Ill

THE  TREASURY
Short-term  borrowing  is  an  accredited  expedient
of  war  financing.  The  Treasury  must  be  put  in
ready  command  of  large  funds  immediately  upon
the  declaration  of  hostilities;  and  for  the  considerable ­
  time  elapsing  before  sources  of  extraordinary ­
  revenue  —  war  taxes  and  funded  loans  —  become ­
  productive  there  is  likely  to  be  need  of  anticipatory ­
  borrowing.  The  excesses  to  be  avoided
are  (i)  undue  reliance  upon  temporary  loans  in
lieu  of  definitive  revenue,  with  the  possibility  of  embarrassing ­
  refunding  operations  at  perhaps  critical
intervals;  and  (2)  entry  upon  a  policy  of  shortterm ­
  borrowing  with  insufficient  banking  machinery, ­
  with  the  danger  of  descent  to  bills  of  credit
and  fiat  notes.  These  conclusions  may  fairly  be  described ­
  as  in  conformity  with  accepted  fiscal  theory
and  as  realized  in  familiar  fiscal  practice.
As  employed  by  the  United  States  in  the  present
war,  short-term  obligations  in  the  form  of  certificates ­
  of  indebtedness  have  served  a  larger  purpose.
They  have  indeed  been  used  in  the  traditional  way,
at  the  outset  and  to  a  very  limited  extent,  to  bridge
over  the  initial  interval  until  war  loans  and  war
taxes  should  become  productive.  But  much  beyond
this,  certificates  of  indebtedness  have  been  continu-73