Changes

<youtube>https://www.youtube.com/watch?v=SwaCg7Gwtzw</youtube>__NOTOC__[[File: King William III 1-1-e1509187620207.jpg|thumb|left|Figure 1. William of Orange was given the idea to create the concept of public debt by creating the Bank of England. ]]Debt has a long history, particularly for individuals and businesses. Public debt, on On the other hand, public debt is more complex, as it seems not to not have existed until Medieval or even early Modern European states emerged. How public Public debt developed and its impacted helped shape shaped modern financial institutions that have transformed economic ideas in the last few centuries.

==Early History of Public DebtWere ancient Empires such as Rome in debt? ==In ancient societies, such as Rome, Mesopotamia, and Egypt, governments were generally creditors and not in debt. They would finance institutions or individuals at given lending rates. At times of war or major state projects, funds would be raised through taxes and directly used if there was an immediate crisis where the state required financial support, the state would generally turn to its wealthy families.

In ancient societies, such as Rome, Mesopotamia, and Egypt, governments were generally creditors and not in debt. They would finance to institutions or individuals at given lending rates. At times of war or major state projects, funds would be raised through taxes and directly used. If there was an immediate crisis where the state required financial support, then the state would generally turn to its wealthy families for support. Wealthy families had an incentive to simply give their money to the state if it meant the survival of the statecountry, as the wealthiest most affluent families were often the ones that ruled or had the most to lose. The state could even simply confiscate wealth in order to finance its enterprises. The general pattern in antiquity, particularly in the Old World, is that the state country would allow creditors to loan individuals and debt. The state would periodically issue decrees to forgive debts, particularly in periods where debt levels became high and could threaten the overall economy. This also proved popular for rulers, particularly if forgiving debts did not hurt the rulers but mainly affected debt collectors. Even if debt forgiveness affected the state's finances, this forgiveness of debts could be seen as less painful than allowing too many people to default.

In The state would periodically issue decrees to forgive debts, particularly in periods where debt levels became high and could threaten the contentious European wars of overall economy. This approach also proved popular for rulers, particularly if forgiving debts did not hurt the late Medieval period and early Modern period, kings began to finance their wars using rulers but mainly affected debtcollectors. InitiallyEven if debt forgiveness affected the state's finances, kings this forgiveness of debts could raise taxes and then directly finance their warsbe seen as less painful than allowing too many people to default. However<ref>For more on early debt in antiquity, it became increasingly hard for kings to keep order by raising taxes in times of warsee: Hudson, particularly as wars became frequentMichael. 2018. .. It was simply easier to borrow. Kings also believed they were put in place by God so they often had little to fear <i>And Forgive Them Their Debts: Lending, Foreclosure, and Redemption from creditors. This made it a problem as creditors soon began Bronze Age Finance to refuse to lend to kings since they realized they may not be paid backthe Jubilee Year</i>. This financial crisis for wars began to affect different monarchies throughout Europe ISLET.</ref>

==Developments in In the contentious European wars of the Early late Medieval period and early Modern Period==period, kings began to finance their wars using debt. Initially, kings could raise taxes and then directly finance their wars. However, it became increasingly hard for kings to keep order by raising taxes in times of war, particularly as wars became frequent. It was simply easier to borrow. Kings also believed they were put in place by God, so they often had little to fear creditors.

In the 17th centuryThis was a problem because creditors soon refused to lend to kings since they realized they might not be paid back. This created financial crises for monarchs, particularly when wars became long, England and France increasingly spared for influence began to affect different monarchies throughout Europe.<ref>For more on how wars in Europe and the emerging sea trade across the North Atlantic. Initiallychanged finances for states, both countries would finance their wars through taxes or creditorssee: Glete, but this became harder over the course of the 17th centuryJan. 2002. During the reign of William <i>War and the Orange State in England in 1680s-1690sEarly Modern Europe: Spain, William was engaged in the Nine Years War that saw all of the European powers fighting. William could not easily raise taxes or get loans from creditorsDutch Republic, so and Sweden as the idea developed that England would have its own government bankFiscal-Military States, creating what became the Bank of England1500-1660</i>. The Tonnage Act 1694 was created to enable the Bank of England, which was the idea of Charles Montagu, 1st Earl of Halifax, who saw the Bank of England as a company that could benefit by being the sole bank that could issue monetary notes Warfare and provide banking privileges to the wealthy and nobilityHistory. London ; New York: Routledge. </ref>

Funds were raised from private investors and the bank bought government stock and issued securities, equivalent to bonds, while giving lending notes to the government. The securities acted as contracts and would give individuals return on those investments, while the funds given by the individual could be used to finance == Which countries first created public debt. Businesses and individuals also were allowed to deposit money. This created a pool ? ==[[File:Bank of funding for the government that it was able to use without directly going to Parliament to raise taxes or use other creditorsNorth America. Now, William III could finance his warsjpg|thumb|left|Figure 2. Initially, the The Bank of England North America was not a government the first institution but a private company created through a charter. However, as in the government saw it useful United States to its efforts, it began to depend on the Bank morefinance public debt. ]]In 1708, the government let the Bank have sole rights to create currency notes. Notes did not have fixed values17th century, as they do today, but could be changed by agreement. Within a year, the government also made it a monopoly, as other large banks were not allowed England and other banks could not issue notes. By 1720, the '£' sign was created France increasingly sparred for influence in Europe and by 1745 notes had fixed values of £20 to £1000. In the Seven Years war, another major conflict with France, led to emerging sea trade across the creation of small notesNorth Atlantic. Initially, £10both countries would finance their wars through taxes or creditors, as but this allowed more borrowing for smaller denominationsbecame harder over the 17th century. Over During the course reign of William the rest of Orange in England in the 18th century1680s-1690s, the Bank had a greater role he was engaged in the economy not only for the government but also Nine Years War. This war resulted in financing more enterprise throughout the country, including increasing trade. The system proved a success for England and other countries in Europe began to copy the system by the end fight between all of the centurymajor European powers. In 1782William could not quickly raise taxes or get loans from creditors, so the Bank of Spain was created and in 1800 idea developed that England would have its government bank, creating the Bank of France was established. The Bank of North America was the first public bank in the United States, but it soon failedEngland (Figure 1).

==Modern Characteristics The Tonnage Act of Public Debt==1694 was created to enable the Bank of England. The idea of a national bank was developed by Charles Montagu, 1st Earl of Halifax. He saw the Bank of England as a company that could benefit by being the sole Bank that could issue monetary notes and provide banking privileges to the wealthy and nobility.<ref>For more on the Tonnage Act and its effect, see: Kynaston, David. 2017. <i>Till Time's Last Sand: A History of the Bank of England, 1694-2013</i>. London ; New York: Bloomsbury Publishing, an imprint of Bloomsbury Publishing Plc.</ref>

With the creation of Funds were raised from private investors, and the Bank of England, the English bought 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 stock 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 private individuals, particularly the Rothschild family. The weakening of the Bank allowed other securities equivalent to push for the liberalization of banking, leading bonds while giving lending notes 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 debtgovernment. The new independent countries of Latin American in the 1820s were able to get loans from the bond market in London, securities acted 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 contracts 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 crises occurred during the two world wars and the Great Depression. The Great Depression, in factprovide individuals with return on those investments, led to while the last time a state within funds given by the United States, Arkansas, individual could be used to default on its finance debt obligations. Countries from the 1920-1930s increasingly found it hard to pay their debts, leading to debt payments to be rescheduled Businesses and new payment agreements individuals also were allowed to be createddeposit money. By this time, credit ratings began to emerge. John Knowles Fitch in 1913 This created the concept a pool of credit ratings, which became funding for the AAA through D rating system. This rating system government that it could be applied use without directly going to countries as well as companies. Initial rates for lending thus became affected by a country's rating. This system and tightening processes for issuing government debt led Parliament to few developed countries defaulting in the late 20th centuryraise taxes or use other creditors.

HoweverNow, it was World War II that created many problems for countriesWilliam III could finance his wars. Initially, including developed states. Many countries found themselves bankrupt after the devastation Bank of the warEngland was not a government institution but a private company created through a charter. The International Monetary Fund (IMF) as well However, as the World Bank were developed government saw it useful to help in such cases. Both institutions its efforts, it began to finance states depend on the Bank more and their enterprises; these institutions were seen as being comparable to the New Deal of the 1930sincreasingly incorporate it into its policies. In 1708, 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 government let the Cold WarBank have sole rights to create currency notes. GenerallyNotes did not have fixed values, 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 changedo today, 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 GDPbut could be changed by agreement.

Government debt, or The Bank of North America was the first public debtbank in the United States, but it was a new concept that did not originate until soon replaced by the late 17th centuryUnited States Bank (Figure 2). Governments before simply spent what they had These institutions tried to copy the system in England and they only had limited options attempted to raise funds for wars or other enterprisescreate a system of public debt financing. This changed with the founding of <ref>For more on how the Bank of England evolved and how that other countries later emulated. In the 20th century, international institutions began to fund influenced public financing and debt, with the founding of the World Bank and IMF near and after the end of World War IIsee: Slater, Martin. 2018. <i>The National Debt: A Short History</i>. London: Hurst & Company.</ref>

== What does Modern Public Debt look like? ==With the Bank of England's creation, 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 based on currency value, which initially helped currencies 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 wealthy private individuals, particularly the Rothschild family. The weakening of the Bank allowed others to push for the liberalization of banking, leading to the 1825-1826 Bank Charter Act that helped spread large banking. Other countries were not as lucky as the United Kingdom when it came to financing debt. The newly independent states 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 the power to forgive debts and, similar to new government institutions in antiquity, would 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 and the Great Depression. The Great Depression led to the last time a state within the United States, Arkansas, 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 the D rating system. This rating system could be applied to countries and companies and was soon used to gauge country's 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 a few developed countries defaulting 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, World War II, and its destruction of many advanced economies, created many problems for countries. Many countries found themselves bankrupt after the devastation of the war. The International Monetary Fund (IMF) and 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 the 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> ==Summary ==Government debt, or public debt, was a new concept that did not originate until the late 17th century. Before simply spending what they had, governments only had limited options to raise funds for wars or other enterprises. This changed with the founding of the Bank of England that other countries later emulated. In the 20th century, international institutions began to fund public debt, with the World Bank and the IMF's founding near and after the end of World War II. ====References====<references/> [[Category:Wikis]] [[Category:Economic History]] [[Category:United States History]] [[Category:European History]]