﻿102

WAR BORROWING

terval of new certificate issues, the Treasury might
at any and all times have prevented or at least
quickly corrected an over-full balance. We may
assume a certain reluctance on the part of depositary
banks to suffer a net reduction of government de-
posits, when in the course of public expenditure such
deposits were drawn upon. But with the redis-
count facilities of the Federal Reserve System mak-
ing it possible for the depositary banks to increase
their available funds under such circumstances with
little effort and at moderate cost, it seems unlikely
that the Treasury would have given consideration to
pressure from this quarter whether presented in the
interest of monetary ease or of some related reason.
Until such time, however, as the purpose of the
Treasury shall have been fully set forth, it seems
idle to speculate as to motive. The essential fact is
that to the extent that the working balance was built
up or maintained at a higher level than safe financ-
ing necessitated, the maximum economy of certifi-
cate borrowing was unrealized.

There remain to be considered the advantages of
certificate borrowing as a continuing mode of war
financing. Over and above its effectiveness or
otherwise in meeting immediate fiscal necessities, in
how far may a policy of anticipatory borrowing be
regarded as rendering easier or more difficult the
prospective financial requirement? Having to do
with a war of highly uncertain duration and of
rapidly progressive cost, it is quite conceivable that
a present fiscal advantage may be gained only at ex-
cessive cost with respect to future needs.

Theoretical analysis suggests that there are two