200

WAR  BORROWING

procedure  used  by  the  Governor  of  Guernsey  in
building  the  market  hall  of  his  town  by  an  issue  of
town  notes,  subsequently  redeemed  from  out  of
market  rentals  may  not  be  capable  of  general  adoption. ­
 3  But  this  is  because  of  the  defects  of  human
nature  rather  than  the  unsoundness  of  the  device.
The  fiscal  possibilities  of  certificate  borrowing  under ­
  existing  banking  conditions  offer  an  exact  parallel. ­
  As  a  painless  mode  of  supplying  and  replenishing ­
  the  Treasury  with  available  funds,  the  certificate ­
  of  indebtedness  may  encourage  laxity  or  extravagance ­
  in  public  expenditure;  but  it  need  not  necessarily ­
  do  so.  Kept  within  the  bounds  imposed  by
periodic  redemption  from  out  the  proceeds  of  savings-paid
  long-term  loans,  the  funds  provided  by
certificate  borrowing  are  likely  to  be  expended  with
neither  greater  nor  less  liberality  than  other  borrowed ­
  sums.
The  recent  experience  of  the  United  States  has
been  much  of  this  kind.  Certificate  borrowings  have
kept  the  Treasury  in  funds  without  the  legislative  delay, ­
  the  administrative  burden,  and  the  popular  agitation ­
  inevitably  incident  to  taxation  and  funding.
There  is  no  evidence  to  conclude  that  the  presence  of
ample  resources,  readily  procured,  has  encouraged
public  extravagance  or  laxity.  Indeed,  our  effectiveness ­
  both  in  direct  preparation  for  the  national
defense  and  in  credit  advances  to  the  Allies  has  probably ­
  been  greater  by  reason  of  the  readiness  and
adequacy  of  our  war  chest.  Had  the  war  been  long
prolonged  it  is  possible  that  with  progressive  increase
3 Jevons,  “Money  and  the  Mechanism  of  Exchange”  (New
York  edition,  1876),  p.  204;  lately  cited  by  Withers,  “Our
Money  and  the  State”  (London,  1917),  p.  57.