i MODERN MONETARY SYSTEMS 
Fifth type: Gold Exchange Standard or Gold Reserve.—At 
the end of the 19th century and as a result of circum- 
stances which will be described later, certain countries 
with internal silver or paper currencies wished to find a 
basis for their monetary system in common with mono- 
metallist gold standard countries. They brought this about 
by providing that their silver coin or notes should be con. 
vertible into gold currencies at a constant exchange rate 
fixed by law. In such countries gold is therefore accepted 
for free coinage, or minted coin is allowed to enter, and 
the export of gold is permitted or gold already deposited 
in foreign countries is made available for payments abroad. 
In this way they do enjoy a gold standard for the purpose 
of transactions with other countries although there may be 
no gold in their currencies. Silver is not accepted for free 
coining and cannot be freely exported or imported. It is 
issued in quantities sufficient to meet the requirements of 
trade, whether for internal use as a normal instrument of 
payment (in which case it will be unlimited legal tender) or 
as subsidiary coin. It is convertible into gold at the fixed 
exchange rate for the purpose of payments abroad when- 
ever the public authorities have a sufficiently large gold 
reserve to meet their liabilities. At home, notes may be 
convertible into silver if it is unlimited legal tender, or 
else they may be inconvertible ; but like silver, they are 
convertible into gold for the purpose of effecting payments 
abroad. 
This system, discovered empirically, was put into force 
by experimental stages in India, where the internal cur- 
rency consists mainly of silver rupees. It has also been 
used with a paper currency in the Argentine, and it has 
spread over almost the whole of the Far East. It is the 
most modern and the most “economical” of systems ; with 
a limited stock of metal it affords the most solid foun- 
dation for a monetary system based on gold, which is set 
free to perform its proper function as an international 
currency. 
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