Complete. From “The Spirit of Laws.”

SOME have imagined that it was for the advantage of a state to be indebted to itself; they thought that this multiplied riches, by increasing the circulation.

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  Those who are of this opinion have, I believe, confounded a circulating paper which represents money, or a circulating paper which is the sign of the profits that a company has, or will make by commerce, with a paper which represents a debt. The two first are extremely advantageous to the state; the last can never be so; and all that we can expect from it is, that individuals have a good security from the government for their money. But let us see the inconveniences which result from it:—

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  1.  If foreigners possess much paper which represents a debt, they annually draw out of the nation a considerable sum for interest.

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  2.  A nation that is thus perpetually in debt ought to have the exchange very low.

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  3.  The taxes raised for the payment of the interest of the debt are a hurt to the manufacturers, by raising the price of the artificer’s labor.

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  4.  It takes the true revenue of the state from those who have activity and industry, to convey it to the indolent; that is, it gives the conveniences for labor to those who do not labor, and clogs with difficulties the industrious artist.

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  These are its inconveniences; I know of no advantages. Ten persons have each a yearly income of a thousand crowns, either in land or trade; this raises to the nation, at five per cent., a capital of two hundred thousand crowns. If these ten persons employed the half of their income, that is, five thousand crowns, in paying the interest of a hundred thousand crowns, which they had borrowed of others, that would be only to the state, as two hundred thousand crowns; that is, in the language of the Algebraists, 200,000 crowns—100,000 crowns + 100,000 crowns = 200,000.

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  People are thrown, perhaps, into this error, by reflecting that the paper which represents the debt of a nation is the sign of riches; for none but a rich state can support such paper without falling into decay. And if it does not fall, it is a proof that the state has other riches besides. They say that it is not an evil, because there are resources against it; and that it is an advantage, since these resources surpass the evil.

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