20

WAR  BORROWING

sufficient  amount  to  meet  pressing  requirements  in
periods  of  impending  war  or  acute  monetary  disturbance ­
  unrelieved  by  adequate  banking  facilities.
Whatever  effectiveness  such  expedients  possessed
was  largely  a  consequence  of  their  use  not  as  formal
borrowing  devices,  but  —  after  the  manner  of  the
continental  bills  of  credit  —  as  fiat  emissions  for
direct  payment  of  public  accounts.  Whether  the
fiscal  exigency  was  in  each  case  desperate  enough
to  justify  such  a  policy  with  its  reasonably  certain
accompaniments,  if  sufficiently  pursued,  of  inflation
and  depreciation  is  a  problem  which  at  this  late  day,
with  scanty  statistical  evidence,  practically  defies
solution.  So  utilized,  the  short-term  obligation  became ­
  an  insecure  make-shift,  inviting  return  of  the
very  consequences  which  the  framers  of  the  constitution ­
  in  the  fullness  of  experience  had  sought  to
avert  by  discountenancing  the  emission  of  bills  of
credit.  At  best,  it  served  as  a  last  resort  of  a
strained  treasury  unsupported  by  adequate  credit
agencies.
The  short-term  issues  of  the  Civil  War  were
largely  a  result  of  Secretary  Chase’s  opposition  to
long-term  bonds,  heightened  by  his  reluctance  to
adjust  the  interest  yield  of  funded  loans  to  the  prevailing ­
  rate  of  the  money  market.  In  fiscal  effect
the  use  of  such  “  temporary  obligations  falling  due
in  the  midst  of  civil  conflict  ”  has  been  fairly  described ­
  as  “  a  source  of  double  vexation  to  the
treasury  department,  which  was  obliged  to  conduct
a  series  of  refunding  operations,  and  at  the  same
time  to  go  into  the  money  market  to  borrow  ever
increasing  sums  for  a  war  which  apparently  would