II

INFLATION AND DEFLATION

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claims. Unquestionably, the first is prefer-able on grounds of virtue, justice, and theory.For Britain in a similar fix I should advocate it.But I think it so probable that such a projectwould be defeated in France to-day by thesame political and administrative difficultieswhich stand in the way of further taxation,that I should not lose my time on it. Thesecond method is attractive, if only because itoffers no administrative difficulties. I believethat some authorities in France have favouredit. Nevertheless, I should decline this expedientalso, if I were in your place, because, unlike ageneral capital levy or a depreciation of money,this species of discrimination is truly namedRepudiation, and Repudiation of the NationalDebt is a departure from financial virtue soextreme and so dangerous as not to be under-taken but in the last emergency.

We are left, therefore, by a process of theexclusion of alternatives, with one Exit only—a rise of internal prices; which leads us awayfrom the fiscal field to the price level, theforeign exchanges, the gold in the Bank ofFrance , the volume of foreign investment,and the balance of trade. Here I must inviteyour particular attention to an interestingparadox.

Successive Finance Ministers have, in fact,done their utmost to find an escape through theExit I indicate. They have inflated magnifi-cently, and they have brought down the goldvalue of the franc by progressive stages with