IV
THE  MONEY  MARKET
The  prime  purpose  of  a  fiscal  expedient  in  time
of  war  is  to  supply  the  Treasury  with  funds  sufficient ­
  to  meet  the  extraordinary  requirements  of
national  defense.  The  further  effectiveness  of  a
war  revenue  measure  is  gauged  by  its  success  in  satisfying ­
  the  Treasury’s  needs  with  least  disturbance
of  the  business  activity  of  the  nation  and  with  least
injustice  to  social  classes.  In  matters  of  taxation
these  indirect  but  none  the  less  vital  tests  are  the  resultant ­
  pace  of  industry  and  the  final  incidence  of
tax  burdens.  With  respect  to  public  borrowing,  the
criteria  are  the  course  of  the  money  market  and  the
movement  of  prices.  The  course  of  the  money
market  is  likely  to  register  the  strain  and  dislocation
put  upon  trade  and  industry.  The  movement  of
prices  will  disclose  the  presence  and  extent  of  monetary ­
  inflation,  with  its  accompaniments  of  social  injustice ­
  and  economic  hardship.
It  becomes  important,  accordingly,  to  examine  in
how  far  the  use  of  certificates  of  indebtedness  in  our
war  financing  has  affected  the  money  market  and
the  price  level.  In  the  present  chapter  examination
will  be  made  of  the  relation  of  our  short-term  borrowing ­
  to  the  supply  and  cost  of  business  capital;  in
the  following  chapter  the  effect  of  certificates  of  in-109