sovereign at one time may appear to 
 be a smaller payment than when made at another, 
 
 I
 
 114 THE GOLD TREASURE OF INDIA. 
 
 although the amount of food purchasable with the 
 sovereign may on both occasions be the same. To 
 avoid any chance of the use of the sovereigns becoming 
 unpopular from this apparent variation in their value 
 at the market, it is better to take no steps to intro- 
 duce their circulation into the petty commerce of the 
 country by law. The gold coins will, in the course of 
 time, find their way into all markets, where they can 
 be profitably used by the mere volition of the people 
 themselves. There may be, and probably will be for 
 sometime to come,' in out-of-the-way places, a dislike 
 to the use of the new gold coins, from the people 
 being habituated to the use of silver rupees. From 
 the fact that in such localities gold has not in this 
 generation been seen in competition with silver, the 
 traders who regulate the retail prices of commodities 
 will, if their customers are required by law to use gold 
 for making small payments, take advantage of their 
 ignorance to defraud them. 
 
 None of these objections, however, apply to large 
 transactions, involving single payments of Rs. 5000 
 and upwards. These are conducted on both sides hy- 
 men of experience, engaged in a large way of business, 
 who are not at all liable to be deceived, and are quite 
 capable of looking after their own interests, and will 
 take care to exact full legal payment in gold in lieu 
 of the silver value of their goods. The use of gold
 
 ARGUMENT FOR SECOND PROPOSAL. 115 
 
 coin is advocated principally in the interests of the 
 foreign trade of India with gold- using countries, in 
 which transactions of a lower value than Rs. 5000 are 
 probably not common. An English merchant paying 
 for Indian commodities would, therefore, be generally 
 able to deal with the Indian vendor in the same coin 
 that he would use if he were buying goods in London 
 — the Indian being the intrinsic equivalent of the 
 English sovereign. It will not be overlooked that, 
 under this scheme, if the party making the payment 
 choose, he is always at liberty to pay in silver coin 
 instead of gold ; and, on the other hand, a vendor can 
 always protect himself from a real or imaginary risk 
 of loss in being required to take payment for Rs. 5000 
 in gold coin by drawing his contract to sell in terms 
 of the gold instead of the silver currency. As a 
 matter of fact there can be no doubt that in large 
 trading cities, and for large transactions in all parts 
 of India, the £ 1 sterling of the Indian currency will 
 be the standard measure of the value of goods in 
 exchange and the coin with which commercial balances 
 between all but petty traders will be adjusted, as 
 soon as the mercantile classes become accustomed to 
 the new gold currency and appreciate the advantage 
 of using it. 
 
 The arrangements proposed in this part of the 
 plan are made with a view to provide the public with
 
 n6 THE COLD TREASURE OF INDIA. 
 
 a legal method of discharging contracts to pay in 
 rupees by the use of sovereigns, an initiatory measure 
 which is absolutely necessary to introducing and 
 setting up a circulation of the gold coin, but which 
 will in the course of time become almost, if not entirely, 
 obsolete by reason of a voluntary substitution on the 
 part of the people of gold for silver coin as the basis 
 of all important contracts. The greater the approxi- 
 mation may be to a general use of gold, the larger 
 the demand for gold will grow, and the more profitable 
 will it become for the owners of gold to coin their 
 hoards into the currency and use them as money in 
 trade. The merchant who is ready to pay in gold will 
 always rule the market. 
 
 Argument for Third Proposal. 
 
 Next comes the question of the rate at which the 
 gold coins are to exchange for the silver rupees in the 
 same currency. In the plan under discussion, the 
 Government of India will fix a rate expressed in so 
 many rupees for the sovereign, at which they will 
 take the gold coins of their currency instead of silver 
 rupees in payment of money to the State. At the 
 same rate debtors will be at liberty to make payments
 
 ARGUMENT FOR THIRD PROPOSAL. 117 
 
 due to be paid in rupees, if they please to do so. 
 This rate will be fixed from time to time, as seldom 
 or as frequently as may be convenient, in strict 
 correspondence with the relative market value of 
 the gold and the silver in either coin by public pro- 
 clamation. 
 
 This plan of a " State rate of conversion " has 
 been before the public now for three years, and while 
 its correctness from the point of view of scientific 
 theory has never been seriously disputed, the prin- 
 cipal objection to its practical use is, that no Govern- 
 ment will undertake the responsibility of saying how 
 many sovereigns Rs. 5000 are worth. This really 
 touches the personal idiosyncrasies of the officials on 
 whom such a duty may be laid. That the Indian 
 Government would shrink from such a task if sup- 
 ported by a sense of the advantage to be conferred on 
 the people of that country directly and indirectly of 
 the civilized world at large, and of the necessity of 
 finding a way out of the financial troubles in which 
 the declining and varying value of the silver currency 
 involves the administration of the country, to which 
 the use of gold as public money is a preliminary and 
 absolutely essential step, can hardly be discussed as 
 probable. What all the world knows, the Govern- 
 ment of India can ascertain with the greatest certainty. 
 The market value of the £ 1 sterling of the realm is
 
 iiS THE GOLD TREASURE OF INDIA. 
 
 quoted in every daily paper published in India, and 
 it is merely futile to argue that the advisers of the 
 Viceroy of India are likely to make a mistake, which 
 no banker would make in his own business, in fixing 
 a rate of exchange for the gold and silver coins of the 
 currency in respect of payments into the public 
 treasury. The Government would be the first to 
 suffer if it were to make such a mistake, since if it 
 materially undervalued the gold as against the silver 
 coin of its currency it would receive none, and if it 
 overvalued the gold coin it would lose on using those 
 coins to make payments contracted to be paid in 
 silver. This is a good guarantee for the exercise of 
 care and caution. If more were required, the Govern- 
 ment could get the best available information of the 
 market value of its gold coin in the principal cities of 
 foreign countries and in Indian markets almost from 
 hour to hour by using the telegraph. It could watch 
 from day to day the movement of the precious metals 
 in the trade, and it would naturally consult, in the 
 most public manner possible, commercial men whose 
 opinion on such a subject might have a recognized 
 authority as to the actual market value in India of 
 its silver coin in terms of the gold currency, and by 
 this means give confidence to the public that its 
 interests in this matter were properly safe-guarded. 
 The Government of India would have every induce-
 
 ARGUMENT FOR THIRD PROPOSAL. 119 
 
 ment to fix a rate of conversion in exact correspond- 
 ence with the ratio of intrinsic value obtaining between 
 the two kinds of coin, and none whatever to do other- 
 wise. Under these circumstances, no practical diffi- 
 culties of an insuperable or even a serious kind exist 
 against the use of a golden sovereign in the Indian 
 currency along with the silver rupee on the terms 
 above described. 
 
 It may be apprehended that the ratio between the 
 two classes of coin would vary so frequently that the 
 State rate for converting the silver into gold coin 
 would be never constant. 
 
 The certainty of the value of money and the con- 
 venience of the public would be best secured by altera- 
 tions in the rate of exchange being made no more 
 frequently than might be necessary, and if it is appre- 
 hended that the frequency of such alterations would 
 be in itself inconvenient, it will not be overlooked that 
 they will not be more frequent, but less, under the 
 system proposed, than the alterations which are daily 
 made in the rates of exchange at which foreign bills are 
 now sold. That fluctuations in the rate of exchange 
 between gold and silver legal tender coins circulating 
 together will have a tendency to diminish rather than 
 to increase, must be the natural consequence of the 
 two metals being used indifferently for the same 
 purposes. If silver is in excess, and therefore falling
 
 120 THE GOLD TREASURE OF INDIA. 
 
 in value against gold, while gold is stationary in 
 quantity, silver will be exported and its value rise, 
 and vice versa. A decline in the value of either metal 
 will be participated in by the other. The free use of 
 both on terms of their intrinsic value will always 
 operate, if not to narrow the ratio of value obtaining 
 between them, at least to mitigate its fluctuations, 
 and to render the point of equilibrium more constant. 
 Under a system by which any amount of one metal 
 will always exchange at its full natural value for 
 a corresponding amount of the other, the capacity for 
 mutual substitution, which makes gold and silver so 
 suitable for money, obtains its highest development. 
 It is only when they are divorced from one another 
 by artificial currency regulations that gold and silver 
 work in opposition. Allow them to work together in 
 the order of their nature, and these divergences of 
 value from which so much is feared must necessarily 
 diminish, while the approximation to the attainment 
 of a stable ratio of value will be correspondingly 
 great. 
 
 The expectation is at least reasonable, that when 
 gold and silver coins come into competition with one 
 another and actually change hands at a valuation 
 measured by the intrinsic worth of either, in number- 
 less transactions great and small, and in widely sepa- 
 rated localities, such a valuation will be ascertained
 
 ARGUMENT FOR THIRD PROPOSAL. 12 1 
 
 with a much closer approximation to fact than is now 
 the case where no such interchange is possible, and be 
 established on a more reliable and permanent basis 
 than that which it now rests on. 
 
 The gold quotations in the silver rupee of India 
 are at present very much the result of transactions 
 often more speculative than real in character, which 
 are virtually arranged between a few individuals, 
 instead of being, as they will be under the system 
 proposed, the outcome of the daily traffic in com- 
 modities bought and sold with either metal indis- 
 criminately in dealings to be counted by millions. 
 The sale of the Council bills is in effect a sale of 
 silver bullion for gold coin, because the price paid by 
 the purchaser cannot be more than it would cost him 
 to transport the same quantity of silver, for which he 
 buys bills, as bullion to the East ; but it is open to 
 question whether this method is not inadequate for 
 ascertaining the value of silver in India when ex- 
 changed for gold in the same country. The quota- 
 tion of the value of the Indian sovereign in Indian 
 rupees will, of course, under the plan proposed, 
 approximate to the market rate of exchange at 
 which bills payable in sterling in London are sold for 
 rupees in India, but it may be safely predicted that 
 it will rest on a basis exclusively Indian, regulated 
 principally by the conditions of her own trade and
 
 122 THE GOLD TREASURE OF INDIA. 
 
 the value of her gold coin in her local markets, and 
 be therefore liable to much less fluctuation than a 
 ratio of value established by methods which are quite 
 independent of any competition between the two 
 metals circulating together as coin in the country 
 itself. 
 
 In point of fact, such fluctuations as can occur 
 under the system proposed are of little or no impor- 
 tance to the public in general. A rise or fall in 
 the value of the rupee by an eighth or a sixteenth 
 of a penny has no effect on prices. The price of 
 grain does not vary correspondingly. It is the 
 business of the banker and of the speculator in the 
 exchanges rather than that of the trader which is 
 affected by them. From this class of financiers, 
 opposition to any scheme for introducing the use of 
 gold into India as coin is to be expected ; because, 
 as the stability of value between gold and silver coins 
 as against each other increases, the opportunities of 
 profit which they may now have by speculating in 
 the exchanges will necessarily rather diminish than 
 increase as the exchange becomes steadier. This is 
 a matter of small moment to the public, and it must 
 not be supposed that what is a cause of alarm to 
 bankers and bullion dealers is therefore a matter of 
 peril to the community.
 
 RELATIVE VALUE OF GOLD AND SILVER. 123 
 
 Relative Value of Gold and Silver 
 ascertained by this measure. 
 
 Under these circumstances, the Indian currency- 
 will no doubt take the part which that of France for 
 a long time played in the monetary world, as an 
 equilibrating machine for establishing the true level 
 of value between gold and silver. Whatever tendency 
 to aberration local conditions in different countries 
 may temporarily produce, the free competition of both 
 metals as coin on the basis of their intrinsic value in 
 India will offer at once an infallible standard for its 
 detection and a means of correcting it. To India all 
 men will turn to learn the daily value of the precious 
 metals. India will justly claim to be the single 
 country in which the commodities of the world are 
 measured in gold and silver, and they in one another 
 by a standard scientifically true and beyond the risk 
 of deterioration from any external causes. Among 
 secondary aids to commercial progress, the use of 
 such a standard must take high rank. 
 
 As her commerce expands, increasing numbers of 
 men and transactions of increasing value will fall 
 under the influence of her commercial system. The 
 use of a currency in which both metals circulate at 
 their full value in one another will act as an induce-
 
 124 THE GOLD TREASURE OF END I A. 
 
 ment to traders to trade with India in preference to 
 many other countries. Merchants will by preference 
 contract to sell their goods in a market where they are 
 paid in coin which is liable to no artificial diminution 
 of purchasing efficiency. Investors will willingly lend 
 money to a Government which pays in such coin, or 
 provide capital for enterprises to which the returns 
 are realized in so secure a form. So far as gold may 
 become the standard of value in India, the country 
 will reap all the benefits to be derived from pay- 
 ments due to her people being made in the more 
 stable of the two metals. Her stock of gold will be 
 continually replenished, and as gold will under such 
 circumstances continue to raise the profits of all con- 
 tracts which foreigners may enter into with the 
 inhabitants of India, payments made under loans 
 borrowed from them will acquire a gradually but 
 constantly increasing value.
 
 STABILITY OF VALUE OF SILVER. 125 
 
 Silver will become more, not less Stable 
 
 in Value. 
 
 It is not irrelevant here to refer to a criticism * of 
 this plan for working a gold and silver currency 
 together at a variable ratio of exchange between the 
 two classes of coin, from the pen of a writer in the 
 Nineteenth Century. Its scope and method he has 
 misunderstood, and the conclusion he arrives at, that 
 
 * Extract from an article in No. 63 of the Nineteenth Century. 
 " What is a standard ? 
 
 " Mr. Clarmont Daniell, an Indian writer, proposes that there should 
 be but one standard and one legal tender of money for all the world- 
 gold. To this he adds, silver to be equally legal tender to any amount, 
 but upon condition that its value as existing in the bullion market shall 
 be ascertained from time to time and proclaimed by competent authority. 
 Professor Bonamy Price supports this theory, and backs it by the singular 
 argument ' that steadiness of value is incomparably the highest quality 
 which money can possess.' He therefore wishes to take away that 
 quality from that which is the money of a very large portion of the 
 human race, simply because he is unwilling to accept one fact which 
 Professor Jevons has proved to be mathematically correct, and another 
 which the French mint prices show to be mathematically true. 
 
 "The objection which I feel both to Lord Grey's plan and to Mr. 
 Daniell's is, that they have all the evils of a radical change without 
 bringing us back to that state of the common measure of value which 
 was lost when the French mint prices were given up. The use of a 
 standard is, that if the unit be a pound, a dollar, a mark, a rupee, a 
 franc, the persons having any number of these written against their 
 names may know, as exactly as possible, what their debt is,, and what 
 quantity of what substance will suffice to free them from it. Now with 
 a varying price between gold and silver, notwithstanding that both 
 would be used as ' instruments of exchange between nations,' the above 
 advantage would be lost."
 
 126 THE GOLD TREASURE OF INDIA. 
 
 to subordinate the rupee currency to a gold currency 
 of sovereigns is to introduce instability into the 
 silver currency of India, is open to question, both as a 
 matter of theory and of fact. 
 
 Any one who carefully reads what has gone before, 
 will not fail to perceive that the bulk of the internal 
 commerce of India will, under the plan proposed, 
 continue in the future as it has been in the past, 
 unaffected by the gold price of silver, its stability or 
 its variation. Goods will continue to be sold all over 
 the country for silver rupees. A debtor with a rupee 
 debt inscribed against his name will have to pay that 
 debt in rupees, unless it exceeds Rs. 5000, and he 
 elect to pay its equivalent in gold. 
 
 Except in the largest commercial cities and at 
 the ports, gold and silver coin will not, for a long 
 time, come into competition. Gold will not be used 
 in the petty traffic of India's multitudinous bazaars. 
 For all the influence that gold has on silver, the rupee 
 in such places will buy just as much or just as little 
 as it would have bought under any circumstances ; 
 and any rise of prices caused by the use of gold 
 coin will be so gradual as to be imperceptible. It 
 of course may be argued that a man who makes 
 a payment of Rs. 12 with a sovereign one week, 
 and a payment of Rs. 12] with another sovereign the 
 next week, gains 4 anas by the latter transaction.
 
 STABILITY OF VALUE OF SILVER. 127 
 
 But this is a delusion. Under the plan proposed, 
 such a payment could not be made except by the 
 consent of both parties, for gold is not to be legal 
 tender for a payment by one private person to another 
 for sums under Rs. 5000. When such a payment is 
 made by consent, the payee may be assumed to 
 benefit by it, and no more need be said about it. 
 
 If the case is assumed of such a payment being 
 made by law, that condition of things could only exist 
 at some future time, when the use of the Indian 
 sovereign had become so common in every bazaar as 
 to be recognized as the measure of value for all com- 
 modities under all circumstances. It is obvious that 
 when this happens, the goods under sale being 
 measured by the sovereign used to pay for them, the 
 same value of goods, if not the same quantity, would 
 be sold in each week for that piece of money, and 
 that the Rs. 1 2 the equivalent of the sovereign in one 
 week, or the Rs. \2\ its equivalent in the next, would 
 be of the same value, because (as Euclid says) things 
 which are equal to the same thing are equal to one 
 another. The sovereign would in each week have 
 bought a sovereign's worth of goods, and the varying 
 amount of silver coin would likewise have purchased 
 a sovereign, or a sovereign's worth of goods ; and 
 whether the purchaser were to use a sovereign, or a 
 sovereign's equivalent in silver, he would in each week
 
 128 THE GOLD TREASURE OF INDIA. 
 
 have got full value in goods for his money, although 
 he may have paid a different quantity of silver money 
 for the same quantity of goods in either week. 
 
 As long as the gold coin does not actually 
 compete with the silver coin, the stability of value 
 of the latter is unaffected ; if the gold really but 
 imperceptibly competes with the silver, the instability 
 of the latter as a measure of value is expressed in 
 a rise in price ; if the gold visibly competes with the 
 silver, it declares itself openly to be the true standard 
 of value, and silver in that case entirely abdicates 
 its function of a standard of value for goods under 
 sale, and takes its own value from the gold coin. 
 What really happens in the case upon which the 
 essayist in the Nineteenth Century may be assumed 
 to have argued is, that gold has replaced silver 
 as a standard of value. If it is made a ground 
 of complaint against gold that silver in this event 
 loses its stability of value, the logical justification 
 for such an objection is, that it is better for a nation 
 to continue to use silver, a varying and declining 
 standard of value in its commerce, because its defects 
 are not startlingly obvious, and only work mischief 
 gradually, than gold, which besides being exempt 
 from such a defect, has this merit, that it invests all 
 kinds of property with a more continuous and there- 
 fore a more certain value. Thus, to introduce gold
 
 STABILITY OF VALUE OF SILVER. 129 
 
 into circulation in a market hitherto exclusively 
 occupied with silver, and to exchange each kind of 
 coin with the other on the basis of their intrinsic 
 value, does not result in making the subsidiary silver 
 coin less stable in value, but has the effect of making 
 its inherent instability, both as against gold and as 
 against commodities, more apparent than before, and 
 at the same time, of substituting for it a less variable 
 standard. This plan provides a method by which 
 the owners of silver, when employing it in trade, 
 will get their full value for their money, either in gold 
 or commodities. This inducement, acting without 
 restriction on the supply of either kind of metal, 
 will call into use as coin the utmost quantity that 
 commerce can require. The value of such a currency 
 will be especially liable to gravitate towards the level 
 of the cost of its production, and be proportionately 
 less exposed to that kind of fluctuation which a 
 sudden demand excites on a supply of money which 
 cannot be easily or quickly increased. 
 
 The variations between the relative values of the 
 silver money of India and the gold money of 
 England, which now act as a serious restraint on 
 trade, will, for these reasons, be neither so sudden, 
 frequent, or excessive ; and it may be safely predicted 
 that the daily joint circulation of gold and silver coin 
 at an unfixed ratio, so far from making silver less 
 
 K
 
 130 THE GOLD TREASURE OF INDIA. 
 
 stable in the gold valuation than before, will mitigate 
 the existing instability in their respective values. It 
 will be no matter for surprise if it is discovered, when 
 such a system has been fairly at work for a few years 
 in India, that a tolerably permanent ratio of exchange 
 between the gold and silver coins exchanging for 
 commodities in the Indian market takes the place 
 of that which so long prevailed. The commercial 
 classes will cease to regret the disappearance of the 
 i : 15J ratio when its place has been taken by another, 
 educed by the action of the natural laws of the cost 
 of production and of supply and demand, acting on 
 a free and unrestricted use of both kinds of money 
 in the Indian currency. 
 
 Question of a Common Measure Examined. 
 
 In the same passage the writer objects that the 
 plan under discussion involves all the evils of a 
 radical change " without restoring the common 
 measure of value " which the ratio of 1 of gold to 
 15^ of silver established. The justification of those 
 who impose by law a fixed rate of exchange between 
 coins current in any country is either that it is the 
 natural and true rate of exchange, or, if it is an
 
 QUESTION OF A COMMON MEASURE. 131 
 
 arbitrary rate, that it shall so work as to be fair to 
 all men using it alike. M. Chevalier has told us 
 that when the French currency was reorganized at 
 the end of the last century, the ratio of 1:15^ was 
 enforced because it was the intrinsic ratio prevailing 
 between gold and silver, and the possibility that the 
 legal would at some future time cease to correspond 
 with the natural ratio was foreseen, in which case a 
 recoinage of the gold currency was the expedient 
 anticipated as a remedy for the divergence. The 
 plan under discussion proposes that which is in 
 principle the same remedy for a similar fluctuation 
 of value, but without the ruinous expense attending 
 a recoinage of an entire currency, which in the case of 
 the Indian silver coin would require a mass of metal 
 equivalent in value to no less than Rs. 420,000,000. 
 The radical feature of the proposed change consists 
 in the introduction into India of gold as legal tender 
 coin, and in the establishment of a measure of value 
 common to those countries with which the most 
 important part of the trade of the country is carried 
 on, and which shall at the same time be an equiva- 
 lent as permanent in that character as it is in its 
 function of a measure of value. When this change 
 is effected, the Indian trader will know with a certainty, 
 which he has been a stranger to for the last ten years, 
 what value of coin will suffice for his business, since
 
 132 THE GOLD TREASURE OF E\DIA. 
 
 if he chooses to discharge with gold a contract pay- 
 able in silver he will be no loser, because in a falling 
 market his gold will command an increasing number 
 of rupees ; and if he has contracted to pay in gold, 
 he will be able to dispense altogether with calcula- 
 tions of the silver value of the goods he is dealing 
 in ; and if he chooses to pay in silver, he can still 
 do so. 
 
 The objection contained in the passage quoted 
 above in fact involves the whole question, whether 
 it is necessary for commerce that a fixation of value 
 should be established between the gold and silver 
 coins which in any country are current together. 
 
 A debtor under the system proposed knows quite 
 as well as under any other currency system what 
 sum of money is required to discharge his debt. If 
 he, having undertaken to pay in silver, chooses to 
 do so, he cannot be ignorant of the amount required 
 to pay the debt. If he elect to pay in gold, its 
 amount is easily ascertainable, and the creditor gets 
 his full value for the silver clue to him, and having 
 regard to the tendency which under such a system 
 gold has to rise, the gold payment he receives would 
 not in the future be less efficient for trade or loan 
 than the silver for which it was substituted. It is 
 a mistake to speak of gold and silver when circulating 
 together on the basis of their intrinsic values as
 
 QUESTION OF A COMMON MEASURE. 133 
 
 constituting two different standards. Where either 
 is used apart and beyond competition from the other, 
 it is the single exclusive standard of the market. In 
 those markets or those transactions in which the two 
 metals come into competition, gold becomes the 
 standard. This is a matter of fact which experience 
 has placed beyond dispute. In a choice of standards 
 all men prefer gold to silver. When gold is sub- 
 stituted for its equivalent value of silver, no loss can 
 occur to a debtor paying a debt, nor undue gain to 
 a creditor, nor can either feel uncertain about the 
 value of the coin which will pass between them. 
 
 The system under which gold and silver circu- 
 lated together in the French currency in unlimited 
 quantities is spoken of by the writer in the Nine- 
 teenth Century as having provided a common 
 measure of value, which has been lost since that 
 nation ceased to maintain a fixed ratio of value 
 between coins of the two metals. This common 
 measure was lost because it was arbitrarily fixed by 
 law, and as such laws are not obeyed when they are 
 in conflict with the interests of the people, as soon 
 as the condition of the bullion market, acting on the 
 arbitrary fixation of the standard, created a field 
 of profitable enterprise in the purchase of the over- 
 valued with the cheaper metal, its uselessness as a 
 common measure of value became immediately
 
 134 THE GOLD TREASURE OF INDIA. 
 
 apparent. So long as the legal rate of exchange 
 for the coins of the French currency corresponded, 
 or nearly corresponded, with the natural ratio of 
 value prevailing at the market between the two 
 metals which they were made from, this common 
 measure was maintained, but no longer. The common 
 measure owed its efficiency to the fact that the coins 
 exchanged on the basis of their intrinsic value and 
 to nothing else. When from temporary causes the 
 natural and legal ratio ceased to be identical, and 
 the equilibrium got off its balance, it was restored 
 by an increase in the supply of one metal or a 
 diminution in that of the other. This went on as 
 long as the balance oscillated over a curve of limited 
 range, but to extend the metaphor, when silver 
 became so light as to require not I5| but 18 times 
 the weight of a given mass of gold to bring the latter 
 metal up to its former level, a currency system 
 designed to keep in equilibrium gold and silver in 
 the proportions of 1:15^ necessarily failed in its 
 object. The plan now put forward, if properly 
 worked, cannot fail to reconstitute this common 
 measure in India, which has been lost in France. 
 The essential principle is common to both that of 
 exchanging the coins on the basis of their intrinsic 
 value. In India, however, it will not be fixed by 
 law at an immutable figure, but will from time to time
 
 QUESTION OF A COMMON MEASURE. 135 
 
 be declared by competent authority to be what it 
 actually is at the time of the declaration. Thus the 
 natural ratio of value and the legal ratio must always 
 coincide. 
 
 It is only with some qualification that the French 
 currency system can be described as providing a 
 common measure of value, if by measure is meant 
 that which does not alter — a yard or a pound for 
 instance. Under that system sometimes gold, some- 
 times silver, was the measure of value; when either 
 metal became inefficient to measure the other, when, 
 so to speak, a twenty-franc gold piece became too 
 short to measure four silver five-franc pieces, or gold 
 became overvalued, it disappeared and ceased to be 
 a measure at all. What the French currency system 
 effected was this : it gave the continental money- 
 dealers a means of coining as much metal as they 
 might wish, of testing by experiment the relative 
 value of given quantities of either, and then of taking 
 away the one of the two metals which they could 
 employ more profitably outside France than within 
 the limits of the country. The necessary result was 
 that only that amount of either kind of coin remained 
 in France which, under the influence of the ratio 
 of value prevailing generally in the bullion market 
 of Europe and America, could be circulated in the 
 currency at the legal rate of exchange of 1 : 15^.
 
 136 THE GOLD TREASURE OF INDIA. 
 
 At such times as this condition was secured, and one 
 kind of coin was not engaged in expelling the other 
 from circulation, gold and silver can be correctly 
 described as a " common measure of value," but at 
 no other time. Circumstances latterly occurred which 
 made it profitable to employ only one kind of metal, 
 silver, at that rate, and highly unprofitable to employ 
 gold at the same rate. Gold was, in consequence, 
 disappearing altogether from France, and the 
 Government of the country thenceforth gave up the 
 attempt to circulate the two metals as coin together 
 at a legal valuation which had ceased to be identical 
 with the natural ratio of value existing between them 
 as bullion. The French currency was a machine 
 for distributing gold and silver over Europe, and even 
 more distant parts of the world, in such proportions 
 that the stock of gold remaining at home should 
 nearly always be 15! times as valuable as that of the 
 silver. The French Government obtains the same 
 result now by restricting very materially the. coinage 
 of silver, and by locking up a large portion of its 
 existing silver currency, and so enhancing the value 
 of the remainder ; but this is done at the expense 
 of the principle of the free coinage of both metals 
 in unlimited quantities. If France were to adopt 
 the natural ratio of value now obtaining between 
 the two metals and coin, and exchange gold and
 
 QUEST 10 X OF A COMMON MEASURE. 137 
 
 silver in the ratio of 1 : 18 or thereabouts, its former 
 system might (certain disturbing causes apart) flourish 
 as it did before. 
 
 What the plan under discussion proposes for 
 India is, that gold and silver should be a common 
 measure of value for commodities ; but it differs from 
 the French plan in that it secures this condition under 
 all circumstances and under all fluctuations in the 
 bullion value of the two kinds of coin. In France, 
 on the other hand, this " common measure " was only 
 found when the mass of the gold in the currency 
 happened to be exactly 15! times as valuable as that 
 of the silver. At other times the two metals were 
 not a common measure, but, approximately speaking, 
 one or other became the single measure, and the 
 discarded metal travelled abroad. In India, as in 
 France, the owners of both metals will be free to coin 
 them and use them as a legal tender money under 
 regulations which will ensure that under all circum- 
 stances either exchanges for the other and both for 
 commodities at their full market value. That which 
 wrecked the French system, the fixation of the 
 value of silver in gold, will be avoided in the 
 system proposed for India. The mutual substitution 
 of the two kinds of coin is, in the plan under dis- 
 cussion, provided for by the condition that the legal 
 rate of exchange shall always be that which is
 
 138 THE GOLD TREASURE OF L\ T DIA. 
 
 dictated by the natural value of one of them in the 
 other at the market. A conversion of one kind 
 of money into the other cannot be effected on the 
 basis of their relative intrinsic value under any other 
 system yet proposed. That a state currency must 
 be regulated by the Government of the country that 
 uses it is evident, because it is the Government which 
 must fix the amount of money of either description 
 which it levies as taxes ; and in order to secure 
 certainty in the fulfilment of contracts, must declare 
 what is and what is not a legal payment in discharge 
 of debts. It is only on such terms that the owners 
 of gold and silver coin will consent to exchange 
 them for one another in commerce, when the coinage 
 and circulation of both metals as legal tender money 
 is free and unrestricted. 
 
 The length of time during which the ratio of 
 i : 15^ actually obtained made it necessary through- 
 out the Latin Union to coin silver and gold on those 
 terms, and the difficulty and expense of reforming 
 the coinage of the associated countries when the 
 natural ratio began to differ from the legal ratio, 
 in order to bring the currency value of their gold and 
 silver coins into conformity with their intrinsic value 
 in one another, were found to be enormous, probably 
 insuperable. Of this any one can convince himself 
 by a short arithmetical calculation of the cost of
 
 QUESTION OF A COMMON MEASURE. 139 
 
 increasing the metal in the silver five-franc pieces 
 held by France alone, by an amount sufficient to 
 make four of them equal in value to one gold twenty- 
 franc piece, and by a forecast of the effect that such 
 an operation would have on the relative bullion value 
 of silver and gold. . ne only feasible plan for using 
 existing gold and silver coins in circulation together 
 as legal tender money to any amount or value, 
 is one of the characters proposed which provides 
 for their exchange into one another without prejudice 
 to either. 
 
 The author of this plan does not attempt, as has 
 been erroneously stated, to advocate its adoption 
 in Europe. However desirable or practicable such 
 a course may be, it does not enter into the scope 
 of this discussion to do more than show that in India 
 no practical difficulties of an insuperable or even 
 a serious character are opposed to the coinage and 
 use as legal tender money of the stocks of gold 
 existing in India under the system proposed. 
 
 When experience has proved how it will work 
 in India, other nations will be able to judge how far 
 such a system may suit the peculiar conditions of 
 currency and trade which prevail among them. 
 
 The currencies of other countries besides England 
 are becoming more rather than less monometallic 
 with gold as a standard. In France a large portion
 
 140 THE GOLD TREASURE OF INDIA. 
 
 of the silver coin is locked up, the remainder being 
 used for the petty commerce of the country. Austria 
 is said to be imitating the example of Germany, 
 and to be getting rid of her silver. In America, the 
 coinage of silver is limited ; but indirectly uncurrent 
 silver is used as a medium of exchange, by a system 
 of certificates entitling the present holder to the 
 possession of a store of silver held in reserve in the 
 State treasury. The result of this state of things is 
 considered to be an appreciation * in the value of 
 gold as against commodities which operates to the 
 disadvantage of those who have contracted to make 
 fixed payments in gold during a term of years. 
 
 This appreciation in the value of gold can only 
 be reduced in one way. If the internal trade of the 
 United Kingdom requires 20,000,000 or 30,000,000 
 more of gold coin than it can now obtain, the want 
 cannot be supplied otherwise than by using a cor- 
 responding quantity of silver in excess of that now 
 current. This, however, is not possible where silver 
 coin is token money, as it is in England ; and as the 
 silver coinage of foreign bimetallic countries is now 
 managed, the supply of silver cannot be considerably 
 increased without deranging the system into which 
 the currencies of those countries have drifted. If it 
 
 * Speech delivered by the Right Hon. G. J. Goschen, in the House 
 of Commons, on the 20th of February, 1S83.
 
 ' QIES7J0X OF A COMMON MEASURE. 141 
 
 were possible to work a bimetallic currency with 
 silver and gold coins, exchanging at an invariable 
 rate without any limitation on the quantity of either 
 in circulation, the appreciation, which is said to affect 
 the value of gold in exchange for commodities, would 
 of course disappear ; since, if silver coin could be 
 used in unrestricted quantities as legal tender money, 
 it would supply the deficiency which is said to exist 
 in the supply of gold coin. But if such a system 
 cannot be established, and neither law nor convention 
 suffices to give silver a value in gold which it does 
 not naturally possess, then it is worth considering 
 whether the plan of exchanging gold and silver coins 
 on the basis of their intrinsic value will correct the 
 artificial appreciation of gold or not. 
 
 Clearly, it must do so. 
 
 If {e.g.) throughout the Latin Union commodities 
 are assumed to have fallen 20 per cent, in their gold 
 valuation, in consequence of a restriction in the 
 supply both of gold and silver coin, and if the 
 quantity of the former cannot be increased, while 
 that of the latter can be increased indefinitely, the 
 use of a sufficient supply of silver to do 20 per cent, 
 more work than is now done by the gold coin would 
 necessarily bring prices to their former level. With- 
 out recommending this plan for general adoption, 
 it is not irrelevant to show that an argument in
 
 142 THE GOLD TREASURE OF h\ 7 DIA. 
 
 support of its technical soundness as a currency 
 system can be found in the existing condition of 
 the coinages of some gold-using countries. 
 
 Alterations in the State Rate of Con- 
 version WOULD SELDOM OCCUR. 
 
 It will be remembered, that the receipt of a pay- 
 ment in gold for silver due, as between private persons, 
 is only obligatory under this plan in a case where a 
 large amount of money is involved, and only when 
 the payer may elect to use gold On the other hand, 
 the price of gold coin in the silver currency would be 
 practically determined by an infinitely vast multitude 
 of transactions throughout the country ; these would 
 be settled, being of small amount, by the voluntary 
 action of individuals at any rate of conversion which 
 the parties in each case might agree upon. 
 
 Their transactions being below Rs. 5000 in value, 
 they would, if they agreed to use gold, be at liberty 
 to do so on any terms they might choose. It is by 
 means of transactions of this kind that the real value 
 of the ^old and silver coins in one another will be 
 evolved. It may vary somewhat in different localities
 
 STATE RATE OF CONVERSION. 143 
 
 in correspondence^ with some peculiarity of local 
 demand for either kind of coin. But the practice of 
 the chief cities, where such transactions will be 
 numerous, will influence that of less important places, 
 and the ease with which money can be carried about 
 will tend to equalize the rate of exchange in con- 
 formity with that prevailing at the chief trade centres ; 
 and it will be to the rate prevailing in the latter 
 places that those upon whom the duty falls of fixing 
 the rate of conversion for the payment of taxes and 
 large debts will principally look, in order to ascertain 
 what the real relative value of the gold and silver 
 coins in the currency is. The circumstances which 
 regulate the sale of bills of exchange drawn on a 
 foreign country payable in gold will not altogether 
 govern the State rate for converting rupees into 
 sovereigns in the Indian currency. In the former 
 case, the demand for foreign bills, the credit of export- 
 ing firms who have bills to sell, the rate of interest 
 prevailing abroad, the amount of money available for 
 loans at home, all contribute to determine the gold 
 price of rupee bills. But in the exchange of the two 
 classes of coin in the currency, the demand for gold 
 coin on the spot will principally regulate the price to 
 be paid for it in silver. 
 
 The only true test of the value of Indian 
 sovereigns in Indian rupees is the rate aUwhich one
 
 144 THE GOLD TREASURE OF INDIA. 
 
 passes in the other when both are used for the 
 purchase of goods in the market. The value of 
 English sovereigns (which are, in India, not money, 
 but bullion), although it is daily quoted in the Indian 
 newspapers at so many rupees apiece, is by no means 
 an absolutely certain indication of what their value 
 will be when their Indian counterpart is freely used 
 as money along with the rupee. The Indian price of 
 English sovereigns is largely influenced by the quota- 
 tions of the value of silver bullion in the pound sterling 
 in London, which depends on circumstances to a great 
 extent independent of Indian considerations ; and the 
 rupee value of the sovereign is also affected by the 
 course of trade, the demand or otherwise for those 
 coins for exportation, and by the very important fact 
 that the number of sovereigns in the Indian markets 
 cannot be increased by the fabrication of fresh sup- 
 plies of coin in the country, but that if more are wanted 
 they must be obtained by importation from abroad. 
 
 As there can be no doubt that our present means 
 for ascertaining the actual relative value of sovereigns 
 and rupees when both are used together as money 
 are defective, we may expect — when the coinage and 
 circulation together of both is unrestricted, and their 
 quantity only limited by the extent to which people 
 may choose to _ use them — to see the values of gold 
 and silver money take a somewhat different relation
 
 STATE RATE OF CONVERSION. 145 
 
 to one another from that in which they have been 
 hitherto considered to stand, under the prohibition 
 which the currency law of India places on the 
 exchange of money coined out of either metal. 
 
 The State rate of conversion would always be 
 under the pressure of a force constantly tending to 
 ensure its accuracy ; and if in any large market it 
 were materially to vary from the market rate of con- 
 version in vogue for small dealings, a withdrawal of 
 the superabundant, or an importation of the scarcer 
 metal, would immediately ensue, and the two rates 
 of exchange would approach one another or become 
 identical. The tendency of the market rate, when 
 differing from the State rate, would always be to 
 approach towards rather than to diverge from the 
 latter, because capitalists and traders, having com- 
 mand of large stocks of coin, would be the class to 
 use the State rate of conversion in settling their pay- 
 ments, and they would take care so to adjust the 
 stock of either metal in the markets which they 
 might be able to influence as to save themselves from 
 loss in doing so. If a divergence of value originating 
 in any permanent cause were to arise, Government 
 would proclaim a fresh rate at which its coin would 
 interchange, and this would become known in the 
 course of a few hours at every considerable market in 
 every quarter of the country. 
 
 L
 
 146 THE GOLD TREASURE OF INDIA. 
 
 It is not probable that the State rate of conversion 
 evolved under these conditions, being the result of 
 an actual competition between the two metals in use 
 as coin, and following while it might appear to rule 
 the rate of exchange, would require frequent rectifica- 
 tion. The very frequency of the interchange of the 
 coins is itself an element of stability of value. 
 Government by accepting payments due to itself 
 at its published rate of exchange would, from the 
 magnitude and variety of the business it transacts, 
 invest the State rate of conversion with an influence 
 over all smaller and less important transactions, 
 whether the use of gold in such payments were 
 partially obligatory or quite optional. Government 
 transactions and those of private persons would act 
 and react on one another, with the result ordinarily 
 obtained under such a process of uniformity and 
 steadiness in the rate of exchange. 
 
 That the Government of India must be the 
 ultimate referee and decide what shall be the rate 
 at which its own coins are to exchange into one 
 another, is an obvious and indispensable condition 
 in the existence of a legal tender currency. To 
 forbear from deciding on such a question would 
 be to abdicate one of its principal functions as a 
 Government ; and as it would obtain the best informa- 
 tion about the condition of the money market, and
 
 STATE RATE OF CONVERSION. 147 
 
 advice from many more sources than are available 
 to private persons, the determination of the rate by 
 a State official would necessarily command more 
 confidence than could be secured for a rate of exchange 
 ascertained by any private person, or in any other 
 method than that already indicated. 
 
 That which has been done in other countries 
 might, if the Government were to decline the duty 
 of declaring the rate of exchange for the coins of 
 its own currency, be done in India ; and combinations 
 among speculators in the exchanges be formed to 
 depress or elevate artificially one or other kind of 
 money in pursuit of their own profit. 
 
 The success of such schemes is possible where 
 the State undertakes to pay, say, a fixed sum in 
 gold for a fixed sum in silver or paper money ; as, for 
 example, when the United States undertook to redeem 
 their paper currency in gold, an attempt was made 
 to make a profit out of the necessity that Government 
 was under to get gold, by a ring of speculators who 
 contrived to prevent a sufficient supply of gold being 
 immediately forthcoming. Under the plan of a 
 State rate for the conversion of the coins into one 
 another, such a scheme could never succeed. If gold 
 were artificially restricted in supply, its silver price 
 would rise, and those who would have before been 
 inclined to purchase gold would leave it alone, and
 
 148 THE GOLD TREASURE OF INDIA. 
 
 from being neglected it would immediately fall in 
 value. Those already holding gold would in such 
 a case benefit by discharging a silver debt in gold — 
 but only in the event of the State rate of conversion 
 having been altered in correspondence with the 
 artificial enhancement, which in the case supposed 
 had been contrived in favour of gold. But such 
 an alteration is exactly that which Government 
 would not under the circumstances make. If the 
 rate for the conversion of the coins were liable to 
 be fixed by any other association than the State, 
 those who fix the rate and those who artificially 
 enhance the value of the metal might possibly be 
 the same persons. As the case stands, it would 
 be apparent to Government that the enhancement in 
 the value of gold was temporary and artificial, and 
 not supported by the condition of the metal market, 
 or by the state of the exchanges outside the local 
 area, within which the speculators were operating — 
 that is, throughout all India, and the principal cities 
 on the continent, and in America. The speculators 
 would be left with their accumulated gold on their 
 hands. The pubiic would use the gold currency on 
 the authorized terms of exchange, or temporarily 
 cease to use gold at all, and use silver instead ; or 
 gold would come into the market affected from many 
 •quarters, and its price in silver would fall. In any
 
 STATE RATE OF CONVERSION. 149 
 
 case, the combination would collapse in a dead loss 
 to the speculators on the artificial rise. 
 
 Furthermore, the area over which such speculators 
 would be obliged to operate, if they wished to engross 
 any considerable portion of the gold coin of the 
 country, would be too large for them to work in 
 with any chance of success ; for it would include all 
 India, Australia, the China ports, and other more 
 distant places. 
 
 If, on the other hand, their object were to enhance 
 for their own profit the silver price of gold, in the 
 hope that Government would buy it at their price, 
 they would be easily defeated in this way. The 
 Queen's dominions in India are divided into 
 " districts," a few hundred in number. The " district " 
 is the unit of the civil government of the country, 
 and each district is the seat of a " treasury " of the 
 Government of India, where taxes are received and 
 disbursements on the public service are made. Any 
 attempt which might be made in the large cities 
 to enhance the price in silver of the gold currency, 
 could, so far as it might affect the Government, be 
 met by the latter inviting payment of its silver taxes 
 in gold, at the market rate of exchange, at every one 
 of these numerous local treasuries. Again, in order 
 successfully to "corner" the Government on any 
 occasion when it might seem likely to these specu-
 
 i;o THE GOLD TREASURE OF INDIA. 
 
 lators that gold would be required for State purposes, 
 two conditions must exist : first, that Government 
 should require a large quantity of gold coin, and 
 next, that it should want it at once. But under 
 a currency worked on this plan these two conditions 
 never can arise. In no case will it be obligatory 
 on any person or on Government to pay gold away ; 
 that is always optional. Silver being under all 
 circumstances legal tender for any amount, the 
 Government of India could never come (as far as 
 a currency system worked on the plan under dis- 
 cussion is concerned) under the necessity of obtain- 
 ing a large quantity of gold for State purposes, either 
 within a long or short period of time. 
 
 If the case be assumed of the Government of 
 India shipping the gold coin of India to London by 
 way of " home " remittances, and speculators for a rise 
 intercepted the supply, this form of remittance would 
 at once cease, and the money required in London 
 would be raised there by selling bills on India payable 
 in gold or silver, or both, as might be convenient. 
 A temporary and artificial restriction of the supply 
 of gold coin circulating in Calcutta would not affect 
 the price of these bills in London ; and the causes 
 which would fix that price would be necessarily too 
 numerous and too remote from the influence of any 
 ring of Indian speculators to be controlled in any 
 degree by their operations.
 
 LOSS BY EXCHANGE. 151 
 
 Thus any apprehension that the " State rate of 
 conversion " is, under any circumstances, likely to be 
 regulated by manoeuvres of this kind is seen to 
 be groundless. 
 
 Loss by Exchange is more Apparent 
 than Real. 
 
 The excess of commodities exported from India 
 to England over those imported from the same 
 quarter is paid for by imported treasure. Were the 
 values of both imports and exports in equilibrium, 
 there would be no balance left for settlement which 
 had been unprovided for by the exchange of goods. 
 The commercial balance is against England. But 
 this is apparently not the case. The Government 
 of India and the English in that country complain 
 that the exchanges are against them when remit- 
 ting money to England. If, however, the factors 
 which contribute to this result could be dissociated, 
 and the intrinsic value of the pound sterling in 
 the Indian rupee, and the price of bills of ex- 
 change (as affected by other circumstances than the 
 depreciation of silver in the gold valuation) be
 
 152 THE GOLD TREASURE OF INDIA. 
 
 separately ascertained, the latter would probably 
 be found to be favourable to persons remitting money 
 from India to England. This advantage is, however, 
 lost, and the contrary result attained, because the 
 currency of India has fallen from its former value 
 in the sterling money of the realm. So long as 
 Englishmen in India cherish the delusion that 
 Rs. 10 ought to be of the same value as £1 
 sterling, they will continue to talk about loss by 
 exchange. Let the fact be recognized, that the par 
 of exchange has altered from Rs. 10, to Rs. \2\ 
 or more for £1 sterling, and the exchanges will not 
 then appear so unfavourable to India as they do now, 
 or may turn out to be to the advantage of that 
 country. The proof of this would be forthcoming 
 if in India a legal tender gold currency identical with 
 that of England were in use. If the par of exchange 
 were thus restored, if sterling bills were sold in the 
 Indian market for sterling money, then £1 sterling 
 in the East would buy £1 sterling in the West ; and 
 if there proved to be a greater demand for bills on 
 England in India than there is in England for bills 
 on India, the latter country would get the benefit 
 of the exchange, and £1 in India would buy ^i^ 
 or £l^xs in England, and the present apparent loss 
 by exchange would be converted into a visible gain. 
 The device of exchanging the gold and silver
 
 LOSS BY EXCHANGE. 153 
 
 coins of the Indian currency at a variable rate in 
 correspondence with their relative intrinsic values 
 would not affect the price of bills of exchange drawn 
 by either country on the other, except indirectly and 
 to a very slight degree, that is, to the extent to which 
 the conversion at their true values of one kind of 
 coin into the other would operate to prevent combi- ' 
 nations arranged to create a fictitious rate of ex- 
 change. The influence of the State rate of conversion 
 would invariably tend to steady the exchanges. The 
 interference of the Government of the country would 
 be confined to fixing the rate at which the taxpayer 
 might convert his rupee payments into sterling, if 
 he chose to use gold rather than silver money, and 
 to fixing the same rate as that at which private 
 persons paying debts of Rs. 5000 and upwards might 
 do so likewise. The action of Government would 
 in no way affect the price in rupees of sterling bills 
 drawn on London. Any one buying such a bill 
 for any amount, large or small, would make, as he 
 does now, his bargain with the seller, equally whether 
 he were to pay for the accommodation in silver or in 
 gold. If, in such a case, the Government of India 
 were to go into the market to buy bills as a means 
 of remitting money to London, its own valuation of 
 the gold coin in its currency would not impose any 
 other price on such bills than that which they might
 
 154 THE GOLD TREASURE OF INDIA. 
 
 naturally fetch. Indirectly, the fact that in India 
 a local value for sovereigns is evolved out of their 
 daily circulation as money with rupees will no doubt 
 have an influence on the price at which sterling bills 
 are quoted in the market. The purchaser of a £100 
 bill drawn on London will have a fair idea of what 
 it is worth in rupees by the price which he has to 
 pay for one hundred Indian sovereigns in that kind 
 of money, but this is a result on every ground to 
 be desired. It will tend to steady the rate of ex- 
 change by making the real value of the £\ sterling 
 of the realm more easily ascertainable in Indian 
 money, and avert much of that kind of loss which 
 private persons now suffer from the use of two 
 standards of value in the currencies of England and 
 of India. 
 
 When a new par of exchange has been ascertained 
 and established, the benefit of the exchange, so far 
 as it depends on the relative indebtedness of either 
 country, would probably be in favour of persons 
 buying bills of exchange drawn by India on England ; 
 but in addition to the causes which ordinarily govern 
 the price of such bills, there are others which are 
 peculiar to the commercial and political connection 
 existing between the two countries. The sea-borne 
 trade between India and the West being carried by 
 English shipowners, there must be a considerable
 
 LOSS BY EXCHANGE. 15 5 
 
 debt due by India for freights. Many mercantile 
 houses engaged in the Indian trade have their 
 principal places of business in London, where com- 
 missions, profits, and similar transactions have to 
 be settled. The returns to English capital invested 
 in plantations, or machinery for the manufacture of 
 textile fabrics, are to a great extent remitted to 
 England. The English in India not being colonists, 
 but merely residents, have occasion to remit week 
 by week considerable sums of money to their own 
 country for many necessary purposes ; and, lastly, 
 that part of the cost of administering the government 
 of India, and of the interest on the public debt, and 
 of the interest on the capital invested in guaranteed 
 railways, which must be paid in London, amounts 
 to ;£ 1 4,000,000 a year. These circumstances would 
 operate to maintain the price of bills drawn on 
 England, which might be offered for sale in India 
 at a high figure ; but whatever that might amount 
 to, it would be the result of natural and automatic 
 causes, and would be in no way attributable, as is 
 now the case, to an exclusive and compulsory use 
 of silver as coin in India. 
 
 The Secretary of State for India at present 
 obtains the money he requires by a sale for sovereigns 
 of rupees lying in the treasuries of the Government 
 of India, the principal and material factor in the
 
 156 THE GOLD TREASURE OF INDIA. 
 
 price paid being the value of silver bullion in the 
 London market. When India obtains a gold cur- 
 rency, this operation will be no longer necessary ; 
 the Secretary of State will cease to figure as the 
 largest vendor of silver in the world. The Govern- 
 ment of India will then be able to purchase sterling 
 bills on England with the sterling money in which 
 part of the revenues of India will be paid, or will 
 ship specie in the form of sovereigns to defray the 
 home charges. 
 
 Good Money is Consistent with an Unfixed 
 Rate of Exchange. 
 
 The principles above described, which control the 
 exchange of money for commodities, operate with 
 equal rigour in the case of coins made from different 
 metals when exchanging with one another, provided 
 that the supply of either kind is unrestricted in 
 amount by any but automatic limitations, and that 
 the rate of exchange corresponds with the relative 
 intrinsic value of the coins in use. Let it be assumed 
 that a given quantity of any article exchanges in- 
 differently either for coins weighing one ounce of
 
 UNFIXED RATE OF EXCHANGE. 157 
 
 gold or for coins weighing sixteen ounces of silver, 
 and as things which are equal to the same thing 
 are equal to one another, the equation of value 
 between gold and silver is at that time 1 : 16. If 
 a sudden increase of gold, say of ^, were made 
 to the stock in use, the article under sale, which before 
 exchanged for one ounce of gold money, would 
 exchange for an ounce and a fraction, perhaps 1^ oz.; 
 but the same quantity of goods would still exchange 
 for sixteen ounces of silver (putting aside for the 
 moment any slight fall in the value of silver 
 occasioned by an increased supply of current money), 
 and the equation of value would then be 1^ : 16. If, 
 during a long course of years, 1 : 16 were the ratio 
 of value between gold and silver, that formula would 
 describe the relative cost of their production ; and 
 if the aberration from that ratio to another of i-jV : 16 
 were not occasioned by any permanent cause, but 
 were owing to the temporary incidents of supply 
 and demand, the respective values of the two kinds 
 of coin would take again their original proportions. 
 But whether this were to occur or not, it is evident 
 that the gold and silver coins, when exchanging for 
 one another, are ruled by the same laws which either 
 kind of coin and commodities obey, and that the 
 alteration indicates a real change of value, which if 
 the equation had been artificially maintained at 1 : 16
 
 158 THE GOLD TREASURE OF INDIA. 
 
 would never have been expressed in the rate of 
 exchange at all. 
 
 It has been objected that coins of which the 
 value is not the same from day to day, that is to say, 
 which do not always exchange for the same piece 
 of gold, do not constitute true money. This, how- 
 ever, is a mistake. Any natural uniformity in the 
 rate at which coins of one metal may pass in those 
 of another is an accidental not an essential quality 
 in money. In a few countries this uniformity is 
 maintained in the interest of retail dealers by artificial 
 contrivances, which induce peculiar evils of their own, 
 and these have in their turn to be obviated or cured 
 by remedies which complicate questions of currency 
 otherwise very simple, and natural conditions are 
 superseded by arbitrary laws and conventional ex- 
 pedients. That only can truly be called stability of 
 value which is ascertained by the sale of one thing 
 for another at a price fixed by the competition of 
 traders. An uniformity in the ratio of exchange 
 obtained by legal restrictions on the coinage of 
 money, or on the amount of coins of one kind which 
 may be given for those of another, is no guarantee 
 of stability of value, and this becomes immediately 
 apparent by the successful infraction of such laws, 
 and by the disregard shown to the principles they 
 embody, by those who are beyond their reach. A
 
 UNFIXED RATE OF EXCHANGE. 159 
 
 sham stability of value asserted in an artificial rate 
 of exchange between two kinds of coin is at once 
 challenged by the sale of commodities at different 
 rates in the gold and in the silver coins of the 
 currency, at prices which do not correspond with 
 the conventional rate fixed for their interchange. 
 
 People in England have so long been accustomed 
 to use gold and silver money in a fixed proportion 
 of value, that the use of money on any other terms 
 is deemed impracticable. In India, however, although 
 for many years the East India Company's gold 
 mohur was obtainable at Rs. 16, and the sovereigns 
 of the English and Australian mints ordinarily passed 
 for Rs. 10, yet the public are quite accustomed to 
 the idea of silver and gold coins having a varying 
 value from their daily experience of the fluctuations 
 in the value of sovereigns and gold mohurs in 
 the rupee currency. That gold and silver money 
 circulating together as legal tender coin under 
 conditions of a perfectly free exchange will pass 
 at a varying rate of exchange in one another, is a 
 circumstance of which the practical inconvenience 
 will be subsequently shown to be insignificant, and, 
 so far from exciting dislike to the use of both kinds 
 of coin, will be regarded by the mercantile classes 
 among the natives of India as a guarantee that their 
 relative value is correctly ascertained, and expressed
 
 160 THE GOLD TREASURE OF INDIA. 
 
 in the rate of exchange, since the State rate of 
 conversion will be subject to the test of comparison 
 with that evolved by the daily traffic of the bazaar. 
 
 Value is not like colour or weight, an inherent 
 and substantial quality in money ; it cannot be 
 measured by a rule fixed by the processes of nature. 
 The dynamic standard of a foot-pound maintained 
 by the law of gravitation never varies, the linear 
 yard is preserved at an invariable length by a metal 
 standard ; but the value of money depends on what 
 it will exchange for, a condition liable to infinite 
 variation, and legal ordinances for the valuation of 
 current coin, are pernicious in the degree in which 
 they interfere with complete freedom of exchange 
 on the basis of the intrinsic value of the coins in 
 one another. 
 
 If these arguments are sufficient to prove that 
 the exchange value of money depends on the inci- 
 dents of supply and demand, and ultimately on the 
 cost of its production, it follows that any legal or 
 arbitrary expedients which interfere with the free- 
 working of these conditions must induce confusion 
 into commercial business, while they cannot in the 
 long run invest money with an efficiency exceeding 
 its real value. 
 
 It is only in the case of a complete insulation of 
 a currency, such as that which occurred in Japan
 
 UNFIXED RATE OF EXCHANGE. 161 
 
 previous to the seventeenth century, that the demand 
 of those exchanging commodities for money fails to 
 act on the real value of the coin measured by a 
 standard common to all commercial nations. When 
 the domestic currency of any country in which the 
 nominal value is higher than the real value of the 
 coin comes to be measured in the currency of a 
 foreign country where the coinage and circulation 
 of money is free, an arbitrary valuation of one kind 
 of coin in the other fails in its operation. 
 
 That this is the case, may be illustrated by the 
 analogy of coin of which the real value has become 
 degraded below the standard or nominal value by 
 wear and tear. Let it be supposed that the gold coin 
 of the realm has on the average lost 3 per cent, of 
 its mass by wear and tear, in this case a bill drawn 
 from France, and paid for with a weight of gold coin 
 equal to £97, would be reckoned at par if it procured 
 ;£ioo in England; but, nevertheless, if the price paid 
 for the bill in France contain as much gold as were 
 actually found in £98 English, then the exchange 
 would be £l in favour of England, although it would 
 apparently be £2 to her disadvantage, judged by the 
 standard or nominal value of sovereigns. Such a 
 condition of the exchange was by no means un- 
 common at the end of the last century, when the 
 currency of this country was in a very imperfect state, 
 
 M
 
 1 62 THE GOLD TREASURE OF INDIA. 
 
 and foreign merchants settled their trade balances on 
 the basis of the intrinsic and not of the nominal or 
 standard value of the light-weight coin of England. 
 The consequence was that the rates of exchange 
 stated in terms of the standard coin confused and 
 concealed the actual relation of value between English 
 and foreign money. 
 
 Whether a distinction between the real and 
 nominal value of current coin is occasioned by wear 
 or by debasement of the currency, or by legislative 
 regulations for the coinage and use of money, the 
 same result follows ; in free commerce it is by the 
 real not the nominal value of the currency that the 
 prices of commodities within the country, and the rate 
 of exchange for foreign bills drawn on the country, 
 where these regulations prevail, will be adjusted. 
 
 This fact cannot be too clearly kept in view in 
 every discussion on the comparative expediency of 
 fixing by law, or by a convention of nations, the value 
 of one kind of money in exchange with the other, 
 or of allowing the two kinds of coin to pass at their 
 intrinsic value in one another. 
 
 The practice which has prevailed in England since 
 1816, and within the last few years in France, of 
 using silver coin in exchange at a nominal value, higher 
 than its real value, in no way conflicts with this argu- 
 ment, because in both countries the silver currency is
 
 UNFIXED RATE OF EXCHANGE. 163 
 
 practically insulated, and effectual precautions arc taken 
 against its quantity being increased by an amount 
 which would deprive the coin of its artificial value 
 when exchanging with gold. The silver coin of those 
 countries never comes into competition with the silver 
 coin in unrestricted circulation in foreign countries, 
 because both the English and French settle interna- 
 tional trade-balances in gold, although in the case of 
 the latter the gold used is described in terms of its 
 conventional valuation in silver. As goods in the 
 French trade are described as being sold for francs, it 
 always appears that they are sold for silver, and simi- 
 larly bills of exchange drawn on France in terms of 
 francs appear to be sold for their real value in the 
 latter coin ;■ whereas in either case the sale price is 
 actually regulated by a valuation calculated in the 
 gold currency of England and France respectively. 
 Were France to adopt the rate of exchange of 1 5| ozs. 
 of silver coin for 1 oz. of gold coin, and to allow 
 a perfectly free coinage to gold and silver in her mint, 
 bills purchased for rupees in India, if they were 
 payable in silver in France, would draw an equal 
 value of silver in francs, calculated at their intrinsic 
 value, without reference to the ratio of 1 5 J : I ; and 
 if such bills were payable in gold in France, their 
 price in rupees in India would be fixed by the 
 intrinsic value of silver in gold metal, without refer-
 
 164 THE GOLD TREASURE OF INDIA. 
 
 ence to the fact that the silver coin of France was 
 rated at 15-J : 1 in the gold coin of the same country. 
 Thus the arbitrary fixation of one kind of coin in the 
 valuation of the other can only induce confusion into 
 trade transactions, and under a system of free coinage 
 can have no effect on the value of the coin in exchange 
 for commodities, or in any way influence the value 
 set on the domestic currency of the people who 
 exchange their gold and silver coin at an arbitrary 
 valuation by foreign nations in their dealings with 
 them. 
 
 Case for an Alteration of the Rate of 
 
 Exchange. 
 
 It may be objected that a producer buying his 
 material and paying for labour with rupees might 
 find the ratio of value to have altered between the 
 date his goods were brought to market and the 
 date of their sale. Let us assume that he fixes his 
 price at Rs. 5454 8a. 8p., calculated to give him the 
 ordinary profit of his business on the transaction. 
 This sum of rupees at is. iod. per rupee he might be 
 required to take payment for in £^0O. If before 
 he could convert his sovereigns into silver the rate
 
 ALTERATION OF RATE OF EXCHANGE. 165 
 
 of exchange rose to is. io^gd., the vendor would 
 only get Rs. 5439 la. 8p. in the market, which 
 would be the silver price of his manufacture. On 
 applying this money in his business, he would find 
 that the cost of commodities and labour had not 
 altered in correspondence with this rise in the value 
 of silver against gold, and he would be unable 
 immediately to recover this loss of Rs. 15 7a. 3p. on 
 ^500. Prices, if tending towards an alteration, would 
 be inclined to fall rather than rise ; but the rise of 
 one-sixteenth in the value of silver as against gold 
 would not necessarily result in a fall in the silver 
 prices of commodities brought for sale in silver. If 
 the trader were dealing in produce raised in a part 
 of the country where the influence of gold had not 
 yet reached, the vendor would have a smaller sum 
 of money then he counted on wherewith to commence 
 a fresh transaction, and would be a loser by being 
 paid in gold instead of silver. This illustration 
 describes that which daily occurs in the foreign trade 
 of the country (except that silver generally falls 
 rather than rises as against gold), and, under existing 
 circumstances, the loser and an innumerable suc- 
 cession of losers after him are left to bear their losses 
 or risks of losses, while no attempt is made, or is 
 even contemplated, to diminish those risks by an 
 improvement in the Indian currency. If an apprecia-
 
 166 THE GOLD TREASURE OF INDIA. 
 
 tion of silver against gold were to occur, and its 
 importance and the probability that it arose from 
 permanent causes justified an alteration in the State 
 rate of conversion, the necessary revision would under 
 the system be made, and future risk of this kind of 
 loss would be eliminated from the traders' calcula- 
 tions. 
 
 If, however, the dealer in produce were tolerably 
 skilful, he would anticipate the decline in the value 
 of silver, and provide against this risk by asking a 
 slightly enhanced silver price, and so obtain a 
 payment in gold which, converted into silver, would 
 yield him the desired sum of profit in that coin. On 
 the other hand, although on exchanging his £500 into 
 silver, the trader may get less silver than he previously 
 counted on, the diminished quantity of silver will, 
 in the market where he sells his goods for gold, avail 
 to purchase more gold than was possible before, and 
 in any business for which he may purchase gold 
 with silver he will gain to the same extent that 
 he had lost in the case assumed ; and if he trades 
 with silver in that market, all commodities offered 
 for sale therein being regulated by the gold standard, 
 the amount of silver into which he may have con- 
 verted the gold will be as efficient for purchase as 
 the gold itself. In the first case, the effect is seen of 
 a rise in the value of silver in an area of production
 
 ALTERATION OF RATE OF EXCHANGE. 167 
 
 or manufacture where silver exclusively regulates 
 values and gold does not compete with the baser 
 metal at all. The silver prices of commodities 
 remain practically unaffected (or at least are but very 
 slowly affected) by variations in the value of silver 
 when measured in gold in the bullion market, or 
 in distant centres of trade. 
 
 But, in the second case, if gold and silver are 
 both circulating together as legal tender coin, the 
 liquidation of a contract for payment in silver by a 
 payment in gold cannot result in loss to the payee, 
 since the gold used for payment is equal in value 
 to the silver, and all the commodities in that market, 
 silver among them, are priced by the gold standard. 
 It may also be safely predicted that transactions in 
 a locality where the prevailing use of gold has 
 caused it to become the standard of value will be 
 carried through with gold, and in a very short time 
 the case of a silver payment being made at the 
 option of the payer in gold will become very rare. 
 It is necessary, however, during the period of transi- 
 tion from the use of silver to the use of gold, to 
 provide a means by which gold payments can be 
 made the legal liquidation of silver debts. 
 
 In producing goods for sale in a market where 
 gold prices prevail, the manufacturer would, in bring- 
 ing his goods to sale for gold, reckon his expen-
 
 168 THE GOLD TREASURE OF INDIA. 
 
 diture of silver in manufacturing them, as he reckons 
 every other item of the cost of production. The 
 silver coin (or for that matter the copper coin) he 
 may spend in paying labour or buying raw material 
 would be regulated in its amount by the gold price 
 which he might reasonably expect to get in lieu of 
 the silver price, at which he would calculate the value 
 to him of the article he was manufacturing. This 
 being the case, and payment for goods being made 
 with gold, if the silver returned to the vendor on the 
 conversion of the gold price into that coin is less 
 than he expected, then the trader is proved to have 
 overvalued his goods at their silver price in the mar- 
 ket, the value of the quantity of goods he offered for 
 sale would turn out to be less than Rs. 5454 8a. 8p., 
 the supply of the article as contrasted with the 
 demand for it being considered. 
 
 The silver spent by the manufacturer, and every 
 other expense incurred in bringing the commodity 
 to sale, fixes the minimum price at which he can 
 profitably sell it ; the gold price is determined by the 
 lowest rate at which the commodity can be sold for 
 gold throughout the whole market, without reference 
 to the particular expense which each separate pro- 
 ducer is put to for his share of the bulk of that 
 article offered for sale at the time. If the vendor 
 loses on the transaction, he is unfortunate or un-
 
 ALTERATION OF RATE OF EXCHANGE. 169 
 
 skilful. His loss may not be his own fault, but it is 
 not the fault of the gold or the silver coin current 
 in the market, nor does it arise from their inter- 
 change on the basis of their intrinsic value. 
 
 It is too obvious to require argument for its proof, 
 that in a market or in an area of production in which 
 gold regulates values, and in which silver is used 
 indifferently with gold as money, the cost of pro- 
 duction and the ultimate price being regulated by 
 the same standard, no serious variation of real value 
 arising from the use of both metals as currency can 
 occur between that of the labour and materials used 
 for the manufacture of any commodity at one time, 
 and similar labour and materials used on producing 
 fresh supplies of the same article at a little later 
 date. The money which the manufacturer gets for 
 his goods, be it gold or silver, will be equally 
 efficient for the latter as for the previous operation. 
 When this is not the case, the declining efficiency of 
 money for purchase arises from a general rise of 
 prices, and is not attributable to any such cause as 
 a variation in the value of the silver and gold coins 
 in the currency when exchanged for one another.
 
 170 THE GOLD TREASURE OF INDIA. 
 
 Argument for Fourth and Fifth Proposals. 
 
 The fourth of the foregoing proposals is, that the 
 silver rupee of India shall, under all circumstances, 
 continue to be legal tender for the payment of any 
 kind of debt. Thus, while in some cases a debtor 
 may compel his creditor to take gold, no creditor 
 can compel a debtor to pay gold. The use of gold 
 is, for large transactions, optional on the part of the 
 payer. The use of silver is, under all circumstances, 
 lawful. The Government of India, it is proposed, 
 should agree to take gold at the State rate of con- 
 version in payment of any debts due to itself however 
 small, but will be in no way bound to pay gold away. 
 When Government chooses to do so, in making 
 payments of Rs. 5000 and upwards in value, it will 
 be able, like private individuals, to compel the reci- 
 pient to take gold at the authorized rate of conversion. 
 The efficiency of silver as legal tender money will 
 remain unimpaired, and its coinage, as it is now, be 
 unrestricted in quantity. 
 
 Silver will also be sometimes used in completing 
 gold payments in such cases as the following. If 
 a debtor were to pay a debt of Rs. 5000 in gold, 
 and the rate of conversion were Rs. 12 for a sovereign, 
 he would pay £416, the equivalent of Rs. 4992, and
 
 EFFECT OF DISPLACED SILVER ON GOLD. 171 
 
 Rs. 8 of the silver currency, because there would be 
 no gold coin current equal to Rs. 8. If the Govern- 
 ment were to issue half-sovereigns, then, of course, 
 in the case assumed, £4 16 J- would be paid in gold 
 and Rs. 2 in silver. Such a use of both kinds of 
 coin in combination would be obviously extremely 
 easy and cause trouble to no one. 
 
 The fifth proposal is only inserted to make it 
 more clear that the silver currency of India remains 
 unaffected as legal tender money. 
 
 Effect of Displaced Silver on the Price 
 
 of Gold. 
 
 The apprehension at first sight seems not alto- 
 gether groundless, that to change a portion of the 
 Indian currency from silver to gold coin will still 
 further lower the value of silver, which would fall 
 against gold in correspondence with the quantities 
 discarded ; that the conversion of rupees into 
 sovereigns could only be effected by a continually 
 increasing quantity of silver ; and that the financial 
 difficulties of the Government instead of diminishing 
 would increase.
 
 172 THE GOLD TREASURE OF INDIA. 
 
 But those who argue thus have overlooked certain 
 results arising from the introduction of gold coin into 
 the currency of India, which in the ordinary operation 
 of cause and effect would prevent silver falling in 
 value against gold in the manner such an objection 
 anticipates. 
 
 One effect of the use of gold as coin would be 
 to stimulate production in India by the wider market 
 which it would open to the sale of her commodities. 
 This increased production can only be effected by 
 an increased expenditure of silver coin, that is, by 
 an enlargement of the annual increment now made 
 to the Indian currency of £8,000,000 or £10,000,000 
 worth of silver ; and the silver, or a large portion of 
 it, on being displaced from use by gold would be 
 absorbed in increasing the natural productions of 
 the country. Silver coins must necessarily, from the 
 low price of labour and the necessaries of life in 
 India, continue for many generations to be the 
 popular money of the country. 
 
 Another effect of bringing the hoarded gold into 
 use as coin would be to increase the world's stock 
 of coined gold in the form best calculated to extend 
 its use in commerce. Sovereigns would necessarily 
 become cheaper in the silver valuation with every 
 million issued from the mints, until this tendency 
 were checked by the demand for the gold coin
 
 EFFECT OF DISPLACED SILVER OX GOLD. 173 
 
 increasing in correspondence with its declining value. 
 This, of course, might occur very soon, and even 
 before any material alteration of value had taken 
 place. If silver were discarded in favour of gold, 
 the mass of silver bullion would, from increasing 
 redundancy, fall in value against gold coin ; but this 
 would be quite a different thing from silver coin 
 falling in value against gold coin. Silver, on the 
 other hand, as fast as any of the discarded stock 
 were brought again into use for the purchase of fresh 
 supplies of gold for coinage, would, under the influence 
 of the law of the proportion between the amount of 
 goods under exchange and the amount of money 
 used in exchanging them, experience an increase 
 of exchange value on that it held when discarded. 
 The additional employment given to silver under 
 the stimulus which an extended use of gold is 
 assumed as giving to the productive energies of the 
 people, would also act towards a rise in exchange 
 value. These and other causes would go far to 
 prevent a fall (if they did not completely succeed 
 in averting it), and in any case would prevent violent 
 oscillations in the rate of exchange for gold money 
 in use. 
 
 It is with the latter condition that the financial 
 authorities of India would have to deal. The gold 
 and silver with which they would be concerned in
 
 174 THE GOLD TREASURE OF INDIA. 
 
 future would in all cases be money. Nor, as is now 
 the case, would first one metal and then the other 
 be for the purposes of their business bullion. 
 
 The value of gold and silver money in free circula- 
 tion together does not depend in their interchange 
 on the proportion between the quantity of either 
 in use and the quantity of bullion of the same metal 
 out of use. It does not follow that when silver 
 may be discarded to some extent that the value 
 of the silver coin will fall in a corresponding degree 
 against the gold coin of the same currency. The 
 efficiency of both kinds of money for the purchase 
 of commodities depends on their quantity as con- 
 trasted with the work they have to do, and the same 
 cause will regulate the efficiency of either for the 
 purchase of the other. If Rs. 50 or £4. will in- 
 differently purchase a given quantity of goods, either 
 sum will purchase the other. The apprehension 
 that the use of gold will lead to the discarding of 
 silver, and thence to a fall in the purchasing power 
 of silver money, arises from the existing condition 
 of the currency of India. People see that when the 
 price of silver falls the price of rupees in sovereigns 
 falls also, and this is because the Indian rupee 
 currency is liable to be increased if a higher than the 
 bullion price is given for rupees. In the event, 
 however, of gold becoming legal tender coin and
 
 EFFECT OF DISPLACED SILVER ON GOLD. 175 
 
 the standard of value in the currency and commerce 
 of India, the gold coin of England will purchase the 
 gold coin of India, and the price of bills of exchange 
 will tend to seek the specie point, not of silver, but 
 of gold. Silver coin in use in India will necessarily 
 take its value rather from the demand for it for use 
 as money in that country than (as is now the case) 
 from the bullion value of silver in sovereigns. That 
 the cheapness of silver bullion will have some effect 
 on the quantity of that metal coined from time to 
 time into the currency is not to be denied, but that 
 effect has been much overrated. Facts very clearly 
 prove that additions are not made to the Indian 
 rupee currency in correspondence with a decline in 
 the value of silver bullion. 
 
 This is evident from some facts brought together 
 in a recent discussion on this subject by a contributor 
 to the Westminster Review* He remarks that 
 " At those times when silver has been dearest, the 
 largest additions have been made to the currency 
 of India ; and in more recent years, when silver has 
 been cheap at the gold valuation, the yearly increment 
 has been least. Thus, in 1856, and 1857, and 1859, 
 when the price of silver ranged from 6o|d. to 62|d., 
 and between 1863 and 1866, when the average price 
 continued slightly above 6id., more than seventy 
 
 * Westminster Review, No. cxiii. p. 135.
 
 176 THE GOLD TREASURE OF INDIA. 
 
 and a quarter millions sterling were added to the 
 silver currency of India, at an average rate of more 
 than ten millions per annum ; while, on the other 
 hand, in the period between 1873 and 1876, when 
 the price of silver ranged from 5od. to 59^d., the 
 average yearly increment was considerably less than 
 five millions." 
 
 Additions are only made to the currency as 
 commodities in increasing quantities come into the 
 market to be exchanged for one another, and it 
 therefore will be in the case assumed a matter of 
 secondary importance whether silver bullion falls 
 or does not fall when priced in the gold money of 
 India. It will be on the exchange value of one kind 
 of coin with the other that the attention of the 
 Government will be fixed, and this will be principally 
 regulated by the increasing or decreasing quantities 
 of commodities under exchange for one another, that 
 is, by the requirements of the whole commerce of 
 the country, and only in lower degree by the price 
 of silver bullion. 
 
 Finally, if the contrary were the case, and silver 
 money were liable to fall in value against gold money 
 as silver bullion became cheaper, it would follow that 
 as fast as this occurred fresh silver coin would be 
 added to the Indian currency ; since, on this assump- 
 tion, it is only by being coined in increased quantities
 
 EFFECT OF DISPLACED SILVER ON GOLD. 177 
 
 that the cheapness of bullion causes a decline in 
 the exchange value of money. But additions to the 
 rupee currency are not made from such a cause now, 
 and they therefore in future will certainly not be 
 made from the same cause when gold coin is 
 in use exchanging for silver coin at its intrinsic 
 value. 
 
 The example of the French currency, which at first 
 sight appears to contradict this theory, really proves 
 it. The French gold currency was in danger of being 
 bought up with coin of the silver currency, which 
 it was reasonably expected would be fabricated in 
 large quantities with this particular object, irrespec- 
 tive of the demands of French commerce for silver 
 coin, and the reason of this was, that the French law 
 for the interchange of gold and silver coins rated 
 the gold coins at 20 per cent, below their value in 
 silver. If the rate had been fixed on the basis of 
 the relative intrinsic value of the two kinds of money 
 in circulation, one could not have been used to buy 
 up the other ; for the purchaser would gain no profit 
 in doing so, and speculators would have at once 
 perceived the futility of adding more silver coin 
 to the currency in order to buy up the gold coin, 
 when by doing so they would have to give pro- 
 portionately more of the former for the latter than 
 they gave before. 
 
 N
 
 178 THE GOLD TREASURE OF INDIA. 
 
 It therefore follows that the value of the silver 
 coins of the Indian currency, when exchanging with 
 the gold coins, will not depend on the bullion value 
 of silver in gold, but on the demand which commerce 
 may make for silver in preference to gold for use 
 as money. This demand, however, cannot, under the 
 regulating influence of the exchange on the basis of 
 their intrinsic values, occasion either sudden or great 
 variations in the relative value of the two kinds of 
 money, because any material additions made to one 
 kind will cause it to fall in value against the other to 
 the same extent to which (from that kind of money 
 being redundant) its value would fall against com- 
 modities. 
 
 The argument cannot be too plainly urged which 
 has run through some part of this discussion, that 
 necessity and expediency, to say nothing of the 
 duty of the ruler to his people, combine in favour 
 of an unrestricted use of either kind of metal as coin 
 at their actual value as the true and only remedy 
 for embarrassments, which have their origin in the 
 employment of the inferior metal and in the exclusion 
 of gold money from use in India. Until unlimited 
 space for free play is accorded to the action of the 
 two natural forces of the cost of production and 
 of supply and demand in the currency as well as 
 in the commerce of India, nothing but loss and
 
 EFFECT OF DISPLACED SILVER OX GOLD. 170 
 
 confusion continually recurring in new forms and 
 fresh combinations will be the result. The evolution 
 of a new and true ratio of value for silver and gold 
 money in the Indian currency by the action of 
 natural causes is the great desideratum. The surest 
 means to secure that end should be taken, and the 
 issue may then be awaited with an assurance that 
 whatever it may be, it will be that which best serves 
 the commercial interests of the people of the country. 
 
 The objection that an increased use of gold coin 
 involves a decline in the value of silver coin would 
 have weight if there remained no field open for the 
 use of the discarded silver. Such, however, is by no 
 means the case. 
 
 The stocks of gold now held in India are there 
 for some purpose. The Indian people have not accu- 
 mulated £112,000,000 sterling in gold in forty-seven 
 years for no reason at all. Gold coins and gold blocks 
 serve as a medium for making remittances, and are 
 hoarded as a security against the vicissitudes of 
 fortune, or as a resource to fall back upon in times 
 of political convulsion. Gold is largely held by 
 bankers, whose acknowledged possession of a stock 
 of gold is the foundation of their commercial credit. 
 As a hoard to be laid up against bad times, silver 
 is nearly as useful as gold, and if the owners of gold 
 saw their profit in using it in trade, a large part of
 
 180 THE GOLD TREASURE OF INDIA. 
 
 their gold treasure would doubtless be replaced by 
 silver. Bankers and other traders who now possess 
 gold would, for a similar reason, substitute for it 
 silver. 
 
 This practice of hoarding coin is by no means 
 without advantage to commerce. When currency 
 tends to become redundant, prices rise, and fresh 
 accretions to the stock of coin fall off. The surplus 
 money goes away from the country, or is hoarded, 
 as it is in India ; hoarding, therefore, is beneficial 
 in its tendency to rectify a too-frequent variability 
 of ratio between gold and silver, by reducing the 
 quantity of the more abundant metal. 
 
 The extension of the market for the productions 
 of India by the use of gold money in the currency 
 is not the only stimulus it affords to her industry. 
 If it were the case that silver, from being discarded, 
 declined in value as against commodities in India, 
 the rise of prices which would result would have an 
 immediate effect in increasing production, and thus 
 would create a demand for further supplies of silver 
 coin, and, so far as this might be the case, the fall 
 in the value of silver against gold would be propor- 
 tionately arrested. 
 
 The continuous demand for silver from Asia, no 
 doubt, keeps up its price at the tolerably steady 
 figure about which it has ranged for some time past ;
 
 EFFECT OF DISPLACED SILVER ON GOLD. 1S1 
 
 and if the metal which India annually absorbs — to 
 the value on an average of ^8,000,000 or £10,000,000 — 
 were gradually reduced, existing inducements to the 
 mining of silver would be correspondingly removed, 
 less fresh silver would be excavated, and a fall in its 
 value by this means mitigated. 
 
 All these causes would be in operation at once, 
 and have no other tendency than to prevent a fall — 
 and much more a sudden fall — in the value of silver 
 as measured in gold. The establishment of a gold 
 currency in India will be a work of time and very 
 gradual in its process, and the best security that 
 the countrv can have that the existing condition 
 of the metal market will not be violently disturbed, 
 is found in the provision that the coinage of gold 
 under the plan proposed should be limited by the 
 amount of bullion which the people of the country 
 may themselves bring to the mints. As the propor- 
 tion in which gold may be introduced into and silver 
 displaced from the currency will depend on the 
 volition of the people themselves, no fear need arise 
 that they will do injury to their own interests by 
 too great a haste in discarding their silver from use. 
 Bullion dealers, no doubt, hearing that the Indian 
 Government is about to coin gold, would calculate 
 on the discarding of silver, and would endeavour to 
 sell their stocks while they could. The exchange
 
 1 82 THE GOLD TREASURE OF INDIA. 
 
 banks would, for a similar reason, make the use of 
 gold as money in India a pretext for raising the 
 silver price of gold bills. The best way of preventing 
 the occurrence of these eventualities would be for 
 the Government to make as public as possible, some 
 time before it was introduced, the scheme they might 
 adopt for using gold money in India. Speculators 
 would then wait and see how much gold was brought 
 to the mints for coinage into money, and how much 
 silver was discarded, and what rate of exchange 
 between the two metals would be the outcome of 
 the actual circulation and use indifferently of both 
 kinds of coin in the Indian markets on the basis of 
 their intrinsic value. 
 
 Stability of Silver Values in India. 
 
 The question has been asked why it is that 
 although silver has fallen during the last ten years 
 some 20 per cent, in the gold valuation, prices calcu- 
 lated in the silver currency of India have not risen 
 correspondingly. The theory that the exchange 
 value of money (and in this particular case silver 
 money is in question) is regulated by the proportion
 
 STABILITY OF SILVER VALUES IX INDIA. 183 
 
 between the goods in commerce and the money in 
 circulation accounts for this circumstance. Although 
 the silver coin of that country has in recent years 
 been largely increased, the quantity of goods in 
 commerce has been increased also. Prices at the 
 principal centres of trade are probably higher than 
 they were ten years ago, as in such places the in- 
 fluence of the new coin on the money value of 
 commodities would be more active than in remoter 
 situations, and money and goods would have taken 
 a slightly different proportion to one another than 
 they held before. Merchandise, the subject of export 
 abroad, will be found to have been affected in a more 
 decided manner, because when goods are taken from 
 a cheap to a dear market, their value shows a tendency 
 to rise in the former to the level obtaining in the 
 latter. They are confronted in both markets together 
 with a larger amount of money than was in circula- 
 tion in the market of production. The jute tea or 
 indigo of India are exchanged for other commodities, 
 not only by means of the rupees circulating in that 
 country, but by means also of the sovereigns and 
 eagles circulating in England, Australia, or America. 
 So far as the people of those or other foreign 
 countries buy goods in India, they bring those goods 
 within the scope of their own currencies. The 
 Indians, although they may not be able to trace
 
 184 THE GOLD TREASURE OF INDIA. 
 
 the effect to its cause, find that as their exportable 
 production are being exchanged both among their 
 own people with their own money and among 
 foreigners with foreign money, they obtain the advan- 
 tage of a demand made by a larger number of 
 customers using a proportionately larger amount 
 of current money for the purchase of the whole 
 stock of articles of this description which are offered 
 for sale in India. 
 
 Whether silver has become cheaper by a diminu- 
 tion in the cost of its production, or by a redundancy 
 in the stock in consequence of the metal being 
 discarded as coin, silver money will not be less 
 efficient for purchase than before, so long as the 
 increased amount of money which has been coined 
 into the circulation is not more than is required to 
 exchange the increased commodities brought into 
 the Indian markets. Although silver bullion may 
 have fallen 20 per cent, in value when measured in 
 gold, so long as the stock of silver money which is 
 exclusively used as currency in India only increases 
 in the same proportion that commodities in commerce 
 increase, prices will, on the average, remain unaltered.
 
 BARTER SHOULD BE DISCOURAGED. 185 
 
 The Custom of Barter should be Dis- 
 couraged. 
 
 In a country like India, whose commercial arrange- 
 ments in some places approach those of the more 
 civilized nations of Europe, and in other places are 
 not much advanced beyond those of very primitive 
 communities, it is of primary importance to familiarize 
 the more backward populations with the superior 
 advantage attending the use of money over purchases 
 by barter and book credits, and the payment of labour 
 in coin rather than in grain or provisions. It is only 
 by putting it within the power of the ryot to insist 
 on receiving money wages for his labour, and to pay 
 ready money for his food and clothing, that the 
 Government will effectually succeed in protecting 
 him against famine by giving him the means of 
 saving money or storing his crop, and thus improv- 
 ing his condition. At the same time, a continuous 
 development in the public revenues, whether derived 
 from land-rent or taxation, would be secured with 
 the increasing prosperity of the producing class. In 
 order to this end, the stock of coined money now in 
 British India must be much increased. 
 
 The extent to which barter is resorted to in the 
 daily life of the Indian labourer and artisan, and the
 
 1 86 THE COLD TREASURE OF INDIA. 
 
 numbers of people who live on food borrowed from 
 day to day, on the credit of the next harvest, and 
 the amount of wages which is paid in provisions, can 
 be with difficulty understood by those accustomed 
 to European methods of business. The Indian 
 magistrate or revenue collector, having daily ex- 
 perience of these customs, soon ceases to notice them 
 as unusual. The influence, however, which they 
 exert as restraints on industry is, from an economical 
 point of view, of enormous importance ; and any 
 measure tending to improve a condition of the labour 
 market so injurious to the people at large, claims 
 attention on this, if on no other ground. 
 
 At present, the quantity of silver in use in India 
 is by tale less than ten rupees per head of the 
 population, while throughout all Europe it is estimated 
 at the equivalent of about Rs. 21 per head. No 
 account is taken of copper or of paper money in 
 either case. The Indian populations may, therefore, 
 be said to be grievously in want of money. This 
 they can only supply themselves with by increasing 
 their productions under the stimulus of high prices, 
 and one step in that direction is to liberate silver 
 and extend its use by employing gold in the currency 
 of the country. ' 
 
 The Government of India has shown much 
 wisdom in disregarding all persuasion to extricate
 
 BARTER SHOULD BE DISCOURAGED. 187 
 
 itself from the financial difficulty known as "loss by- 
 exchange," by enhancing in any artificial manner the 
 exchange value of its silver currency. Recommenda- 
 tions of more than one kind have been urged on its 
 notice to diminish the quantity of coin in circulation, 
 and thus increase its purchasing power. To these 
 the Government has fortunately turned a deaf ear, and 
 so averted a serious calamity which at one time 
 seemed impending over the people. The higher 
 price which people with incomes in silver have to pay 
 for sovereigns now than they paid ten years ago, 
 has so far dominated men's ideas on this question 
 that they fail to perceive its economic and social 
 aspect, and look at it solely from the point of view 
 of bills of exchange. 
 
 To limit the quantity of coin in circulation in 
 India, to omit any effort to provide facilities for the 
 free coinage and use of all kinds of money, would 
 be, in the present condition of her people, the greatest 
 financial blunder which the rulers of that country 
 could commit. Although much has been done, much 
 remains to be done, especially in the field of 
 financial administration, to improve the condition of 
 the masses ; and one obvious requirement is to give 
 them the means of supplying themselves with as 
 much coin as they require. An enormous proportion 
 of the lower class of people arc not only habitually
 
 1 88 THE GOLD TREASURE OF INDIA. 
 
 in debt, but are insufficiently fed and clothed, and 
 are always on the verge of starvation. A very slight 
 increase in the cost of provisions brings peasant 
 families in great numbers down to one meal in two 
 days, and to the use of weeds and berries as food. 
 This prevalent poverty will only disappear with an 
 abundance of money. When this is acquired, the 
 ryot will sell his crop for cash, and buy food of the 
 kind and at the time he may want it, instead of 
 " trucking " at the provision shop, where he has to 
 take what he can get at a price fixed by the vendor, 
 on which interest is charged until the account is 
 settled. When money becomes plentiful, he will get 
 the best price in the market for his wheat or millet, 
 and spend the money as he may find convenient. 
 
 Now he bargains with a neighbour over the 
 exchange of a bag of corn for a little salt, a petticoat 
 for his wife, or a pair of shoes for himself. Yet it 
 is this barbarous condition of trade that those who 
 recommend a restriction on the quantity of money 
 in use would, perhaps without knowing it, perpetuate 
 and intensify. If the people were allowed an un- 
 limited right of coinage, and a free circulation of 
 gold and silver money were set up, the currency 
 would be replenished to the full. Experience teaches 
 us that under such conditions coin will be added to 
 the circulation in quantities progressing in the ratio
 
 BARTER SHOULD BE DISCOURAGED. 189 
 
 of the volume of commodities, and of the ease and 
 celerity with which they exchange together. Facilities 
 for trade are yearly expanding, and the demand for 
 fresh coin more than keeps pace with extensions of 
 commerce. An abundance of money in circulation 
 results in a high price of produce and a low rate 
 of interest. Its diffusion is more general, the number 
 of money-lenders increases, and that part of the 
 population which, as they are now situated, must 
 borrow to live at all, will have a choice of creditors 
 and obtain their means of subsistence on easier terms. 
 
 The importance of this kind of alleviation in the 
 hard life of the working classes in India will be 
 recognized by all who are acquainted with their 
 condition, or whose business has given them ex- 
 perience of the petty tyrannies and extortion of 
 the village grain- dealer and money-lender. 
 
 The ascendency of this class in their character 
 of creditors, among the cultivating proprietors and 
 tenantry, gives them a comparative monopoly in the 
 purchase of produce, and the price at which they 
 choose to buy is in practice that which the seller 
 must accept. The emancipation of the agricultural 
 classes from this kind of serfdom can be effected 
 by no means which omit to provide for the unrestricted 
 coinage of as large a portion of the gold and silver 
 bullion now in India, and the free circulation of both
 
 1 9 o THE GOLD TREASURE OF INDIA. 
 
 kinds of money, as the people may by their own 
 action bring into use. 
 
 Prices do not answer quickly to a fall of one 
 precious metal in the valuation of the other. During 
 the ten years in which silver has fallen about 20 per 
 cent., some commodities have been scarcely affected 
 in price, and none have risen very much. The reason 
 of this is, that the Indian silver currency is supplied 
 by the action of the people themselves in just such 
 quantities as they require it. With the assistance 
 of credits, paper contrivances for circulating money, 
 barter and payment in kind, it suffices for their wants 
 in the present condition of the country. The amount 
 of the currency corresponds with the amount of work 
 it has to do in exchanging commodities, and it is 
 increased as the commodities brought into the 
 markets increase. If those commodities, or that part 
 of them which exchange for coined rupees, were 
 suddenly to increase 20 per cent., then India would 
 simultaneously require an addition of 20 per cent, 
 on her present stock of coined money. If coin in 
 the proportion of 20 per cent, were added at a stroke 
 to the Indian currency, then prices would rise 
 accordingly. But no such violent alteration in the 
 amount of goods or of coin in the market has taken 
 place. This is the reason why silver, although its 
 value when competing with gold has fallen about
 
 BARTER SHOULD BE DISCOURAGED. 191 
 
 20 per cent, since 1870, has not lost its efficiency 
 for the purchase in India of produce in any such 
 proportion. 
 
 The coined money of the currency has not been 
 increased by 20 per cent., or by any sum at all 
 approaching 20 per cent., on the figure at which it 
 stood in the beginning of this decade ; and such 
 increase as has been made to the stock of currency 
 during that time has been almost entirely absorbed 
 in the production of increasing quantities of raw and 
 manufactured goods, in supplying outlying districts 
 hitherto in want of coin, or in constructing communi- 
 cations, and so equalizing the values of produce in 
 distant places. 
 
 Silver prices in their general steadiness have only 
 expressed the fact that, although coined money and 
 productions have both increased in the last ten years, 
 the proportion previously existing between them has 
 been closely maintained. 
 
 It must not be forgotten that although gold has, 
 in the last ten years, risen some 20 per cent, on its 
 former value in silver, and other commodities have 
 not done so, there is no proof in this condition of 
 things of the existence of two values in the same 
 market for the same article. Gold in India is 
 bullion. If gold legal tender money had been 
 circulating in India during the last ten years, prices
 
 192 THE GOLD TREASURE OF EVD7A. 
 
 would have adjusted themselves to the rise in the 
 value of gold ; but no gold money having been in 
 use, prices have adjusted themselves to the only 
 measure of value existing in the country, and gold 
 bullion, like any other commodity, has taken its 
 present value (of about Rs. 20 instead of Rs. 16 per 
 tolah) from that standard. 
 
 Reason why a Sudden Rise of Prices will 
 
 not occur. 
 
 As goods come to be customarily sold for gold 
 in the Indian markets, the demand for them may be 
 expected to rise, in consequence of the convenience 
 to trade which the use of gold as the money common 
 to the Indian producer and the English consumer 
 will secure. The increased demand will be followed 
 by a rise in the price of exportable articles in India, 
 and by a gradually and imperceptibly diminished 
 purchasing power in the silver currency. 
 
 As the goods whose price would thus rise are 
 only a small portion of all the goods in exchange, 
 the effect of a rise of their value on the purchasing- 
 power of all the money in India will correspond to
 
 SUDDEN RISE OF PRICES WILL NOT OCCUR. 193 
 
 the proportion in which they may stand to all the 
 goods under exchange for money, and will necessarily 
 be but slight. At the same time, the quantity of 
 money will itself increase in consequence of this rise 
 in prices. The supply of silver, from which the call 
 for fresh money can be answered, is out of all pro- 
 portion larger than the demand for it, and bullion 
 will continue to be coined into money as fast as any 
 profit, however small, can be obtained by doing so. 
 Under these circumstances, the fall in the value of 
 silver money in consequence of any expansion which 
 commerce may experience from the use of gold 
 money will either be very slight or amount to nothing 
 at all. 
 
 All accessions to the treasure or coined money 
 of any nation are first appropriated by a few indi- 
 viduals, or a limited class of people. They soon 
 distribute their surplus wealth among producers, 
 whose livelihood depends on the vigilance with which 
 they watch the requirements of consumers. Prices 
 never rise universally and suddenly. First one 
 commodity is affected, then another, some more and 
 some less ; others cease to be in demand at all, being 
 superseded by other more useful articles. The value 
 of commodities, like the height of trees in a forest, 
 is of gradual growth. Although all the trees may grow 
 together, they never grow at the same pace ; some 
 
 O
 
 194 THE GOLD TREASURE OF INDIA. 
 
 grow quickly, some slowly, some are overshadowed 
 by others and die down. Some goods under the 
 stimulus of a high price are produced in greater 
 quantity than before, and, perhaps, ultimately fall 
 in value relatively to other commodities, whose rise 
 in value has been more gradual and permanent. 
 A proportion will always be maintained between 
 the values of different articles, although it may be 
 very different from that existing in a previous genera- 
 tion ; and men adjust their expenditure, their mode 
 of life and social habits, to the fresh conditions in 
 which they find themselves placed. Governments 
 do the same ; they adjust the burden of taxation to 
 classes who have become rich, and relieve those 
 which have fallen behind in the race for wealth. 
 Such a contingency as a universal rise of prices 
 is an impossibility, and only less impossible is it that 
 the Government of a country should find itself in the 
 midst of increasing public wealth, and at the same 
 time be in difficulties about raising money to meet 
 the increasing demands of a more highly organized 
 polity. The growth of the revenues of the Govern- 
 ment of India, which have more than trebled in forty 
 years, while, owing to a general advance of public 
 prosperity during the same period, the incidence 
 of taxation is more equable and less onerous to the 
 individual than it probably ever has been, is the
 
 EFFECT OF ENHANCED PRICES. 195 
 
 safest augury by which we can predict that no rise 
 of prices consequent on the enlarged facilities for 
 trade with which a reformed currency will provide 
 the people can prove in any way embarrassing to the 
 Government of India. 
 
 Beneficial Effect of Enhanced Prices. 
 
 One among other beneficial effects of the in- 
 creased circulation of money in India is, that by 
 raising prices it enhances the value of the productions 
 of that country all over the world. In some quarters 
 this is not, however, considered an advantage. There 
 are those who consider that it is better for the Indian 
 ryot that he should sell his produce cheap than sell 
 it dear, as the cheaper it is the more he will sell of it. 
 But as cheap and dear are relative terms, such an 
 argument means that the commodities of the exporting 
 country (in this case India) are cheaper than those 
 of the importing country, that is to say, if the 
 advantage in favour of the latter is 25 per cent., the 
 fruit of one hundred and twenty-five days of the labour 
 of the Indian ryot exchanges for the fruit of one 
 hundred days labour on the part of the English
 
 196 THE GOLD TREASURE OF INDIA. 
 
 workman ; and as the exports of India constitute her 
 payments for what she buys abroad, labour for labour, 
 India has to give more for an article of English 
 manufacture than she gets for one of her own. That 
 exchanges on these terms are more beneficial to 
 the exporting country than if the profits on the 
 trade were more equally divided, is an argument 
 that contains its own contradiction. Let it be 
 supposed that an article of Indian production can 
 be sold for £1 4s. at a profit of is. in England, and 
 that no smaller profit will induce its importation, and 
 that the cost of carriage is 3s., then its cost in India 
 to ensure a profit on its sale in England must be no 
 more than £1. In 1870, £1 sterling was equivalent 
 to Rs. 10, and in 1880 to Rs. 12. If, then, the cost 
 of the article in both years had been in India Rs. 12, 
 it could not have been imported into England in 
 1870, because its cost would have been equivalent 
 to £1 2s. ; but it could have been imported in 
 1880, when its cost in India was only equal to £1. 
 In this case, the Indian producer was neither better 
 or worse off, by reason of silver having fallen in ten 
 years 20 per cent. He did not sell more of his 
 commodity at the beginning of the period for Rs. 10 
 than he did at the end for Rs. 1 2. 
 
 The English consumer benefited, for he got in 
 1880 for^i what had before cost him £1 2s. Let
 
 EFFECT OF ENHANCED PRICES. 197 
 
 it next be supposed that the price of the article has 
 risen to Rs. 14. It then ceases to be imported into 
 England ; but the Indian producer is no worse off on 
 that account, for the rise in its price shows that the 
 market for the sale of the article has extended; that 
 more purchasers are offering to buy it than before. 
 These additional purchasers may not be Englishmen, 
 but that is of no importance to the producer in 
 India. The latter is benefited by the rise in value, 
 although the former may have to go without the 
 particular commodity. If, however, it is in great 
 request in England, the consumer in the latter 
 country will have to give more for it, he will (other 
 things being equal) have to reduce his expenditure 
 on some other class of goods in order to do so ; and 
 if this economy of expenditure is effected in respect 
 of a class of articles which is not produced in India, 
 the latter country attracts to the purchase of her 
 own productions money which formerly had been 
 applied to buying the productions of her neighbours. 
 In any view of the case, a rise of price in Indian 
 productions is advantageous, not injurious to her 
 interests. 
 
 Again, let it be supposed that one maund of 
 indigo costs in rupees the equivalent of ,£20, and 
 that five tons of iron cost .£20, and that the equation 
 of exchange is one maund indigo = five tons iron,
 
 198 I HE GOLD TREASURE OF INDIA. 
 
 and that the indigo, when sold in London, fetches 
 ,£40, and the iron, when sold in India, fetches the 
 equivalent in rupees of £25. If, in consequence of 
 a rise of prices in India, the indigo were to cost more 
 in that market, and the other factors in the calcula- 
 tion remained the same, the proportion between the 
 profits realized by either party to the transaction 
 would be altered. In the first case assumed, England 
 made £20 profit on the sale of the indigo, and India 
 £$ profit on the sale of the iron. In the second case, 
 each would make say £\o and £5 respectively ; 
 that is to say, that on the whole transaction India 
 obtained £15 instead of £5 out of the £25 of profit ; 
 and although this increase of profit was acquired by 
 way of an increased price for the indigo, it is a 
 real advantage on the whole transaction in favour of 
 India ; although if the increased cost of the dye were 
 to have arisen from an increased cost of production, 
 and not from an increased demand for it, the whole 
 of the increased price may not have been clear gain 
 to India to the same extent that it would have been 
 if the cost of production had remained the same. 
 The increase of the proportion of the profit which 
 India in this case has obtained at the expense of 
 England is entirely advantageous to her; and the 
 illustration serves to show that an increase in the 
 prices of commodities in the cheaper and producing
 
 EFFECT OF ENHANCED PRICES. 199 
 
 country results in their having a higher value abroad, 
 and causes a fairer distribution of the profits of trade 
 between the producing and the consuming country 
 than obtained before. 
 
 The Government of the country may in con- 
 sequence be conducted at an absolutely greater 
 expense, but if its fiscal system is based on sound 
 principles, relatively to the wealth of the country, 
 it need cost no more than before. As was remarked 
 before, the object of a country in producing com- 
 modities of a description and quantity not used at 
 home is, that by exporting them they may serve to 
 pay for foreign goods which can either not be 
 produced at all in the country itself or only pro- 
 duced at a greater cost than abroad. No exportation 
 takes place but with a view to making importations 
 cheaper to the consumers in the exporting country 
 than they otherwise would be, and it therefore follows 
 that as long as the people of India continue to 
 increase their productions they are benefiting them- 
 selves in two ways, both by giving increased em- 
 ployment to the working classes in the production of 
 the surplus or exported commodities, and by cheap- 
 ening to the people of the country the goods which 
 are imported in return. And no rise of values in 
 the productions of India, or fall in the purchasing 
 power of her money which may be the result of an
 
 200 THE GOLD TREASURE OF EYDIA. 
 
 increased activity of production and interchange, is 
 otherwise than beneficial to the whole people. 
 
 Experience teaches us that in any country whose 
 expanding material prosperity is proved by an increase 
 in the quantity of money in use, its more general 
 diffusion among all classes, and by a developing 
 power to produce, and by variety of production, life 
 is easier, the means of obtaining a livelihood are more 
 numerous, and the avenues to wealth are wider and 
 better planned. Although the money value of the 
 necessaries of life may be absolutely higher than in 
 a former period, it is relatively lower ; for while the 
 exchange value of money has diminished, the pro- 
 ductions of the national industry are forthcoming 
 in increased quantities, improved in quality, more 
 various in kind, and are more within everybody's 
 means than they were before. 
 
 Effect of the English System on Indian 
 
 Commerce. 
 
 The inhabitants of India possess a civilization 
 which, while it seems to have been arrested during 
 some centuries, preceded that of Europe by many
 
 ENGLISH SYSTEM AND INDIAN COMMERCE. 201 
 
 generations. At a time when gold and silver money 
 was but little or at all used on the shores of the 
 Mediterranean, the Indians procured the precious 
 metals from every quarter in which they could sell 
 their exported produce, for conversion into money. 
 They well understood the facilities which the rise 
 of coin provides for the production and exchange 
 of commodities. The economy of coin effected by 
 the use of bills of exchange, the advantages attending 
 the accumulation of the surplus capital of one class 
 of people and its distribution among another for use 
 in trade which constitutes banking, and the insurance 
 against accident of goods in transit, were employed 
 as ordinary commercial expedients in India many 
 generations before they were known in Europe. The 
 antiquity of the commerce of India and the com- 
 parative perfection of its methods are quite sufficient 
 to account for the continuous flow of the precious 
 metals from the West to the East from the dawn 
 of history. 
 
 The Indians, however, shared the superstition 
 which has been dispelled among educated people 
 only within the last century, that accumulations of 
 gold and silver constitute wealth. The vulgar are 
 slow to realize the fact, that the means of producing, 
 not of purchasing, the conveniences and luxuries of 
 life really constitute wealth ; that gold and silver
 
 202 THE GOLD TREASURE OF EXDIA. 
 
 buried in the ground will not, like seed-corn in a 
 similar situation, germinate and increase. That for 
 all purposes which are connected with wealth, money 
 lying idle in a chest or hidden away in a pot might 
 as well never have been taken out of the mine. 
 
 Insecurity of property, the result of the political 
 convulsions to which India was constantly liable, 
 was another cause of the accumulation of treasure 
 in India. The ease with which the precious metals 
 can be concealed or carried about gives them, among 
 people so situated, a peculiar value. It is to these 
 accumulations that India is greatly indebted for 
 the means of enlarging her commerce. Now that 
 the " Pax Britannica " is imposed on the subject 
 powers and people throughout the land, the country 
 has started afresh on the paths of commercial progress 
 with money, the machinery of commerce, supplied by 
 previous generations. 
 
 The fiscal legislation of the Indian Government 
 is at once of the most liberal character, and inspired 
 largely with the commercial spirit. A numerous and 
 important class, both in India and in England, may 
 be described, without exaggeration, as considering the 
 development of trade to be the principal argument 
 for the existence of the English in that country. To 
 show no favour to one interest rather than another ; 
 to provide means of traffic, facilities for the recovery
 
 ENGLISH SYSTEM AND INDIAN COMMERCE. 203 
 
 of debts, for the coinage and use of silver money ; 
 to promote the exchange of home and foreign pro- 
 duce, — are objects of administration which are attained 
 with much and increasing success. The people are 
 becoming familiarized with the ways of Western 
 traders, with the principle of association in the pro- 
 duction and conveyance of commodities, with the 
 advantages of competition as opposed to combination, 
 of small profits and quick returns distributed among 
 a large number of traders in substitution of large 
 profits obtained at longer intervals by a smaller 
 number. The solvent influence of Western ideas and 
 English legislation on the ancient trade customs 
 of the people of India, no one can fail to perceive 
 on a retrospect of years. One important improve- 
 ment, the reform of the currency and its assimilation 
 to the systems in use among more civilized nations 
 with which India trades, would be a proper object 
 to engage the solicitude of her rulers, as the following 
 considerations clearly show. 
 
 Facility of communication acts as the most cogent 
 inducement to the producers of similar commodities, 
 in places distant from one another, to reduce the 
 prices of their wares to a common level. 
 
 Abundance of money alone cannot effect this, 
 for it cannot bring the surplus produce of the country 
 into the towns if the cost of carriage or the absence
 
 204 THE GOLD TREASURE OF INDIA. 
 
 of roads prohibits conveyance. It is the steamship, 
 the railway, the metalled and bridged roads of this 
 age, that bring the Californian miner and the Indian 
 ryot together. Until the present generation, India 
 was singularly badly off for internal communications. 
 The governors of the country in the last century were 
 too fully occupied in acquiring territory and con- 
 solidating our power, and their immediate successors 
 with improving the details of fiscal and political 
 administration to give much attention to this subject ; 
 nor were the revenues of the territory or the credit 
 of the British Government equal, until comparatively 
 recent times, to undertaking the expense of bringing 
 remote districts into easy communication with one 
 another. The period when money began to be 
 generally diffused to a more perceptible extent than 
 before, may be said to commence with Lord Dalhousie's 
 tenure of the office of Governor-General of India, 
 which he quitted in 1856. He is justly regarded 
 as the pioneer of civilized communications in India. 
 Under his administration, trunk lines of metalled 
 roads connecting the Eastern, the North-western, 
 and the Western provinces together, running for 
 some thousands of miles in their different courses, 
 were completed. The main lines of now existing 
 railways were sketched out and commenced, and 
 both telegraphic and postal lines were opened out
 
 ENGLISH SYSTEM AXD EXDIAX COMMERCE. 205 
 
 and multiplied, while the attention of local authorities 
 in the interior was constantly directed to perfecting 
 the details of the general plan of improvement. 
 To judge of the effect of these measures on the value 
 of the produce of the interior by bringing it within 
 reach of the money circulating in the towns, one 
 must compare the delay and expense incurred in 
 conveying one hundred tons of goods along un- 
 metalled and unbridged roads, on the backs of bullocks, 
 or in carts drawn by such animals (who necessarily 
 consumed on their journey a weight of food equal 
 to no small portion of their burden), and the cost of 
 carrying the same weight of merchandise by railway, 
 or even along a stone-paved road. The alternative 
 of river transport was full of risk, delay, and un- 
 certainty, and in the interior of the country this 
 mode of conveyance ceases when, in the dry season, 
 the rivers shrink in many places into fordable streams, 
 too shallow to float a barge. 
 
 These impediments to the exchange of produc- 
 tions and the circulation of money between not even 
 distant, but adjacent districts restricted the free 
 action of those principles of trade which have been 
 already noticed, and served to intensify the evil 
 effects of combination, as opposed to competition 
 on the commerce of the country. As these arc being 
 gradually removed, the habits of thrift and industry,
 
 206 THE GOLD TREASURE OF INDIA. 
 
 and the commercial spirit of the people are finding 
 vent ; the weight beingr withdrawn, the elasticity of 
 enterprise has found room to play, and the expanding 
 energies of the industrial classes are from time to 
 time setting in motion the machinery of commerce 
 in new centres of population and industry. 
 
 A continued multiplication of its home produc- 
 tions which a nation may during a course of years 
 effect, accompanied with an increase in its import 
 of foreign goods for home consumption, indicate 
 an advance in general wealth ; since commodities are 
 in the long run neither produced nor imported except 
 at a profit, and those who make the profit must 
 necessarily do so out of an increasing ability on the 
 part of the consuming classes to pay for fresh supplies. 
 No nation can increase its consumption of home and 
 foreign productions unless it be growing richer ; 
 the latter condition is an antecedent necessity to the 
 former. 
 
 It has been already shown that any increase in 
 the circulation of money can only arise from an 
 increase in the commodities brought into the markets 
 for sale, since money is, from the point of view of 
 commerce, used to no purpose except when effecting 
 exchanges. Any large increase of coin in circulation 
 during a long period of years is therefore proof 
 of a corresponding increase in the amount of goods
 
 ENGLISH SYSTEM AND INDIAN COMMERCE. 207 
 
 under exchange. If the contrary were the case, fresh 
 additions to the currency could only be made at 
 a smaller return in labour (in the sense before defined) 
 than was spent on the production of the metal from 
 which they were provided. On such an assumption, 
 consumers in India would have been spending between 
 250 and 300 per cent, more money than before on 
 the same quantity of commodities. This we know 
 to be inconsistent with the methods of commerce, 
 and, as fact, not to have occurred. Since 1835 prices 
 have improved very considerably, more especially in 
 remote parts of the country never before brought 
 into communication with the principal centres of 
 trade ; but in the latter localities, especially during 
 the last ten or fifteen years, violent perturbations of 
 values have become much less frequent, because 
 at the beginning of that period the diffusion of money 
 under the English rule had become fairly complete 
 and commodities have, in consequence, during the 
 period of the great decline of value in silver at the 
 gold valuation, i.e. subsequent to 1870, been flowing 
 into the markets in increasing quantities in corre- 
 spondence with the demand for them expressed by 
 increasing additions to the currency. 
 
 Between 1835 and 1855, the Government of India 
 coined only Rs. 685,000,000, of which a little less than 
 a third, or 195,000,000, was a recoinage of existing coin
 
 208 I HE GOLD TREASURE OF INDIA. 
 
 previously issued, but called in at the change of the 
 currency law in 1835. During the period from 1855 
 to 1882, there have been issued from the Indian mints 
 Rs. 1,910,000,000, of which only 27,500,000 was old 
 money recoined. Putting aside the recoinage of 
 obsolete coins, the people during the first period 
 required therefore a little less than a fourth of the 
 quantity of coin which they required in the latter 
 period for their commerce. 
 
 It may here be mentioned that up to 1835 the 
 currency of British India was composed of the coin 
 of the native powers, and that issued from several 
 mints by the East Indian Company in the name of 
 the Emperor of Delhi. In 1835, silver money with 
 the king's head stamped on it first became legal tender 
 in British India. 
 
 The condition of the export trade of India affords 
 additional evidence of the capacity of her people to 
 take advantage of the opportunities for gain which 
 the administration puts within their 'reach. The 
 exports of a country are the measure of its ability to 
 pay for foreign productions, since they are produced 
 and exported both for the purpose of doing so and 
 with the object of providing the home producers with 
 more money than they can obtain by selling their 
 productions in their own country, to invest in fresh 
 enterprises. Hence an expanding import trade is a
 
 ENGLISH SYSTEM AND INDIAN COMMERCE. 209 
 
 sure proof of increasing' wealth at home. India, whose 
 soil and industries provide all the necessaries and 
 most of the luxuries of life which her inhabitants 
 require, in exporting her productions in exchange for 
 those of foreign countries gets rid of what is more 
 really surplus produce than the exports of another 
 country may be, which are designed to purchase corn, 
 meat, various kinds of food, and other indispensable 
 necessaries. India is in this case disposing of her 
 redundant wealth abroad. The official returns of the 
 exports in the Indian trade, from the year 1855 to 1882 
 inclusive, estimate their value at within a few thousand 
 pounds of £1,446,000,000, and the same figures show 
 that during the first decade of that period the value 
 of the exports of India was £394,000,000, and during 
 the last decade £657,000,000 ; the result of a gradual 
 and continuous expand of her trade. Beyond this, no 
 proof is needed of the capacity of the people of India 
 to profit by such an enlargement of their facilities for 
 commerce as this treatise is addressed to recom- 
 mending. 
 
 The prevalence of the custom of trade by barter 
 and the fact that a large part of the agricultural 
 population of India is habitually maintained between 
 seed-time and harvest by advances of food on the 
 part of the grain merchants, to whom the peasantry 
 hypothecate their crops as security for repayment, to
 
 2io THE GOLD TREASURE OF INDIA. 
 
 some extent account for these large additions to the 
 silver money circulating in India. The new money 
 was necessarily used in making those exchanges 
 which had hitherto been made in kind, and the people, 
 on the other hand, instead of borrowing their food on 
 the credit of the crops on the ground, spent the money 
 thus earned in purchases. But the increased currency 
 was not solely employed in this way, as we know 
 from the fact that this archaic system of trade and 
 subvention is still universally practised, as well as 
 from the vastly increased amount of capital now 
 invested in the carrying trade of the interior of the 
 countiy in the construction of roads, bridges, and 
 railways, and from the expansion above described of 
 the export trade of India. 
 
 It is the increase in the sum of all commodities 
 which have (especially during the last thirty years) 
 been brought for exchange to the Indian markets 
 which has necessitated a corresponding increase in the 
 money in circulation, and which at the same time 
 provides a test of the effect which a diffusion of money, 
 accompanied with enlarged facilities for trade, has 
 upon a people of strong commercial instincts, and 
 justifies the expectation that when the restrictive 
 influence on the foreign trade of India which an ex- 
 clusive silver currency now exercises is removed, and 
 the £ i sterling becomes the coin in which her produce
 
 ENGLISH SYSTEM AND INDIAN COMMERCE. 211 
 
 is sold and her foreign purchases bought, that a fresh 
 start will be made in the development of her internal 
 wealth. 
 
 It is but trite to remark that wealth consists in 
 the power to create, and that the inducement to exert 
 that power is found in extended markets ; and that 
 the shortest and most convenient road to these objects 
 lies in the use of a common coin, a common measure 
 of value, by both the people of India and their foreign 
 customers. 
 
 Exclusive Use of Silver Coin a Restraint 
 
 on Trade. 
 
 It has been frequently remarked that the uncertain 
 value of the silver coin of India in the gold coin of 
 England involves a risk to merchants exporting goods 
 to India of incurring a loss where they expected a 
 profit, from an unexpected fluctuation in the value of 
 the two metals, and that the possibility of such an 
 eventuality has the same effect as the levy of a heavy 
 import duty at the Indian ports. 
 
 That such is the case is clear enough. An Indian 
 trader importing English goods has to pay gold for
 
 212 THE GOLD TREASURE OF INDIA. 
 
 them in Manchester or Sheffield. He has to calculate 
 their price to the Indian purchaser at a sum which 
 will yield the ordinary profit of his business and be 
 sufficient to cover what is known as the loss by 
 exchange, and also to provide against further loss 
 arising from any variation in the relative value of the 
 two metals which may occur before the transaction is 
 completed. 
 
 This being the case, the Indian purchaser has to 
 pay a corresponding high price for any goods of this 
 class which he buys. Their sale and their export 
 from Europe consequently fall off. This is one 
 reason among others why a large balance is annually 
 run up against England in the commercial account 
 between her and India which cannot be settled in 
 exports, and must be settled in money. The results 
 of this condition of things have been often and ex- 
 haustively discussed, and need no further notice in this 
 place. As the ratio of value between gold and silver 
 narrows, or the rate of exchange becomes more con- 
 stant under the operation of the scheme now discussed, 
 this restraint on the export of European goods will be 
 reduced ; and as, at the same time, the bulk of the 
 currency will not be diminished but rather increased, 
 prices will tend to rise, producers in India will make 
 larger profits and have more money to spend on com- 
 modities which in the case assumed will be imported
 
 LEVY OF REVENUE IN COLD. 213 
 
 and sold at lower prices than can be accepted now. 
 Thus the use of gold in the manner advocated will 
 stimulate the productions of Western manufactures 
 for the Indian market, and will, by giving employment 
 to increasing quantities of the Indian rupee currency, 
 mitigate any tendency to violent and sudden altera- 
 tions in the relative value of the two kinds of coin in 
 use in that country. 
 
 Accrediting their full force to all these causes 
 combining to arrest a fall in the value of silver against 
 gold, or a rise in the price of commodities against 
 silver, the most cautious of Indian administrators has 
 no need to apprehend the occurrence of any fresh 
 embarrassment in the financial affairs of India from 
 the use of gold exchanging with silver as current coin 
 on the basis of their relative intrinsic value. 
 
 Levy of Revenue in Gold. 
 
 The only course which would effectually terminate 
 the drain on the revenues of India arising from the 
 loss by exchange, which is not likely in the future to 
 be less than Rs. 30,000,000 per annum, is the levy of 
 the public revenue in gold. This could only be done 
 
 P 3
 
 214 THE GOLD TREASURE OF INDIA. 
 
 by converting payments now due to be made in silver 
 into their equivalent in gold at the State rate of con- 
 version. It would probably be found expedient to 
 take no step of this kind until the period during which 
 existing arrangements for the levy of the land revenue 
 are in force expires. As the different land revenue 
 settlements come again under revision, some classes of 
 proprietors might be required to pay their revenue at 
 an assessment made in the Indian gold sterling coin. 
 Intermediately other branches of the public revenue 
 which are not periodically readjusted, such as that 
 derived from salt and the sale of opium, might be 
 levied in gold. But before this can be done, gold 
 legal tender money must of necessity be introduced, 
 and the people become familiarized with its use, and 
 the quantity of gold which India can herself annually 
 supply be ascertained by actual experiment. If in 
 the course of a few years the Indian Government 
 could obtain a revenue of only £ 1 0,000,000 or 
 £15,000,000 paid in its own gold currency, its princi- 
 pal financial difficulties would disappear. 
 
 Nor can a circulation of gold money be maintained 
 with as much regularity as is desirable, unless the 
 Government, which is in the East the principal single 
 source both of demand and supply for coin, assists in 
 promoting its activity. So long as a portion of the 
 public taxes is levied in gold, the same amount of gold
 
 RESULTS OF THE SCHEME. 215 
 
 will continue to be paid away in purchases, salaries, or 
 the liquidation of drafts on the State treasury, and 
 this force will operate to put gold coin in movement, 
 not only in the principal trading cities, but throughout 
 every administrative circle of towns and villages in 
 the whole Empire. If gold were to leave the country, 
 a constant demand for it as the vehicle for paying 
 several millions sterling in taxes would bring it back 
 again, and the settlement in England of balances due 
 from the Indian Government on account of its public 
 debt and for other purposes, by means of bills drawn 
 against its gold revenues in India, would ensure a con- 
 tinuous disbursement from- the local State treasuries 
 of the gold coin, and prevent its accumulation in any 
 particular market. 
 
 Results of the Scheme. 
 
 The currency system in which gold and silver 
 coins exchange at their true value has, in the particular 
 application recommended in these pages, the advan- 
 tage of adding largely to the stock of gold coin avail- 
 able for the world's use. It creates a demand for 
 silver to an extent which has been unknown for many
 
 2i6 THE GOLD TREASURE OF INDIA. 
 
 years, under a form of bimetallism, which has this 
 attraction for those who are large owners of that 
 metal, that it secures to all men at all times the 
 certainty that their gold or silver in any quantity will 
 always exchange with one another at their actual 
 value, because neither metal will be liable to be 
 affected in its purchasing power by arbitrary or arti- 
 ficial depreciation. No man will fear to use or accu- 
 mulate for use either kind of coin in any quantity 
 which convenience may dictate ; for as one kind of 
 money will always pass at its true rate of value in the 
 other, there can be no loss or gain on the use of 
 either in effecting exchanges of goods. Under such a 
 system, an equilibrium is established between both 
 kinds of currency, without the ruinous expense of 
 recoinage. By giving no advantage to the owners of 
 one metal over those using the other, it leaves existing 
 contracts unaffected ; and by maintaining the circula- 
 tion of a double currency, it secures the employment 
 of gold and silver indifferently in proportions regulated 
 by the volition of the people, and, therefore, in exact 
 correspondence with the requirements of commerce. 
 It leaves the efficiency of silver money unimpaired, 
 and the coinage of rupees unrestricted. It gives the 
 State at once a gold revenue, which may be consider- 
 able, and a means of realizing in the course of time 
 the whole of its revenues in gold. It substitutes a
 
 RESULTS OF THE SCHEME. 217 
 
 firm foundation, upon which its financial administra- 
 tion can be built up in the place of the shifting sand 
 of silver on which that part of its affairs now rests. 
 It places the commercial classes in India in more 
 direct communication with purchasers and producers 
 in foreign countries than can be contrived by any 
 other means. By promoting the exchange of goods 
 and the expansion of trade, it becomes an aid to the 
 people of India in their efforts to enrich themselves 
 and thereby strengthens equally the commercial and 
 political interests which attach the Dependency to the 
 paramount Power. By making the Indian currency a 
 machine for certifying the value of the precious metals 
 and for securing their exchange at their true value for 
 commodities, it gives to the Indian trader, whether 
 purchaser or producer, an advantage over competitors 
 in many other countries, and serves to attract capital 
 to India for investment by the security it affords that 
 the returns will be obtained in coin exempt from 
 depreciation by artificial causes. So far as this 
 scheme would affect the mass of the population, its 
 employment would act as a constant stimulus to pro- 
 duction, and operate to diffuse coined money in in- 
 creasing quantities among the largest possible number 
 of people. It would tend to discourage the customs 
 of sale by barter, of purchase on long credits and pay- 
 ment in kind. Nothing in the fiscal or commercial
 
 2i8 THE GOLD TREASURE OF INDIA. 
 
 condition of India offers any serious difficulty to the 
 circulation of money on the terms herein discussed. 
 Against the public advantage and the removal of 
 restraints on trade, which this reform of the currency 
 effects, there is no set-off in any way mischievous or 
 injurious which it is likely to originate. For all the 
 evils arising out of "the silver question," it is the 
 single remedy which can be applied in India. 
 
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