﻿THE FUTURE

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credit which if not directly responsible for infla-
tion and rising prices must at least be regarded as
contributory thereto. This wholesale creation of
new credit results primarily from the fact that the
essence of successful certificate borrowing is the
absorption of the certificate issues by the banks and
the use of payment by credit in settlement. There
need be no counterpart to this in installment bond
borrowing. In connection with each installment
payment there will doubtless be some expansion of
credit by the banks in the form of loans to bor-
rowing subscribers, and some rediscount by mem-
ber banks with the Federal Reserve Banks in con-
nection with the remittance of installment pay-
ments. But this also occurs under certificate bor-
rowing — in connection with the funding loan
flotation — as a secondary form of credit expan-
sion. Moreover in the case of installment loans,
it will occur only to the extent that the prime pur-
pose of such borrowing — payment from out of
savings rather than out of credit — is unrealized,
and will represent in so far the short-coming and
not the essence of the procedure.

It thus appears that an installment loan, as com-
pared with certificate borrowing, would be as ef-
fective and probably more economical in supply-
ing the Treasury’s needs; it would cause as little
strain and dislocation to the money market — and
this of a kind which the general credit apparatus of
the country could correct; and it would be directly
responsible for a notably less expansion of banking
credit with its theatening vista of inflation and
rising prices. Compared item for item installment