A few countries, including Mexico, China, the Philippines and India, which are upon a silver basis, have been able to adjust their international relations with gold standard countries by adopting the "gold exchange standard," so called because the currency issued under it is exchangeable at a fixed ratio with gold. "The gold exchange standard," says Conant, "differs from the single metallic standard in the fact that it contemplates the coinage and circulation of little or none of the standard metal, but provides means (chiefly by government control of the coinage) for keeping token coins of cheaper metal at a fixed value in standard money."1 This-system is in practice similar to that of the limping standard, but the latter term is applied more properly to the coinage system of countries which have unconsciously-drifted into the large use of overvalued token money; while the term gold exchange standard is applied to the system of countries which "have adopted gold as the standard but have deliberately issued token silver coins for current use, adjusted to local requirements and to the reduced value of silver bullion." India adopted the gold exchange standard in 1899, the Philippines in 1904, and Mexico in 1905. To sustain the silver coins at their face value for purposes of money, laws have been passed limiting the quantity issued to the commercial needs of the country, and making them receivable at face value by the government for public dues. In the plans adopted for a gold exchange standard the coinage ratio between gold and silver was adjusted to the decline in the gold value of silver in recent years. Thus, the ratio adopted in the Philippines was about 32 to 1. To meet the demands of foreign exchange growing out of international trade, the governments of countries having the gold exchange standard keep gold funds in the leading financial centers and sell foreign exchange calling for gold in these centers at fixed rates in exchange for the silver money of the country. The adoption of the gold exchange standard by countries formerly upon a silver basis has steadied the par of exchange between Oriental and Western countries and has left countries where silver was best adapted to local conditions free to use it without being subject to the inconvenience of fluctuations in its gold value.1

1 Conant: Principles of Money and Banking, Vol. I, p. 279.

Reading References

Conant: Principles of Money and Banking, Vol. I, Bk. I,

Ch. II; Bk. III, Chs. I, II, III, V. Johnson: Money and Currency, Chs. II, XI. Kinley: Money, Chs. IV, V, XIII, XIV.

1 For a full discussion of the gold exchange standard see Conant, Principles of Money and Banking. Vol. I, Bk. III, Chs. VI. VII; also Economic Journal, June. 1909, pp. 190-200, and Quarterly Journal of Economics, Vol. XIX, pp. 600-605.

Laughlin: History of Bimetallism. Scott: Money and Banking (5th ed.), Chs. I, II. Taussig: Principles of Economics, Chs. 20, 21. White: Money and Banking, Bk. I, Chs. II, VI.