"First period: Before 1845; Great confusion in the currency, chiefly owing to a very serious redundancy of copper coins. In conformity with Gresham's law all the silver had disappeared. The copper currency was debased. Trade was much hampered. Second period: 1845 to 1854 or 1859. The Government lends vigorous assistance by the issue of silver certificates; withdrawal of the copper surplus from circulation. Unmixed application of the gold exchange system (then silver exchange system). Adoption of the pure silver standard by act of May 1, 1854. Large imports of silver standard coins and withdrawal of silver certificates. Third period: 1854 to 1877. Pure application of the silver standard system, with silver as the standard of value. Exclusive circulation of silver standard coins, and consquently no further reason for the application of an exchange system. Fourth period: 1877 until recent years. The gold ten-guilder piece is introduced as gold standard coin by act of March 28, 1877. The silver standard coin is reduced to the rank of token coin, though remaining legal tender. Owing to a continuous depreciation of silver the necessity for a gold exchange system as regards these silver coins is revived, inasmuch as gold is neither found in circulation nor otherwise present in the country to any important extent."


The four countries that have the gold exchange standard, i.e., India, Java, Straits Settlements and Philippines, have the following in common: first, under present conditions they maintain the value of the silver token coins by drawing more or less on gold reserves abroad; second, the gold reserves again are the bulwark of the currency or bank-notes; third, they settle their balances, and maintain the artificial par of exchange by making remittances in bullion which consists of gold for India, the Straits and the Philippines and gold and silver for Java - because silver is also legal tender in Holland. In Java, or the Netherlands Indies, the Government does not act as a guarantor of the currency by way of Government remittances, as this function is satisfactorily performed by the exchange banks acting in accord with the central bank of issue. In any case, all these countries have arrived at a stage in which gold exchange standard can easily be abolished and the gold standard substituted as soon as legal tender gold coins could be issued in sufficient numbers and could be absorbed by these countries easily.

I have dealt rather extensively with some of the details contained in this chapter, especially with regard to the progress of currency reform in India, in order to facilitate a clearer grasp of the evolution of the standard of value. Various eminent authorities have from time to time proposed either the gold or the gold exchange standard for China, and a work dealing with currency has necessarily to go into the history of the gold standard and the result of the applications of the gold exchange standard to Asiatic countries. Further, those that have suggested various reforms, for some reason or other, have not been as explicit as they could probably be, with regard to progress in other countries. It might be argued by them that the reason for not making extensive references was that conditions were not altogether on all fours. But a student who wants to learn the effects of the operation of certain laws or of a specific kind of reform must have a correct comprehension of the processes and results in other countries. The test of the usefulness or practicability of a proposal of currency reform for China is the experience of other countries, exactly as the effect of legislation of any kind is always measured by the success or otherwise of a similar measure in another country.