I have already quoted the late Lord Goschen’s authority in support of the centralisation of gold reserves. A further passage from the address he delivered on the same occasion (in proposing a scheme of one–pound notes for England) is relevant here:—“I would much prefer for national and monetary purposes to have £20,000,000 of gold under our command at the Bank of England than 30,000,000 sovereigns in the hands of the public.... If the issue (of one–pound notes) took place, and were taken up, we should have £20,000,000 more _central_ gold—an immeasurably stronger reserve than 30,000,000 sovereigns on which we could not place our hands.” 18. There are, in fact, two ways of maintaining stability in a country whose demand for currency varies widely from year to year—_either_ it must consist almost _wholly_ of gold, or a sufficient reserve must be _concentrated_ in the hands of Government. If only one–quarter or one–fifth of the circulation consists of gold, I do not think that a Government can rely on getting more than a _fraction_ of this, when it becomes necessary to contract the circulation by one–sixth or one–seventh; whereas if the gold is in the Government’s reserves, the _whole_ of it is available. For obvious reasons of convenience and of economy the greater part of the Indian circulation must continue in any case to consist of rupees. It is vain to suppose that the advantages of a true gold currency can be obtained by the compromise of somewhat increasing the gold element. If the Government dissipates some part of its sterling resources over the country—and any proposal for a greater infusion of gold into the currency amounts to this—it must plainly stand in a weaker position to meet a crisis than if they are concentrated in its own chests. 19. The encouragement of gold, therefore, would involve expense, and, at the same time, diminish safety. There is a further argument against it, connected nevertheless with the above, which is of great importance. If gold were to supplant rupees only and not notes, and were to supplant them to so great an extent that sovereigns would tend to flow out of the currency at times of depression, there might be something to be said for it. It is certainly the case that it is a disadvantageous thing for India to have so large a part of her currency in the form of expensive tokens,—the issue of rupees strengthens the reserves by less than a half of their nominal value. The degree of damage to the Government’s reserves, therefore, would be much less if the gold were to supplant rupees than if it were to supplant notes. But this is most unlikely to be the case. It is for comparatively large payments that the sovereign may gradually come into use, and for these it is essentially a rival to the note. For small payments, which in India make in the aggregate an enormous total, the sovereign can no more supplant the rupee than it can supplant the shilling in England.