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WAR BORROWING

infer that any process of currency expansion directly
associated with the issue of certificates of indebted-
ness would begin to operate with the completion of
payments by subscribing banks. Upon this basis,
the assumption of a five months period of incubation
would lead us to expect that any such effect exerted
upon the price level by the certificates issued in an-
ticipation of the First Liberty Loan would not have
become apparent before December, 1917, and that
any such effect exerted by succeeding issues of cer-
tificates would not have become apparent until
thereafter.

But there is a further reason, although of a very
different kind, why the possible price raising effect
of an increase in the volume of money should not be
apparent in a rising index number during the first
seven months of our war borrowing even though the
period of incubation were less than that assumed.
Under the stress of war conditions the United States
has pursued to an increasing extent the policy of fix-
ing by statute and by administrative order or of
otherwise influencing or determining the maximum
prices which may be paid for a large body of com-
modities, a considerable number of which figure in
the computation of the index number.

The price-fixing activities of the United States
Government began practically with the passage in
August, 1917, of the Food and Fuel Act.15
Through the powers conferred by this law upon the

15 For the following particulars I am indebted to a memor-
andum prepared by Dr. Leo Wolman of the Johns Hopkins
University, at present associated with the Price Section, Di-
vision of Planning and Statistics, of the War Industries Board.