The wartime increase in the "true floating debt." that is the debt held in the main by the banks and the money market houses, thus shades down to the comparatively modest figure of £992250000. Of this, the major part, £519,000.000, is accounted for by the funds deposited directly by the banks with the Treasury in the guise of six months' deposits. Of the balance, £445 millions represents the expansion in the issue of Treasury bills made through the weekly tender from £500 millions to £945 millions, The remaining £28,250,000 is the ways and means indebtedness at the Bank of England, which the Exchequer had temporarily incurred over the turn of June, whereas no such debt was out-Standing on the outlreek of the wi In so far as the increases both in the tender issue of Treasury bills and in Treasury deposits represent the investment of funds accumulating here on behalf of central banks and issuing authorities in the sterling area, the wartime movement must be still further differentiated from short-term Government borrowing from the bonks, The investment of sterling in Treasury bills or de-
"good" money and, though made for the moment in the form of very short-term debt, it is an investment which it is reasonablv*safe to assume will be fairly permanent. If this factor is allowed for, particularly in the issue of Treasury bills by the weekly tender, it will be found that the financing of the war by means of floating debt borrowing from the banking system has been even more modest than the above calculations suggest This is borne out by the clearing bank statements, which show that, between August 1939, and May, 1941, the banks' holding of bille di: counted actually fell from £279,069, 000 to £172807000. Even if an appreciable reduction in the volume of commercial paper over this period is allowed for, this fall probably indicates a decrease in their holding of Treasury paper.
This, at least, is the conclusion suggested by the experience of the clearing banks which separate their holding of Treasury and commercial paper in their balance sheets. In the case of Lloyds Bank, for example, the holdings of British Government "Treasury bills fell between August, 1939. and May, 1941. from £38,- 319000 to £25,115,000. This drop may not be exacty representative of the experience of the whole banking system, but as a guide it cannot be disregarded. It suggests that rather more than the increase of £445 millions in the issue of Treasury bills through the weekly tender has, in fact, gone to satisfy the investment requirements of sterling area countries whose funds in this country have been steadily increasing since the outbreak of the wa If this increasing diversion of Treasury bills into channels that form no pert of the true domestic credit structure is recognized, there has at no time since the outbreak of the war been any.sugyestion of an excessive volume of bills being foisted on the banks. It may, therefore, be asked why the Treasury and its financial advisers should have one out of their way to substitute footing debt. It is this item which now takes the impact of what remains of the seasonal fluctuations in the flow of revenue and expendi-ire.
The issue of Treasury bills through the weekly tender, which previously fulfilled this function, has now been virtually stabilized. It remained
Text read from the printed page and cleaned; old type leaves the occasional error.