TUE PROJECTED GOLD CURRENCY FOR INDIA.

T 'ORD LYTTON and his Council are not content, it would _LI ,sppear, with the war they have on hand. They long for -more occupation, and are inclined, by way of distraction, to take up projects ;fora grand reform of the Indian currency. According to a rumour, in which we ourselves believe, - they have decided that the wisest way to remove the diffi- culties caused by the depreciation of silver is to introduce a gold currency into India, and are actually ready, if the English economists will but consent, to undertake that heroic task. Though we write lightly, our warning is intended to be seri- ous, and we earnestly hope that as soon as Parliament meets, Mr. -Hubbard or some other Member of the domina.nt party interested in finance will insist upon the most explicit informa- tion. There is no reason whatever for secrecy upon the pro- posal, if it has been made, and it is one which may affect the pros- perity of the worldand the fortune of every Member of the House of Commons. Few people outside a narrow circle of economists and Anglo-Indians have any idea of the disturbance which such-a project, if carried out in a grandiose spirit, might have upon the gold market, or of the effect it might exercise upon the prices of commodities throughout the world. It might for a time completely disorganise trade, and produce- a distress in this country of which the present " depression " gives but a faint idea. We quoted recently the opinions of the Econ.°- , 1i-tut:and of Professor Stanley Jevons as to the rapid-apprecia- tion , of gold which is probably going on, and they have since been -confirmed by Mr. Robert Giffen. No one can read the paper submitted by that accomplished and most cautious statist to the Statistical Society, on the 21st of January-a paper of which the newspaper reports give a most imperfect idea-without perceiving that, in the writer's judgment, a main factor in the astounding fall of prices during the last five,years has been the increase in the value of gold. The extent of this fall may be judged by the least :experienced from this simple table :-

Prices of Leading 'Wholesale Commodities in January, 1873 and 1879 compared.

Scotch pig iron per ton Goals 2) Copper, Chili bars Straits tin Wheat, Gazette average.., per qr „ Red spring, at New York, per bahl.

Flour, town made per sack „ New York price Beef, inferior per stone „ prime small Cotton, mid. upland per lb.

Wool per pack Sugar, Mapilla Musca per cwt Coffee, Ceylon, good ord „ Pepper, black, Malabar per lb • Saltpetro, foreign per cwt.

The total fall in everything may be taken at 22 per cent., and for reasons given at length by Mr. Giffen, which we cannot recapitulate here, it is nearly certain that the " depression " arises mainly from this cause,-that the volume of trade has not decreased, that we export as much as we ever do in a normal year, but that values have so declined as to leave manufacturers and exporters no profit. Of this decline in values, part is due, no doubt, to bad harvests, and part-to other causes, but part also, probably a large part, has been produced by the increase in the demand for gold. It is probable that as the supply of gold has fallen enormously-more than a third, since 1860-the permanent demand of the world has out- stripped supply, and gold is going up, as coals or cotton would under the same circumstances ; but it is certain that this is -tem- porarily true, and that Germany and the United States, by taking £120,000,000 of gold for their new gold coinage, have for the time disturbed all prices, and helped to create the present, de- pression. These Governments have taken £15,000,000 a year, out of a total supply which has sunk in the following way :- Estimated Production of Gold in the Years 1852-73, in Quinquennial Periods, with the several Averages for each Period.

Period.. Total Production. Annual Average.

1852-56 £149,665,000 £29,933,000

1857-61 123,165,000 24,633,000

1862-66 113,800,000 22,760,000

1867-71 108,765,000 21,753,000 1871-75 (4 years) 76,800,000 19,200,000

There is, in fact, not sufficient gold left for other countries for coinage, wear-and-tear, and use in manufactures, and the price has gone up, whether expressed in commodities or in silver, as the price of any other article would of which the world wanted more than it could get.

We cannot see how this view can be contested. There may be a question as to the extent of the appreciation of ,gold, and there is a question as to the probable continuance of the rise in value, after America and Germany have been satiated, but of the fact there can be no doubt whatever. Gold is an article of commerce, like coal, and when two Finance Ministers who took none before suddenly demand three-fourths of the world's supply, and keep on demanding it for years on end, the price must have risen, and as we should judge, have risen heavily. The demand is not yet over, but it is lesseniag, and it is just when financiers and men of business see daylight that a third and monstrous competitor threatens to enter the market. If the Indian Government resolves on a change of -currency, it will do it in order to be rid of its losses by ex- change, it will desire a speedy success, it will enter the market on a grand scale, and it will be provoked to extravagant purchases by a cause absolutely peculiar to itself, which we shall presently mention. We shall, of course, assume that the Government of India intends toad with as little rashness as possible and to avoid, so far as it can, any disturbance to the world ; bat ;till, if it acts at all it must act with decision and energy sufficient to secure its own ends. It must purchase enough gold to have an appreciable effect upon its currency. It will want, to use colloquial language, to see its gold pieces in circulation if only to assure itself that its work has begun. Well, how much gold will it take to make gold pieces occasionally visible in Indian bazaars, to begin, as it • The fall in the latter of these two eases appears to have been affectedty$110 )apyaselation of the paper-money in the UMW State&

January.

1.873. January; 1870. Fall-in 1819.

Amount.171.7enin

PM"' 1873.

127s. 43s. 84e. 66 30s. 19s. 11s. 37 £91 £57 £34 37 £124 £61 £81 57 55s 11d. 396 7d. 16s 4d. 29 $1•70

$1.10 $0.60s

35 47s 6d. 37s. lOs 6d. 22

$7.5 $3-70 $3-804

51 3s 10d. 2s 10d. is. 26 5s 3d. 49d. 6d. -10 10d.

41d. 46 223 £13 £10 48 21s 6d. 16s. 5s 6d. 26 80s. 65s. 15s. 19 7d.

44-d)

21(1. 80 29s. 19s. 10s. 34

were, the work of changing the currency ? We answer, the whole supply of gold in the world for five years, and probably very much more. We do not mean that the new currency will take so much. That is a subsequent question. We mean that so much, and probably more, will be taken before the change of currency begins to be effected, before the foundations of the new system have risen above the ground. The process, as we judge—and though we use absolute words, for the sake of convenience, we write with every respect for experts who may judge differently, —will go on in this wise. The Government, after the pre- liminary difficulties of new Mints, purchase of metal, ttc., have been overcome, will issue, say in 1881, ten millions of new gold coins,—" Kaisers," as we suppose they will be called. In three months they will disappear, vanish out of circulation as utterly as if they had been eaten. They will, in fact, be buried in the earth. India is, as all economists know, the Chat Moss of the precious metals, because her people, who outnumber by twice the population of France the whole population of Europe, hoard them, and they all prefer gold as a hoard to silver. So great is this preference, that the Punjabees have been buying sovereigns to hoard, at an agio of sixpence a sovereign, for twenty years, and boxes of sovereigns are annu- ally sold by jewellers—we write of what we have seen—with a puncture in each, to enable the owners to string them round the neck or waist more easily. The gold "rusts" less, and it is nearly twenty times as easy to carry or hide away. The moment, therefore, the gold appears, the silver hoards will be exchanged for it, even at a loss, and until the silver hoards have been replaced by gold, there will be no gold in circulation. In other words, a sum of gold usually estimated at £100,000,000, possibly much more, will be absorbed by India, before the new currency is visible in common life. To that extent, at least, the Government of India must be a purchaser, before it begins to effect the change of currency it desires. We need not dwell on the effect such a demand—continued, as it must be, for so many years—would produce upon the European market. " India " would be as heavy a purchaser as the German Government, it would come upon the top of the German and American Governments, and it would, like them, pay in silver, having nothing else to pay in ; it would, that is, while immensely increasing the demand for gold—and remember, even a little demand in excess of the whole supply of any article causes a famine price—increase also the redundancy of silver, till during the time of the altera- tion Indian exchanges would go wholly to pieces, and we might see the rupee quoted at 14d. At the same time, the disturbance of prices,—that is, their rapid decline, as against gold—would increase in severity, till the difficulties of adjustment would throw all trade into despair. It is impos- sible to sell cotton for a currency the value of which rises every month, and yet which is used in all markets to designate the value of the cotton. No contract can be possible, for no contract has any meaning. Everybody sees that when the currency is paper, and when gold fluctuates, the effect is pre- cisely the same,—only instead of being measured, as paper is, in gold, gold must be measured in silver and commodities. But is there no exaggeration in this statement ? It is possible there may be, but we confess, after most careful thought, we fail to perceive where it is. It is certain that the demand for gold is already, though possibly only for a time, in excess of the supply, and that the value is slowly rising. It is cer- tain that India hoards in coins and specie vast sums. It is certain that she prefers gold coin to any other form of hoard- ing, the Princes, for example, keeping their treasure, when they can, in that form. It is certain, therefore, that the Indian Government must, if it begins buying gold, buy as much as will replace the hoarded silver, before it can expect to see its gold pass from hand to hand as coin, and then buy sufficient for its currency. Those being the facts, the greatness of the dis- turbance the change will cause can hardly be disputed, the only question in doubt being its precise limits. Even if this passion for hoarding did not exist, or if the amount hoarded were not so large as we believe it to be, the entrance of another first-class Government into the market as a buyer of gold with silver would be at this moment most dangerous. It would be as if Germany doubled her demand, and that after the limit of the supply of gold had been fairly reached or over-passed. But our contention is that the extent of currency required would not be the limit of the purchases which the Indian Government must make, if it thinks of establishing a gold currency ; but that it ha.s previously, as a preliminary step, to fill up a sort of Chat Moss, a quagmire in which gold will sink to an undiscovered extent. Gold is not current in India now, but no banker in Calcutta or Bombay will fix the limit after which it would be difficult to sell gold without a reduction in its price. The people will take any quantity, and all that is taken disappears, or is visible only when some petted child is shown loaded down with necklaces, bracelets, and waistbelts of solid gold. The Indian Government may have arguments for the change of irresistible strength, but they will embark in the greatest financial operation ever seen, and one which European economists should study jealously before the operation is begun.