﻿204

WAR BORROWING

without succeeding contraction by certificate liquida-
tion.

Both in estimating our experience and in antici-
pating our requirement, the question thus presents
itself; Is it possible to fashion a borrowing device
which will secure the gain and avoid the loss iden-
tified with the use of certificates of indebtedness?
Specifically, this means a procedure which will offer
like advantage to the Treasury, will leave the money
market as free from strain and will save the price
mechanism from credit inflation.

The program which would seem fairly to meet
these several requirements is — to the extent that
recourse must be had to loans — an initial issue of
anticipatory short-term certificates of indebtedness to
put the Treasury in immediate funds, followed by a
succession of long-term bond issues designed in
technique for popular absorption, payable in evenly
distributed serial installments and sufficient in aggre-
gate amount both to extinguish existing short-term
indebtedness and to obviate further interim bor-
rowing. The loans might be issued either in con-
tinuing “ over the counter ” sale or be floated in
periodic “ drive ” campaigns. In the case of con-
tinuing sale, a less number of installments would
be required inasmuch as offerings might be sus-
pended whenever the influx of funds became ex-
cessive. The effectiveness of this procedure can
best be examined by assuming a specific, though hy-
pothetical instance.

Let us assume, in initiation of the procedure, the
flotation of a Liberty Loan at the earliest date
deemed opportune after the declaration of hostilities,