THE THEORY OF EXCHANGE 137 
the loss on exchange to the internal depreciation as it exists 
in our day and as measured by purchasing power over 
goods and services. The decline in the purchasing power 
of assignats was less than the premium of specie with 
regard to them. But this premium also appears not only in 
foreign exchange transactions but also in certain internal 
transactions—for many contracts were still fixed in specie ; 
internal depreciation could therefore not be as clearly dis- 
tinguished from external depreciation at that time as at 
present. On the other hand, the premium on metal was 
closely connected with the increase of the paper currency 1 
and coin, viz., the exportable currency which it was more 
and more expensive to acquire had not entirely disappeared 
and was still available for use. It therefore seems as though 
in the case of the assignats the loss on exchange and the 
internal depreciation proceeded from some cause common 
to both, i.e., the expansion of paper currency. 
But most modern examples show that an exchange 
crisis does not proceed from the increasing difficulty in 
procuring coin, due to inflation, but to a fundamental 
alteration in the conditions of the exchange market, due to 
the complete impossibility of obtaining exportable currency 
caused by the introduction of forced currency and the 
prohibition to export gold. And so whether this disap- 
pearance is merely accompanied by abnormal issues or 
more or less prepared and caused by them, it is now estab- 
lished (1) that the mere disappearance of the gold point is 
likely, even without inflation, to bring about an exchange 
crisis and (2) that inflation will not by itself bring about 
an exchange crisis so long as the gold point remains. 
In general, therefore, we need only remember, in order 
to see the origin of an exchange crisis, that it arises with 
the impossibility of obtaining without loss an exportable 
currency, 7.e.,—in practice and in most cases at the present 
time—with the inconvertibility of notes which prevents 
the specie holdings of the bank of issue from being used 
and with an export prohibition which even prevents coin 
from being taken out of circulation for export. 
1 See p. 105 above.