214 MODERN MONETARY SYSTEMS 
exchange standard, stable in relation to the French franc 
and, later, to the United States dollar down to the middle 
of 1919 and only fell after a fourth campaign which was 
also unsuccessful. 
It is, however, even more important to remember that 
the objection which is made to the system of the gold reserve that 
it did not everywhere withstand the crisis of the world war is 
equally true of countries with the traditional system of the gold 
standard. For from the opening of hostilities even neutral 
countries were obliged to suspend the convertibility of notes and 
the free export of gold, and even now their exchanges almost all 
fluctuate in relation to the dollar far outside the gold points. 
This fact is in itself sufficient to dissipate the legend 
that only countries with the gold reserve system have to 
face the problem of stabilising their currency when the 
balance of payments is in deficit and when international 
disturbances arise. Apart therefore from periods which 
are really catastrophic, when 4// monetary systems go to 
pieces, it is entirely permissible to contemplate that a 
system of this kind should be generalised and should 
work regularly with the help of some central institution of 
international credit. 
But in the first place we must set aside the doubt which 
really lies behind the objection described above. If some 
people still hesitate in considering the gold reserve system 
as a normal one, the reason is that it does not seem to them 
to bring into play those forces tending to bring about an 
equilibrium which they believe to have been present in the 
former system of the gold standard with an internal gold 
circulation. They are obsessed by the old doctrine of 
Ricardo, either in its original form or in some new form; 
they believe that foreign exchanges naturally tend to 
balance and that this tendency reduces to a minimum the 
media of payments which will be required to wipe out any 
deficit and which will avoid any prolonged disequilibrium 
in the balance of payments. 
Ricardo’s arguments are well known. Under his anti- 
quated theory any temporary excess of imports provokes 
the export of metal currency, and reduces the volume of