226 MODERN MONETARY SYSTEMS 
of prices in internal currency and of the volume of internal 
currency. 
But if an attempt is to be made to raise the parity by 
successive stages, e.g., every year or every two years, the 
normal procedure would be that this process should be 
accompanied by a contraction of the currency. In any case 
recourse to irregular issue of notes must be stopped once 
for all as being incompatible with sound budgetary prin- 
ciples which by common consent must be observed if the 
first condition for obtaining a credit destined to restore and 
stabilise the exchange is to be fulfilled. 
On the other hand, we have seen that it is necessary for 
the National Exchange Office to be empowered to pur- 
chase private bills and therefore to re-sell them in order 
that the process of stabilisation may work both ways. But 
this does not mean that all foreign bills must necessarily 
be centralised there. In countries where financial as well 
as commercial transactions of an international character 
follow their normal course the Central Office will, if 
necessary, supply the required media of exchange out of 
its gold or gold credit reserve in the same way in which, 
before the war, the Banks of Issue of large trading 
countries did so (thus fixing the gold points) without it 
being necessary to restrict the liberty of private trans- 
actions in the slightest degree.! 
1 The compulsory centralisation of foreign valuta may of course be 
considered to be a pre-requisite of monetary reconstruction in countries 
which are without the stock of gold required for external payments, and 
are also unable to obtain external credits sufficient to provide drafts for 
meeting temporary deficits in the balance of payments. It is conceivable 
that in these circumstances the centralisation of all foreign exchange 
might enable foreign bills to be bought and sold at a fixed rate, subject only 
to proof that the bills sold are intended to meet payments for justifiable 
imports. Probably this method would not prevent the creation of other 
exchange markets with somewhat different rates; but it would at least 
prevent an increase in the price of such imports as are considered necessary 
beyond the limit corresponding to the value of exports. This is more or less 
the system which has worked in the belligerent countries of Central 
Europe, and particularly in Germany, during the period of hostilities. But 
itis a high-handed method, difficult to apply; on the other hand, the system 
of the gold exchange standard described above is as liberal as the former