66 MODERN MONETARY SYSTEMS 
therefore no longer responsible for rising prices; it can 
only help to confirm them, after having itself followed the 
rise, unless indeed the mere prospect of further inflation 
may be considered as influencing the exchange. In fact, it 
must be a desperate financial situation as a whole, and not 
inflation by itself, which really influences speculation.t 
Inflation does not therefore appear to have a greater 
responsibility than has been indicated above for the 
accelerated depreciation of the German mark and for its 
ultimate downfall. For from the beginning of 1920 to the 
middle of 1921 it did not have any very conspicuous effect on 
prices; since then it has lagged far behind the price move- 
ments which were bound up with the exchange ; iz cannoz 
therefore have been capable of preventing the recovery of 
foreign trade by causing a rise in prices. Moreover, until 
recently (February 1923) internal currency depreciation 
has almost always been less than external depreciation, 
thus leaving German exporters who sold foreign exchange 
a margin of profit. As we shall see, iz was only as a result 
of the habit of using the dollar as a money of account that 
internal prices rose to the level of the loss on exchange, and that 
the internal depreciation of the mark came to equal its external 
depreciation and ultimately to exceed it. 
§ 7. General characteristics and results of the world crisis in 
the exchanges after the War. Fundamental importance 
of price movements following instability of the exchanges. 
The difference between the phenomena, taken as a 
whole, which appeared during the exchange crisis and 
those which had previously been observed is one of degree 
rather than of kind. We are witnessing a universal 
monetary crisis chiefly caused by the existence of a large 
number of countries with an inconvertible paper currency 
1 Tt should be observed that even quite recently, when the note issue has 
continually increased, a temporary fall in prices has occurred which 
exactly coincides with a temporary improvement in the exchange due to 
the intervention of the Reichsbank; the price index, which reached 7040 in 
February 1923 when the dollar index stood at 6647, fell to 6124 in March 
1923, the dollar rate having fallen to 4965.