RELATION TO MONEY AND PRICES

closure of the mints to silver attracted into the circulationsilver from other channels, especially old native hoards.Within a few years, however, this source of supply wasdried up so that the legal par was reached in 1898 andwas maintained thereafter, subject only to the slight vari-ations of exchange due to the cost of shipping specie.

But until the par was proved actually stable by twoor three years’ experience, the public refused to haveconfidence that gold and the rupee were once more torun parallel. Their lack of confidence was shown in thedifference in the rates of interest in gold and rupee se-curities during the transition period, 1893-1898, and thetwo or three succeeding years. From 1893 to 1900 inclu-sive the two rates averaged .5 per cent apart. From1901 to 1906 inclusive, the average difference was only.1 per cent, 6 showing that confidence in the gold valueof the rupee had been established.

§4. Money Interest and Real Interest

The foregoing comparisons relate to simultaneous ratesof interest in two contrasted monetary standards eachactually used for loan contracts. We now turn to a com-parison between money rates and real rates of interest,mentioned in Chapter II. Unfortunately no contracts interms of real or commodity standards are available forquotation. All we can do is to note the changes in the

'The preceding comparisons serve only to establish the influence ofthe expected divergence between, the two standards on the rates ofinterest, but afford no exact measure of that influence. In order tomeasure the extent to which the fall of silver was allowed for by in-vestors, it would be necessary to examine the rates realized duringspecific periods. Somewhat unsatisfactory attempts to do this (both forthe case above of American gold and “currency” bonds and for the casebelow of Indian gold and “rupee bonds”) were made in my Appreciationand Interest, but are not reproduced here.

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