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The author examines the state of the fiscal and welfare policy of public debt in the U.S. based on the evidence provided by economist Olivier Blanchard in his presidential address to the American Economic Association in 2019. Topics discussed include the welfare effects of increased debt against realistic increase in risks, views on Blanchard's calibrated approach toward positive welfare effects of increased debt, and the importance of government debt expansion in times of economic growth.

The article examines the findings of a study published by French economist Olivier Blanchard about public debt and low interest rates in the U.S., in 2019. Topics discussed include the Pareto efficiency of a fiscal Ponzi scheme according to Blanchard, impact of social security on wages and welfare losses, and Blanchard's views on the possibility of fiscal Ponzi scheme based on the economy's growth rate.

This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. Because imperfect knowledge breaks Ricardian equivalence, the scale and composition of the public debt matter for inflation. High and moderate duration debt generates wealth effects on consumption demand that impairs the intertemporal substitution channel of monetary policy: aggressive monetary policy is required to anchor inflation expectations. Counterfactual experiments conducted in an estimated model reveal that the US economy would have been substantially more volatile over the Great Inflation and Great Moderation periods if US debt levels had been those observed in Italy or Japan. (JEL D84, E31, E32, E52, E62, H63) [ABSTRACT FROM AUTHOR]

The article examines the scale of fiscal policy on deficit financing and public debt in the U.S. based on the studies published by economists Olivier Blanchard, Lukasz Rachel and Lawrence H. Summers in 2019. Topics discussed include the fiscal and welfare costs of public debt according to Blanchard, the scale of Pareto efficiency in an overlapping generation economy, and the safe labor endowment assumption.

The article analyzes the effects of deficits and debt on the economy of the U.S. Topics discussed include effects of deficit-financed spending on short-run aggregate demand, the importance of discretionary fiscal policy in dealing with financial crises, and the efficacy of countercyclical fiscal policy.

Donald B. Woodward in his paper on public debt and institutions seems about equally awestruck by three sets of thoughts. That the Treasury has various specific and contingent obligations that are not a part of the formal public debt. But most individuals and business enterprises have similar unclassified liabilities. Woodward mentions such items as social security commitments, and commitments to make future loans. Now one can go to any lengths he finds useful in this direction. His second thought is that the influence of the debt upon governmental policies will have baneful effects upon all principal social institutions, and his third, that the Treasury has become a maker—he thinks the principal maker—of monetary policy. His paper does not appear to be a call to action of any kind. For the most part it is rather a recitation of various direct and devious ways in which the family, the church, the economic organization, and the state will be inescapably corroded or distorted by the demands of a great public debt.

Charles C. Abbott's paper on the commercial banks and the public debt has tentatively proposed certain courses of action without insisting that they offer a final answer. This opens up topics for comment without being controversial. Abbott has directed his attention to the broader aspects of public debt management rather than solely to commercial bank government security portfolio management. He has properly stated that debt management for banks cannot be treated independently of other nonbank security holdings. He indicates the importance of debt management and has cited a number of questions which need to be carefully considered in formulating policy. He urges that the interest charges should be held down and that the debt should be managed in such a way as to prevent it from becoming a factor of instability in the economy. He rails attention to the fact that a public debt may serve some beneficial public advantages. For instance, it may become a medium for the accumulation of savings.

The article discusses a paper "Management of the Public Debt After the War," by Simeon E. Leland, that was published in the June 2, 1944 issue of the journal "American Economic Review." Professor Leland's paper does not state specifically what should be done or when action should be taken. The first proposition for emphasis is that the men size of the debt is not crucial in determining its effects on the economy. Changes in its composition and in the holders of it may be of greater importance than changes in the quantity of debt outstanding. The possible shifts of securities between individuals, insurance companies, banks and the Reserve System are perhaps of more significance as well as of greater magnitude than any likely short-term changes in the size of the postwar debt. It is important to note that there can no longer be a passive debt policy in which inaction may be presumed to yield neutral effects. The very decisions not to initiate conversions or not to induce shifts in the type of debt holders are themselves forms of action. With the debt a large factor in a dynamic economy, it cannot at any time be ignored.

We document that the percentage of all U.S. assets that are 'safe' has remained stable at about 33 percent since 1952. This stable ratio is a rare example of calm in a rapidly changing financial world. Over the same time period, the ratio of U.S. assets to GDP has increased by a factor of 2.5, and the main supplier of safe financial debt has shifted from commercial banks to the 'shadow banking system.' We analyze this pattern of stylized facts and offer some tentative conclusions about the composition of the safe-asset share and its role within the overall economy. [ABSTRACT FROM AUTHOR]

The article focuses on how the U.S. government managed the enormous debt generated by the War for Independence in the period 1784-1802. Before the enactment of the U.S. Constitution in 1789, Congress had no power to tax, and could only request funds from the states. Until then the U.S. was essentially in default of all its loan obligations, including the Continental currency it formally repudiated in 1790. After that year, Congress paid interest on its debt through tariff revenues, lifting the country from default and keeping the debt burden constant. The assets of land owned by the government backed its interest-bearing loans, enabling its escape from payments on principle. The repudiation of the Continental currency thus made the U.S. a solvent institution.

The aim of this paper is to examine the arguments for and the implications of the maintenance of the wartime pattern of yields on government securities. The pattern is roughly defined by three-eighth of 1 percent on 90-day Treasury bills, seven-eighth of 1 percent on one-year Treasury certificates of indebtedness, and two and a half percent on the longest term bonds. This is substantially the pattern which was adopted fortuitously early in the war to aid in financing the war by means of bank borrowing at low cost. The arguments adduced for this policy are inconsistent and are not convincing. The extension of this policy during peacetimes, particularly when full employment exists, implies the complete surrender by the Reserve System of quantitative control over the supply of money and eventually necessitates the curtailment of the present-day lending functions of commercial banks. Such a policy affords no satisfactory alternative quantitative basis of monetary control, which control is made to depend entirely upon the management of Treasury receipts and expenditures.

The principal emphasis here is, first, upon the national income and what its probable future level, in dollar terms, implies for those unhappy people whose task it will be to manage a debt of almost uncomprehended size in a period when taxation will not be popular, however sure it may be. Second, the paper refers briefly to the distribution of national income and some of its consequences for the handling of the debt. With respect to debt management itself, it defers to the fiscal and monetary experts. The facts of the federal public debt in relation to national income are in themselves fairly simple. The total debt of the federal government in October 1946 was 26334 billion dollars, all but 1 billion of which was interest bearing. This includes all those bonds, notes, certificates of indebtedness, and special issues commonly classified as "public debt" by the Treasury Department, but not guaranteed securities. It embraces all indebtedness in that category which the Congress has, by statute, limited to a total of 275 billions.

The historians have a familiar saying that history must be written anew each generation to comply with the changing theories of historical development. If there was a history of the federal debt in the United States no doubt it, too, would be rewritten from time to time to prove or disprove different theories concerning the economic effects of that debt. Unfortunately, however, there is nothing approaching a general history of the debt in this country, so the future scholar who writes such a history will not have the satisfaction of correcting the errors of his predecessors nor will he have their mistakes to warn him. In a brief paper of this kind it is not possible to give a comprehensive treatise on the federal debt. The discussion, therefore, will be limited to a survey of the general course of the debt and to some comments on its larger aspects. Under the funding plan of 1790, the struggling young nation assumed a debt of approximately 17 million dollars. Despite substantial repayments, by 1803 current deficits and the Louisiana Purchase raised the gross debt to a peak of 86.4 millions.

The article presents several articles contributed by readers to "American Economic Review." The research paper "A Note on Cyclical Wage Rigidity," by Joseph Shister, attempts to interpret the downward rigidity of wage rate patterns in different manufacturing industries in the U.S. during the cyclical turning point in business which began in 1929. The point emphasized in that aside from the influence of unionism on rigidity, there are factors relating to the economic structures of the industries in question which determine the relative degree of wage rigidity. The article D. McC. Wrights Character Attack" by H.G. Moulton, the author comments on the sweeping indictment in the "The New Philosophy of Public Debt," by David McC. Wright, an economics professor, published in September 1943, issue of "American Economic Review," that Moulton has deliberately misrepresented A.H. Hansen's, an economics professor, stand. Wright cites five bits of evidence as proof of author's intellectual dishonesty.

The article presents critical discussion of a few papers related to city planning and municipal finance. Cities are customarily defined as incorporated places having a population of 2,500 or more. The diversity that exists among such places is very wide, and it is surprising indeed that there are so many common attributes in such a heterogeneous collection of communities. The displacement of local units by regional government may solve the financial problems of parent cities, but it is pertinent to inquire if the solvency of a particular city or cities should be the prime motivation in meeting the demand that something be done to stem the tide of decentralization. It is questionable that equitable distribution of the debt burden of parent cities on what have been called the parasitic dormitory cities would abate the tendency toward decentralization. A major point is that fiscal management or administration is all important, that given two cities with equal economic resources, one may successfully weather a financial storm and the other may not, depending upon the caliber of the fiscal administrators and the freedom of action allowed them by state legislation.

This article discusses the limitation of government borrowing in the U.S. The question posed in this paper is whether governments are subject to an analogous constraint--when a government runs a deficit, is it making an implicit promise to creditors that it will run offsetting surpluses in the future. If governments are subject to this constraint, which is termed the present-value borrowing constraint, the policy of running a permanent deficit interest payments is infeasible. The question of feasibility of a permanent deficit holds profound implications for macroeconomic theory and practice. If governments intend to raise the needed revenues with future tax increases, then government deficits may have no stimulative effect on aggregate demand, but can have significant distortionary effects on private incentives if the future tax increases are large. On the other hand, if the revenues are to be raised implicitly through money creation, budget deficits can be a principal cause of inflation. Whether governments can continually run a budget deficit, remains an unsettled theoretical question.

In this article a complete macroeconomic model has been specified in order to investigate effects of investment incentives in a general equilibrium setting. Constant returns to scale are assumed for the production sector implying the lack of an investment demand function. Investment is determined through firms' decisions to produce investment goods and households' saving and portfolio decisions. The saving decision results from an inter-temporal utility maximization. The effectiveness of tax policy in stimulating private investment is found to depend critically on the form of the complete fiscal package. At one extreme investment incentives have no immediate impact and actually have a lagged effect causing investment to decline. This occurs if the resulting increase in saving is entirely "invested" in government debt. Consumption increases due to higher wealth and investment suffers. At the other extreme investment incentives initially increase private investment dollar for dollar. This occurs if the government revenue foregone via investment incentives is matched by a concurrent reduction, in government purchases of investment goods from the production sector. The conclusion of this article is that judging the effectiveness of tax policy requires much more attention to the development of an appropriate macroeconomic context.

Presents a series of abstracts on various topics of economics published in the January 1964 issue of the periodical 'The Southern Economic Journal,' vol. 30. Suggested areas to which economists should give attention; Appraisal of the alleged substitute for money in the monetary system of the U.S.; Suggested ways for the management of federal debt of the U.S.

We study the information sensitivity of government debt denominated in domestic versus foreign currency: the former is subject to inflation risk and the latter to default. Default only affects sophisticated bond traders, whereas inflation concerns a larger and less informed group. Within a two-period Bayesian trading game, differential information manifests itself in the secondary market, and we display conditions under which debt prices are more resilient to bad news even in the primary market, where only sophisticated players operate. Our results can explain debt prices across countries following the 2008 financial crisis, and also provide a theory of "original sin." (JEL D84, F34, H63) [ABSTRACT FROM AUTHOR]

This lecture focuses on the costs of public debt when safe interest rates are low. I develop four main arguments. First, I show that the current US situation, in which safe interest rates are expected to remain below growth rates for a long time, is more the historical norm than the exception. If the future is like the past, this implies that debt rollovers, that is the issuance of debt without a later increase in taxes, may well be feasible. Put bluntly, public debt may have no fiscal cost. Second, even in the absence of fiscal costs, public debt reduces capital accumulation, and may therefore have welfare costs. I show that welfare costs may be smaller than typically assumed. The reason is that the safe rate is the risk-adjusted rate of return to capital. If it is lower than the growth rate, it indicates that the risk-adjusted rate of return to capital is in fact low. The average risky rate however also plays a role. I show how both the average risky rate and the average safe rate determine welfare outcomes. Third, I look at the evidence on the average risky rate, i.e., the average marginal product of capital. While the measured rate of earnings has been and is still quite high, the evidence from asset markets suggests that the marginal product of capital may be lower, with the difference reflecting either mismeasurement of capital or rents. This matters for debt: the lower the marginal product, the lower the welfare cost of debt. Fourth, I discuss a number of arguments against high public debt, and in particular the existence of multiple equilibria where investors believe debt to be risky and, by requiring a risk premium, increase the fiscal burden and make debt effectively more risky. This is a very relevant argument, but it does not have straightforward implications for the appropriate level of debt. My purpose in the lecture is not to argue for more public debt, especially in the current political environment. It is to have a richer discussion of the costs of debt and of fiscal policy than is currently the case. (JEL E22, E23, E43, E62, H63) [ABSTRACT FROM AUTHOR]

This article provides information about the book "Budget Deficits and Debt: A Global Perspective" edited by Siamack Shojai. Fourteen papers in the book consider the size, measurement, causes, consequences, and political economy of fiscal deficits. Papers discuss measures of budget deficits and national debt; the federal budget process in the United States; major federal budget laws of the United States; a historical perspective on the size of deficits and debts in OECD countries; budget deficits and economic activity; fiscal imbalances and the exchange rates; theoretical perspectives and empirical evidence on the link between deficits and inflation; the impact of federal budget deficits on financial markets; a survey of theoretical and empirical studies of the relationship between budget and trade deficits; the link between fiscal imbalances and real economic growth; the welfare state in the United States and Europe, entitlements and popular resistance to retrenchment in the 1990s; why the United States continues to pursue a prudent fiscal policy; the size, nature, and causes of budget deficits in developing countries and the budget process and fiscal imbalance in the new South Africa.

The United States faces a rising future ratio of debt to GDP that, if allowed to continue, would have serious adverse consequences for the American economy. Fortunately, policy changes can increase the size of the future GDP and shrink the future budget deficits. Relatively small reductions in future annual deficits could reverse the increasing ratio of national debt to GDP. Those annual deficit reductions could be best achieved by slowing the growth of Social Security and Medicare and by raising revenue by limiting tax expenditures or increasing the tax on gasoline. [ABSTRACT FROM AUTHOR]

This article presents a strategy for efficient debt reduction. For the past seven years, the U.S. government has managed the debt crisis with the preeminent goal of sustaining the flow of debt servicing payments from the debtor countries to the commercial banks. The focus on the banks, especially in the first years of crisis, is easily explained. Several money-center banks had exposure of nearly 200 percent of bank capital in Latin America alone upon the outbreak of the crisis in 1982. A widespread suspension of debt-service payment could well have sunk several major banks. Today, those U.S. government's policies are being revised. After years of steady decline in the exposure ratios of the most heavily exposed banks, the risk of a U.S. banking crash as the result of the debt crisis is now virtually nonexistent. In addition, the burden of debt payments is contributing to profound economic crises and growing political instability in almost all of the democracies in Latin America. A wide range of analysts now concurs that the debt burden should be reduced, not only for the sake of the debtors, but also for the sake of the creditors, who have an important long-run stake in allowing the developing countries to surmount the current acute crisis.

This article focuses on report of the finance committee of the American Economic Association. The report accompanies the list of securities held by the Association at the end of the fiscal year, November 30, 1963, and the changes made during that year. The report also contains a list of the stocks and the bonds according to maturity and records the cost and approximate market values on November 30, 1963. The securities account of the Association does not include temporary operating funds which are deposited in a savings account and approximated $24,000 at the end of the last fiscal year. It has been the practice of the Association to set aside a portion of its resources consisting of grants made for specific purposes subject to early withdrawal to finance projects underway. These resources have been invested in U.S. Treasury securities or held in savings accounts. The transfer of $30,000 to the securities account during the past fiscal year will leave approximately $24,000 in the temporary operating fund, which under present conditions seems adequate.

The author's base their discussion on what would, in non-emergency times, be a rather unlikely reaction of individuals to the change in fiscal policy in the U.S., which includes the financing of bond purchases entirely by curtailing consumption. The author traces results through generations of individuals in a way that tends to obscure some of the fundamental repercussions on such matters as investment and the marginal productivity of labor. Their analysis may have some validity in a borrowing and rationing situation such as occurred during the Second World War, but it seems inapplicable to periods where individuals are in fact free to expand their total consumption. The crux of the problem of the relative burden of debt finance and tax finance is that monetary and fiscal policy together provide two major degrees of freedom for over-all public policy by means of which control can be exercised over two basic parameters of the economy: the aggregate level of activity and consequent output, on the one hand, and the way in which this aggregate output is apportioned between current consumption and capital formation, on the other. A firm commitment to the maintenance of a given level of activity and employment will use up one of these degrees of freedom; but within this commitment there remains one degree of freedom in the choice of suitable combinations of fiscal policy and monetary policy.

There is justifiable dissatisfaction with the state of economic understanding in the U.S., and therefore with the results achieved by the teaching of economics-especially at the elementary level. The work in the high school field of the Joint Council on Economic Education reflects this feeling, as does the search at various colleges for some new approach. The purpose of this communication is to present the findings to date of a survey of the success of the elementary course. Identical or closely similar sets of true-and-false questions have been administered-when possible both before and after the course. The experiment has revealed an unsatisfactory rate of progress generally, and particular fields in which students have learned little or nothing. Regarding the last point, it was sometimes necessary, where qualified economists differ on an issue, to select propositions so extreme that all would agree on them. To use hypothetical examples, "Public debt is always bad" and "Public debt is never dangerous" are false, though "Economists see no reason why public debt should not be made the vehicle of economic expansion" would draw divergent answers, and therefore would be unusable.

The article traces the origin of the monetary policy objective of maintaining an orderly market in government securities in the United States. According to the author, monetary management in the country has been strongly influenced by considerations related to federal debt management. The factors that brought about the shift in investors' preferences toward the longer-term issues are also discussed in the article. The wide-range economic consequences of the nation's monetary policy are discussed and analyzed.

It is becoming more and more evident that economic pressures of major importance during the next few years stem primarily from the second World War rather than from the great depression. In the financial field the greatly increased federal debt occupies the center of the stage. Methods and procedures employed in managing this 265 billion dollar obligation will be of far-reaching significance. In this undertaking the commercial banking structure occupies a key position. During the immediate future, debt management will attract much of the attention bestowed upon deficit spending during the 1930s and upon central banking techniques in the decade after the first World War. Until recently the problems implicit in this subject have not been studied intensively either by monetary theorists or by practical financiers. Neither the present state of the knowledge nor the theoretical framework within which much of the financial thinking takes place leads one to believe that problems inherent in the present situation will be resolved without much hard thinking and hard work.

Monetary-fiscal policy, including its handmaiden debt policy, is the keystone of the new economics, with its primary emphasis on the overall level of income and employment. Surely much good has come of this special emphasis, but in the rush to board the bandwagon no little uncritical enthusiasm may have been engendered and many implications remain to be developed. Most of the government's economic policy over the last decade has consisted of a series of ad hoc decisions calculated to settle pressing current problems and giving only minor attention to longer run implications. The combination of powerful producer pressure groups and widening recognition of the employment-creating powers of deficit financing is rendering obsolete the opportunistic expansionary policies generally advocated to obtain full employment. Stabilization of the value of money represents the most hopeful long-run guide to monetary-fiscal policy, partly as an end in itself but primarily as the most promising means of achieving a continuously rising, relatively stable level of real income and employment.

The first impression, due to the previous conditioning received, is that the public debt is a known and finite thing, consisting of the total appearing on the "Treasury Daily Statement," and made up of the maturities and types reported in detail in the "Treasury Bulletin." The public debt is a mass of contracts to transfer monetary claims within society through the federal treasury with the tax power as the ultimate resort. No statistical method have been found to measure the total of these contracts in homogeneous units, but both quantitatively and qualitatively the debt seems to be something quite different than the 260 billion dollar aggregate usually denominated as the public debt. The mass of contracts constituting the debt ranges all the way from those which are specific and unconditional to those which are extremely nebulous. Contract identification and classification by degree of specificity is only one of a number of possible methods of analysis. The contracts may also be classified by maturity or time of transfer, by extent of transferability, by rates of interest, by obligees, for example.

Formal discussion of the economic outlook by economists at meetings of professional associations is a long-established practice. In the 1920s a luncheon session devoted to this subject was a regular feature of the program of the American Statistical Association, which at that time dealt to a large extent with economic realities, such as when to buy stocks, while the American Economic Association meetings were more concerned with the hypotheses of neoclassical theories. There seems now to have been a change, the statisticians are emphasizing hypothetical mathematical formulae and the economists are greatly concerned with the immediately current problem of the public debt. Since the 1920s, when these forecasting luncheons were the most popular of all meetings, particularly if held within the proximity of Wall Street, there have been great changes in the objectives and procedures of economic analysis. At that time the aim was to predict the course of events that was presumably the result of freely operating competitive forces in the markets with little influence from public controls. Since then there has been more widespread acceptance of the view that economic forces and events can be planned and controlled toward certain objectives.

The second World War and the preceding decade of depression, deficit financing, and expansion of the role of government in economic affairs have profoundly altered the environment of central banking in the U.S. Among the major changes have been, first, far-reaching shifts in the climate of opinion; second, the rise of new governmental tools for deliberate exertion of monetary influence, not yet co-ordinated with Federal Reserve machinery; third, the emergence of a public debt so big that even moderate increases in interest rates would produce very sizable increases in the government's interest costs; fourth, a vast increase in the public's holdings of currency, bank deposits, and government securities without a commensurate increase in output or prices; and, fifth, the transformation of U.S. commercial banking system from one in which the public's cash and the earnings of banks were mainly based upon loans to private business to one in which they are mainly based upon bank holdings of public debt securities.

Debt management in postwar years will be determined by uncertain variables produced by unpredictable future events and by heritages from present policies. Debt management cannot be considered apart from other fiscal policies of government. It is an instrument of fiscal policy like taxation borrowing and expenditure. All phases of fiscal policy interact and condition each other and all must be geared to the relevant stage of the cycle. Like other elements of fiscal policy, debt management embraces far more than the purely financial programs appropriate for a private corporation. The general state of the economy, as has been suggested in the opening paragraphs, must be the controlling factor in policy determination. If, in the postwar period, the Federal Reserve System should attempt to control inflation by raising its loan and discount rates, it is doubtful whether the financial institutions would renew their subscriptions to the maturing bills and certificates while indebted to the Reserve banks. The problem of maintaining the market raises the question as to whether the government should attempt to keep the price of its bonds hi the open market from falling below par.

The author's approach is to the subject of the U.S. debt is from the point of view of the debt itself. This approach involves a quantitative consideration of the size of the debt and of the portion held by the various groups which have invested in it, and of changes over recent years. The statistical approach is a necessary one, and must form the basis of any conclusions upon the inflationary possibilities of the present deficit financing or upon the position of government obligations in the banking system. It is unnecessary to add the warning that statistical measurements cannot yield definitive conclusions on such general considerations without recourse to other methods of reasoning. Certain comments, however, seem to be called for. The first is that the government debt involves, basically, questions of credit, both governmental and banking. Credit is much more than a conspectus of assets and assets, since it involves the element of confidence which is in turn subject to quick change.

The retirement of the public debt of the nation, once its expansion is no longer necessary, will for some years constitute the most important fiscal problem of the federal government. The major issues which affect both sides of the budget and necessitate some advance planning are the rate of retirement, the method of retirement, and the source of funds. All three are fundamentally problems in taxation, with perhaps some repercussions as to retrenchment in ditures, and are concerned primarily with the production of a surplus, available for debt repayment, of current revenues over current expenditures. In order to simplify this discussion four assumptions will be made at the outset. It will be taken for granted that debt repayment is desirable; that only the net funded debt of the national government is to be discussed; that the entire debt is internally held; and finally, that definite maturity dates constitute no problem for the Treasury and necessitate no periodic amortization charges to be incorporated into the annual budgets. The rate of repayment, is the major problem of debt management.

Before the Aldrich-Vreeland Act was passed in the U.S., it was generally assumed that such exceptional gain as might result from the issue of bank notes based on bonds would be offset by the high price at which government bonds must be purchased. There has consequently been little interest in the question, although a better understanding of it would have led to a clearer insight into the business significance of notes secured by United States bonds. But there is a peculiar contradiction between current economic monetary theory and the assumptions upon which the Aldrich-Vreeland Act was passed. A five per cent, six per cent or seven per cent tax on the Aldrich-Vreeland Act notes need not retire them if a given amount of lawful money in bank supports several times its amount in loans and deposits for the issuing bank. It is currently assumed that a bank does not lend its deposits and that a reserve of lawful money will support deposits equal to from four to six times its total amount. It seems to be further assumed that these credit deposits are, in fact, loans left on deposit.