MONETARY STABILIZATION FROM AN INTERNATIONAL POINT OF VIEW.

Since 1914 the world has had two breakdowns of the international gold standard. The cause of the first was a general rise of prices, and of the second a general fall. That such worldwide movements of prices can occur under the gold standard is the principal indictment to be made against it. They destroy the fundamental assumption underlying that standard and by so doing undermine the standard itself. The gold standard concept of monetary stability is something more than fixes it of exchanges secured through defining currencies as fixed weights of gold. This in itself is merely a device; its justification, if it has any, is founding the assumption of stability of gold. Stated in terms of prices, what the gold standard assumes is stability of the entire composite of prices of which national price levels are the individual items. Whenever this condition is seriously violated, the old familiar conception of offsetting and counter-balancing price changes in particular countries, mutually correcting each other through gold flow, must be abandoned.