Page:Indian Journal of Economics Volume 2.djvu/599

 ECONOMIC DEYELOPME17I' 581 England it has expanded to eighty crores. There is a good deal o! misapprehension as to the real nature o! the fiduciary portion o! the Currency Reserve, which Government itself to some extent fosters by the character o! the legislation regarding the Currency Reserve. In reality the reserve required for paper currency is precious metal, gold or silver coin, or bullion of either metal. When Government issues paper money to an metal which it has actnally upon the faith, warranted by amount larger than in reserve, it is experience, that the done only a small amount of the notes are likely to be presented any one time. portion of the reserve to redeem its in no promise coin of the realm: for if for encashment at The fiduciary way helps Government of encashment of notes in it is short of silver in India it can do nothing bnt make special arrangements to import it, as it is doing from America; and if it is short of gold, fifty million pounds of War Bonds in London are of no nse because the export of gold is at present controJled and pro- pnblic will absorb a higher cir- notes it is perfectly legitimate hibited. When the eulation of currency for the. Government of India to increase the fiduciary portion of.the Reserve. What the Government does, however, s to manufacture money with a printing press and put it into circulation in India. Instead practice its own of indefinitely commitments, of following the unprincipled issuing notes merely to meet as was done by France in the Revolution, and by Sonth American lepublics throughout the 19th centnry, and is done by Russia to-day, the Government of India can by law only use the newly created credit money which is its own property either to purchase its own loan securities in India or to invest in British Government securities in London. In other words it