CURRENCY AND PRICE MOVEMENTS 113
year 1923 brings a curious check ; between February and
April the circulation nearly doubled—it rose from 3513
milliards of marks to 6546 and prices tended to fall.1
Finally, two recent experiments, so far from con-
tributing any precise proof of this theory, give rise to
serious doubts, viz., the monetary reform in Czecho-
slovakia and the monetary reform on Austria. In the first
case, a policy largelybased on the Quantity Theory showed
that the limitation and even the contraction of a currency
did not prevent prices from rising considerably between
1919 and November 1920. The index reached about
1500 in 1920 (the base index being 100 for 1914 and
the figure at the end of 1919 being about 700) and showed
a level of prices which, in 1920 and the first quarter of
1921, was at least as high as in Germany, where inflation
has been continuing. Moreover, at the very time when a
fresh increase in the circulation (12 milliards of crowns
as against 8 milliards when the monetary reform took
place) brings it to its maximum, prices begin to fall ;2
and here again we find that the fall was much sharper
from 1922 onwards than the further reduction in the
circulation, viz., 100 to 67 as compared with 100 to 89.
On the other hand, we have another counter proof in
experience in Austria, where the note issue trebled
between September 1922,3 when the exchange was stabil-
ised, and the end of 1923 without being accompanied
apparent inflation, the increase in clearing operations or setting off debts,
if it does not bring about an increase in the number of real units, at least
multiplies the number of units of account proportionately to the rise in
prices. But the fact that, in spite of a restriction of the number of monetary
‘nstruments, methods of settlement tend to increase proportionately to a
rise in prices, shows that prices are not proportionate to the number of
“physical” monetary instruments, which alone can be regulated in quantity
by public authorities.
1It may be added that this was a period of stable prices. As soon as
methods directed towards stabilisation ceased to operate, prices resumed
their upward movement. See Aftalion, “La circulation, les changes et les
Prix,” in the Revue Economique Internationale, February 1924.
2 It has been pointed out above that this double price movement again
corresponds very exactly with the movements of the exchange.
8 See above, p. 91.