198

WAR  BORROWING

avoid  the  necessity  of  such  renewal  or  reissue  and
to  provide  for  the  liquidation  of  the  certificates  by
the  flotation  of  long-term  loans.  But  this  is  a  sequel
to,  rather  than  a  condition  of  certificate  borrowing,
comparable  to  a  deliberately  contemplated  funding
loan  with  regard  to  which  demand  notes  are  issued
and  out  of  which  they  are  eventually  extinguished.
Heretofore,  the  Treasury  has  floated  bond  issues
enough  in  volume  and  frequency  to  discharge  the
intervening  certificate  issues,  without  appreciable
recourse  to  renewal  and  without  undue  reliance  upon
bank  absorption  and  credit  payment.  It  is  likely
that  the  maintenance  of  this  policy  has  operated  to
restrain  the  issue  of  certificates  however  easy  the
process  of  emission,  precisely  as  the  definite  contemplation ­
  of  a  refunding  operation  would  check  the
issue  of  demand  notes.  But  subject  to  such
restraint,  certificate  borrowing  like  fiat  money  constitutes ­
  an  almost  effortless  mode  of  supplying  the
Treasury  with  resources  in  the  amounts  and  at  the
times  needed  for  public  expenditure. 2
The  objection  to  demand  notes  as  a  fiscal  expedient ­
  lies  in  the  fact  that  their  proper  use  calls
for  a  degree  of  wisdom  and  reserve,  if  not  superhuman, ­
  at  least  beyond  that  self-control  which  any
modern  state  has  been  able  to  muster  to  the  service
of  its  exchequer.  Were  a  state  to  issue  inconvertible
2  It  is  impossible,  however,  to  neglect  the  significance  of  the
lengthening  “  overlap,”  that  is,  the  extent  to  which  the  maturities ­
  of  the  certificates  of  one  cycle  extend  into  the  issue
period  of  the  succeeding  cycle.  Taken  in  conjunction  with
the  heavy  over-payment  of  the  first  installments  on  account  of
loan  subscriptions,  and  the  small  use  of  certificates  as  compared ­
  with  payment  by  credit,  such  procedure  verges  close
upon  certificate  refunding.