It may be the case, therefore, that a German merchant, careful of his future credit and reputation, who is actually offered a short period credit in terms of sterling or dollars, may be reluctant and doubtful whether to accept it.
He will owe sterling or dollars, but he will sell his product for marks, and his power, when the time comes, to turn these marks into the currency in which he has to repay his debt is entirely problematic.
Business loses its genuine character and becomes no better than a speculation in the exchanges, the fluctuations in which entirely obliterate the normal profits of commerce.
There are therefore three separate obstacles to the revival of trade: a maladjustment between internal prices and international prices, a lack of individual credit abroad wherewith to buy the raw materials needed to secure the working capital and to re-start the circle of exchange, and a disordered currency system which renders credit operations hazardous or impossible quite apart from the ordinary risks of commerce.
The note circulation of France is more than six times its pre-war level.
The exchange value of the franc in terms of gold is a little less than two-thirds its former value; that is to say, the value of the franc has not fallen in proportion to the increased volume of the currency.[150] This apparently superior situation of France is due to the fact that until recently a very great part of her imports have not been paid for, but have been covered by loans from the Governments of Great Britain and the United States.

This has allowed a want of equilibrium between exports and imports to be established, which is becoming a very serious factor, now that the outside assistance is being gradually discontinued.
The internal economy of France and its price level in relation to the note circulation and the foreign exchanges is at present based on an excess of imports over exports which cannot possibly continue.

Yet it is difficult to see how the position can be readjusted except by a lowering of the standard of consumption in France, which, even if it is only temporary, will provoke a great deal of discontent.[151] The situation of Italy is not very different.

There the note circulation is five or six times its pre-war level, and the exchange value of the lira in terms of gold about half its former value.

Thus the adjustment of the exchange to the volume of the note circulation has proceeded further in Italy than in France.