THE THEORY OF EXCHANGE 135
It is possible, however, that the loss on exchange does
not appear at once, if the balance of payments is positive.
For the absence of exportable gold does not make itself
felt and the available drafts on foreign countries will amply
suffice to meet external payments. Thus, particularly in
1914, the repatriation of capital enabled France for some
time to keep the exchange in her favour in spite of forced
currency and the impossibility of exporting gold. But this
state of affairs could not continue for long. Even a country
 with a positive annual balance of payments will suffer
an exchange crisis if its currency cannot be exported, since
periods will always occur when the balance of payments is
negative ; then the exchange will break and its fluctuations
will have no limits in the absence of any means of procuring
 exportable currency at a fixed rate.
The question ought, however, to be put whether behind
this direct cause of a fall in the exchange there does not
exist a more remote cause among the circumstances which
brought about the disappearance of the exportable currency
 and thereby of the export gold point. Now this disappearance
 has generally accompanied abnormal issues of
fiduciary currency. Is it therefore right to conclude that
in the last analysis the exchange crisis is connected with
the excess of currency and so amenable to an explanation
based on “quantity” which would fit in so well with the
vague and confused notion of monetary depreciation to
which we have already directed the reader’s attention ?
In the opinion of certain economists this view is connected
 with the idea of internal depreciation due to inflation
 preceding the loss on exchange. An internal currency
which has lost purchasing power will only be in demand in
foreign countries if it suffers in relation to par or to the
previous parity a loss which makes up for the decrease in
its internal purchasing power. Therefore in the opinion of
these writers, if the franc only retained one-quarter of its
purchasing power, Americans will not buy francs for the
purpose of making purchases in France at more than onequarter
 of its previous value unless the dollar has also lost
purchasing power. In any case, they will wish to obtain in
exchange for their dollars a sufficient quantity of francs to