PRESIDENTIAL ADDRESS SECTION F. 115"" 



on the one side and of his liabilities on the other. A ratio is 

 established at so much in the £, distribution of the assets takes 

 place at such a figure, and the balance is written off as a loss to all 

 concerned. In national insolvency there is no court to move; no 

 estimation of the amount to be written off, but the same result is 

 reached — annihilation of values — by an automatic process of rising 

 prices. The State does not withdraw the money by taxation, but 

 renders property worthless proportionately to the rise in prices. In 

 Austria one crown instead of being worth ten pence is now worth 

 about one-fifth of a penny; while in Russia roubles, which before 

 the war would have been worth about .£100,000, can now be bought 

 as a speculation for £20. An Austrian teacher of whom I have 

 heard retired on a pension of 2,000 crowns, with a purchasing power 

 of £85, has now the impossible task of living on a purchasing power 

 of £1 8s. The effect of such a state of things is that all foreign 

 trade becomes impossible. The Austrian crown is depreciated to 

 such a degree that it is virtually unrecognised abroad. Industry, 

 so far as it depends on transport of raw material, is at a standstill. 

 Fixed incomes and wages which have not managed to keep up with 

 the cost of subsistence have become inadequate to support life. All 

 credit is at an end, as creditors are ruined and refuse to lend. 

 Modern economic civilisation, which is based upon production for 

 exchange, has become impossible", and the only economic reality 

 left standing is production for use, thus shelving or side-tracking 

 the whole of the official, professional, and commercial classes. The 

 economic bankruptcy of a nation then means reversion to an early 

 or archaic type of civilisation — production for use only, and the 

 sacrifice for a time of all the artistic and professional values of 

 civilisation. Such a possibility affects every individual in the State, 

 and ought to g«ive him a direct and living interest in the policy 

 of Government which may have such trenchant and far-reaching- 

 results. 



Economic Disconformtty. 



The second large phenomenon of modern economics which 

 appears to claim attention is the breakdown of the system of inter- 

 national exchanges. Although most social institutions and prac- 

 tices have beginnings which are unknown and work unconsciously 

 and automatically, it is well to remember that society is instinct 

 with purpose and it is always worth while, for purpose of inter- 

 pretation and criticism, to treat such practices teleologically. From 

 this point of view we may regard the system of international 

 exchanges as an attempt to reduce national media of exchange to 

 a common denominator in the bullion value of the respective cur- 

 rencies. For this purpose perfect and fluid permeation of gold as 

 bullion is necessary. Freedom of import and export of the precious 

 metal is of the very essence of the device. Only on such conditions 

 was it possible to find an equation of exchange for the payment of 

 the balances of international trade. The moment the freedom of 

 flow was interrupted between country and country it was found 

 that the integrity of the international basis had been eaten out by 

 the substitution of notes and credit instruments locally valid, but. 



