CURRENCY AND PRICE MOVEMENTS 109 
and Japan, than in belligerent countries on the continent 
of Europe. 
The post-war period may seem to offer more favourable 
opportunities to examine these two phenomena, although 
the end of hostilities may account both for the decrease 
in note issues and for the increase in the production of 
commodities and hence for the fall in prices. Moreover, 
the two phenomena of currency contraction and declining 
prices are only approximately parallel in most countries 
after 1920. If the price index (wholesale) and the mone- 
tary circulation (total circulation for the United States, 
note issue for other countries) are each put at 100 in 
1919, a table issued by the League of Nations! shows 
up to the end of 1922 their respective movements every 
quarter in about fifteen countries. Now, in almost all, the 
fall in prices preceded the contraction of the currency— 
especially in the United States, Great Britain, France, 
Spain, Sweden, South Africa and Japan. In the last- 
named country the note issue even went on expanding 
until the end of 1921, the index reading 1038, whereas 
the fall in prices began in January 1920 and fell from 
111, the figure at which the index stood on that date, 
to 72:6 in December 1921. 
These observations will obviously not fit in with the 
theory that price changes are connected with changes in 
the monetary circulation, and that deflation is the cause 
and necessary pre-requisite of a fall in prices. And so 
one author, who has hitherto firmly held that the Quantity 
Theory comes into play like a piece of automatic machin- 
ery, has himself explicitly admitted that, particularly in 
England and the United States, the essential factor in a 
fall in prices is not a contraction of currency but a con- 
traction of credit and the resulting crisis. He thus sees 
in currency contraction, not the cause but the effect of 
the fall in prices.2 
Again, it should be observed that although there may 
have occurred simultaneously during the period imme- 
! “Memorandum on Currencies, 191 3-1922,” Geneva, 1922, p. II. 
* Rist, “La déflation en pratique,” Paris, 1924.