m THE BURDEN OF THE LONDON SETTLEMENT 75

short periods than in the long run. For in the longrun all values in Germany , including the yield oftaxation, will tend to adjust themselves to an apprecia-tion or depreciation in the value of the paper markoutside Germany . But the process may be a veryslow one, and, over the period covered by a year'sbudget, unanticipated fluctuations in the ratio of thegold to the paper mark may upset entirely the financialarrangements of the German Treasury.

This disturbance has of course occurred on anunprecedented scale during the latter half of 1921.Taxation in terms of paper marks, which was heavywhen the £ sterling was worth 200 paper marks,becomes very inadequate when the £ sterling isworth 1000 paper marks; but it is beyond thepower of any Finance Minister to adjust taxation tosuch a situation quickly. In the first place, when thefall in the external value of the mark is proceedingrapidly, the corresponding fall in the internal valuelags far behind. Until this adjustment has takenplace, which may occupy a considerable time beforeit is complete, the taxable capacity of the people,measured in gold, is less than it was before. Buteven then a further interval must elapse before thegold-value of the yield of taxation collectible in papermarks can catch up. The experience of the BritishInland Revenue Department well shows that theyield of direct taxation must largely depend on thetaxable assessments of the previous period.