reduction is compatible with the preservation of national security.

(_c_) Abandon all unproductive extraordinary expenditure.

(_d_) Restrict even productive extraordinary expenditure to the
lowest possible amount.

The Supreme Council of the Allied Powers in its pronouncement on
the eighth of March declared that "armies should everywhere be
reduced to a peace footing; that armaments should be limited to the
lowest possible figure compatible with national security and that
the League of Nations should be invited to consider, as soon as
possible, proposals to this end."

The statements presented to the conference show that, on an
average, some 20 per cent of the national expenditure is still
being devoted to the maintenance of armaments and the preparations
for war. The conference desires to affirm with the utmost emphasis
that the world cannot afford this expenditure. Only by a frank
policy of mutual cooperation can the nations hope to regain their
old prosperity, and in order to secure that result, the whole
resources of each country must be devoted to strictly productive
purposes.

The conference accordingly recommends most earnestly to the Council
of the League of Nations the desirability of conferring at once
with the several governments concerned, with a view to securing a
general and agreed reduction of the crushing burdens which on their
existing scale armaments still impose on the impoverished peoples
of the world, sapping their resource and imperiling their recovery
from the ravages of war. The conference hopes that the Assembly of
the League, which is about to meet, will take energetic action to
this end.

The above recommendations were ignored by the League of Nations and by
practically all the governments concerned. Consequently the debts and
deficits of most European countries are larger at the present time than
they were a year ago, and most of the paper currencies have
depreciated--some very heavily--during the last twelve months.

THE DANGERS OF INFLATION

I turn next to the resolutions proposed by the second commission which
had to examine problems of currency and foreign exchange.

From its resolutions, which also were adopted unanimously by the
conference, I extract the following:

The currencies of all belligerent and of many other countries,
though in greatly varying d