THE GOLD EXCHANGE STANDARD 381 
Essentially the same situation exists if the established exchange 
rate be quite different from what it would be under specie — if it 
be one adjusted to a currency which had been overissued. The 
currency is to be stabilized in terms of gold, even tho there is no 
return to specie payments. The equivalent of the currency to the 
gold money of another country (the pound sterling or the dollar) is 
fixed at a rate corresponding to the existing depreciation. At the 
rate fixed on this basis, the rates of exchange are to be held. Asin 
the case just considered, a central bank is put in charge, or a 
government department of analogous character. There a stock of 
bills on foreign countries and especially on gold-standard countries 
is to be kept on hand ; there bills are bought and sold at the fixed 
rate, and more particularly are available for those who have pay- 
ments to make abroad. Fluctuations in exchange may go on, but 
they are of a minor sort, kept within a narrow range. Such minor 
fluctuations, combined with changes in discount rates, are expected 
to suffice for bringing about a balance of the international debits or 
credits. 
It is beyond the scope of this book to consider the difficult ques- 
tions of monetary theory and experience which are raised by the gold 
exchange plan. I will confine my comments to a brief notation, 
in the nature of a recapitulation, on certain fundamental points. 
Obviously, as in the case of temporary pegging, so in that of the 
permanent gold exchange standard, the maintenance of the fixed 
rate is made the more secure if the government has large resources 
and is determined to use them freely. Bills on foreign countries 
can be bought, impounded as a reserve, and sold when called for. 
Additional bills can be got in a pinch by borrowing abroad; 
arranging, for example, with foreign correspondents that bills shall 
be met whenever drawn. Seasonal variations in the exchanges can 
be readily smoothed over, much in the same way as they are 
smoothed, without deliberate intent, in the ordinary course of 
dealers’ transactions under the plain and simple gold exchanges. 
Fluctuations and oscillations over longer periods, too, can be taken 
care of. The effects of crop changes, often momentous for the sea- 
son, can spread over time; and in time, with careful nursing, can