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 themselves
 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. Butisitsufficient
 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 represented
 by it. When, as a result of exceptional circumstances,
 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 onefifteenth
 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 convertibility
 lasted. In 1920 the parity was changed and the