CHANGES IN VOLUME OF PAPER MONEY 387 
summarily enough, on this topic. What is to be noted here is 
the peculiarity of the silver exchange case: that the mere rise in 
silver exchange, if caused by a drop in the gold price of silver, raises 
in itself export prices and the profits of exporters, while it does 
not in itself affect other prices. Exports thus are stimulated; 
the exporters get the bounty. 
The silver-exchange case, however, does point to the way on 
which, as it seems to me, depreciating paper money and rising paper 
exchange may act as a bounty on exports. If exchange rises more 
than prices do, the prices of exportable goods will be affected more 
than other prices, and the export bounty will set in. 
Imagine the countries to be Germany and the United States. 
Paper money is issued in Germany ; prices rise, but dollar exchange 
rises more than prices. German goods in general can be bought at 
prices which, tho higher, are not advanced as much as is the 
exchange rate. As German goods are exported to the United 
States, and dollar exchange is drawn against the shipments, the 
dollar bills sell in Germany at a comparatively high rate in marks; 
there is a special gain, a bounty. On the first emergence of such a 
situation the gain is probably shared between the producers and the 
various middlemen. The German exporting merchants who buy 
from the German producer will get some of it, and the American 
importers will get some. If competition is keen between the 
dealers, the German producer will get the lion’s share. In any 
case he will find business good. And he will be led to enlarge his 
operations and offer more of goods for export, continuing to pocket 
an extra profit so long as the gap continues between German prices 
and dollar exchange. 
But events may take precisely the reverse course. Exchange 
may rise less than prices. Then there will be a special profit on 
importing ; a bounty on imports; a damper on exports. There 
is nothing in a priori reasoning, and nothing in the history of paper 
money, to lead to a presumption that exchange will rise faster or 
slower, more or less, than prices. In the long run, the two will show 
roughly parallel movements; so much is in accord with general 
reasoning and general experience. For considerable periods there