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WAR BORROWING

anciering would dictate.12 An ordinary long-term
bond issue must inevitably be floated some time in
advance of the date at which its proceeds will begin
to be needed, and the amount made available and be-
come subject to interest charge will for a consider-
able time be in excess of the Treasury’s needs. It
is possible to attempt to reduce the cost and strain
of this plethora by permitting the optional payment
of bond subscriptions in several installments, and by
arranging for the redeposit of funds in subscribing
banks qualified as government depositaries with
nominal interest return. But as long as installment
payment is not mandatory there will be heavy over-
payment and payment in full, and in such event the
difference between the interest rate borne by the
bonds, and the interest return upon the public de-
posits constitutes a net charge.

On the other hand, certificate borrowing — the
machinery once perfected — should enable the
Treasury to delay recourse to credit until the re-
quirement is close at hand, and thereafter should
permit a precise adjustment of loan to need. The
distinction is much akin to the advantage which a
business man would enjoy with respect to the bank-
ing accommodations which he requires were the
banking mechanism so secure, his personal credit so
indubitable, the money market so stable that he
could entirely forego time loans and rely entirely on
demand borrowing.

12 “ The first rule laid down by the science of finance is, that
the demands of the government for money shall never exceed
the amount necessary to perform with economy those duties
imposed upon it” (H. C. Adams, “Public Debts,” New York,
1887, p. 92).