﻿THE FUTURE

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and to the further fact that the course of prices of
many commodities entering into the index number
was affected directly or sympathetically by govern-
ment price fixture. The sharp rise of commodity
prices in the second phase may be supposed to have
resulted from the expiration of the period of in-
cubation and the confinement of price fixing activity
to basic materials.

Turning from the evidence of the index-number as
at present available, to the factor — an extraordi-
nary increase in the volume of a credit — which in
the absence of counteracting elements is assumed to
bring about such a rise in prices, the exhibit is un-
mistakable. Certificate borrowing has involved the
creation of a huge volume of additional bank credit
in the form of government deposits and there has
been no corresponding contraction or deflation in-
cident to the liquidation or funding of the certificate
issues.

To sum up: The use of certificates of indebtedness
has made it possible for the Treasury to supply its
fiscal requirements with great ease and with reason-
able although not maximum economy and without
any traceable evidence of laxity or extravagance.
In the money market, the accompaniment of certifi-
cate borrowing has been a remarkable absence of
strain or dislocation; but this is imputable to the
associated credit mechanism rather than to any
specific quality of the certificates. Finally, a direct
and unmistakable effect of certificate borrowing has
been the creation of a large volume of banking credit
in the form of government deposits subsequently dis-
persed in the course of government expenditure