rdinary expenses amounted to far more than
the total government revenue. As lately as 1920, all of the European
belligerents, with the exception of Great Britain, all of the European
neutrals, except Sweden, and all of the other principal countries of the
world except Peru and the United States, reported expenditures in excess
of receipts. The deficit for Austria amounted to 38 per cent of its
expenditures. In other principal countries the ratio of deficit to
expenditure was:

Belgium 69 per cent
France 57 " "
Germany 46 " "
Italy 21 " "
Japan 17 " "

("Our Eleven Billions," p. 40-41).

These events led inevitably to a demoralization of the foreign exchange
market, which reflects the measure of confidence felt by the business
men of one community in the promises to pay made by the government of
another community. The exchange values of the non-warring countries
remained generally near to par during the entire war and post war
period. Japanese exchange fluctuated very little; British pounds, which
up to the time of the war were recognized the world over as the standard
of value, fell to about three fifths of their par value as expressed in
dollars; the French franc and the Italian lira fell to a quarter of
their par values, while the Russian ruble, the German mark, the Austrian
and the Polish crowns fell to less than one-tenth of one per cent of
par. In addition to the serious depreciation of these various
currencies, their values fluctuated from day to day and hour to hour,
making business transactions difficult or impossible.

Coupled with the disorganization of exchange has been the economic
depression which, beginning in March, 1920, spread like a tidal wave,
bringing disaster and hardship to workers, farmers and business men.
With abundant crops, with industries united into great combinations,
with the banks more efficiently organized than ever before in modern
times, there should have been no crisis according to the accepted
economic philosophy, or, if there was a temporary set-back following the
strain of the war, it should have been a regulated panic. But despite
the predictions the depression came, and proved to be one of the most
severe that the modern world has experienced. The thoughtful man noting
these facts, and then learning that, beginning with the hard times of
1814, there have been seventeen of these breakdowns in the economic
machinery