19. The discussion of this question will be concluded in Chapters VI., VII., and VIII. But it will be well to say a few words at once with a view to avoiding misunderstandings on two points. It has been necessary in the immediate past to use the Paper Currency Reserve as a part of the general reserves held for ensuring the absolute stability of the rupee. I do not advocate the lending out in India of any part of this reserve, or of the Cash Balances, at the expense of the stability of the Gold Standard, or until adequate measures can be taken in other ways to ensure this. But I think the time has practically arrived when the whole of the liquid portion of the Paper Currency Reserve is not required, in addition to the Gold Standard Reserve proper, for this purpose. A busy season will soon come when the Government might lend some part of its reserves in India without endangering in the least the stability of its system and to the great advantage of Indian trade. It ought, at least, to have the power to do this. 20. The remaining point is this. A provision of the above kind for introducing some degree of elasticity into the Indian currency system would not be very useful in a season such as that of the autumn and winter of 1905–6 or of the autumn of 1912–13, when there was a demand for rupees on so great a scale that it could only be met from the Mint. Additions to the currency of this kind can only be made by importing funds from abroad. But these are permanent not temporary additions. Every such addition makes a similar demand for new coinage in succeeding seasons less likely. They are abnormal, and recent history seems to show that these permanent additions to the Indian currency are not made by slow and steady accretions year by year, but in great bursts of activity at considerable intervals. In years of normal activity, therefore, there may be considerable stores of rupees lying idle in the reserves beyond what is required for the safety of the currency. Indian bankers and merchants can only get at these rupees, so as to obtain a net addition to the currency, by buying sovereigns or Council Bills in London. If the use for the additional currency is only temporary, the cost of transport or remittance is great enough to make it not worth their while to get this addition until the Indian rate of discount has been forced up to a high level. If the Government were free on such occasions to lend out some part of the rupees, against high–class security, at 5 or even 6 per cent, this would be profitable to the Government, and would prevent the discount rate from reaching a level which is caused, not by anxiety, but merely by the expense arising out of the distance between London and Calcutta. CHAPTER IV THE PRESENT POSITION OF GOLD IN INDIA AND PROPOSALS FOR A GOLD CURRENCY