﻿IV

THE MONEY MARKET

The prime purpose of a fiscal expedient in time
of war is to supply the Treasury with funds suf-
ficient to meet the extraordinary requirements of
national defense. The further effectiveness of a
war revenue measure is gauged by its success in sat-
isfying the Treasury’s needs with least disturbance
of the business activity of the nation and with least
injustice to social classes. In matters of taxation
these indirect but none the less vital tests are the re-
sultant pace of industry and the final incidence of
tax burdens. With respect to public borrowing, the
criteria are the course of the money market and the
movement of prices. The course of the money
market is likely to register the strain and dislocation
put upon trade and industry. The movement of
prices will disclose the presence and extent of mone-
tary inflation, with its accompaniments of social in-
justice and economic hardship.

It becomes important, accordingly, to examine in
how far the use of certificates of indebtedness in our
war financing has affected the money market and
the price level. In the present chapter examination
will be made of the relation of our short-term bor-
rowing to the supply and cost of business capital; in
the following chapter the effect of certificates of in-

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