﻿THE PRICE LEVEL

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The current war loans of the United States have
been neither as simple nor as direct as the above, and
this in consequence of the use of certificates of in-
debtedness. The Treasury has been supplied in the
first instance by anticipatory borrowings in the main
from the banks and to a limited extent from in-
vestors, and such temporary obligations have at in-
tervals been liquidated out of or funded into issues
of long term bonds bought in the course of intensive
flotation campaigns by investing citizens and banks.
This procedure — conveniently described with re-
spect to its dominant feature as “ certificate borrow-
ing ”— presents much more complex possibilities as
to resultant inflation. The certificates of indebted-
ness may be paid for from out of savings or from
out of loans, and the same alternatives exist with re-
spect to the bond issues by which or from the pro-
ceeds of which the certificates are eventually extin-
guished. In short, new variables enter into play and
the outcome becomes more than ever dependent upon
elected policies. The conclusions which might be
expected to result from these more intricate con-
ditions might be summarized briefly as follows: If
the certificates are taken over by the banks and by
investors without the creation of additional deposit
currency, and if the funding bond issues are there-
after subscribed and paid for from out of savings,
there will be no loan-created inflation. To the
extent that any of these assumptions are unrealized,
the possibility of such inflation is present.

Before passing to our direct concern — the man-
ner in which, if at all, the use of certificates of in-