Nelson's history of the war. Vol. XI., The struggle for the Dvina, and the great invasion of Serbia

76 HISTORY OF THE WAR.

over, by the import of war stores the balance against us was hugely increased. If we put the debit balance at [200,000,000, which was certainly an under-estimate, and add the [400,000,000 we were lending to our Allies and Colonies, we reach a figure of some [600,000,000 which could not be met by any of the means used to finance our internal effort. These figures are speculative ; but in the case of the United States we could get a calculation approximately exact. For the year ending June 30, 1914, the excess of American exports over British imports was [60,000,000. For the year ending June 30, 1915, it was £131,000,000. If we take the figure of [60,000,000 as the excess which could be met in the normal way of trade, then [71,000,000 had to be met by extraordinary measures — that is, by other means than freight earnings or the interest on British-owned American securities. The result of this abnormal situation, which the Government appeared to be slow in recognizing, was that the American exchange went steadily against us. Early in November it was as much as thirty-six cents below the normal. This meant that to settle our debts to America we must pay considerably more than the amount of the debts. One result, partly attributable to this fact, was a great inflation of prices. For the nine months ending September 1915 we imported 17,000,000 cwts. less of grain and flour than for the same period in 1913, but they cost us £20,000,000 more. We imported 2,300,000 cwits. less meat, but at an increased cost of £26,000,000. To meet this grave situation there were various possible expedients. One was to increase our civil

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