(To TUE ED/TOR OF TM/ .8PROTATOR.1
SIR,—The so-called depreciation of gold to which " Latona " refers in his letter of February 23rd is, of course, only another way of expressing the fact that the gold price of certain com- modities has risen. It is impossible to say to what extent this rise in prices or depreciation of gold is due to an increased -output of gold, but it is quite certain that the revival of confidence and trade speculation which is coincident with, though not of necessity caused by, the increased output, has given rise to an enormous increase in the mass of banking credits, and has thereby raised the total volume of the currency to a far higher level than can be accounted for simply by the increased output of gold itself. Gold debts are discharged only to the extent of probably 2 per cent. by the actual payment of gold, the remaining 98 per cent. being discharged by the creation, renewal, and transfer of promises to pay in gold, which, so long as the credit is sound, are as good as gold, and have the same effect upon the general level of prices. The comparative stability which has been given to the Indian exchanges by the adoption of the gold standard has removed much of the uncertainty and incon- venience experienced by Eastern traders, and the opinions of those who confidently predicted an enormous " appreciation of gold" or fall in prices from the adoption by India of the gold standard have proved to be groundless. Possibly this may account to some extent far the revival of confidence.—I am,
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