unemployment make an ominous combination. We may be sure that
discontent will be profound and widespread. This discontent is pretty
sure to lead, especially in the defeated nations where there is no
compensating "glory," to strong revolutionary movements just as was the
case in Russia after her defeat by Japan. Whether or to what extent
these movements, in which "Socialism" in the various meanings of that
word is sure to play a part, will succeed, depends on the relative
strength of opposing tendencies which cannot yet be measured. One
possible if not probable result may be, as I suggested in THE TIMES two
weeks ago, some international device to secure disarmament and to
safeguard peace.

Though part of the losses to Europe will be permanent, her chief loss
will be coterminous with the war. She will, therefore, seek ways and
means to fill in this immediate hole in her income in order to "get by."
To do this she must borrow; that is, she must secure her present bread
and butter from us and other nations and arrange to repay later out of
the fruits of peace. She can stint herself, but not enough to meet the
situation. She must borrow. And in one way and another she will satisfy
this necessity by borrowing in the United States.

Most of the strange and unprecedented phenomena which we have witnessed
in the last month, in rapid succession, are due to this pressing
necessity of the belligerent peoples to cash in now and trust to good
fortune to pay later. As soon as the war became even probable Europe
tried to cash in on our securities. The pressure for our gold pushed it
toward Europe faster than it could move. Exchange jumped to the
gold-shipping point of $4.89 per pound sterling, and did not stop. In
some cases it reached $7. This was partly due to the desire to get our
gold and bolster up a credit structure, tottering before the deadly blow
of war; but it was also partly due to the need of ready money for
supplies of all kinds. This need applies not only to the Governments,
but to the individual people. To obtain this ready money they threw back
on us the securities they had purchased of us in former years. They
wanted us to take back these titles to future income and give them
instead titles to present income. Had they secured our gold their next
step would have been to spend part of it for supplies, and this would
have caused any foreign dealers to whom they applied to place orders
with us. The gold then might have t