So far from this being a truism, it is not literally or exactly true at all; and one can only say that it is more or less true according to circumstances. If capital and labour can freely move on a large scale between home and export industries without loss of relative efficiency, if there is no movement in the “equation of exchange” (see below) with the other country, and if the fluctuations in price are solely due to monetary influences and not to changes in other economic relationships between the two countries, then this further assumption may be approximately justified. But this is not always the case; and such a cataclysm as the war, with its various consequences to victor and vanquished, may set up a new equilibrium position. There may, for example, be a change more or less permanent, or at least as prolonged as the reparation payments, in the relative exchange values of Germany’s imports and exports respectively, or of those German products and services which can enter into international trade and those which cannot. Or, again, the strengthening of the financial position of the United States as against Europe, which has resulted from the war, may have shifted the old equilibrium in a direction favourable to the United States. In such cases it is not correct to assume that the coefficients of purchasing power parity, calculated, as they generally are calculated, by means of the relative variations of index numbers of general purchasing power from their pre-war levels, must ultimately approximate to the actual rates of exchange, or that internal and external purchasing power must ultimately bear to one another the same relation as in 1913. The Index Number calculated for the United States by the Federal Reserve Board illustrates how disturbing may be the influence of the change since 1913 in the relative prices of imported goods, exported goods, and commodities generally: Goods Goods All Imported. Exported. Commodities. 1913 100 100 100 July 1922 128 165 165 April 1923 156 186 169 July 1923 141 170 159