112 MODERN MONETARY SYSTEMS 
to be almost impossible to discover any complete proof of 
the Quantity Theory in a few summary comparisons in 
which other possible relations of cause and effect are 
ignored. At most, it may be pointed out that there are 
a few concordant phenomena, which militate in favour of 
the theory, but which do not justify any a priori rejection 
of other possible explanations ; for in order to discard the 
influence of certain factors it is not enough merely to set 
them aside as if they did not exist. 
Moreover, recent events subsequent to the war have 
run counter to the current theory. The monetary crisis 
in Germany, in which superficial observers might see a 
confirmation of this theory (since inflation occurred 
simultaneously with a rise in prices), on the contrary 
introduces a new element of doubt on closer observation. 
For, taking the index of 1919 at 100, prices will be seen 
to have been stationary between the second quarter of 
1920 and the second quarter of 1921 at about 170, and 
indeed to have gone back since the first quarter of 1920 
(index 213), while the circulation, which had previously 
been lagging behind price movements, thenceforward 
showed a marked increase, the index being 118 for the 
first quarter of 1920, 136 during the second quarter of 
that year, and 170 for the second quarter of 1921. On 
the other hand, after the second quarter of 1921, the rise 
in prices far outruns the increase in the circulation, so 
that this apparent inflation merely constitutes some 
attenuation of the tremendous contraction resulting from 
the enormous disproportion between the level of prices 
and the number of monetary instruments. Taking an 
index of 100 in 1919 for both prices and circulation, the 
former reached an index of 18,377 in December 1922, 
whereas the index of the circulation did not exceed 2587.1 
Surely the fact that contraction is so powerless to counter- 
act a rise in prices can with difficulty be reconciled with 
a strict application of the Quantity Theory.? Finally, the 
1 See memorandum of currencies for 1923, p. 12. See also the figures 
quoted above, p. 65. 
2 The objection may, of course, be made that if prices rise without any