Excerpt from The Quarterly Journal of Economics, 1920, Vol. 34
The forces were not only complex; they were also enormous in volume. The ordinary mechanism of ad justment proved quite inadequate for regulating this cataclysmic overturn. It was simply impossible to find anywhere in the world means of remittance, of the usual kind, suficient in amount to provide payment for the exports demanded from the United States. The ortho dox analysis of the case is that an excess of exports will be paid for by inflow of specie, continuing until changes in prices lead to the refistablishment of equilibrium. But nothing of this kind was possible. If the gold flow into the United States had been allowed to continue until it thus came automatically to an end, all the avail able gold in allied countries would have been carried te the United States, and yet without bringing its own remedy. Here, as in so many other cases, time is of crucial importance. If the process had been spread over a decade or two, the results contemplated by theory would presumably have come about. Given time enough, prices and merchandise imports and exports would have shifted in the predicted way. But so enor mous a movement, concentrated in so short a period.
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