THE EVOLUTION OF SECURITIES

tragic human consequences, and with such an unavoidable economic
 moral, as in the period following the Great War.
The truth is that there is no royal road to financing governments,
 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. Originally,
 when most European countries were monarchies, and
before national debts managed by parliaments and assemblies
had been instituted, governmental loans were personally obtained
 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.