THE MONETARY CRISIS 51 
To these causes of monetary instability and dislocation 
of the exchanges was added yet another when, at the 
beginning of 1916, silver began to appreciate rapidly. 
For countries with a silver currency which had adopted 
the gold exchange standard had fixed the new parity at a 
point which was not far from the rate of exchange ruling 
at the time when their monetary reform took place ; if 
silver was exported their exchange was liable to rise above 
the gold point corresponding to the official rate and as 
high as the silver point corresponding to the market price 
of silver. Even British India, in spite of having stabilised 
the rupee at the fairly high rate of 16 pence, was affected 
by this unexpected event. For not only was silver ex- 
ported in spite of prohibitions, but in order to make 
necessary payments in India and meet internal currency 
needs in a country which, as is well known, had an 
enormous capacity for absorption, silver had to be bought 
at a much higher rate than 164. The difference between 
the purchase price and the legal parity was due both to 
the appreciation of white metal on the American market 
and the depreciation of sterling in relation to the dollar. 
After trying various palliatives, the Government of India 
decided to alter the official parity of the rupee, and finally, 
under the Act of September 8th, 1920, fixed it at two 
shillings to the rupee or ten rupees to the pound, a rate 
equivalent to a ratio of 1: 15 between gold and silver. 
Such are the circumstances, briefly summarised, in 
which there arose and developed a world-wide monetary 
crisis from which we have not yet emerged. For even 
between a few countries such as the United States and 
Japan a mutually stable exchange on a par basis has only 
just been re-established. 
After this short summary, we shall have to examine 
successively the exchange policy pursued during the war ; 
observation, which will show that, if a common basis can be given to 
several national monetary systems, this is not only due to their respective 
monetary units representing a given weight of metal, 7.c., a certain quantity 
of the commodity, but also because under the system of free coinage the 
passage of gold from one country to another allows one monetary unit to 
be converted into another at a fixed rate.