place, the Government can postpone for a short time a demand for rupees by refusing to supply them in return for sovereigns tendered in London and by insisting upon the sovereigns being sent to Calcutta. Sometimes they do this, but very often it is worth their while, for reasons to be explained in detail later on, to accept the tender of sovereigns in London. In either of these cases the permanent effect of their action one way or the other on the volume of circulation is inconsiderable. The kind of difference it makes is comparable to the difference which would be made if it lay within the discretion of a government to charge or not, as it saw fit, a small _brassage_ not much greater than the cost of coining.[5] CHAPTER II THE GOLD–EXCHANGE STANDARD 1. If we are to see the Indian system in its proper perspective, it is necessary to digress for a space to a discussion of currency evolution in general. My purpose is, first, to show that the British system is peculiar and is not suited to other conditions; second, that the conventional idea of “sound” currency is chiefly derived from certain superficial aspects of the British system; third, that a somewhat different type of system has been developed in most other countries; and fourth, that in essentials the system which has been evolved in India conforms to this foreign type. I shall be concerned throughout this chapter with the general characteristics of currency systems, not with the details of their working. 2. The history of currency, so far as it is relevant to our present purpose, virtually begins with the nineteenth century. During the second quarter of this century England was alone in possessing an orthodox “sound” currency on a gold basis. Gold was the sole standard of value; it circulated freely from hand to hand; and it was freely available for export. Up to 1844 bank notes showed a tendency to become a formidable rival to gold as the actual medium of exchange. But the Bank Act of that year set itself to hamper this tendency and to encourage the use of gold as the medium of exchange as well as the standard of value. This Act was completely successful in stopping attempts to economise gold by the use of notes. But the Bank Act did nothing to hinder the use of cheques, and the very remarkable development of this medium of exchange during the next fifty years led in this country, without any important development in the use of notes or tokens, to a monetary organisation more perfectly adapted for the economy of gold than any which exists elsewhere. In this matter of the use of cheques Great Britain has been followed by the rest of the English–speaking world—Canada, Australia, South Africa, and the United States of America. But in other countries currency evolution has been, chiefly, along different lines.