OH. 21

INTERNATIONAL DISEQUILIBRIUM

353

sources of the nationals of the foreign Central Banks ,has forced these Central Banks to part with their ownbalances;—and in either event there will be no economyof gold to the Central Banks of the world taken asa whole.

It would seem, therefore, at first sight that wecannot have it both ways. Either the complaint ofthe critics as to the lack of reciprocal action is justified,or there is no real economy of gold. But it is notnecessarily so bad as this, for the following reason.

Suppose that the increase or decrease of the liquidforeign resources of Central Bank A with CentralBank B is at the expense of the decrease or increaseof the resources of Central Bank A' with CentralBank B, then, although there is no reciprocal actionso far as B is concerned, there is reciprocal action onthe part of A' of a kind to help A towards its readjust-ment. Moreover, if Central Bank B is used as aClearing House by the Central Banks of the rest ofthe world so that a change in the balances of oneCentral Bank with B is normally balanced by an equaland opposite change in the balances of some otherCentral Bank, then it will be reasonable for CentralBank B not to hold any important proportion of goldagainst the normal aggregate of foreign Central Bank balances held with it, though regarding any departurefrom this normal aggregate as a symptom requiringmuch the same treatment as if it were a movement ofgold. In this case we should, up to the extent of theaccepted size of this normal aggregate, secure for theworld a real economy of gold, and also for individualCentral Banks, when they vary the amounts of theirforeign balances, the same reciprocal action on thepart of other Central Banks, as if they were vary ingtheir stocks of gold.

In practice, however, the actual position is un-fortunately not so good as this ideal case. For theideal case requires the fulfilment of two conditions :—

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