The greatest factor in keeping the monetary and financial systems viable over
the past 50 years has been the role of the Federal Government as “borrower of last resort.” When others refused to borrow or were refused credit by the banks, the Federal Government borrowed money into circulation. This began with the institution of the New Deal programs by which the Government began to borrow money and then spent it into
circulation. These amounts, however, were relatively modest. It took World War
II to provide an excuse for the really huge deficits required to pump up the money
supply to adequate levels.