Changes

With the creation of the Bank of England, the English government began to successfully pay its public debt even when it reached high levels. In the Napoleonic Wars of the first decade of the 19th century, debt reached 200% of GDP. In the early 19th century, governments began to make gold as the basis of currency value, which initially helped currencies to stabilize and gave some confidence in notes issued by governments. During the 19th century, the increasing wealth of the United Kingdom, and the government's success in paying its debt down, lowered debt in the United Kingdom. However, at times, the Bank struggled and was bailed out by wealth wealthy private individuals, particularly the Rothschild family. The weakening of the Bank allowed other others to push for the liberalization of banking, leading to the 1825-1826 Bank Charter Act that helped the spread of large banking. Other countries were not as lucky as the United Kingdom when it came to financing debt. The new independent countries of Latin American in the 1820s were able to get loans from the bond market in London, as the United Kingdom became the central country for government finance. Some of the countries defaulted; however, the Bank of England did have power to forgive debts and, similar to early government institutions in antiquity, would simply allow indebted countries to walk free. Other times the terms were rewritten in regards to servicing the debts. The next set of global crises occurred during the two world wars World Wars and the Great Depression. The Great Depression, in fact, led to the last time a state within the United States, Arkansas, to default on its debt obligations. Countries from the 1920-1930s increasingly found it hard to pay their debts, leading to debt payments to be rescheduled and new payment agreements to be created. By this time, credit ratings began to emerge. John Knowles Fitch in 1913 had created the concept of credit ratings, which became the AAA through D rating system. This rating system could be applied to countries as well as companiesand was soon used to gauge countries ability to borrow. Initial rates for lending thus became affected by a country's rating. This system and tightening processes for issuing government debt led to few developed countries defaulting in by the late 20th century.<ref>For more on how 19th century finances changed as public institutions developed, see: Eichengreen, Barry, Robert Alan Feldman, Jeffrey B. Liebman, Jürgen von Hagen, and Charles Wyplosz, eds. 2011. <i>Public Debts: Nuts, Bolts and Worries</i>. Geneva Reports on the World Economy 13. Geneva: ICMB, Internat. Center for Monetary and Banking Studies.</ref>

However, it was World War II that , and its destruction of many advanced economies, created many problems for countries, including developed states. Many countries found themselves bankrupt after the devastation of the war. The International Monetary Fund (IMF) as well as the World Bank were developed to help in such cases. Both institutions began to finance states and their enterprises; these institutions were seen as being comparable to the New Deal of the 1930s, where they would help stimulate financial growth in countries affected by devastation. With the linkage of politics with these international financial institutions, debt soon became a major political issue used in the Cold War. Generally, it became easier for major and developed countries to secure loans as they were more likely to pay off debts at regular intervals. Only in very recent times did this change, with Greece in 2015 becoming the first developed country to default on loans after the Banking Crisis of 2008-2009. The generally high debt ratings for developed countries has allowed them to more recently borrow at rates of 80% or more of their GDP, which some see as a potential future crisis as public debt now has been increasing.<ref>For more on the IMF and World Bank in an age of increasing public debt, see: Esteves, Rui Pedro, ElGanainy, Asmaa A, Mitchener, Kris James, and Eichengreen, Barry. 2019. <i>Public Debt Through the Ages</i>. INTERNATIONAL MONETARY FUND.</ref>