THE  FUTURE

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credit  which  if  not  directly  responsible  for  inflation ­
  and  rising  prices  must  at  least  be  regarded  as
contributory  thereto.  This  wholesale  creation  of
new  credit  results  primarily  from  the  fact  that  the
essence  of  successful  certificate  borrowing  is  the
absorption  of  the  certificate  issues  by  the  banks  and
the  use  of  payment  by  credit  in  settlement.  There
need  be  no  counterpart  to  this  in  installment  bond
borrowing.  In  connection  with  each  installment
payment  there  will  doubtless  be  some  expansion  of
credit  by  the  banks  in  the  form  of  loans  to  borrowing ­
  subscribers,  and  some  rediscount  by  member ­
  banks  with  the  Federal  Reserve  Banks  in  connection ­
  with  the  remittance  of  installment  payments. ­
  But  this  also  occurs  under  certificate  borrowing ­
  —  in  connection  with  the  funding  loan
flotation  —  as  a  secondary  form  of  credit  expansion. ­
  Moreover  in  the  case  of  installment  loans,
it  will  occur  only  to  the  extent  that  the  prime  purpose ­
  of  such  borrowing  —  payment  from  out  of
savings  rather  than  out  of  credit  —  is  unrealized,
and  will  represent  in  so  far  the  short-coming  and
not  the  essence  of  the  procedure.
It  thus  appears  that  an  installment  loan,  as  compared ­
  with  certificate  borrowing,  would  be  as  effective ­
  and  probably  more  economical  in  supplying ­
  the  Treasury’s  needs;  it  would  cause  as  little
strain  and  dislocation  to  the  money  market  —  and
this  of  a  kind  which  the  general  credit  apparatus  of
the  country  could  correct;  and  it  would  be  directly
responsible  for  a  notably  less  expansion  of  banking
credit  with  its  theatening  vista  of  inflation  and
rising  prices.  Compared  item  for  item  installment