9 8

WAR  BORROWING

anciering  would  dictate. 12  An  ordinary  long-term
bond  issue  must  inevitably  be  floated  some  time  in
advance  of  the  date  at  which  its  proceeds  will  begin
to  be  needed,  and  the  amount  made  available  and  become ­
  subject  to  interest  charge  will  for  a  considerable ­
  time  be  in  excess  of  the  Treasury’s  needs.  It
is  possible  to  attempt  to  reduce  the  cost  and  strain
of  this  plethora  by  permitting  the  optional  payment
of  bond  subscriptions  in  several  installments,  and  by
arranging  for  the  redeposit  of  funds  in  subscribing
banks  qualified  as  government  depositaries  with
nominal  interest  return.  But  as  long  as  installment
payment  is  not  mandatory  there  will  be  heavy  overpayment ­
  and  payment  in  full,  and  in  such  event  the
difference  between  the  interest  rate  borne  by  the
bonds,  and  the  interest  return  upon  the  public  deposits ­
  constitutes  a  net  charge.
On  the  other  hand,  certificate  borrowing  —  the
machinery  once  perfected  —  should  enable  the
Treasury  to  delay  recourse  to  credit  until  the  requirement ­
  is  close  at  hand,  and  thereafter  should
permit  a  precise  adjustment  of  loan  to  need.  The
distinction  is  much  akin  to  the  advantage  which  a
business  man  would  enjoy  with  respect  to  the  banking ­
  accommodations  which  he  requires  were  the
banking  mechanism  so  secure,  his  personal  credit  so
indubitable,  the  money  market  so  stable  that  he
could  entirely  forego  time  loans  and  rely  entirely  on
demand  borrowing.
12  “  The  first  rule  laid  down  by  the  science  of  finance  is,  that
the  demands  of  the  government  for  money  shall  never  exceed
the  amount  necessary  to  perform  with  economy  those  duties
imposed  upon  it”  (H.  C.  Adams,  “Public  Debts,”  New  York,
1887,  p.  92).