THE THEORY OF INTEREST

often been commented upon, especially in this country,where the Treasury for half a century was relativelyindependent of such institutions of credit between thegovernments and certain central banks as have longexisted in England, and exist now in this country. Thegovernment may correct the irregularities in its incomestream by borrowing for current expenses in anticipationof taxes. The United States Government often sells shortterm Treasury certificates when government receipts arelow, and redeems these certificates when funds come infrom taxes or other sources. The opposite process maybe employed. The Government may lend at interest bydepositing surplus funds in banks to draw interest untilneeded for disbursements, or, what amounts to receivinginterest, it may, by buying its own bonds or redeemingthem for a sinking fund, save interest which would other-wise have to be paid. But this last operation is normallyemployed only when the funds are not needed later fordisbursements.

The public productive, or business loan, is exemplifiedin loans for the purpose of constructing railroads, or otherimprovements which are intended to be business under-takings, such as the erection of government buildings,the improvement of roads, bridges, and harbors, the con-struction of municipal waterworks or schoolhouses. Inall such cases it is usual to finance the enterprise byissuing bonds. The reason is that these improvementsconstitute an extraordinary cost, similar to the expenseof a war, which if undertaken without the issue of bondswould cause a temporary and inconvenient depressionin the income streams of the taxpayers. They, as a whole,could not afford any such first heavy drain, even withthe prospect of substantial benefits to follow. They there-

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