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 subsequent contraction had to be more severe." Later on he says that "the whole world has been plunged into the most appalling distress for nearly two years by the strain of raising the commodity value of the dollar 80 per cent. . . . How did such a mistake ever come to be made? The explanation is, I think, simply that the working of the 'vicious circle' of deflation was not understood. It was not realized that a deterrent discount rate, once it had taken effect, can safely be reduced."

This is surely a most interesting example of the success with which a really philosophical mind can detach itself from the facts of life, and can isolate certain items that interest it and subject them as if in an imaginary test tube to experiments that have no connexion with practical existence. Anyone reading Mr. Hawtrey's paper might suppose that the war had only inflicted loss on humanity by disarranging the currency system and that all the miseries of the after-war period were due, not to bad temper, a bad peace and the failure of European politicians to let their countries get back to work, but to the slow and tentative steps with which the United States Federal Reserve Board raised its rediscount rate and its failure to see that the rate might come down again much sooner than it did. Surely Mr.