²⁹⁵ The Finance Member of the Viceroy’s Council, in his Financial Statement for 1908–09 (p. 23, italics not in the original), observed:— “Had we complied with the demand for issues [of gold] without limit, the whole available supply might have been drawn off in a few weeks. … _For these reasons we decided to stand by our legal rights. We are not bound to give sovereigns in exchange for rupees except at our own convenience_. The currency offices were accordingly instructed _not_ to issue gold in larger quantities than £10,000 to any individual on any one day.” These words were used to explain the attitude of the Government regarding its sense of obligation as to convertibility of the rupee in the exchange crisis of 1907! The degree of convertibility being a matter of administrative discretion it is difficult to define the extent to which it is given effect to in practice. Official evidence is inclined to impress upon the public that practically the rupee is convertible. If that is so, why not make it legally convertible. For, if convertibility is complete in practice a legal convertibility cannot impose upon the Government greater obligations than what the official evidence suggests the Government to be actually assuming. It is said that Government does not do so because it is afraid that exchange speculators will take advantage of it. By why should they not? Are they not holders of rupees? It does not, however, appear to have been adequately realized that this defence implies that the currency is issued so much beyond the point of “saturation” that its value is always on the margin of being affected by an element of speculation. ²⁹⁶ For reasons giving rise to a premium on gold in terms of the rupee, _see_ Chap. VI. For reasons explaining how there can be a general depreciation of the rupee without there being a specific depreciation of it in terms of gold, _see_ end of Chap. VI and beginning of Chap. VII. What we are considering at this stage are the inherent potentialities of an inconvertible currency. Suffice it to say here that the name Gold Exchange Standard cannot conceal the true nature of the Indian Monetary Standard. Its essence consists in the fact that although gold is unlimited legal tender there is alongside an unlimited issue of another form of fiduciary currency well-nigh inconvertible, and also possessing the quality of unlimited legal tender.