THE MONEY MARKET 
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the Reserve Banks in connection with each Loan 
flotation. Thereafter the number of discounting 
banks has first declined and then tended to stability 
until the resumption of certificate borrowing has re 
newed the cycle. The whole movement has been 
cumulative and progressive, both in absolute addi 
tion and in relation to the total membership of the 
Federal Reserve System. 
The discount operations of the Federal Reserve 
Banks reflect the same movement with even greater 
clearness. The volume of bills discounted which 
for the first three months of 1917 showed a monthly 
aggregate of 22 millions rose in April to 50 millions 
and in May to 91 millions. With the flotation of 
the First Liberty Loan there was precipitate increase 
in June to 750 millions. During July and August 
— with the maturing of outstanding certificate 
issues, the influx of Liberty Loan payments, and the 
progress of public expenditures — the member 
banks liquidated their indebtedness rapidly so that 
the volume of bills discounted for member banks 
and other Federal Reserve Banks dropped again 
to where it had been before the loan flotation. 
Upon the resumption of certificate borrowing and 
the withdrawal of government deposits in August 
and September the process of expansion was again 
renewed. Gaining rapidly in intensity in October 
with the flotation of the Second Liberty Loan a 
climax was reached in November, after which the 
recurrent liquidation set in. This liquidation pro 
ceeded more slowly from December on, and in Feb 
ruary was practically overtaken by renewed creation 
of war paper — a condition which continued through