II

INFLATION AND DEFLATION

Ir 5

the £) than to one-fifth of the pre-war value.But the French Index Numbers are very crudeaffairs subject to a wide margin of error, andthe two and a half years which has elapsed sincethe franc was worth more than the figure nowfixed, is a fair time to allow for an adjustment ofprices upward—a much quicker business thana downward adjustment can be. House rentsdoubtless must rise, but it is probable that otherprices will trend only a little upward if at all,compared with gold prices abroad. As for therentier, a very drastic capital levy having beenbrought about de facto and the awkward conse-quences surmounted, it is asking too much toundo gratuitously what is already done. Threeother arguments, however, of a practical orderare probably those which have convinced M.Poincare. To choose a higher value for thefranc might disturb the equilibrium of theBudget which has been so painfully achieved.It would upset the industrialist exporters—whohave their means of exerting political influence.And—most tangible of all—it would involve theBank of France in a loss on the foreign exchange,said to amount to some £300,000,000, which,as an agent of the Government, it has boughtup at the present rate. To fix 100 francs tothe £, for example, might cost the Bank ofFrance £60,000,000, of which no mean pro-portion might accrue to foreigners. This is justthe sort of argument which M. Poincare andevery other Frenchman is able to understand.

The deed, therefore, is done. Since it re-