ontribute to the taxation that goes into the pockets of
debt-holders.

Inflation, the third method of paying for war, again produces the same
effect of a reduction of consumption by the civilian population, but
in a roundabout manner, which works at first without being noticed,
and so is particularly dear to the adroit politician. By it nobody
transfers buying power to the Government, but the Government and
the bankers, who are generally most reluctant accessories to the
transaction, between them create new buying power, which, coming into
a restricted market for goods in addition to all the existing buying
power, simply forces everybody to consume less because the money in
their pockets fetches less goods owing to the rise in prices.

The evil attached to this system is obvious enough. It amounts to a
tax on the general consumer in proportion to his consumption, and so
it lays the sacrifice on the shoulders of those least able to bear it.
No Government would have the courage to impose such a tax openly and
frankly. All the warring Governments in varying degrees have used this
roundabout device of imposing it, very likely being quite unaware
of the fraud on the consumer that they were perpetrating. Our own
Government, in fact, having first added by this process to a rise in
the price of bread, then reduced it by a special subsidy--a pleasant
touch of Alice in Wonderland finance. This mode of taxing by raising
prices hits, of course, all those who live on fixed incomes and
salaries and wages. Those who can strike, or take more out of the
consumer, can evade it, and so it falls on the weakest shoulders and
incidentally produces friction, discontent and dangerous suspicion.
But even it works at the time when it happens. Each creation of new
buying power gives the Government, for the moment, control of so much
in goods and services at the expense of the consumer; but when once
the new buying power has been distributed by the State's payments it
is in the hands of the nation as a whole. If the process ceased, the
nation would still have control of the whole of its output, which is
its income, though the injustice involved, to those who are not strong
enough to resist the effects of higher prices, would continue.

Thus, whatever means--straightforward or devious--are used for
financing war, it is paid for while it goes on by the warring country
if the financing is done at home, or by its foreign creditors if the
financing