Page:Bankers and Credit (1924).pdf/55

 no increase in the aggregate demand for goods and services and there need be no rise in the general price level. Goods wanted for the war go up in price, but articles of luxury and all those commodities and comforts in which people have to stint themselves in order to pay the increased taxes, tend to go down, as happened when the war began. If a war's needs could be wholly met in this way, it would leave the nation with no debt and no debasement of currency. Producers of luxuries would be hit, but only for a time and until they adapted their activities to war production, the demands of which are now so great that they quickly absorb all available energy.

Number two—financing war out of loans subscribed with saved money—also has the great advantage of transferring the buying power of those who save to the Government for buying goods needed for the war. This method also should cause no rise in the general level of prices, because the Government's increased demand for goods would be offset by the reduced demand of those who saved to subscribe. This was the kernel of the doctrine preached, with astonishing success, by the War Savings Committee during the war. The objection to the system is that it leaves a debt