CHAPTER 29

INFLUENCE OF CHANGES IN THE VOLUME OF
Parer MONEY

I procEED finally to a subject which so far has been advisedly
put aside : the influence not of dislocated exchanges in themselves,
but of the process of dislocation. To put it in another way, the
problem now to be considered relates to the influence not of paper
money in itself on foreign exchange and international trade, but of
changes in the volume of paper money. As between increase or
decrease in volume, it is the former, expanding currency and
progressive depreciation, that bulks largest in the literature on
the subject, and has chief attention.
A common opinion is that enlarging paper money issues, rising
prices, and exchanges disturbed in correspondence, stimulate
exports and check imports. There is supposed to be inevitably a
bounty on exports. Most writers who analyze this sort of situation
fail to distinguish between progressive depreciation and established
depreciation, not considering any such reasoning as has led in the
preceding pages to the conclusion that the mere fact of depreciation
and of dislocation may lead either to a bounty on exports or,
according to the circumstances, one on imports. What they
attend to is the more conspicuous phenomena : the effect of rapid
additions to the volume of paper money, the consequences of
rapidly rising prices, and of exchange quotations also rising rapidly.
Then there is supposed to emerge a sudden increase of exports, and
a danger to industries in the countries to which the exports go.
When Germany resorted in 1921-23 to its extraordinary and indeed
fantastic currency issues, many countries thought it necessary to
defend themselves against the “exchange dumping” of German
goods. Great Britain, France, the United States, Australia, were
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