Volume 2 - ElectricCanadian.com

THE BANK DURING THE WAR 345be sold for future delivery, a drop in price took place. It wasnot long, however, before the first signs of the unusual demandcreated by the war made their appearance. Silver was neededas currency for military disbursements and to replace gold,which it was necessary to husband for the purpose of liquidatingexternal indebtedness. As prices in general rose and the fieldof military operations widened, the demand for silver increasedand the price of the metal also rose. Thus, as early as 1915,active military operations in Egypt caused a great demandfor silver from that country. The troops employed therewere largely from India, and were accustomed to the use ofsilver. When the supply of piastres ran out, the Indian rupeewas made legal tender in Egypt. Later, as the war extendedto Mesopotamia and East Africa, the rupee was in great requestin both these countries. In Mesopotamia the Arabs had tobe paid in silver for supplies or services, and a large proportionof the rupees disbursed for these purposes disappeared intothe neighbouring countries, where these hitherto unknowncoins found a ready welcome as a trustworthy currency. Atone time as much as 10,000,000 ounces of silver a month wasrequired for the three theatres of war just mentioned. This,of course, created a demand for silver from the Indian Mint,to replace the rupees withdrawn for use elsewhere. Therewas also a heavy demand for coinage purposes from nearlyevery European nation, either for military purposes or becauseof the marked rise in prices that was becoming so general.The first effect in India of all these influences had been todecrease the home demand for silver. The natives reasonedthat the price of silver was too high as measured by thatof the products which they had to sell. But the enormousexternal demand for rupees soon depleted the Indian reserves,and the shrewd native traders, watching this and foreseeingthe demand which was coming, began to buy silver, andsoon in competition with their own Mint forced the priceto a very high level. This involved grave difficulties for theIndian Government in its policy of steadying the gold exchange