r is
interfered with. This is true today of cotton.

There has already been a speculative movement to anticipate these
changes and arbitrarily to mark some prices up and some prices down. But
as this is guesswork, and will be subject to frequent revision, one of
the striking phenomena will doubtless be an increase in the variability
of prices. The general level of prices will tend to rise. The rise will
probably be greatest in little countries like Belgium, which are in the
war zone and largely dependent on foreign trade. The rise will be less
in England and in the United States than on the Continent. In fact, it
is conceivable that in England the hoarding of money and the shock to
credit, which is as predominant there as it is here, may actually lower
the general level of prices during the war, especially if we could
include in the index number the prices of securities, luxuries, and
articles of English internal trade. If any nation tries the old
experiment of paying its bills in irredeemable paper money, that
desperate expedient will have the same result that it did with us during
the civil war. Inflation of the currency will expel gold from that
country and raise its price level higher than elsewhere.

After the war is over prices will probably not retreat, but will move
upward even faster than before. There may then come the familiar "boom"
period, which may culminate in a commercial crisis in a few years after
the close of the war, as was true after the Crimean war, the American
civil war, and the Franco-Prussian war. The rebound will probably be
fastest in England. Statistical price curves of many nations usually
show an upward turn when war begins and another when it ends. The war
will thus aggravate a rise of prices already in prospect.

It would take considerable space to give, completely, the reasons for
these prognostications, but I have tried to justify them in a brief
addendum to a book to be issued this week on "Why Is the Dollar
Shrinking?"

The sudden lightning bolt of war produced as one of its first economic
effects a general dislocation of credit machinery in Europe and to some
extent in this country. We heard at once that letters of credit of
travelers in Europe were uncashable. Gold was hoarded everywhere. It is
estimated that about $30,000,000 in gold was hoarded in New York in the
first week in August. Runs on banks were frequent. Bank reserves were
depleted.

The moratorium was resorted to