This system which has grown up in place of the system originally contemplated by the Government of India is called the gold-exchange standard. Whatever that designation may mean it was not the plan originally contemplated by the Government of India in 1898. How the departure came about we shall deal with in another place. Here it is enough to state—one may also say necessary, for many writers seem to have fallen into an error on this point—_that the Government did not start to establish a gold-exchange standard_. Rather it was contemplating the establishing of a true gold standard, which, however inadequately understood by the men who framed it, was in essential agreement with the principles governing the English Bank Charter Act of 1844, What are we to say about the new system? The Chamberlain [pg 167] Commission, while reporting that there was a departure from the ideal of a gold standard with a gold currency, observed²⁸⁰:— ²⁸⁰ Report, par. 46. “But to state that there has been this departure is by no means to condemn the action taken, or the system actually in force...” Now why not? Is not the system the same as that proposed by the Government in India in 1878 and condemned by the Committee of 1879? It is true the arguments urged against that plan by the Committee of 1879 were not of much weight.²⁸¹ None the less the plan was essentially unsound. The material point in the introduction of a gold standard must be said to be one of limitation on the volume of rupees, and it is from this point of view that we must judge the plan. But there was nothing in the plan of 1878 that could be said to have been calculated to bring that about. Far from putting any limitation on the volume of rupees, the plan had deliberately left the Mints open to the free coinage of silver. A matter of some interest in the plan was the projection of a system of seignorage so arranged so to make the bullion value of the rupee equal to the gold value given to it. But as a means of limiting the coinage of rupees it was futile. The mere levy of a seignorage cannot be regarded as sufficient in all circumstances to effect a limitation of coinage. Everything would have depended upon how closely the seignorage corresponded with the difference between the mint and market price of silver in terms of gold. If the seignorage fell short of the difference it would have given a direct impetus to increased coinage of rupees until their redundancy had driven them to a discount. In this respect the plan was a reproduction in a worse form of the English Gold Standard Act of 1816. Like the Government of India’s plan of 1878, that Act, while purporting to introduce a gold standard, had authorized the opening of the Mint, which was closed, to the free coinage of silver with a seignorage charge. It is not generally recognized how stupid were the provisions of that Act,²⁸² the ideal [pg 168] of all orthodox gold monometallists, in so far as they contemplated