for the war. War's needs can only be met out of the current production
of the world as it is at present. All the warring powers begin a
war with certain accumulated war stores consisting of battleships,
ammunition, guns and all other forms of war material. Apart from these
stores with which they begin, the whole work of providing the armies
with the fighting materials that they require, and the food and
clothes that they consume, has to be done during the course of the
war, that is to say, out of the current production of the moment.

Therefore the real economic problem that any Government has to face in
war-time is that of inducing its citizens to reduce their purchase of
goods and services, that is to say, to spend less, so that all
the things required for the Army and Navy may be obtained by the
Government. It is true that some of the goods and services required
for carrying on war can be obtained from foreign countries by any
belligerent which is able to communicate with them freely. In that
case the current production of the foreigner can be called in to help.
But this can only be done if the warring country is able to ship goods
to the foreigner in payment for what it buys, or if it is able to
obtain a loan from the foreigner, or some other foreign country, in
order to pay for its purchases abroad, or again, if, as in our case,
it holds a large accumulation of securities which foreign countries
are prepared to take in exchange for goods that they send for the
purposes of the war. By these two last-named processes, raising money
abroad, and selling securities to foreign nations, the warring country
impoverishes itself for the future. When it borrows abroad it pledges
itself to export goods and services in future to meet interest and
sinking fund on the money so raised, so getting no goods and services
in return. When it ships its accumulated wealth in the form of
securities it gives up for the future any claim to goods and services