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→Developments in the Early Modern Period
In the 17th century, England and France increasingly spared for influence in Europe and the emerging sea trade across the North Atlantic. Initially, both countries would finance their wars through taxes or creditors, but this became harder over the course of the 17th century. During the reign of William the Orange in England in 1680s-1690s, 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 creditors, so the idea developed that England would have its own government bank, creating what became the Bank of England (Figure 1). 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 and provide banking privileges to the wealthy and nobility.
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 debt. Businesses and individuals also were allowed to deposit money. This created a pool of funding for the government that it was able to use without directly going to Parliament to raise taxes or use other creditors. Now, William III could finance his wars. Initially, the Bank of England was not a government institution but a private company created through a charter. However, as the government saw it useful to its efforts, it began to depend on the Bank more. In 1708, the government let the Bank have sole rights to create currency notes. Notes did not have fixed values, 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 and other banks could not issue notes. By 1720, the '£' sign was created and by 1745 notes had fixed values of £20 to £1000. In the Seven Years war, another major conflict with France, led to the creation of small notes, £10, as this allowed more borrowing for smaller denominations. Over the course of the rest of the 18th century, the Bank had a greater role in the economy not only for the government but also 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 of the century. In 1782, the Bank of Spain was created and in 1800 the Bank of France was established. The Bank of North America was the first public bank in the United States, but it soon failedwas replaced by the Bank of the United States (Figure 2).
[[File:King William III 1-1-e1509187620207.jpg|thumb|Figure 1. William of Orange was given the idea to create the idea of public debt through the creation of the Bank of England. ]]
[[File:Bank of North America.jpg|thumb|Figure 2. The Bank of North America was the first institution in the United States to finance public debt. ]]
==Modern Characteristics of Public Debt==
