Ambedkar criticizes a book written by his colleague at Elphinstone College, H. Chablaini. He claims the work is too short to properly explain the topic. It lacks proper methodology and has conflicting ideas.
Chablani wrote his plan to stablize the Indian economy.
- Issue Rupees in conjunction with the increase in Indian production
- Allow large amounts of rupees to be converted into metals
- Have the Rupee backed by silver
If too many Rupees are issued their value would decrease in respect to gold and silver. The result would be investors trading in currency for metal reducing the amount of currency. The metal exchange would be a safety value for inflation.
Ambedkar rebuts this with a history of the gold exchange in the world market. In 1873, there was a sharp decline in gold production. Gold exchanges allowed for more money to circulate in the world economy keeping prices steady. After gold production increased in 1910, the major economies ended or restricted their gold exchanges. If they had not inflation would have reduced overall growth because too much money was circulating in the economy. So having a metal exchange would reduce the stability of currency.
Ambedkar also criticizes Chablani’s idea that the limited issuance of the Rupee did not lead to its rise in 1893. Ambedkar folds firm in his belief in fiat currency backed by gold without exchange value.