THE MONETARY CRISIS 67 
and a negative balance of payments. The elements of this 
crisis are of a kind already known, and the exchanges, no 
longer restricted by the gold points, are exposed to all the 
vicissitudes of speculation, as has already happened many 
a time. It is only the extent of the depreciation in some 
countries which is unprecedented ; therefore the present 
crisis 1s chiefly distinguished because its effects are so 
far-reaching. The connection particularly between ex- 
change and price movements has long been known, but 
there was often a fairly long interval between the two 
occurrences ; in any case, the relation between them had 
not usually been closely defined.l 
This relation between price and exchange movements be- 
comes henceforward one of the main features of the crisis. 
Even in countries like France, where the loss on 
exchange has always been fairly small, the accompanying 
internal rise in prices 2 is certainly one of the most 
important factors in the monetary crisis and of the 
various resulting economic disturbances. According as 
the ratio between internal prices and prices of foreign 
goods converted into national currency at the current 
rate of exchange is favourable to export or not, pro- 
duction will be more or less affected. Again, the dis- 
tribution of wealth is considerably altered, as wages usually 
rise and fall more slowly than profits, the higher wage 
varying less than the lower, unearned incomes remaining 
constant or nearly so, while most other classes of income 
increase more or less in proportion to the general rise in 
prices. It becomes very difficult to make long term con- 
tracts on account of the variations from one period to 
another in the purchasing power of the same sum of money. 
These disturbances become catastrophic in a country 
where depreciation is continuous and increasing in pace. 
A certain number of capitalists, e.g., those with unearned 
! See Subercaseaux, “Le Papier-monnaie,” p. 208 ¢¢ seq. 
? We need only observe here the coincidence of the two phenomena, 
whatever the chief cause of the rise in prices in any given case may be,— 
whether it has been traced to the exchange itself, to an increase in the 
note issue or to a scarcity of commodities,