NORMAL EXCHANGES 219 
must necessarily occur in a system which involves the same 
exchange fluctuations within the gold points and the same 
automatic changes in the volume of currency in so far 
as these factors depend in either case on international 
payments. 
§ 3. Requisites for monetary reconstruction. 
Our conclusion therefore is that modern currency experi- 
ments show a gold standard system based on traditional 
systems but somewhat perfected in its application and 
more effective with an equal quantity of gold; none of the 
characteristics of a normal monetary system are absent 
from it. These experiments also indicate the way that 
should be followed in order to stabilise the exchanges by a 
return to the gold standard. Finally, the observation of 
present day events and in particular of recent monetary 
crises show how foolish it 15 to attempt to bring monetary 
equilibrium out of a continual disequilibrium of the exchanges 
by a paradoxical use of the classical theory. On the contrary, it 
will be seen that >. > first condition for any future stability lies in 
the stability of the exchanges ct avy given moment, which 
eliminates the influences of political factors, obviates the dangers 
of a panic, facilitates the placing of credits abroad and, lastly, 
allows a discount policy again to come into play. 
Only a rational and methodical monetary policy which 
has as its object the re-establishment of the external con- 
vertibility of notes can put an end to the world crisis in ex- 
change. A courageous fiscal policy and the stoppage of 
inflation are of course necessary adjuncts; but they are in- 
sufficient; for, taken by themselves, they presuppose the main- 
tenance for an indefinite period of the abnormal and revolu- 
tionary régime of inconvertibility, with its inevitable corollary 
of unstable exchanges 
! While convinced of the necessity of balancing the Budget in a country 
which desires to restore its finances, we confess that we cannot discover on 
what arguments Rist bases his statement that “no bear speculation can 
affect the currency of a country whose finances are in equilibrium” (op. ¢it., 
P- 37)- It is true, of course, that Budget equilibrium will constitute a 
psychological element in keeping the exchange right: it is also true that the