Introduction:

National debt is an old and timeless topic, beginning with the simple loan to a ruler and proceeding up to the idea of the Eurobond. The concrete forms of national debt are as different as the purposes they serve. Over the centuries national debt has been regarded as an accepted aid in unusual situations, mostly due to military pressure, a fact that can be observed from ancient Greek democracy until the modern age. Armament forced up state expenditure often to amounts that could not be covered from regular revenues, not to speak of the costs that resulted from war. As extraordinary events, wars offered rulers and governments justification for levying new or additional taxes which, once introduced, were often continued. To put it simply, the pre-modern state was rarely capable of covering a large and urgent cash requirement by means of long tax collection procedures, so that indebtedness with lenders at home and abroad was the only way to raise the required sums quickly. In the following section (2) some forms of national debt that appeared with increasing complexity over the centuries will be surveyed, and an insight into the motives for state indebtedness offered. In section 3 the Prussian financial system after the Peace of Tilsit will be examined in some details. On the basis of the financial compulsion the Prussian state was exposed to at that time, an impression will be conveyed of the variety of financial instruments available to engineer an escape from that difficult situation, and of the creativity used in their choice. The essay will close with some remarks on the weal and woe of national debt (section 4). Parallels with the debt crisis of our time will become obvious.