18

A TREATISE ON MONEY

BE. I

classic instance—-the Indian Rupee being the subjectof the leading theoretical discussions of this methodof management and also of its actual operation onthe largest scale. Some years ago (in my IndianCurrency and Finance, 1913) I wrote at length onthe subject of Exchange Standards. But a briefdigression may be in place here, bringing up to datemy views as to how this type of standard is mostconveniently classified.

There is, I think, an ambiguity in some discussionsof this topic between Exchange Standards and whatit would be more correct to call Exchange Manage-ment. I define an Exchange Standard as a ManagedRepresentative Money the objective standard of whichis the legal-tender money of some other country.The controversy as to whether the Indian Rupeeshould be fixed in terms of sterling or in terms of goldwas a controversy as to whether or not the rupeeshould be an Exchange Standard. One of the transi-tional standards in the process of stabilising theGerman mark was an Exchange Standard, whereasthe mark as finally established is on a Gold Standard .On the other hand, where the objective standard isnot a foreign money but ( e.g .) gold, but where, never-theless, the method of managing the Money in ques-tion so as to conform to this standard consists, whollyor mainly, in maintaining reserves at foreign centresand in buying or selling foreign exchange at statedrates rather than in buying or selling gold on the spotat stated rates, this I should designate as ExchangeManagement. The objective standard at which Ex-change Management aims may be an ExchangeStandard; but not necessarily so. The characteristicof Exchange Management Moneys is to be found notin their Standard but in their Form.

For countries which are small compared withtheir neighbours, or do not contain independentfinancial centres of international importance, an