Central banking and public debt
A state borrows from a permanent institution and can suddenly afford long wars.
- When
- Known to
- ± 1 year
- Era
- Early Modern, Holocene
The Bank of England is founded in 1694 to lend the government money for war with France, funded by subscribers who receive interest and the right to issue notes. The innovation is a credible commitment to repay, which lets Britain borrow at low rates and sustain military spending far beyond its tax revenue — a decisive advantage over France for the next century. Public debt becomes a permanent instrument of state rather than an emergency measure.