RELATION TO MONEY AND PRICES

able as the effect of the fear of Bryan’s free-silver pro-posal, incorporated (July, 1896) in the platform of theDemocratic party. Had free coinage of silver been re-stored at the ratio of 16 to 1, since the bondholders hadthe option of demanding either gold or silver in pay-ment, coin bonds presumably would still have meantgold bonds. Hence investors were ready to accept lowerinterest on these bonds than on currency bonds.

§3. Gold and Rupee Bonds

Having compared the rates of interest of paper andcoin bonds, we may next compare those of gold andsilver securities. The comparison, to be of value, mustbe between gold and silver contracts in the same marketand with the same security. Fortunately such contractshave been available in the London market of governmentsecurities. The loans of India have been made partly ingold and partly in silver, and both forms of securitieshave been quoted in London . 3 The interest on the silverbonds, or rather rupee bonds, was paid by draft on India.The sums actually received in English money dependedon the state of the exchanges. The rate of interest in thesilver standard was calculated 4 in the same way as was

* The silver bonds or “rupee paper” were issued to raise loans in India,but they were also enfaced for payment in England, and in 1893-1894 some Rx. 25,000,000 were on the London books. Burdett’s Of-ficial Intelligencer (1894), p. 75.

‘Thus, in 1880 the average price paid in London for “rupee paper” offace value Rx. 1000 yielding 4 per cent, or Rx. 40 per annum, was £79.In order to find the rate of interest realized by the investor, we musttranslate £79 into silver. The average rate of exchange in 1880 was 20d.per rupee. Hence £79 were equivalent to 948 rupees. That is, speakingin terms of silver (or, more exactly, in terms of exchange on India),the price of a 4 per cent bond was 94.8, which, if the bond be treatedas a perpetual annuity, yields the investor 4.3 per cent. In the sameyear, an India gold bond yielded 3.6 per cent.

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