Mahr’s article is a theoretical inquiry into why a country’s current balance of payments normally tends toward equilibrium when money is stable. He is not chiefly explaining crisis correction through devaluation, nor defending purchasing-power parity, but identifying the ordinary mechanism by which foreign payments and receipts are brought into line.
He begins by limiting purchasing-power parity. It assumes a world of free commodity arbitrage, yet actual prices differ because many goods are non-traded, transport costs and tariffs matter, and exchange markets include capital movements, transfers, and speculation. Inflation also makes exchange rates move faster than internal prices.
Die Theorie der Kaufkraftparitäten geht von der Voraussetzung eines völlig ungehinderten Güteraustausches zwischen den Ländern aus.
English translation: The theory of purchasing power parities proceeds from the presupposition of an entirely unhindered exchange of goods between countries.
The constructive argument adapts Wieser’s idea that macroeconomic balances rest on the balances of individual economic subjects. Mahr accepts this micro-foundation but shifts the decisive relation from claims and liabilities to money receipts and money expenditures. The national balance of payments tends toward equilibrium because households and firms cannot indefinitely spend without income or receive without either spending, saving, or altering their cash balances.
Die Tendenz zum Gleichgewicht in der Zahlungsbilanz ist die Folge einer analogen Tendenz, die innerhalb der Budgets der Einzelwirtschaften wirksam ist.
English translation: The tendency toward equilibrium in the balance of payments is the consequence of an analogous tendency operating within the budgets of individual economic units.
Mahr formalizes the point by distinguishing units with foreign-receipt surpluses, foreign-payment surpluses, and neutral positions. If aggregate cash balances are not being systematically accumulated or depleted, the excess domestic expenditure of the first group corresponds to the excess domestic income of the second. External balance is thus embedded in the income circuit: exports, imports, and domestic spending are linked through the budgets of individual actors.
Disturbances are then traced dynamically. A rise in imports first weakens domestic sales and income; lower income later reduces imports. Export expansion works in the opposite direction. A foreign loan can postpone the adjustment, but unless it permanently finances excess imports, it too enters the income-spending mechanism. This is Mahr’s income effect.
Auf jeden Fall ergibt sich nach dem Gesagten aus dem Passivwerden der Zahlungsbilanz ein Einkommenseffekt.
English translation: In any case, from what has been said, an income effect results from the balance of payments becoming passive.
The income effect may, however, operate slowly and painfully. Mahr therefore adds the price effect. If domestic prices and wages fall in response to reduced income, exports become more attractive and imports less attractive, accelerating correction. If monopolies, rigid wages, or administered prices block this movement, the burden shifts to output contraction and unemployment. His analysis thereby joins Wieserian budget equilibrium to Keynesian income adjustment and to the foreign-trade multiplier: leakages through imports and repercussions through exports limit, but do not abolish, the equilibrating process.
The policy discussion contrasts fixed and flexible exchange rates. Under gold, specie flows provide the monetary counterpart of deficits and surpluses. Under modern central banking, foreign-exchange intervention changes the domestic money stock in a similar stabilizing direction. Flexible rates can restore balance more directly by changing relative prices, yet Mahr treats generalized exchange-rate variability as politically dangerous because it may nourish protectionism.
The final sections make inflation and deflation central. Balance-of-payments disorder is not merely an external trade imbalance but the international expression of internal monetary disequilibrium. Inflation creates excess money incomes that spill into imports and foreign exchange; deflation produces deficient expenditure, unemployment, import contraction, and pressure in the opposite direction.
Bei Inflation und ebenso bei Deflation kann das Gleichgewicht der Zahlungsbilanz einfach aus dem Grunde nicht aufrecht erhalten werden, weil auch innerhalb der Volkswirtschaft das Gleichgewicht zwischen Einkommen und Ausgaben gestört ist.
English translation: In inflation, and likewise in deflation, the equilibrium of the balance of payments cannot be maintained, for the simple reason that within the national economy too the equilibrium between income and expenditure is disturbed.
The article’s importance lies in replacing a mechanical parity theory with an income-expenditure account of external balance. Normal equilibrium arises from the budget discipline of economic units; persistent disequilibrium arises when monetary policy destroys the correspondence between money income and money expenditure.
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