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 pro- 
portion of exports, instead of throwing bills on to the 
exchange market. Thus, while foreign countries were 
showing their confidence in Germany and were counter- 
balancing the deficit on the German market by purchasing 
German exchange or even notes, certain exporters syste- 
matically 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 require- 
ments 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 down- 
fall of the mark, certainly far more so than German repara- 
tion 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 Govern- 
ment 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