186

WAR  BORROWING

conceivably  accounted  for  by  an  increase  on  the
volume  of  money  in  circulation 18 —with  no  evidence ­
  that  the  creation  of  government  deposits  was
at  the  expense  of  existing  individual  deposits.
In  the  third  cycle  (December  31,  1917-March
4,  1918)  the  volume  of  individual  deposits  subject
to  check  declined  from  $7,497,821,000  to  $7,281,-753,000
  or  $216,068,000;  the  volume  of  loans  and
discounts  declined  from  $9,390,836,000  to  $9,139,-225,000
  or  $251,611,000;  and  the  amount  of  money
in  circulation  decreased  (January  x-March  1,
1918)  from  $5,120,424,908  to  $5,092,530,682  or
$27,894,226.  The  accompaniment  of  certificate  absorption ­
  was  thus  a  reduction  in  the  volume  of  commercial ­
  discounts  and  of  checkable  deposits,  substantial ­
  in  amount  but  notably  less  than  the  volume  of
government  deposits  created  within  the  period.
In  the  fourth  cycle  (June  29-August  31,  1918)
the  volume  of  individual  deposits  subject  to  check
rose  from  $7,161,368,000  to  $7,465,681,000  or
$304,313,000;  the  amount  of  government  deposits
declined  from  $1,037,787,000  to  $506,583,000  or
$531,204,000;  the  volume  of  loans  and  discounts  declined ­
  from  $9,620,402,000  to  $9,493,666,000  or
$126,736,000;  and  the  amount  of  money  in  circulation ­
  increased  (July  i-September  1,  1918,)  from
$5,384,797,000  to  $5,621,311,000  or  $236,514,000.
Thus  during  the  two  months  in  which  the  Treasury
was  borrowing  heavily  by  fortnightly  issues  of  certificates ­
  of  indebtedness  there  was,  far  from  any  reduction, ­
  a  notable  increase  both  in  checkable  deposits
18  Federal  Reserve  Bulletin,  July,  1918,  p.  664.