CH. I

THE CLASSIFICATION OF MONEY

19

Exchange Standard may be ideal. But it does un-doubtedly involve some measure of dependence onthe country whose money is chosen as the basis ofthe Exchange Standard, which may be hurtful to thenational pride. Exchange Management, on the otherhand, whilst partly free from this objection, possessesgreat technical advantages arising from economy inthe transport of bullion and from the avoidanceof loss of interest. Many countries, as for exampleJapan , have employed it for many years with greatadvantage, keeping reserves at more than one foreigncentre and varying the proportions at each centre inaccordance with circumstances. Germany appears tofluctuate in her attitude towards Exchange Manage-ment, with some signs of bias against it on the partof the Keiehsbank authorities. The prejudice shownagainst Exchange Management by some sections ofIndian opinion has been partly due, I think, to aconfusion between Exchange Management and anExchange Standard, the element of dependencewhich is more characteristic of the latter beingerroneously attributed to the former in an equaldegree.

Sterling during the war, or rather from 1915 to1919, was an example of Exchange Management.From January 13, 1916, to March 19, 1919, sterlingwas maintained at about the value of $4-76| in termsof U.S. dollars, by Messrs. J. P. Morgan and Co.,acting as agents of the British Treasury, standingready in the New York foreign exchange marketto buy any quantity of sterling offered at this rate,or, alternatively, to buy dollars for sterling at4-77. 1

Exchange Management has been frequently adoptedin the case of Fiat Moneys which have no fixed ob-

1 Exchange management began in August 1915, but the exchange wasnot “pegged” until January 13, 1916, from which date the rate was keptsteady between 4-76£ and 4-77. After May 1916 the fluctuation was keptbetween 4-76^ and 4-76 t n (..