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Lombard Street in War and Reconstruction

  • Political Science


Lending to Finance the War This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Lombard Street in War and Reconstruction Volume Author/Editor: Benjamin H. Higgins Volume Publisher: NBER Volume ISBN: 0-87014-343-3 Volume URL: Publication Date: 1949 Chapter Title: Lending to Finance the War Chapter Author: Benjamin H. Higgins Chapter URL: Chapter pages in book: (p. 36 - 49) Chapter 4 Lending to Finance the War IN BRITAIN, as in other warring countries, lending institutions found themselves more and more heavily involved in government finance as the war progressed. As outlined in Chapter 3, financial concerns as- sisted the government with exchange control, credit restrictions, and rationing, and provided short-term credits to meet swelling tax pay- ments. They also participated in the financing of war industries by making direct loans. Their chief wartime function, however, was to make loans to the government and to help it borrow from the public. GOVERNMENT BORROWING The government's demand for funds to finance war industries and military operations in part replaced normal peacetime demands, but in part was superimposed upon them. The net effect was to raise the total demand for credit, and to concentrate it in the hands of the govern- ment. Lending institutions accordingly had to adapt their operations to the larger volume and changed nature of the demand. The growth and composition of the British government's wartime borrowing are shown in Tables 5 and 6. Short-term obligations (less than one year) were the chief instrument of new indebtedness, provid- ing more than half the increase in total marketable securities. At first sight it appears that Britain made less use of intermediate-term (1 to 5 years) and long-term obligations, and greater use of short-term bor- rowing than did the United States and Canada; at the end of th

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