i8o

WAR  BORROWING

flation,  if  liberated  government  deposits  have  gone  to
swell  commercial  deposits,  or  (b)  actual  contraction,
if  such  liberated  deposits  have  been  used  to  reduce
existing  loans.  On  the  other  hand,  if  the  funds
with  which  the  maturing  certificates  are  redeemed
are  supplied  by  further  borrowing,  the  inflation  of
credit  will  continue  —  to  the  original  amount  if  the
liberated  deposits  have  been  absorbed  in  loan  repayment; ­
  to  a  correspondingly  greater  amount,  if  they
have  been  dispersed  in  increased  commercial  deposits. ­

Let  us  turn  now  to  the  actual  movement  of  credit
and  currency  during  the  period  of  short-term  borrowing. ­
  In  the  following  table  are  shown  (a)  the
nominal  amount  of  certificates  of  indebtedness  issued
each  month;  (b)  the  volume  of  government  deposits
in  the  Federal  Reserve  Banks  and  in  the  special  depositary ­
  banks  on  the  last  day  of  each  month;  (c)
the  volume  of  individual  deposits  subject  to  check
in  the  national  banks  at  the  “call”  dates;  (d)  the
volume  of  loans  and  discounts  of  the  national  banks
at  the  “call”  dates;  (e)  the  amount  of  money  in
circulation  at  monthly  intervals.
The  volume  of  certificates  discloses  the  three
phases  in  short-term  borrowing,  recurring  in  cyclical
succession  :  (t)  a  period  of  increase  or  active  issue
in  anticipation  of  a  funded  loan,  (2)  a  period  of  constancy ­
  or  suspended  issue  during  the  flotation  of  the
loan,  (3)  a  period  of  reduction  after  the  flotation  of
the  loan,  by  funding  into  the  bonds  of  the  loan  or  by
redemption  upon  or  before  maturity  from  out  the
proceeds  of  the  loan.  With  the  progress  of  our  bor-