CHAPTER 11
THE RETURN TO NORMAL EXCHANGES
§ 1. Remarks on the nature of the exchange and on the idea
of stability.
Taking the example of certain countries in which
irregular price movements have been in direct relation to
exchange fluctuations, we have just seen that the problem
of obtaining a stable monetary standard may be directly
bound up with the problem of exchange stability. The
latter problem deserves to be studied by itself; for there
are countries which, having escaped the more serious upheavals
 due to an unlimited depreciation of the monetary
unit whether external or internal, have been seriously disturbed
 in their economic life by an unstable exchange.
Even when the internal purchasing power of a currency
has not been so far affected as to lose its normal function
of a standard of values over any considerable period, exchange
 fluctuations have nevertheless putserious difficulties
in the way of commerce and industry by removing a sure
basis for transactions with foreign countries. More than
this, if irregular exchanges are prolonged even though the
actual depreciation may still be slight, there is always the
threat of some sudden aggravation and of unlimited depreciation
 with all the series of disasters involved thereby. For in
spite of what Mr. Cassel says, the example of countries
like Poland or Germany has shown that, once the limits
of the gold point have been crossed, there is no factor
other than a return to the convertibility of internal currency
 into external currency which can arrest the fall of a
currency which has become a prey to all the vicissitudes of
speculation. The problem of stable exchanges, and therefore
 of stabilising the exchanges, is one of those practical
;

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