The demand for advances consequent upon the onset of war is presumably now abating end the banks are finding difficulty in acquiring bills If they are given further cash, the direct resuit should be heavy purchases in the gill-edged market. If this is so, it is clearly Politic to withhold any long-term issue until it can be made on much more favourable terms. To rush such an issue out now would be a waste of public money in paying, over a long term, higher interest than will soon be necessary; it might also prejudice the terms on which later issues could be made. The policy for the moment should, therefore, be to expand the credit structure with the object of bringing interest rates down es far as possible, and, in the meantime, to finance war expenditure by Treasury Bills, by direct borrowing from the Bank on ways and means, and by other short-term borrowing.
Preparation of the market has an important bearing on the best type of borrowing policy for the Treasury's needs. It was suggested earlier in this article that the time will shortly errive—if, indeed, itis not already here—for the Treasury to make certain of at least part of iis new borrowing. The technical arguments in favour of a specialized short-term issue, which would be designed to absorb part of the expansion of total Treasury bill issues, and would thus ite contribute towards a controlled credit expansion, are sound. There are, naturally, some points against such a course. It might seem, for example, that a short-term funding issue of limited size would mock the total borrowing programme. Again, the further postponement of a large war loan might seem an admission of doubt regarding the market's capacity. And behind the more formal arguments the inevitable responsibility rests on the Treasury to obtain the Optimum terms for new borrowing. These, however, are not necessarily maximum terms, for it would be folly merely to await the latter if, at the same time, undue risks were involved. At the moment, however,
Text read from the printed page and cleaned; old type leaves the occasional error.