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WAR BORROWING

country are in each case under like state as to loan-
able funds (the relation of reserves to deposits),
and that the absorbing capacity of ultimate investors
is identical in the two instances. Under such con-
ditions the advantages as to the money market of a
series of short-term issues as compared with a single
long-term loan would seem to be unmistakable.

In the case of the long-term loan there is likely
to be strain upon the money market as funds are
withdrawn from circulation or from deposit ac-
counts in payment of bond subscriptions. In the
case of the certificate issues there will be smaller al-
though recurrent requisition upon the capital market
in the first instance and earlier relaxation in the
second. Not only will the total disturbance of a
succession of small strains be less than the disloca-
tion of a single great strain; but the withdrawal
strain will be less protracted and more evenly dis-
tributed in the case of the short-term borrowing.

The foregoing assumes that bond subscriptions
although nominally payable in installments may
nevertheless be over-paid or paid in full at the first
installment date at the option of the subscribers —
and that this practice is largely followed, as has ac-
tually been the case in the Liberty Loan flotations.
It is conceivable however that obligatory, that is
“ un-anticipatible ” installment payments are re-
quired in connection with the bond issue and that
bond receipts are promptly expended or are re-
deposited pending such expenditure by the Treas-
ury in the banks. In such event the relative ad-
vantage of certificate issues as to strain upon the
money market will be less. In the case of cer-