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WAR BORROWING

the form of government deposits, unrelieved by a
corresponding reduction of commercial deposits.

This expansion has not been self-correcting.
With the cessation of certificate issues and the com-
pletion of the loan flotation — involving payment
and redemption of outstanding certificates — the
banks have tended to become less urgent creditors
and more liberal lenders. The volume of com-
mercial deposits and the amount of money in cir-
culation have tended to increase to a slight extent
from more active commercial discounting by the
banks, but to a very marked degree from the accumu-
lation in individual deposit accounts of government
credits liberated in the course of public expenditures.
The second stage in the process has thus been the dis-
persion among commercial deposit accounts of the
volume of credit traceable to the certificate issues
and a withdrawal of some part of such deposits for
additional circulation.

These movements — credit expansion in the pri-
mary stage and credit dispersion in the secondary
stage — have been recurrent in the four successive
cycles of our war borrowing, and they have been
cumulative in result. 21

21 It will be found interesting to compare with the above the
similar conclusions reached in England as to the like policies
there pursued; see Hartley Withers, “ Our Money and the
State” (London, 1917), pp. 60-67; “Second Report from the
House of Commons Select Committee on National Expendi-
ture” (December 13, 1917), sect. 18-19, and Lord Cunliffe’s
Report on Currency and the Foreign Exchanges (reprinted in
Federal Reserve Bulletin, December, 1918).