THE  MONEY  MARKET

151

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  renewed ­
  the  cycle.  The  whole  movement  has  been
cumulative  and  progressive,  both  in  absolute  addition ­
  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  proceeded ­
  more  slowly  from  December  on,  and  in  February ­
  was  practically  overtaken  by  renewed  creation
of  war  paper  —  a  condition  which  continued  through