There are two, and only two, ways in which a State may borrow. It may compel persons to lend to it, or it may offer terms to which persons agree. The first of these will be called, for convenience, forced loans; the second contractual.1 This distinction into two classes according to the motives appealed to is primary. The first class consists of loans that are now comparatively unimportant and rare. They were once very common.2 Few nations now have resort to forced loans, even to the limited extent of paying their current expenses in bonds, compelling persons having claims to accept them.

1 Leroy-Beaulieu, Adams, and Bastable make use of a third class called "patriotic" loans. They have three classes, forced, patriotic, and " voluntary." The need of this second class is not clear. The patriot differs from the other creditors only in that he accepts worse terms, or apparently such. Unless he waive all claim to repayment, in which case there is no debt, his loan differs from those of the third class only in that it is even more " voluntary."

2 See Roscher, § 132,

There is a quasi-forced loan that is of some interest. That is the use of irredeemable paper money.This is very commonly spoken of as aforced loan. It must be observed, however, that it is a loan only when the government making such issues, directly or indirectly, promises to redeem the notes at some future time. Otherwise no debt has been created. When such money is issued with the purpose of retaining it in circulation permanently, it is not, in intention at least, a debt ; but it is a form of forced payment more akin to a tax. Even when there is a promise to redeem the money at some future time, this forced loan shows few of the fundamental features of a debt. Every debt involves the use of credit.1 Now from the subjective side there is little or no credit involved in this case. The trust or confidence amounts to nothing more than a belief in the stability of the government and a readiness to obey its authority. From the objective side the creditor, if we may call him such, receives a claim that is satisfiable not from the goods of the debtor as in other cases, but from the goods of the community, and that by law. Unlike money of " final redemption " these notes cannot properly be said to be based even upon customary credit. From both points of view, then, these so-called forced loans are scarcely more than quasi-debts. They are also quasi-taxes. Dietzel maintained that these loans were merely taxes.

1 Formal credit, to use Professor Sherwood's term ; see note, p. 283.