REPAYMENT OF PUBLIC DEBT. Some parts of the public debt are so constituted as to be auto matically extinguished. Such are the terminable annuities of British finance. Each payment in cludes, besides interest, a partial repayment of time principal. It would obviously be incon venient to pay a large part of the public debt in this way, since payments would have to be made whether revenues were plentiful or not. Most frequently debt is paid by redeeming obligations which are due, or which are payable at the op tion of Government. or by purchasing bonds in the open market and canceling them.
The policy of repaying public debts has often been called into question. In order to redeem a debt, a greater sum must be taken from the peo ple by taxation; and it is the last portion of the taxes which is hardest to collect and which causes the greatest distress. Almost all modern States are growing in wealth and population: conse quently, it is to be expected that a debt which at present would be very difficult to pay will in the future be relatively insignificant. So long as gold was depreciating in value, the burden of debt was automatically growing less: and the application of science to mining and economy in the use of gold may bring about another period of declining value of gold which would again reduce the burden of public debt without resort to taxation.
When a State is insufficiently provided with capital. its bonds are likely to be held by foreign capitalists. In repaying the debt, the State may diminish the scanty supply of capital and so in jure its own industries.
There are, however, cogent reasons for the re demption of public debts. A future generation may indeed be more able to pay a given sum than the present generation; but the future will doubt less have correspondingly heavy obligations of its own. Gold may indeed depreciate. but it may also appreciate. The payment of debt may derange industry, but it unquestionably strengthens the credit of a nation and places it in a condition to meet emergencies. On these grounds the weight of modern authority favors the gradual redemption of public debts.