PRESIDENTIAL ADDRESS SECTION F. 113 



So intense were the demands of the Governments on the 

 resources of their nations that they could not be met out of the 

 annual product of the people, but had partly to be met by dissi- 

 pating their capital. So great were they, too, that they could not 

 be paid out of taxation or out of loans from the people's real sav- 

 ings. All Governments resorted to creating the purchasing power 

 they needed by expanding, according to their necessities, either 

 paper currency or banking credit, without any corresponding 

 increase in real wealth. This form of so-called inflation is merely 

 a method of concealed taxation by which a Government takes from 

 its citizens their wealth, not by forcing them to pay over to the 

 tax-gatherer, but by reducing its value. The more impoverished 

 a country becomes the greater is the extent to which it is driven 

 to trench upon its capital, and the further it is driven down this 

 road to ruin. 



So far-reaching are the effects of this form of so-called inflation 

 that it is worth while to follow them out, as many of the evils are 

 often attributed to other causes, and false diagnosis means wrong 

 treatment. 



(1) This form of inflation is the root cause of profiteering. As 

 long as prices continue to rise, whoever makes or buys or holds 

 goods at one price, and can, in a short time, sell them at a higher 

 price, must profiteer. 



(2) What the profiteer, whether capitalist or wage-earner, 

 gains, is lost by all those living on fixed incomes or salaries, or on 

 wages which have not increased with the increased cost of living. 

 In this way the "new poor" are among the greatest sufferers 

 through the war. 



(3) By necessitating a constant readjustment between wages 

 and prices — the "vicious spiral," as it has come to be called — 

 causes constant strikes and labour unrest, thereby seriously imped- 

 ing progress. 



(4) By depreciating the currency it depreciates the exchanges. 

 Thus imports cost more and prices are driven up. 



(5) By increasing prices it increases Government and manu- 

 facturing expenditure. While revenue will ultimately increase in 

 proportion to prices, expenditure tends to increase more quickly, 

 causing constantly recurring deficits. 



(6) By variation of prices and exchanges, legitimate trade and 

 industry are replaced by speculation. 



(7) Finally, these causes operate cumulatively and this form of 

 so-called inflation disintegrates society and leads to chaos and 

 anarchy. The Bolshevik plan of ruining western civilisation by 

 forging unlimited quantities of each country's currency, if such 

 paper could have been floated on the national markets, would have 

 been certainly successful. For these reasons the Brussels Inter- 

 national Financial Conference recognised that the first financial 

 reform in Europe, on which all others depended, and the only 

 means of avoiding ruin, was to check and to counteract this form 



.of inflation. To this it only seems necessary to add that the com- 

 jmunity is an organic whole, not only as within the state, but within 



