THE EVOLUTION OF SECURITIES 
tragic human consequences, and with such an unavoidable eco- 
nomic moral, as in the period following the Great War. 
The truth is that there is no royal road to financing govern- 
ments, simply because they are governments. No practical 
magic is available which will permit government officials to 
escape the same invariable economic laws that the individual 
constantly encounters in his check book. As with individuals, 
governments which cannot obtain enough current revenue to 
pay current expenses, must contract debts whose reduction 
can be effected only by a more favorable ratio between revenues 
and expenses in the future. 
Early Methods of Government Borrowing.—The exact 
methods employed by governments in borrowing money, along 
with the methods for business borrowing, have, of course, 
undergone great changes in the past three centuries. Origi- 
nally, when most European countries were monarchies, and 
before national debts managed by parliaments and assemblies 
had been instituted, governmental loans were personally ob- 
tained and assumed by the sovereign.! Thus, in the sixteenth 
and seventeenth centuries, and in some countries even later, the 
kings and queens of Europe constantly resorted to private 
money-lenders for short-term loans, which afterward were 
paid off by royal taxation, refunded, or repudiated. Such loans 
were frequently made on the pledged collateral of the royal 
jewels, or even on the assignment of specified taxes. The great 
but troublous reign of Elizabeth was financed through loans 
made by the Antwerp money-lenders. Such transactions afford 
strong contrast with governmental financing as we know it 
today. The risks in such loans were large, for the proverbial 
honor of princes seemed only occasionally to extend to their 
debts. Interest rates had to be high enough to insure against 
the risk of royal repudiation. The element of patriotism in 
such loans was practically non-existent, nor was there yet any 
employment of them to promote international trade. More- 
1 See Appendix Ia.