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WAR BORROWING

conceivably accounted for by an increase on the
volume of money in circulation18—with no evi-
dence that the creation of government deposits was
at the expense of existing individual deposits.

In the third cycle (December 31, 1917-March
4, 1918) the volume of individual deposits subject
to check declined from $7,497,821,000 to $7,281,-
753,000 or $216,068,000; the volume of loans and
discounts declined from $9,390,836,000 to $9,139,-
225,000 or $251,611,000; and the amount of money
in circulation decreased (January x-March 1,
1918) from $5,120,424,908 to $5,092,530,682 or
$27,894,226. The accompaniment of certificate ab-
sorption was thus a reduction in the volume of com-
mercial discounts and of checkable deposits, substan-
tial in amount but notably less than the volume of
government deposits created within the period.

In the fourth cycle (June 29-August 31, 1918)
the volume of individual deposits subject to check
rose from $7,161,368,000 to $7,465,681,000 or
$304,313,000; the amount of government deposits
declined from $1,037,787,000 to $506,583,000 or
$531,204,000; the volume of loans and discounts de-
clined from $9,620,402,000 to $9,493,666,000 or
$126,736,000; and the amount of money in circula-
tion increased (July i-September 1, 1918,) from
$5,384,797,000 to $5,621,311,000 or $236,514,000.
Thus during the two months in which the Treasury
was borrowing heavily by fortnightly issues of cer-
tificates of indebtedness there was, far from any re-
duction, a notable increase both in checkable deposits
18 Federal Reserve Bulletin, July, 1918, p. 664.