DISLOCATED EXCHANGES FURTHER CONSIDERED 367 
modic changes because of crop fluctuations. There are abundant 
examples where a country having an inconvertible currency, and 
therefore dislocated exchanges, finds its international trade per- 
turbed in just this way : Argentina, for example, the United States, 
Russia. 
When such a country has a bumper crop, its exports suddenly 
increase. The price at which the increased quantity of exported 
goods sells in foreign countries will depend on the conditions of 
demand there, and also on the conditions of supply in the importing 
region — on the state of the crops all around. Demand ordinarily 
does not change, or changes but little. It is an abrupt change in 
supply that has to be reckoned with. At the risk of some repetition 
[ will dwell on several aspects of situations of this sort which 
deserve attention. 
The first of our general propositions on the course of interna- 
tional trade under dislocated exchanges is here most conspicuously 
substantiated ; namely, that at any given time the rate of exchange 
is the result of the impact of the momentary supply on the momen- 
tary demand. The enlarged exports and the consequently enlarged 
offerings of foreign exchange meet an unchanged demand. The 
rate of exchange declines abruptly. The actual course of events 
supplies abundant illustrations of this first stage, and there is 
abundant discussion of it in the literature of the subject. Observ- 
ers of all kinds, both those versed in economic theory, and the 
financial writers and the business men, are familiar with the 
effects of crop fluctuations under dislocated exchanges. The for- 
mulation of the rationale of the case has not often been precise, 
but its general character is known to all. The pressure from the 
added exports has for its first effect that exchange on gold countries 
falls. 
It is clear — I would emphasize the point — that such a decline 
in foreign exchange is the result of merchandise movements. It 
is the increased exports, the larger crop movements, that 
bring about the new rates of exchange, and cause them to be more 
“favorable” to the country from which the exports come. The 
sequence is obviously the reverse of that which appears when