NATIONAL DEBT. The National Debt consists of money borrowed from individuals, under the authority of the legislature or the government, and the security for which is all the property of the country. The money so raised is not to be paid on demand, but only the interest thereon, but, from its being transferable, this occasions no inconvenience to the individual, because he can raise money by thu sale of the amount of hie holding, according to the estimated value of his security, and the value of money at the time he feels a necessity for it.
The national debt, wo may observe, consists principally in most countries, as well as our own, of money raised as above stated, and this is called the Funded Debt; but in Great Britain there is also an Unfunded Debt, which consists of money raised by granting annuities for life or term of years, and by Exchequer Bills, which are renewed from time to time. [Exeneeuen BILLS.] The richer a country becomes the greater is the security, and a loan is consequently acquired on easier terms. By this process of borrowing, a country whose credit is unimpeached is, when in imme diate want of money, enabled to raise the sum required without over loading the springs of its natural industry. A man who has more money than he can advantageously employ in manufactures or com merce, or persons who have no facilities or faculties for so employing it, will be glad to accept 4 or 5 per cent for funds that cannot be employed more profitably ; while those who are able to make 10 per cent. by the addition of their own exertions, will not invest their funds in a government loan. The raising of money by loan, thus furnishes a means of securely employing sums that might possibly otherwise remain unproductive, produce a glut of money, or be employed in unprofitable speculation. It is a power, however, that requires to bo prudently used; for if loans are too frequently called for they must have the same effect as exorbitant taxes in crippling the general fund for the employment of industry, besides imposing a heavy load on posterity in the shape of interest. But we shall enter no farther on the interminable questions of the advantages and disadvantages of a National Debt, as it has been adopted by almost every civilised country, but proceed to describe its use and progress amongst ourselves.
The contracting of the National Debt cannot be said to have begun before 1691. Thu kings of England had indeed been accustomed from a remote date to borrow money upon emergencies, but on such occasions the revenues of the crown were pawned for the amount, which was seldom beyond what could by that means be repaid in a few years. The earliest instance of this borrowing which wo have on
record was in the reign of Richard I., when money was wanted to defray the expense of his crusade to the Holy Land. Loans were made upon Exchequer tallies by the Jews ; and the Jews got what they could in the shape of usury. Loans were also raised upon deben tore and privy seal ; and sometimes the capitalist would not lend unless he had the security of the king's jewels. There was a perpetual struggle between borrower and lender—between force and fraud. In three or four centuries loans to the crown ceased to be so much a personal affair, and the Parliament stepped in to give additional security and confidence to lenders. But every such loan was of temporary duration, even when public securities bearing interest became negotiable in 1661.
In 1672, when 1,329,0001.. of revenue was pledged for the immediate payment of loans to the goldsmiths or bankers, whose advances were chiefly made by funds intrusted to their keeping, Charles IL, being somewhat straitened by an expensive Dutch war and a few witty mistresses, shut up the Exchequer, issuing a proclamation announcing that the 1,329,000/. should be paid in a year. There was universal panic and much private ruin. The principal was never redeemed ; but the king charged his hereditary revenue with payment of interest upon this sum, which interest was duly paid to 1694. Law-suits were insti tuted by the creditors against the crown when this interest was stopped. At length an Act of Parliament was passed in 1699, by which, after the year 1705, the creditors were to receive interest of 3 per cent. upon the original amount, to be redeemed when ever the government should pay a moiety thereof. That moiety of 660,263/. is a part of the present funded debt. But even for some few years after the accession of William and Mary the borrowings of the government were for short periods only. In January, 1693, an, act was passed which empowered the raising a loan of a million by way of life annuities, at 10 per cent. till 1700, and afterwards, and during the life of the last survivors of the public creditors, at 7 per cent. The first loan of a permanent character arose out of the chartering of the Bank of England in 1694, when its capital of 1,200,000/. was'lent to the public at 8 per cent. interest. A power of repayment was reserved on this occasion by the crown, but no corresponding right of demand ing payment existed on the part of the bank. Still the system of terminable annuities was that adopted by the statesmen of that day as long as practicable.