126 MODERN MONETARY SYSTEMS 
Economists thus become concerned with exchange 
phenomena when they find themselves faced by a depre- 
ciated national monetary unit. It only needs one step 
further—and a short step—to say that an exchange crisis 
is due to a depreciation of the currency and to ascribe the 
latter to excessive quantity ; and this explanation is all the 
more natural because exchange crises do, in fact, often 
follow exceptional measures such as abnormal issues of 
paper money, etc. We hasten to add that this explanation, 
however hasty and superficial, should not, in our view, be 
entirely discarded. But even if a theory which tends to 
connect closely fluctuations in the exchange with varia- 
tions in the circulation may ix the event be reinforced by a 
detailed analysis of the facts, it nevertheless originates in 
an inadequate knowledge of realities and in misconceptions 
which it is necessary to discard from the beginning. We 
have already pointed out the error contained in the 
common statement that a rise in prices “results” from a 
depreciation of the currency. Prices express an exchange 
ratio between currency and goods. Therefore when the 
value of money falls in relation to goods, or, in other words, 
when prices rise, the value of goods increases in relation 
to money. A rise in the price level and monetary deprecia- 
tion are synonymous terms ; and care should be taken not 
to confuse a tautological expression for a statement of the 
relation of cause and effect which should be sought, not 
as between a rise in prices and depreciation, but as between 
a rise in prices or depreciation and factors, such as, i.e, 
an excess of currency which may have produced it. 
The same remarks also apply to the following case. 
If an exchange crisis is said to be due to the depreciation 
of the national monetary unit and if by depreciation is 
meant the decline in the exchange value of the national 
monetary unit in relation to some foreign curtency, as 
measured by the loss on exchange, then the same error 1s 
made as has been noted above. 
It is true that a national monetary unit which has 
depreciated in relation to foreign currencies may also have 
depreciated internally in relation to goods and usually