TO DISCOVER A STABLE STANDARD 199 
The working of the gold exchange standard, on which 
Mr. Fisher relies, has nothing in common with his system. 
It is true, of course, that gold which is not in circulation, 
or at least not in internal circulation, plays the part of a 
standard in the sense described above, i.e., it is a common 
monetary basis as between countries whose monetary units are 
directly or indirectly defined as corresponding to a given weight 
of gold and in which that given weight of gold is accepted for 
the number of monetary units thus fixed. It is also true that 
this system, under which exchange stability is secured, 
also confers upon internal prices that approximate stability 
which exists in countries where the exchange is contained 
within the limits of the gold points and where the circulation 
is not subject to very wide variations. Finally, it is true 
that gold being an international standard may also serve 
as a measure of internal prices since the goods within a 
country are sold for instruments of exchange which them- 
selves stand at a constant parity with gold. Finally, it is 
perfectly true that if this parity were changed, and with it 
the theoretical content of gold in the internal currency, 
internal prices would be more or less affected. Butisitsuffi- 
cient to admit the part played in this system by gold, which 
is invisibleand absent from the internal circulation, in order 
to arrive at a favourable judgment of Mr. Fisher’s plan? 
Certainly not. We shall see this when we come to 
examine more closely the way in which the gold exchange 
standard reacts on prices. 
This system presupposes in general a constant ratio 
between the monetary unit and the amount of gold repre- 
sented by it. When, as a result of exceptional circum- 
stances, the parity has to be changed, there also takes 
place a change in the ratio of the national monetary unit 
and foreign monetary units. The Indian rupee, for instance, 
represented in accordance with the law of 1893 one- 
fifteenth of a sovereign, that is to say of the weight of gold 
contained in one pound sterling, and it actually was worth 
one-fifteenth of a sovereign from the time when it could 
in fact be converted at this rate and as long as this con- 
vertibility lasted. In 1920 the parity was changed and the