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THE STANDARD OF VALUE SIR DAVID BARBOUR K. C. S. I., K. C. M. G. Financial Member of the Council of the Governor-General of India from 1888 to 1893 Member of the Royal Commission on Gold and Silver Member of the Indian Currency Committee 1898 Chairman of the Committee on the Currency of the Straits Settle ments Author o The Ttteoryxf Bimetallism MACMIL AN AND CO., XIMITED ST. MARTINS STREET, LONDON 1912 TO THE MEMORY OF DAVID RICARDO GOLD AND SILVER HAVING BEEN CHOSEN FOR THE GENERAL MEDIUM OF CIRCULATION, THEY ARE, BY THE COM PETITION OF COMMERCE, DISTRIBUTED IN SUCH PROPOR TIONS AMONGST THE DIFFERENT COUNTRIES OF THE WORLD, AS TO ACCOMMODATE THEMSELVES TO THE NATURAL TRAFFIC WHICH WOULD TAKE PLACE IF NO SUCH METALS EXISTED, AND THE TRADE BETWEEN COUNTRIES WERE PURELY A TRADE OF BARTER. Ricardo. PREFACE THE Indian Mints were closed to the unlimited coinage of silver on 26th June, 1893, with the object of establishing Gold as the Standard of Value in that country, and this measure practically closed the Bimetallic Controversy. The Government of India have been so far suc cessful in their policy that the Gold Standard has been effectively maintained in India since 1898, the par of exchange being Is. 4 d. per rupee. Questions connected with the Standard of Value and the Currency have but little attrac tion for the general public, and to many persons the Bimetallic Controversy must have seemed little more than a war of words. In reality a very important issue was involved in it, namely, whether the Standard of Value of the world should in the future be Gold alone, or whether it should be formed of a combination of and Gold as it had been in the past. x PREFACE I was employed In theFinancial Department of the Government of India when the divergence in the relative value of Gold and Silver began to declare itself and, as the fall in the Indian Exchange had a serious effect on the finances of the Government of India, the subject forced itself on my attention. In 1886 1 published a work called the Theory of Bimetallism, and I was a Member of the Royal Commission on Gold and Silver which sat from 1886 to 1888. I was subsequently Finance Member of the Council of the Governor-General of India, and took part in the measures for the introduction of the Gold Standard into India. I was afterwards a Member of the Committee which recommended that the gold value of the Indian rupee should be fixed at Is. 4 d. Although Bimetallism is no longer a live question, other problems connected with the Standard of Value will arise in the future, and I have decided to place on record the conclusions at which I arrived as the result of my experience and study of the subject, and also to state the circumstances under which it was decided to introduce the Gold Standard into India and explain the procedure adopted for that purpose. PREFACE xi I cannot hope to give the trained Economist fresh light on questions with which he is already familiar, but what I have to say may be of some assistance to the man of business who may be forced by circumstances, as I was, to give his attention to the subject. I feel that some apology is needed for the length of my temarks on the subject of the Quantity Theory of Money and the Relation between Credit and Prices, but at the time of the Bimetallic Controversy the questions connected therewith had not been so thoroughly investigated as they have latelybeen, by Professor Irving Fisher, and other Economists, and the applicability of the Quantity Theory of Money to modern conditions was denied, while, as it seemed to me, wholly untenable theories were put forward regarding the relation between Credit and Prices. It is for this reason that I have felt bound to offer certain remarks in defence of a theory which, rightly understood, ought never to have been challenged. The closing of the Indian Mints was not an isolated action, carried out by the Indian Government without reference to the circum stances of the time...

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