DEBT, Pt'nue. National debt has become a marked feature in the finances of modern States. In any strict sense the public debt designates all of the outstanding obligations of the govern ment. These are of many kinds. Among them, for in those States which conduct gov ernment savings banks must he included the sums due depositors. In countries which, like France, require the collectors of taxes to make paytnents at specified times, advancing if need be from their own resources the amount required, such advances must for the time being be regarded as part of the national debt. lint it is not with these informal obligations, which correspond somewhat with the honk debts of merchants, that the phrase 'Diddle debt' is generally concerned. It refers rather to the more formal obligations undertaken by governments and represented by formal instruments of indebtedness.
This formal debt may he divided into short term and long-term obligations. To the former is frequently applied the expression 'floating debt,' and the analogy which this suggests with the transactions of corporations indicates the general nature of such indebtedness. These short-term obligations are normally used to an ticipate revenues, and resemble the promissory notes issued by merchants in the course of their business transactions. As the latter frequently have a certain aggregate of outstanding notes, though individual notes be promptly paid when due, so the floating debt of the State may readily become a permanent feature in its finances by the creation of new debts running parallel to the payment of the old. When such debts become too numerous, and the obligation of repayment a source of embarrassment, it is not infrequent for them to be converted into funded or permanent debt.
The funded debt consists in obligations which mature at a more or less distant date, or which are payable at the option of the Government. Bonds maturing within a fixed period are fa miliar in American finance—e.g. the so-called ten-forties of the act of March 3. 1S63. But more commonly no time is set for the ultimate redemption of public obligations. In the national finance of European States it is usually under stood that the Government will not soon avail it self of the privilege of repayment. So much is
this the case that on the Continent of Europe the debts are spoken of as rentes, the emphasis being thereby wholly laid upon the fact that the pay ment of interest alone is expected. while in Eng land the greater part of the public debt is regard ed as a series of perpetual annuities. A further form of public debt consists in irredeemable paper money. In essence it is a debt without interest. payable at the option of the Government. See :MONEY.
The public debt, in the sense in which it is known to-day, is essentially a creation of modern times. Emergencies in the medieval State were met by enforced contributions from the people, and in part by contraction of debt by the mon arch. But the debt so contracted was a debt of the crown, and not of the State, and rested upon the personal credit of the ruler. With the growth of parliamentary power and the control of sup plies by representatives of the people, State debts appeared. They were originally confined to States like Holland and England, where loanable capital was plentiful, and where the commercial classes were sufficiently influential with the Gov ernment to insure against repudiation. Later they were extended even to States under despotic and irresponsible rule. In the beginning public debts frequently assumed the form of life annui ties; but as these varied of necessity with the age of the persons who advanced money to the State, the complications of accounting were ex cessive; moreover. the amount of the advances which could be obtained in this way was neces sarily limited. It was a simplification to issue so-called perpetual annuities with a definite an nual payment, and the computation of life an nuities gave way to the simple operations of interest. In Great Britain terminable annuities are till common: but they form a comparatively insignificant proportion of the total indebted ness of the Government. The term public debt usually refers to the national debt alone. In its widest sense, however, it includes local indebted ness also. It is only within the past century that the municipalities have become debtors to any considerable extent ; hut at present the ag gregate of municipal debts in the United States rivals the national debt in magnitude. See