THE  FUTURE

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and  to  the  further  fact  that  the  course  of  prices  of
many  commodities  entering  into  the  index  number
was  affected  directly  or  sympathetically  by  government ­
  price  fixture.  The  sharp  rise  of  commodity
prices  in  the  second  phase  may  be  supposed  to  have
resulted  from  the  expiration  of  the  period  of  incubation ­
  and  the  confinement  of  price  fixing  activity
to  basic  materials.
Turning  from  the  evidence  of  the  index-number  as
at  present  available,  to  the  factor  —  an  extraordinary ­
  increase  in  the  volume  of  a  credit  —  which  in
the  absence  of  counteracting  elements  is  assumed  to
bring  about  such  a  rise  in  prices,  the  exhibit  is  unmistakable. ­
  Certificate  borrowing  has  involved  the
creation  of  a  huge  volume  of  additional  bank  credit
in  the  form  of  government  deposits  and  there  has
been  no  corresponding  contraction  or  deflation  incident ­
  to  the  liquidation  or  funding  of  the  certificate
issues.
To  sum  up:  The  use  of  certificates  of  indebtedness
has  made  it  possible  for  the  Treasury  to  supply  its
fiscal  requirements  with  great  ease  and  with  reasonable ­
  although  not  maximum  economy  and  without
any  traceable  evidence  of  laxity  or  extravagance.
In  the  money  market,  the  accompaniment  of  certificate ­
  borrowing  has  been  a  remarkable  absence  of
strain  or  dislocation;  but  this  is  imputable  to  the
associated  credit  mechanism  rather  than  to  any
specific  quality  of  the  certificates.  Finally,  a  direct
and  unmistakable  effect  of  certificate  borrowing  has
been  the  creation  of  a  large  volume  of  banking  credit
in  the  form  of  government  deposits  subsequently  dispersed ­
  in  the  course  of  government  expenditure