The Problem of Rupee- Its Origin and Its Solution

Book Review by Dr. S. A. Palande, Associate Professor,
Agasti Arts, Commerce and Dadasaheb Rupwate Science College, Akole

The aforementioned book emphasises how the mechanism that was then suggested may maintain the rupee at a stable ratio with gold. Dr. B. R. Ambedkar makes some excellent points, and his arguments and viewpoints are intriguingly new. According to his books, the only benefit a nation may get from switching from the simple gold standard to the gold-exchange system is that it is less expensive, meaning that it requires slightly less value in the form of metallic currency. However, aside from the benefit of having a currency that is more difficult for lawmakers and administrators to manipulate, the amount that may be saved in this way is negligible, nearly nonexistent. Although administrators and lawmakers are painfully few in number, their knowledge of the gold standard is and will likely continue to be ten or twenty times greater than that of the gold-exchange system. The likelihood that a gold-exchange system will be twisted to serve a corrupt agenda is far higher than the likelihood that the straightforward gold standard will be that way. According to the adoption plan, all future expansion of the rupee issue should be permanently barred, and the mints should be open to importers and other gold sellers at a set price. This way, India would eventually have a currency of meltable and exportable gold in
addition to its fixed stock of rupees. In order for India to eventually have, in addition to the fixed stock of rupees, a currency of meltable and exportable gold coins, in line with European precedents, the adoption plan calls for the permanent prohibition of any further expansion of the rupee issue and the opening of the mints to importers or other gold sellers at a fixed price. The introduction of the gold standard occurred in eighteenth-century England because the legislature permitted the ratio to remain unfavourable to the coinage of silver. In nineteenth-century France and other nations, the legislatures undoubtedly closed the mints to silver. In theory, it would not be unusual for there to be a large quantity of fully legal tender silver coins in addition to gold, since this has happened in France, Germany, and the US on a considerably smaller scale. India is sometimes accused of not wanting gold coinage. The accusation bears a striking resemblance to the old claim that “Englishmen prefer gold coins to paper,” which had no basis other than the fact that notes worth less than £5 were illegal to issue in England and Wales but were permitted to circulate freely in Scotland, Ireland, and nearly every other English-speaking nation. Silver’s position in India is more likely to have been maintained because Europeans love gold so much that they cannot bear to part with any of it, rather than because Indians dislike it. This decision was made by the Company before the system of standard gold and token silver was unintentionally developed in England in 1816, long before it was understood. In the short term, gold is not a commodity whose use these nations would like to limit or minimise. The Federal Reserve Board has taken on the new “White Man’s Burden” of absorbing the products of the gold mines since the war, with the support of all Americans who do not want to see prices rise. However, just as the United States failed to maintain the value of silver by buying it, she will eventually fail to maintain the value of gold. Despite what some high-ranking officials believe, it is quite unlikely that the European central banks will support her with a renewed demand for gold reserves. Even the most seasoned financiers must be progressively learning from experience that the supply of paper money is limited, not by tales of “cover” or “backing” that are held in cellars, which maintains the value of paper money. Theory and experience have demonstrated that those little gold holdings are more than adequate to meet all domestic and international demands when properly limited and enforced by 100% convertibility into gold coin that may be freely melted or exported. Individuals are actually more likely to have a high demand than banks are. It’s possible that the citizens of some nations, whose paper money has been devalued to the point of being laughed at, may reject all paper and demand gold coins instead. However, it appears more likely that they will be content enough to receive nicer paper than they have recently become used to and won’t request hard currency with enough vigour to obtain it. Overall, there is a good chance that the demand for gold in Europe and European colonized territories will be lower than it was prior to the conflict, and that it will either rise very slowly or not at all. Therefore, generally speaking, rather than the opposite, there is cause for concern about a decline in the value of gold and an increase in general prices. Limiting gold production through international agreement would be a clear solution to preserve the world’s natural resources for coming generations. Another option is to establish an international commission to issue paper money that is controlled in quantity to maintain a roughly constant value. The introduction of gold currency into the East offers a far more realistic solution to the problem. We will be able to get through the time that must pass until the most productive of the current sources are discovered if the East contributes significantly to gold output in the upcoming years. After then, we might be able to continue as is or we might have arrived to the prospect of a better arrangement. In the long term, stability is beneficial for the community.