122

WAR  BORROWING

country  are  in  each  case  under  like  state  as  to  loanable ­
  funds  (the  relation  of  reserves  to  deposits),
and  that  the  absorbing  capacity  of  ultimate  investors
is  identical  in  the  two  instances.  Under  such  conditions ­
  the  advantages  as  to  the  money  market  of  a
series  of  short-term  issues  as  compared  with  a  single
long-term  loan  would  seem  to  be  unmistakable.
In  the  case  of  the  long-term  loan  there  is  likely
to  be  strain  upon  the  money  market  as  funds  are
withdrawn  from  circulation  or  from  deposit  accounts ­
  in  payment  of  bond  subscriptions.  In  the
case  of  the  certificate  issues  there  will  be  smaller  although ­
  recurrent  requisition  upon  the  capital  market
in  the  first  instance  and  earlier  relaxation  in  the
second.  Not  only  will  the  total  disturbance  of  a
succession  of  small  strains  be  less  than  the  dislocation ­
  of  a  single  great  strain;  but  the  withdrawal
strain  will  be  less  protracted  and  more  evenly  distributed ­
  in  the  case  of  the  short-term  borrowing.
The  foregoing  assumes  that  bond  subscriptions
although  nominally  payable  in  installments  may
nevertheless  be  over-paid  or  paid  in  full  at  the  first
installment  date  at  the  option  of  the  subscribers  —
and  that  this  practice  is  largely  followed,  as  has  actually ­
  been  the  case  in  the  Liberty  Loan  flotations.
It  is  conceivable  however  that  obligatory,  that  is
“  un-anticipatible  ”  installment  payments  are  required ­
  in  connection  with  the  bond  issue  and  that
bond  receipts  are  promptly  expended  or  are  redeposited ­
  pending  such  expenditure  by  the  Treasury ­
  in  the  banks.  In  such  event  the  relative  advantage ­
  of  certificate  issues  as  to  strain  upon  the
money  market  will  be  less.  In  the  case  of  cer-