The use of the public credit, in time of war, is attended by many special difficulties. The outcome of war is always more or less uncertain. Even if defeat would not entirely cripple the nation's resources and render the repayment of the loan uncertain, or affect the payment of interest, yet there are many considerations which make the lender hesitate. The fact that the duration of the war, the extent to which other nations may become involved, and many similar considerations affecting the size of the total demand upon the public credit are unknown, vastly increases the difficulty of placing a loan on favourable terms. But on that very account it is particularly necessary for the successful administration of the war that everything should be done to strengthen and preserve the nation's credit. There may come a time in the progress of the war when the only source from which any funds can be had is the money market. If, therefore, the financier has done anything to weaken the nation's credit at the beginning of the war, he is apt to be helpless at the close. Credit tends to weaken as debt increases.

It is for this reason that resort is frequently had in early war-borrowings to the simplest and most primitive method of debt-making; namely, that which provides revenues for the payment of the interest and the re-payment of the principal at the very timethe debt is contracted. The creditor sees in the new funds flowing into the treasury the security for his advances, and the guarantee of good faith on the part of the government. So long as every new loan is accompanied by new taxes from which its cost can be met, the public credit is practically secure. But if, on the other hand, the government neglect this precaution during the first stages of the war, any attempt to resort to it at a later stage is apt to be regarded as the desperate device of unsound financial management and the presage of coming bankruptcy.

Public credit is a plant of slow growth and extremely tender. It withers in a day before a breath of doubt.

Inasmuch as a successful outcome cannot be hoped for in modern warfare without the funds obtainable solely by public borrowing, and the necessity for loans increases the longer the war continues, it behooves the modern war financier to guard the nation's credit as his most precious treasure. No sacrifice is too great which will strengthen it and preserve it intact for the later stages of the war.