The purpose of this paper is to discuss the effects of events such as the Glorious Revolution and Law Affairs in the public and private debt situation of England and France. It will attempt to explain how these importance events affected the market for private and public debt in the two country’s economy.
The Glorious revolution was a significant event in England because it created a social, political and economic condition favorable to trade, investment and lending. First of all, this event diminished the power of the Crown and the monarch. It became illegal to levy taxes and other payments to the people without the authorization of the parliament. Parliament in fact placed a restriction on the ability of the Crown to expropriate properties and this made property rights more secure. Because the interference of the Crown was negligible, Parliament was able to pass many pieces of legislations that addressed the financing of infrastructure of property rights in land. Property rights in public debt became safer and assured when restrictions and legal obstacles were placed against the power of the monarch.
In France, certain factors and political aspects negatively affected the market for private and public debt. This conditions stems from the very nature of the market for private and public debt in France. In this country there are two kinds of debts, the rentes which were perpetual annuities and obligations which are classified as obligatory bills. Small scale and large scale lenders were adamant in lending money to borrowers because of the high probability of default on the part of the borrower. Aside from these, there was also an issue with regards to the collateral that will be presented by the borrower to the lender. Collateral would refer to buildings, expensive jewelries and tracts of land. The lender cannot really be sure if the properly has not been previously mortgaged, if it is, he cannot claim his money from the borrower of he will be drawn into a long and expensive legal battle with the other lender who received the mortgage. Because of these vital conditions before lending, most loans went to wealthy nobles and rich individuals.
The state also complicated the problem on borrowing and lending. It frequently changed the value of its coin and required that all money will be reminted. The government also had a power to manipulate the value of the currency to erase the debts that it incurred in financing its wars and the crown also has the power to stop its payment of loans. These practices lead to the wholesale devaluation of the currency ruining many lenders. Lenders and financiers were also subjected to a chamber de justice that would strip them of their properties and rights to pursue their claims against the crown and other borrowers.
Another event that adversely affected the market for public and private debt in France is the programs implemented by Law tried to solve the financial difficulty of France and to retool the fiscal stability of the crown by issuing regulations that ultimately backfired. first issued bank notes from his Banque Royale as a legal tender and because of these massive and widespread devaluation of the paper money was experienced by lenders and borrowers. This proved to be an advantageous position to a simple borrower because he can now pay his large debt because of the devaluation while a lender will suffer greatly because he will now receive a small portion of what he loaned. Since this effect was clearly disadvantageous to the lenders, many of them were adamant and wary in granting loans to borrowers thus seriously affecting the public and private debt markets.
Credit:ivythesis.typepad.com
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