170

WAR  BORROWING

infer  that  any  process  of  currency  expansion  directly
associated  with  the  issue  of  certificates  of  indebtedness ­
  would  begin  to  operate  with  the  completion  of
payments  by  subscribing  banks.  Upon  this  basis,
the  assumption  of  a  five  months  period  of  incubation
would  lead  us  to  expect  that  any  such  effect  exerted
upon  the  price  level  by  the  certificates  issued  in  anticipation ­
  of  the  First  Liberty  Loan  would  not  have
become  apparent  before  December,  1917,  and  that
any  such  effect  exerted  by  succeeding  issues  of  certificates ­
  would  not  have  become  apparent  until
thereafter.
But  there  is  a  further  reason,  although  of  a  very
different  kind,  why  the  possible  price  raising  effect
of  an  increase  in  the  volume  of  money  should  not  be
apparent  in  a  rising  index  number  during  the  first
seven  months  of  our  war  borrowing  even  though  the
period  of  incubation  were  less  than  that  assumed.
Under  the  stress  of  war  conditions  the  United  States
has  pursued  to  an  increasing  extent  the  policy  of  fixing ­
  by  statute  and  by  administrative  order  or  of
otherwise  influencing  or  determining  the  maximum
prices  which  may  be  paid  for  a  large  body  of  commodities, ­
  a  considerable  number  of  which  figure  in
the  computation  of  the  index  number.
The  price-fixing  activities  of  the  United  States
Government  began  practically  with  the  passage  in
August,  1917,  of  the  Food  and  Fuel  Act. 15
Through  the  powers  conferred  by  this  law  upon  the
15  For  the  following  particulars  I  am  indebted  to  a  memorandum ­
  prepared  by  Dr.  Leo  Wolman  of  the  Johns  Hopkins
University,  at  present  associated  with  the  Price  Section,  Division ­
  of  Planning  and  Statistics,  of  the  War  Industries  Board.