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 experiments
 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 convertibility
 of notes can put an end to the world crisis in exchange.
 A courageous fiscal policy and the stoppage of
inflation are of course necessary adjuncts; but they are insufficient;
 for, taken by themselves, they presuppose the maintenance
 for an indefinite period of the abnormal and revolutionary
 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