To those who have long been accustomed to think in gold and who have constantly believed what is good for Europe must be good for any other part of the world, the step I now propose may appear retrograde. The basis of theories in currency reform is that there must be a uniformity in the monies of all the world. As such uniformity is only just as practicable as universal peace, it is not worth while making any attempt to controvert such an argument. So long as economic forces must in the end settle the relative value of commodities, there will always be fluctuations in exchange, whatever may be the standard of the world. Again, the advocates of the gold standard appear to ignore history altogether; also that this recent growth in currency can be hardly claimed to be perfect, as France, which is the greatest hoarder of gold, has also silver as partial legal tender. Even in actual gold standard countries like Russia, Japan or Siam, silver still rules the roost as metallic money, while paper money is the principal medium of exchange in all transactions. A point which is not sufficiently recognized by advocates of gold is that conditions of modern trade are approximating more and more to the ancient system of barter - only with this difference, that the bank serves the purpose of the middleman. Instead of currency of any kind changing hands with each transaction as in former times, no money changes hands in big transactions at present. A party that buys produce gives a cheque on the bank not exceeding the amount of money that he has deposited with it; he sells again some other article to another party and receives a cheque which he pays into the bank; and this buying and selling through the medium of cheques goes on ad infinitum. The effect of such a position is that trade worth millions of sterling is carried on with practically no use of any currency whatsoever. It is the development of this system that has facilitated the introduction of gold in Europe.
Now consider the conditions in China. There is no credit in the proper sense of the word in any part of the country; and although the native order and the bank draft system correspond to the bills of exchange and cheque systems in foreign countries, the trade necessitates a much larger movement of currency than in any part of Europe. It is partly due to the old tradition, and partly to the fact of long distances, and want of communications; and the numerous exchanges in the country militate against insuring confidence of any one part of the country in another. There is also another disadvantage which is inevitable in countries which have a vast area like China. The organization of currency has been easy in Europe because of the facility of the early and easy control of the currency, even in the remote parts of the kingdom. It is understood, of course, that in case of panic or serious local or national disturbances metallic currency alone would help to ease the tension; so any steps taken by the authorities should be such as can be speedily applied in every part of the kingdom. Within a small area as in France, England and Germany and in normal times the difficulties could easily be adjusted. There are, however, exceptions, as in the case of the United States or India. In the United States the situation is simplified by the great development in intercommunication - that country alone possessing half the mileage of railways in the world; moreover, it is a new country with no old traditions or customs, composed of people who are mostly emigrants from Europe. The communications in India are certainly better than those of China, although one cannot in the least compare them with even the most backward country in Europe; but India has always the prop of the London market and this helps to ensure confidence. China on the other hand has neither sufficient communications nor any country to look to for support.