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WAR BORROWING

avoid the necessity of such renewal or reissue and
to provide for the liquidation of the certificates by
the flotation of long-term loans. But this is a sequel
to, rather than a condition of certificate borrowing,
comparable to a deliberately contemplated funding
loan with regard to which demand notes are issued
and out of which they are eventually extinguished.
Heretofore, the Treasury has floated bond issues
enough in volume and frequency to discharge the
intervening certificate issues, without appreciable
recourse to renewal and without undue reliance upon
bank absorption and credit payment. It is likely
that the maintenance of this policy has operated to
restrain the issue of certificates however easy the
process of emission, precisely as the definite contem-
plation of a refunding operation would check the
issue of demand notes. But subject to such
restraint, certificate borrowing like fiat money con-
stitutes an almost effortless mode of supplying the
Treasury with resources in the amounts and at the
times needed for public expenditure.2

The objection to demand notes as a fiscal ex-
pedient lies in the fact that their proper use calls
for a degree of wisdom and reserve, if not super-
human, at least beyond that self-control which any
modern state has been able to muster to the service
of its exchequer. Were a state to issue inconvertible

2 It is impossible, however, to neglect the significance of the
lengthening “ overlap,” that is, the extent to which the ma-
turities of the certificates of one cycle extend into the issue
period of the succeeding cycle. Taken in conjunction with
the heavy over-payment of the first installments on account of
loan subscriptions, and the small use of certificates as com-
pared with payment by credit, such procedure verges close
upon certificate refunding.