A high average rate and a high maximum rate are likely to call for different explanations

“In the Punjab it is reported (in 1911–12) that large payments for agricultural produce are never made in notes, and that gold is replacing notes to some extent even in ordinary payments among merchants and traders. Many people of the greatest prestige and rank in the City would covet so great a dignity; if not for themselves, at least for some friend, or some relative, and so the directors would be set upon from every side. But for all temporary purposes, it is the supply in the market which governs the price, and that supply in this country is exceedingly variable. The first is to permit a small variation in the ratio of exchange between the local currency and gold, amounting perhaps to an occasional premium of ¾ per cent on the latter; this may help to tide over a stringency which is seasonal or of short duration without raising to a dangerous level the rate of discount on purely local transactions. I am ready to admit, however, that a general opinion has long prevailed that the Bank of England ought to be prepared to do much more than this, though I confess my surprise at finding an advocate for such an opinion in the Economist.

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