Much significance attaches to these exceptions, as later will appear.


§6. _The Disturbances of Monetary Changes_. But let us still keep a
critical eye on Law II, and submit it to another flashlight from our
practical experience. The recent world war made us all acutely aware
of a remarkable rise in the price of almost everything, which yet did
not seem to diminish appreciably the demand. The explanation of this
paradox is not difficult to find. There was an immense increase in the
volume of nominal purchasing power, due to a complex set of causes, of
which "currency inflation" may be taken as the symbol. Now perhaps we
are entitled to assume the absence of such currency changes as part of
the "other things being equal" which is always understood as
implied. But it is rash to take this particular assumption for
granted, more especially in these days. Already people are too apt to
speak as though the trade depression (which as these pages are written
holds us in its grip) cannot pass away until pre-war prices are
restored, ignoring altogether the great and probably permanent
increase in nominal purchasing power which the war has left behind
it. It would be safer, therefore, to add explicitly to Law II the
reservation, "Assuming that there is no change in the general volume
of purchasing power."

Monetary and allied questions will form the subject of the second
volume of this series. It must not be supposed that our general laws
have no bearing on them. On the contrary, Law I, which all this time
has remained serene and undisturbed by the occasional discomfitures of
Law II, is the gateway through which all questions of currency,
banking and the foreign exchanges should be approached. It is well to
note, as an inexorable corollary of Law I, that prices can rise _only_