NORMAL EXCHANGES 217 
vation. In such circumstances it is useless, even when the 
internal circulation has been reduced or stabilised, to count 
on exchange fluctuations to restore the balance of pay- 
ments or on a restoration of the balance of payments to 
bring the exchange back into equilibrium. 
Indeed in so far as it is at all permissible to speak of an 
equilibrium in international trade,! the main factor in bring- 
ing about equilibrium will be found at the present day in the 
movement of capital. Such movements, due to international 
loans, have made it possible since the end of the 19th century to 
bring the balance of payments of poor countries into equilibrium 
and to restore their monetary systems. On the other hand, it 
is the movements of the rate of discount, carefully regu- 
lated by the great banks of issue, which by attracting the 
available capital from abroad have made it possible for 
large trading countries to reduce their export of gold to a 
minimum by conveniently counteracting any surplus of 
debts which have fallen due. 
It 1s well known that this discount policy, effective as 
it is to meet any temporary deficit in the balance of pay- 
ments, is only possible with stable exchanges. For if the 
exchanges are irregular the risks involved by a double 
conversion both ways at different times of the sum trans- 
ferred would not make it profitable to effect such transfers 
in order to obtain the profit of a slight rise in interest. 
But whatever may be the influence attributed, rightly 
or wrongly, to fluctuations in the volume of currency due 
1 For it should be pointed out that theoretical writers have been some- 
what precipitate in explaining a phenomenon the very existence of which 
has not been clearly established. Even during the period of comparative 
calm at the end of the 19th century we do not observe any general state 
of equilibrium in the balance of payments. On the contrary, we see a large 
number of countries receiving annually, in spite of new investments 
abroad which neutralise part of the payments due to them from foreign 
countries, specie payments in respect of a credit balance, whereas others 
continuously remain debtors. Among the latter the new countries which 
produce precious metals merely send back in the form of bullion the 
dividends of the European shareholders in their mines. Numerous others, 
on the other hand, fall a victim to chronic exchange crises and are reduced 
to perpetual external borrowing in order to bring their balance of payments 
into equilibrium. 
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