the maintenance by a Government of an Independent Treasury, and if its operations were to have a resultant connection with the operations of the business community no harm need arise. But the operations of the Indian Treasury ran counter to the needs of business. It locked up when it should have released its hoards, and released its hoards when it should have locked them up. The causes that “convulsed” the Indian money market had therefore been the inelasticity of the credit media and the working of the Independent Treasury System in so far as they were the prime factors affecting the money supply of the country (_see_ Chart I). The evil effects of such convulsions of the discount rate can hardly be exaggerated.¹²⁹ In an economy in which almost every business man must rely, at certain seasons if not all the year round, on borrowed capital, the margin of profit may be wiped out by a sudden rise or augmented by a sudden fall in the rate of discount leading to under-trading or over-trading. Such fluctuations increase business risks, lead to higher business expenses and a greater cost to the consumer. ¹²⁹ For American experience, cf. E. W. Kemmerer, “Seasonal Variations in the New York Money Market,” in _The American Economic Review_, March, 1911. [Illustration: CHART I: Discount Rates in India] [pg 67] They bring about swings in prices, promote speculation, and prepare for panics. Evils such as these would have in any other country compelled the authorities to take proper steps to deal with them. But it is a curious fact that in India no serious attempts were made to alleviate the sufferings they inflicted upon the trading community. A reform of the paper currency or the abolition of the Independent Treasury System would have eased the situation, though a reform of both would have been better. The general community, however, was not desirous for a change of the paper currency,¹³⁰ but was anxious for the abolition of the Independent Treasury. The Government, on the other hand, refused to do away with its Independent Treasury System,¹³¹ and [pg 68] repudiated even its moral obligation to help the business community on the somewhat pedantic plea that in locking up currency it did not lock up capital.¹³² Nor is it possible [pg 69] to say, since it was not called upon to enunciate a policy, how far it would have gone to modify the Paper Currency Act so as to relieve the situation. Before, however, this controversy could end in a satisfactory solution for imparting to the currency system that element of elasticity which it needed, there developed another and a greater evil which affected its metallic counterpart in a degree sufficient to destroy its most vital element of steadiness and stability of value which it was its virtue to furnish. So enormous did the evil grow, and so pervasive were its effects, that it absorbed all attention to the exclusion of everything else.