THE MONETARY CRISIS 63
German exchange should be attributed partly to a much
more ““ physical ” and immediate cause, viz., a flight of
capital which completely upset the Balance of Payments.
At first this flight was no doubt deliberate, and in the main
took the form of leaving on deposit abroad amounts in
foreign currencies corresponding to a considerable proportion
 of exports, instead of throwing bills on to the
exchange market. Thus, while foreign countries were
showing their confidence in Germany and were counterbalancing
 the deficit on the German market by purchasing
German exchange or even notes, certain exporters systematically
 left the proceeds of their sales in safety abroad
with the certainty of credits in some sound currency, and
in exchange left foreign speculators with unstable German
currency. Thereupon a flight ensued which was the result
of panic. For when a currency loses from day to day both
its exchange value abroad and its purchasing power at
home, it can no longer serve as an instrument for saving,
and anyone wishing to save will look about for some stable
foreign currency ; thus quite independently of the requirements
 for foreign payments a progressive demand for
foreign bills or even notes arises, which is bound entirely
to overthrow the Balance of Payments. In this way the
demand in Germany for foreign currencies by all classes
of the public was necessarily a decisive factor in the downfall
 of the mark, certainly far more so than German reparation
 settlements, even though the Government was not
very skilful in its method of obtaining the foreign exchange
for its first payments.
It should also be pointed out that the German Government
 had not taken the necessary steps after the Armistice
to balance the Budget, and had had recourse much more
than was reasonable to new issues of paper money. The
note issue, which stood at 32% milliards about the end of
1918, 7.e., 22-187 million notes issued by the Reichsbank,
and 10-242 by the loan banks, reached 49% milliards at
the end of December 1919, i.e., 35-698 millions for the
Reichsbank and 13-781 for the loan banks, nearly 81
milliards, 7.e., 68-805 and 11:95 in each case, at the end