THE THEORY OF EXCHANGE 141
This suggestion certainly conforms to the classical doc-
trines about money, and if we take an instance like that of
the assignats we shall indeed see that on the whole! the
premium on metal, as registered either by the French
exchange at Bile or by internal transactions such as pur-
chases of bullion by the Treasury itself, was, above all,
governed by the expansion of the currency.
But when we come to consider closely exchange pheno-
mena of recent date we shall observe that internal depre-
ciation as revealed nowadays by the movement of prices alone,
and external depreciation as revealed by the loss on ex-
change, have become entirely distinct phenomena, the
curves of which, far from coinciding, are not even parallel,
so that fluctuations cannot be attributed necessarily to the
same causes. On the other hand, we have seen how the
classical doctrines about exchange, being doubtless based
on precedents which are not recent, have remained some-
what indefinite, and with the vague idea of depreciation,
which includes both a decline in internal purchasing power
and a loss on exchange, has admitted, a priori, that Quan-
tity may exercise an influence which still needs to be
demonstrated and is supposed to make itself felt in widely
different circumstances. Indeed it is not enough to have
some confused notion that a currency which is considered
to have lost its internal value because it has been over-
expanded, or to have recovered that value because it has
been contracted, has for the same reasons a greater or
smaller value externally and will therefore suffer a greater
or smaller degree of loss on exchange. We must find out
whether this supposed internal depreciation and its fluc-
tuations appear in the movements of prices ; if so we must
make certain that we have reason to presume and are able
to prove that this internal depreciation is connected with
the loss on exchange.
'As we have shown above, the agio did not always move with the
expansion of the currency, there were numerous exceptions; but if we take
the main stages in this process of inflation we shall find that the extreme
rise in the agio did correspond on the whole to the increase in the amount
of notes issued.
