[5] This question of the power of Government over the volume of circulation is discussed in much greater detail in § 8 of Chapter V.
[6] For example, in November 1912, “no gold was handed across the counter at the Bank of France except on the most urgent demand, and then the highest sum paid in gold was 300 francs per head. The other banks followed this example, and the most generous released 200 francs in gold. All special wishes for payment in money were charged 1 per cent premium. At the same time, deposits in gold were credited with 1 per cent premium” (see Bankers’ Magazine, December 1912, p. 794). At the beginning of the month cashiers were charging a premium or commission of 6 f. per 1000 f. for payments in gold instead of silver (see Economist, November 9, 1912, p. 961).
[7] Although the Bank of France only holds an important quantity of foreign bills (generally sterling), on exceptional occasions, e.g. at the beginning and end of 1907 and at the end of 1909, foreign paper enters very largely, through the agency of the great Crédit Banks, into the transactions of the French Money Market. These institutions take foreign bills into their own portfolios, and obtain the necessary funds by rediscounting inland bills at the Bank of France. Thus the French mechanism is much more closely analogous to the British than appears outwardly, and the influence of the Bank of France, like that of the Bank of England, is mainly indirect. The possibility of this is no doubt due to the fact that France, like Great Britain, is a creditor nation in the international short–loan market.
[8] For example, in November 1912 there was a premium of nearly ¾ per cent on gold for export.
[9] This premium was made possible by the Austro–Hungarian Bank’s exercising its right to refuse to exchange its bank notes for gold freely.
[10] In the abnormal conditions of recent times (1912–13), however, the Bank has not found it possible to maintain this part of its reserves at a high level.
[11] This does not include the funds held abroad on account of the Russian Treasury. Speaking in March 1913, in the Budget Committee of the Duma, the Minister of Finance stated that the total amount of Russian State funds placed abroad was £60,000,000.
[12] I have throughout deliberately ignored the current practice of the United States in these matters. Her development and present position are anomalous, and have claimed no imitators. Her arrangements would need a discussion to themselves, and would, I think, convey few lessons of value to students of Indian affairs. In dealing with her dependencies, she has herself imitated, almost slavishly, India.
[13] I may seem to speak as if Japan had in name a Gold–Exchange Standard, which is not the case. There is not much publicity in regard to her monetary arrangements. But I believe that they are, in fact, such that it is as a Gold–Exchange Standard hers ought impartially to be classified. The Finance Minister stated in the Diet in 1912 that the gold funds held by the Government and the Bank of Japan in Europe and the United States were about £37,000,000. The amount of gold circulating in Japan herself is, I believe, inconsiderable.
[14] Unless it be Egypt.