When governments initiated their policies of long-term irredeemable and perpetual loans, the state offered to the citizen an opportunity to put his wealth in safety and to enjoy a stable income secure against all vicissitudes. It opened a way to free the individual from the necessity of risking and acquiring his wealth and his income anew each day in the capitalist market. He who invested his funds in bonds issued by the government and its subdivisions was no longer subject to the inescapable laws of the market and the sovereignty of the consumers. Henceforth his in come no longer stemmed from the process of supplying the wants of consumers in the best possible way, but from taxes levied by the state’s apparatus of compulsion and coercion. He was no longer a servant of his fellow citizens, subject to their sovereignty; he was a partner of the government which ruled the people and exacted tribute from them.
However, even the most ruthless government in the long run is not able to defy the laws determining human life and action. If the government invests funds and no surplus results, or if it spends the money for current expenditure, the capital borrowed shrinks or disappears entirely, and no source is opened from which interest and principal could be paid.
The irredeemable perpetual public debt presupposes the stability of purchasing power. Although the state and its compulsion may be eternal, the interest paid on the public debt could be eternal only if based on a standard of unchanging value.
The investor who for security’s sake shuns the market, entrepreneurship and investment in free enterprise and prefers government bonds is faced again with the problem of the changeability of all human affairs. He discovers that in the frame of a market society there is no room left for wealth not dependent upon the market. His endeavors to find an inexhaustible source of income fail. There are in this world no such things as stability and security and no human endeavors are powerful enough to bring them about.
