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WAR BORROWING

procedure used by the Governor of Guernsey in
building the market hall of his town by an issue of
town notes, subsequently redeemed from out of
market rentals may not be capable of general adop-
tion.3 But this is because of the defects of human
nature rather than the unsoundness of the device.

The fiscal possibilities of certificate borrowing un-
der existing banking conditions offer an exact par-
allel. As a painless mode of supplying and replen-
ishing the Treasury with available funds, the certifi-
cate of indebtedness may encourage laxity or ex-
travagance in public expenditure; but it need not nec-
essarily do so. Kept within the bounds imposed by
periodic redemption from out the proceeds of sav-
ings-paid long-term loans, the funds provided by
certificate borrowing are likely to be expended with
neither greater nor less liberality than other bor-
rowed sums.

The recent experience of the United States has
been much of this kind. Certificate borrowings have
kept the Treasury in funds without the legislative de-
lay, the administrative burden, and the popular agi-
tation inevitably incident to taxation and funding.
There is no evidence to conclude that the presence of
ample resources, readily procured, has encouraged
public extravagance or laxity. Indeed, our effec-
tiveness both in direct preparation for the national
defense and in credit advances to the Allies has prob-
ably been greater by reason of the readiness and
adequacy of our war chest. Had the war been long
prolonged it is possible that with progressive increase

3Jevons, “Money and the Mechanism of Exchange” (New
York edition, 1876), p. 204; lately cited by Withers, “Our
Money and the State” (London, 1917), p. 57.