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WAR BORROWING

flation, if liberated government deposits have gone to
swell commercial deposits, or (b) actual contraction,
if such liberated deposits have been used to reduce
existing loans. On the other hand, if the funds
with which the maturing certificates are redeemed
are supplied by further borrowing, the inflation of
credit will continue — to the original amount if the
liberated deposits have been absorbed in loan repay-
ment; to a correspondingly greater amount, if they
have been dispersed in increased commercial de-
posits.

Let us turn now to the actual movement of credit
and currency during the period of short-term bor-
rowing. In the following table are shown (a) the
nominal amount of certificates of indebtedness issued
each month; (b) the volume of government deposits
in the Federal Reserve Banks and in the special de-
positary banks on the last day of each month; (c)
the volume of individual deposits subject to check
in the national banks at the “call” dates; (d) the
volume of loans and discounts of the national banks
at the “call” dates; (e) the amount of money in
circulation at monthly intervals.

The volume of certificates discloses the three
phases in short-term borrowing, recurring in cyclical
succession :	(t) a period of increase or active issue

in anticipation of a funded loan, (2) a period of con-
stancy or suspended issue during the flotation of the
loan, (3) a period of reduction after the flotation of
the loan, by funding into the bonds of the loan or by
redemption upon or before maturity from out the
proceeds of the loan. With the progress of our bor-