Public debt: Difference between revisions
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'''Public debt''' are [[debt|obligations]] of [[government]]s to pay certain sums to the holders at some future time. Public debt is distinguished from [[private debt]], which consists of the obligations of individuals, business firms, and nongovernmental organizations.<ref name="Britannica_public_debt">Encyclopædia Britannica. [http://www.britannica.com/EBchecked/topic/482318/public-debt "public debt. (2011)."]. Referenced 2011-02-17.</ref> | '''Public debt''' are [[debt|obligations]] of [[government]]s to pay certain sums to the holders at some future time. Public debt is distinguished from [[private debt]], which consists of the obligations of individuals, business firms, and nongovernmental organizations.<ref name="Britannica_public_debt">Encyclopædia Britannica. [http://www.britannica.com/EBchecked/topic/482318/public-debt "public debt. (2011)."]. Referenced 2011-02-17.</ref> | ||
{{See also|Sovereign debt default}} | |||
==History== | ==History== | ||
Revision as of 12:43, 22 March 2011
Public debt are obligations of governments to pay certain sums to the holders at some future time. Public debt is distinguished from private debt, which consists of the obligations of individuals, business firms, and nongovernmental organizations.[1]
History
In 1720s has the Prime Minister Sir Robert Walpole introduced the sinking fund, a funding system designed to pay down England's public debt. Taxes, which had before been laid on for limited periods, were rendered perpetual, and the fund should not be used for any other purpose. The government obtained a reduction on the interest of the public debt. The savings were added to the fund and it was for some time regularly applied to the discharge of debt. But soon, the principle of an inviolable sinking fund was abandoned. During the wars which were waged while it subsisted, the whole of its produce was applied to the expense of the war; and even in time of peace, large sums were abstracted from it for current services. The sinking fund has greatly increased debt instead of diminishing it.[2]
From then on, government debt never needed be repaid. It was enough to create a regular and dependable source of revenue and use it to pay the annual interest and the principal of maturing bonds. Then for every retired bond would be sold a new one. In this way, a national debt could be made perpetual. Walpole's system proved its worth in financing British overseas expansion and imperial wars in the eighteenth and nineteenth centuries. The government could now maintain a huge peacetime naval and military establishment, readily fund new wars, and need not retrench afterward. The British Empire was built on more than the blood of its soldiers and sailors; it was built on debt. The ever-growing debt had the ancillary benefit of attaching the interests of wealthy creditors to the government. This example was not lost on some leaders of the infant American Republic, Alexander Hamilton for one.[3]
References
- ↑ Encyclopædia Britannica. "public debt. (2011).". Referenced 2011-02-17.
- ↑ David Ricardo. "Funding System An Article in the Supplement to the Fourth, Fifth and Sixth Edition of the Encyclopaedia Britannica 1820, Part of: The Works and Correspondence of David Ricardo, Vol. 4 Pamphlets and Papers 1815-1823; 11 vols (Sraffa ed.). Referenced 2010-06-24.
- ↑ H.A. Scott Trask. "Perpetual Debt: From the British Empire to the American Hegemon", Mises Daily, January 2004. Referenced 2010-06-24.
Links
- Repudiating the National Debt by Murray N. Rothbard, first published in June, 1992
- The People Who Borrow by Sir Ernest Benn, excerpted from chapter 6 of Debt: Private and Public, Good and Bad, 1938
- The future of public debt: prospects and implications (contains pdf) by Stephen G. Cecchetti, M. S. Mohanty and Fabrizio Zampolli, Bank for International Settlements, March 2010
- What's Wrong with Government Debt by Robert P. Murphy, March 2011
- Default on Wikipedia