Public loans, the characteristic form of government debts in modern times, may be in the form of short-term instruments, e.g., tax warrants, treasury certificates, treasury notes, and other notes such as those of the Federal Reserve System; of long-term government bonds; and of various notes that promise yearly payment of interest but do not specify a date for payment of principal. Although governments in times of stress have often converted bonds to issues carrying lower interest rates, have depreciated the value of currency, or have defaulted entirely on their obligations, with disastrous results for the bondholders, the number of those holding government obligations has increased in recent history. Default on obligations held by foreigners has been a reason offered for past intervention by major powers in Latin America, Africa, and elsewhere.
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.