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WAR  BORROWING

without  succeeding  contraction  by  certificate  liquidation. ­

Both  in  estimating  our  experience  and  in  anticipating ­
  our  requirement,  the  question  thus  presents
itself;  Is  it  possible  to  fashion  a  borrowing  device
which  will  secure  the  gain  and  avoid  the  loss  identified ­
  with  the  use  of  certificates  of  indebtedness?
Specifically,  this  means  a  procedure  which  will  offer
like  advantage  to  the  Treasury,  will  leave  the  money
market  as  free  from  strain  and  will  save  the  price
mechanism  from  credit  inflation.
The  program  which  would  seem  fairly  to  meet
these  several  requirements  is  —  to  the  extent  that
recourse  must  be  had  to  loans  —  an  initial  issue  of
anticipatory  short-term  certificates  of  indebtedness  to
put  the  Treasury  in  immediate  funds,  followed  by  a
succession  of  long-term  bond  issues  designed  in
technique  for  popular  absorption,  payable  in  evenly
distributed  serial  installments  and  sufficient  in  aggregate ­
  amount  both  to  extinguish  existing  short-term
indebtedness  and  to  obviate  further  interim  borrowing. ­
  The  loans  might  be  issued  either  in  continuing ­
  “  over  the  counter  ”  sale  or  be  floated  in
periodic  “  drive  ”  campaigns.  In  the  case  of  continuing ­
  sale,  a  less  number  of  installments  would
be  required  inasmuch  as  offerings  might  be  suspended ­
  whenever  the  influx  of  funds  became  excessive. ­
  The  effectiveness  of  this  procedure  can
best  be  examined  by  assuming  a  specific,  though  hypothetical ­
  instance.
Let  us  assume,  in  initiation  of  the  procedure,  the
flotation  of  a  Liberty  Loan  at  the  earliest  date
deemed  opportune  after  the  declaration  of  hostilities,