“There was another important reason why he (Mr. Laing) thought that Sir Charles Wood’s principle was the soundest. All parties were agreed that a paper currency ought to be identical with the metallic currency which it displaced. But the system of issuing against two-thirds of securities and one-third of specie, as was proposed by Mr. Wilson, would not always ensure this identity, and there was considerable risk that in times of buoyancy and speculation the circulation would be unduly extended. He thought that that was a point of considerable importance, because if we looked at what had taken place in India during the last three years, we should find a great increase in the wages of labour and the prices of commodities, which should warn us as to what the consequences might be if we were to accelerate the process already going on so rapidly by any artificial inflation of the currency. If you unnaturally [pg 299] stimulated the rise of prices by an over-issue of paper circulation you ran considerable risk of changing the healthy action of commerce into a feverish excitement which was sure to bring about a reaction. If we continued to go on as we had done for the last two or three years, the result would be that many articles of Indian produce might be driven out of the market by the competition of other countries and he therefore thought that the Government ought to be exceedingly cautious how it took any step that might unduly accelerate the tendency to a general advance, as might be the case under the system of paper currency which to any considerable extent represented securities and not bullion. Such an advance might even reach a point seriously embarrassing to the Government if the general rise in the rate of wages and cost of living made the present scale of salaries and the pay of troops no longer adequate.⁴⁴¹ For these reasons he thought it by far the wisest course to adhere to the principle of paper currency adopted in England as laid down in Sir Charles Wood’s despatch.” ⁴⁴⁰ His speech on the Paper Currency Bill, dated February 16, 1861, _S.L.C.P._, Vol. VII, pp. 66–7. ⁴⁴¹ During the bank suspension period in England it is to be noted that the Army and the Navy were paid in gold, for fear of causing discontent. Not only was the Government anxious to put a limit on the issue over and above making it convertible, but it did not want to be vested with the legal authority to issue notes. In a despatch dated April 27, 1859,⁴⁴² to the Secretary of State, the Government of the day observed:—