In its details, the effect of the war upon money, credit and banking is bewilderingly complex. it is, therefore, necessary at the outset to sketch in broad outline certain of the main movements and tendencies as a skeleton about which some of the details may be grouped. This outline is, in fact, fairly simple and the writer is content to present it in a form even simpler than the facts will warrant as a first approximation in the study of a complex body of details.
We must view the effects of the war first on their physical side: what has the war brought about in production and consumption, in the course of manufactures, shipping, agriculture and mining? The first step taken at the outbreak of the war was, of course, the mobilization of the armies. Throughout France, Germany, Austria, Russia, Serbia and Belgium, the outbreak of the war led millions of laborers to drop their tools and go to the front. Production was thus instantly enormously curtailed. At the same moment, there began an incredible increase in consumption, as these millions of men not only consumed more food and wore out more clothing than in ordinary times, but also devoted themselves to the most wasteful kind of destruction of the products of labor in the form of explosives, costly machines of war and the like. The consumption of the governments and the armies increased much more rapidly than civilian consumption could contract, and the reservoirs of supplies existing in the belligerent countries were rapidly diminished.
In ordinary times the world lives from hand to mouth. With all our accumulation of wealth we are never far removed from famine or from shortages of consumption goods. The stored up wealth of the world, railroads and bridges, buildings, factories, machinery, farm improvements, household furnishings,