"Increased prices also necessitate the employment of larger funds in the conduct of a business. A larger volume of credit is required at higher prices to take care of bills for raw materials, and more money is necessary to meet increased payrolls. As a consequence, therefore, of increased prices, business men required increased credit if they were to avoid curtailment of operations and reduced production. Due to higher prices, therefore, the banks were under the necessity of meeting the business demand for expansion of credit."

INFLATION

The inflation process is described as follows:

"In pre-war times every dollar finding its way to the market was supposedly the counterpart of some commodity or part of a commodity also appearing in the market. Funds expended for the purchase of food, clothing, and for the payment of rentals were assumed to have been earned by some productive contribution to the general supply of commodities. With the outbreak of war there began to appear in the market, funds derived from wages, profits, etc., which had been paid out in connection with nonproductive activities of war, and which therefore implied no corresponding contribution to the market supply of commodities. The producers of, and the dealers in, the decreased quantity of commodities brought to market increased the prices of these commodities to the point where they might absorb all the purchase money that became available. These increased prices and wages have required increased circulating medium. This requirement has been met primarily by increased credit and the increased use of bank checks as an instrument of payment. As to the currency situation, the total money in the United States in 1900 amounted to $2,340,000,000. According to a statement issued by Governor W. P. G. Harding, of the Federal Reserve Board, the amount of money in circulation has varied during the last five years as follows:

"This shows an increase during our war period of $7.28 per capita. The amount of money in the Treasury and in Federal Reserve Banks is not in circulation, and is, therefore not included in the figures quoted from Governor Harding's statement.

"In regard to the part played by national credit in meeting the situation growing out of the extraordinary requirements of the government and the rise in prices which the urgency of demands made possible, it is to be noted that government bonds had to be sold to pay for a large proportion of the goods which war activities were consuming. In consequence the national debt up to August 1, 1919, had been increased by $24,518,000,000, or approximately $230 per capita. Of course, government bonds are always good security for bank credit."

FOOD SUPPLY—WHEAT, CORN AND SUGAR

Despite the fact that we sent large shipments of food to our Allies, our supply at the close of the war was not seriously diminished. The 1919 crop, while not expected to be large, was amply sufficient to prevent a real shortage. This is supported by the following extract from Mr. Clarkson's report:

"The wheat crop for 1918 amounted to 917,000,000 bushels, as compared to an average for 1910—14 of 728,000,000 bushels; and the probable harvest in 1919 is 1,236,000,000 bushels. Our supply of wheat in elevators, mills, etc., on May 9, 1919, was 96,000,000 bushels, as against 34,000,000 bushels the year before. Our flour mills, whose capacity is estimated at something like double their usual output, were milling week by week during 1919 considerably more flour than the year before. They produced for the week ending May 9, 1919, for example, 2,553,000 barrels as against 1,569,000 barrels for the corresponding week of 1918. Notwithstanding large exports, our wheat supply is obviously adequate. In 1918, a record year, we exported 21,000,000 barrels of flour. In 1915 our wheat exports reached their maximum—206,000,000 bushels.