Some have belie­ved it was good for a state to be its own deb­tor ; they have thought this mul­ti­plied wealth by increa­sing cir­cu­la­tion.

I believe they have confu­sed cir­cu­la­ting paper that repre­sents money, or a cir­cu­la­ting paper which is the sign of the pro­fits a com­pany has made or will make on trade, with a paper that repre­sents a debt. The first two are very advan­ta­geous to the state ; the last can­not be, and all that can be expec­ted of it is that it be a good secu­rity for indi­vi­duals for the nation’s debt, in other words, that it pro­cure its pay­ment. But here are the draw­backs that result from it :

1st.. If forei­gners pos­sess many papers repre­sen­ting a debt, they draw from the nation every year a consi­de­ra­ble sum in inte­rest.

2nd. In a nation thus per­pe­tually in debt, the exchange must be very low.

3rd. The tax rai­sed to pay the inte­rest on the debt is pre­ju­di­cial to manu­fac­tu­ring by making labor more expen­sive.

4th. It takes away the genuine reve­nues of the state from those who are active and indus­trious, to trans­fer them to idle per­sons, which is to say that it faci­li­ta­tes wor­king for those who do not work, and crea­tes dif­fi­culties for wor­king to those who work.

These are the draw­backs ; I am una­ware of any advan­ta­ges. Ten per­sons each have a thou­sand crowns in income from land or indus­try : that makes for the nation, at five per­cent, a capi­tal of two hun­dred thou­sand crowns. If those ten per­sons use half of their income, in other words five thou­sand crowns, to pay the inte­rest on a hun­dred thou­sand crowns which they have bor­ro­wed from others, that still makes only two hun­dred thou­sand crowns for the state ; that is, in the lan­guage of the alge­brists, 200,000 crowns–100,000 crowns +100,000 crowns = 200,000 crowns.

What can easily mis­lead is that a paper that repre­sents the debt of a nation is a sign of wealth, for only a weal­thy state can sup­port such a paper without fal­ling into decline ; and if it does not do so, the state must have great wealth from elsew­here. We say there is no harm, because there are resour­ces against that harm ; and we say that the harm is a bene­fit because the resour­ces sur­pass the harm.