210 MODERN MONETARY SYSTEMS 
cess of exchange and we have observed that by limiting 
the convertibility of fiduciary currencies into gold to re- 
quirements for payments abroad and by keeping for this 
purpose a reserve of gold coin which would otherwise be 
lost in the internal circulation, it provides a much greater 
margin of security than the method of making notes con- 
vertible without limit and retaining the internal circulation 
of yellow metal. It cannot be reasonably argued that this 
system is more artificial than the older system of fiduciary 
currency, nor the one by which a given number of the same 
monetary units are assigned to coin of different metal. If 
there has been in our modern monetary systems any 
artifice, fruitful though not without its dangers, it has 
been the creation and diffusion of bank-notes which are 
legal tender currency and ultimately govern the entire 
monetary circulation and may become suddenly incon- 
vertible! But it is a mere question of form whether con- 
vertibility shall be complete or limited to foreign require- 
ments, whether it shall be effected by a direct transport of 
yellow metal or by the transmission of a 4i/l payable in gold, 
whether it shall be in the hands of a bank of issue or of a 
more or less independent organisation. The Bank of 
Austria-Hungary, as we have seen, played the part of a 
conversion office or exchange office without any official 
differentiation between its monetary task and its banking 
task. 
When we face the problem which has to be solved it 
is therefore clear that to adopt the gold exchange standard 
merely amounts toadopting one method of returning to the 
gold standard and to gold points by establishing the con- 
vertibility of the fiduciary note issue. This method is more 
economical and more rational and is not a mere expedient, 
as some authors like to have it understood. And if the 
idea of stabilisation is contrasted with that of merely sup- 
pressing legal tender currency, it can only be because the 
former method appears to imply the adoption of a #ew 
parity. But here again there is no fundamental opposition 
between the system of the gold reserve and the old system 
of a gold standard with gold in circulation at home; for