means a severe restriction of purchasing power and a consequent lowering of prices, which is indeed the declared purpose of a deflationary policy. . . . Very little argument is needed to show that a policy of driving or keeping down prices by a restriction of purchasing power must depress trade. . . . If the merchant or manufacturer thinks that prices are going to fall, he will restrict his orders for finished goods or raw materials. . . . What is the consequence? Men and women are thrown out of employment, less is paid in wages and the amount spent upon consumption is reduced." Mr. McKenna's authority on these matters is worthy of all the respect that it so widely commands, but I still venture to submit that there is strong ground, as shown in Chapter V above, for the view that deflation did not cause depression, but followed it and was caused by it. The collapse in trade began abroad, long before there had been in England any reduction in purchasing power as measured by the volume of bank deposits. Bank deposits shrank because trade was inactive and prices were lower and credit was not wanted. The deflation of which he complains, as having been actively continued until three months ago, was the system against which he argued so vigorously in his speech to the Midland bank shareholders
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