70 MODERN MONETARY SYSTEMS 
countervalue in paper at the new rate at the moment of 
withdrawal of the deposit. 
Thus in order to obviate the decline in purchasing 
power there came 20 be applied in practice a coefficient which 
was proportional, not to he increase in the cost of living, 
i.e., the decrease in the internal purchasing power of the 
currency, but to the rate of exchange. Now as the external 
depreciation of the mark had been greater and more rapid 
than its internal depreciation, the general introduction of 
contracts in stable currencies, in which the dollar was in 
fact the standard and the paper mark became a mere 
instrument of payment, ended by accelerating the rise in 
prices in Germany and forced the internal depreciation 
almost to the level of the external depreciation, not with- 
out some risk of the former overtaking the latter.! Prices 
then become absolutely dependent on the exchange, itself 
subject to all the vicissitudes of disordered speculation. 
So the very effort to avoid the disadvantages of an un- 
stable mark only hastened its downfall, without resolving 
satisfactorily the peculiar accounting difficulty which arises 
in industry and commerce. Henceforward the fluctua- 
tions of the mark no longer made themselves felt from 
day to day, but from hour to hour and almost from one 
minute to another, and merchants with one eye fixed on 
the exchange quotations altered their prices several times 
a day. But though they made certain in this way of re- 
ceiving a sum in paper marks equivalent at the moment 
of sale to a certain sum in dollars, they could not tell what 
they could buy with those paper marks on the evening of 
the same day if they had not immediately covered them- 
selves by converting their marks into foreign exchange. 
These fruitless attempts seem to demonstrate that a 
solution of the problem of stabilising a standard of values 
can only be found in stabilising the instrument of exchange 
itself.2 
1 Internal depreciation can overtake external depreciation because 
dealers discount an anticipated fall in order to make certain of making 
their profits and renewing them. 
2 Tt is true that a monetary unit may be claimed to have been stabilised