our capitalists, or its own
promises to pay.

With regard to the goods that we might have available for export,
these were likely to be curtailed owing to the diversion of a large
number of our industrial population into the ranks of the Army and
into munition factories. This curtailment, on the other hand, might
to a certain extent be made good by a reduction in consumption on the
part of the civilian population, so setting free a larger proportion
of our manufacturing energy for the production of goods for export.
Otherwise the problem of paying for goods purchased from abroad could
only be solved by the export of securities, and by borrowing from
foreign countries, so that the shells and other war material that were
required, for example, from America, might be paid for by American
investors in consideration of receiving from us a promise to pay them
back some day, and to pay them interest in the meantime. In other
words, we could only pay for what we needed from abroad by shipping
goods or securities. As is well known, we have financed the war by
these methods to an enormous extent; the actual extent to which we
have done so is not known, but it is believed that we have roughly
balanced by this process the sums that we have lent to our Allies and
Dominions, which now amount to well over 1300 millions.

If this is so, we have, in fact, financed the whole of the real cost
of the war to ourselves at home, and we have done so by taxation,
by borrowing saved money, and by inflation--that is to say, by
the manufacture of new currency, with the inevitable result of
depreciating the buying power of our existing currency as a whole. How
much better could the thing have been done? In other words, how much
of the war's cost in so far as it was raised at home could have been
raised by taxation? In theory the answer is very simple, for in theory
the whole cost of the war, in so far as it is raised at home, could
have been raised by taxation if it could have been raised at all.
It is not possible to raise more by any other method than it is
theoretically possible to raise by taxation. It is often said, "All
this preaching about taxation is all very well, but you couldn't
possibly get anything like the amount that is needed for the war by
taxation, or even by borrowing of saved money. This inflation against
which economic theorists are continually railing is inevitable in time
of war because there isn't enough money in the count