inflation would be less although the
market price of Liberty Bonds might be lower.

That short world production has been one of the causes of rising prices
cannot be denied. The warring powers of Europe took 60,000,000 men from
production (nearly one third their productive man power) and put it to
destruction. They have lived to a great degree by gain of commodities
from the United States, and thus brought their shortage to our shores.
They have not yet altogether recovered from the holidays of victory, the
gloom of defeat, the persuasive "isms" that would find production
without work, the destruction of their economic unity, transportation,
credits, and other fundamentals necessary to maintain production. It
will be some time before they do recover. In the meantime, they are
perforce reducing their consumption--their standard of living--because
they have largely exhausted their securities, commodities or credit to
continue the borrowing of our commodities for their own short
production, as during the war. The exchange barometer is today witness
of the end of this procedure of living on borrowed money. In passing, it
may be mentioned that exchange is no more a cause of their inability to
buy from us than is the barometer the cause of blizzards. The storm is
that they have mostly exhausted their credits and they have not
recovered production so as to offer commodities to us in exchange for
ours.

Our own industrial production, as distinguished from agricultural
production, has fallen rapidly since the armistice. Some of the fall is
due to war weariness, some to "isms" that have infected us from Europe,
some to the natural abandonment of high cost production brought into
play during the war, some to strikes and a host of other wastes. Our
consumption has greatly increased since the restraints of war. Decrease
had not penetrated our agricultural community up to 1919 harvest, nor
will such decrease arise from these causes, but as I will set out later,
forces are entering that will decrease our agricultural production. Our
production in nearly all important food commodities except sugar is in
surplus of our own need. It only becomes a shortage affecting prices
under the drain of exports. Therefore, it is the world shortage that is
affecting our price levels, and not, so far, a deficiency for our needs.

So far as relief from price influence by shortage in production is
concerned, it may arise in two ways. First, slowly thr