Perpetual debts

The perpetual debts are a form of credit that has been used primarily as a sovereign debt instrument in the late Middle Ages .


Perpetual debts have long been legitimized by the prohibition of interest-bearing loans for religious reasons and mistrust of creditors. The debtor, usually a sovereign, was not compelled by force to repay the loaned capital, and likened to a land which the farmer would not owner while having an irrevocable right to use one .

In return, perpetual debt holders could resell them, valuing them by the perception that they granted a right without limit in time to interest.

A famous perpetual debt was purchased by Charles X to finance the “billion Emigrants” paid in compensation for their pains and their unwavering support for the monarchy 1 .

When John Law convinces the regent Philippe d’Orléans to create a State Bank on December 4, 1718, prohibiting at the beginning of 1719 to use the cash for payments over 600 pounds, the former company of the Mississippi financial Antoine Crozat is transformed into Company of the West , with the capital of 50 000 shares of 500 pounds, of which the king has discreetly subscribed 40%, they are payable in state notes. They are exchangeable at the Treasury for perpetual 4% annuities, which allows debt consolidation 2 .

Notes and references

  1. ↑ a and b “Perpetual debts: a new instrument of sovereign debt?”, By Pascal Ordonneau, in Les Échos, November 17, 2012 ( article online  [ archive ] )
  2. ↑ “John Law, the Mint, the State” conference Pierre Tabatoni at the French Institute of Public Administration in March 2000, site of the Académie des Sciences Morales et Politiques ( Pdf  [ archive ] )

Leave a Reply

Your email address will not be published. Required fields are marked *