The explanation for such a market phenomenon is to be sought in the irregularity of the money supply of the country. In order that money may be had at a uniform price, its supply should be regulated according to the variations in the demand for it. It is well to recognize that the demand for money is never fixed. But it will avail nothing until it is realized that the changes in the demand for money [pg 62] which take place from year to year with the growth of population, trade, etc., belong essentially to a different category from the fluctuations in the demand for money which occur within the course of a year owing to seasonal influences. In any well-regulated currency it is necessary to distinguish these two categories of changes in monetary demand, the one requiring steadiness and expansibility and the other elasticity. On a comparative view it seems more than plausible that a metallic money is as especially adapted to furnish this element of steadiness and stability as paper money is to furnish that of elasticity. Indeed, so appropriate seem to be their respective functions that it has been insisted¹²⁴ that in an ideal system these two forms of money cannot interchange their functions without making the currency burdensome or dangerous. The proof of the soundness of this view, it may be said, is found in the fact that, excluding the small transactions which take place by direct barter, the purchasing medium of any commercially advanced country is always a compound of money and credit. ¹²⁴ Cf. Prof. R. P. Falkner in _A Discussion of the Interrogatories of the Monetary Commission of the Indianapolis Convention_, 1898, Publications of the University of Pennsylvania in Political Economy and Public Law, No. 13, pp. 26–26. On the face of it the Indian currency is also a compound of money and credit, and as such it may be supposed that it contained provisions for expansibility as well as elasticity. But when we come to analyse it we find that it makes no provision whatever for elasticity. Far from allowing the credit part of it to expand and contract with the seasonal demands, the Paper Currency Act placed a rigid limit upon the volume of its issue regardless of any changes in the volume of the demand. Here, then, is to be found one of the causes for the “convulsions” in the discount rates prevalent in the Indian money market. As was pointed out by Mr. Van Den Berg:—