DUBUC DEBT. A third division of the subject of finance concerns public credit and its use. As the creation of public debt often required by the exigencies of national life rests upon the public credit, a complete theory of finance must comers itself with the means by which public credit is established and maintained, as well as the methods by which it is drawn upon fur the sup port of the public finances.
Like the credit of individuals, public credit rests upon confidence; and, like the credit of in dividuals, such confidence rests upon past per formance of obligations incurred. Without a sac rifice of sovereignty the State can offer no other guaranty to its creditors. It is true that in cer tain cases the obligations of one Government have been guaranteed as to interest and princi pal by the Government of another State, as in the case of the Egyptian bonds guaranteed by the English Government. But in such a case the power which guarantees tends to extend its sov ereignty over the Government which contracts the obligations. Again, governments have some
times set aside the receipts from certain revenues. as, for instance, customs, for the payment of interest obligations; but without good faith this guarantee is of little value with a foreign admin istration of the revenues, which is again an abdi cation of sovereignty.
The basis of public credit is therefore the ability of the State to fulfill its contracts, and the punctiliousness with which it actually does so. Public debts are therefore bonds without mort gages or similar security. They are primarily contracts to pay interest, but may include also an obligation to pay the principal, either in whole or in part. Usually, in European countries, no fixed date is set for the repayment of public debt. A different policy is pursued by the United States. See DEBT, PUBLIC.