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34 gratification, immediately reduced deposits or credit inflation.

In all cases where the amount subscribed is not saved, the Government creates or secures purchasing power without creating any equivalent goods to purchase. It either creates the purchasing power out of whole cloth, as in Russia, or authorizes banks to create it out of whole cloth, as in Germany, England, and, to a less extent, the United States. All of these methods of war finance, like the greenback method in the Civil War and the Continental paper money method of the Revolution, may be defended on the plea of military necessity, but they are inflation none the less, even when gold redemption has been nominally maintained, and they therefore tend to add to the cost of living. As Dr. A. C. Miller of the Federal Reserve Board has said, "Inflation is no less inflation when gilded with gold."

10. Extent of War Inflation

On the whole, the money in circulation in the United States rose from three and one third billions in 1913 to five and a half billions in 1918, and bank deposits from thirteen to twenty-five billions, both approximately corresponding to the rise in prices.

Taking a world-wide view, the money in circulation in the world outside of Russia increased during the war from fifteen billions to forty-five billions and the bank deposits in fifteen principal countries from twenty-seven billions to seventy-five billions. That is, both money and deposits have trebled; and prices, on the average, have perhaps trebled also.