00:00Imagine you're the ruler of medieval Serbia.
00:04You love your people, even though sometimes they don't love you back, and you want to
00:09make their short and mostly miserable lives just a tiny bit better.
00:13You want to build roads, universities, and maybe even a functioning sewage system.
00:19But the poor sods in the countryside, well, they just won't pay any extra taxes.
00:24So what do you do?
00:26Well, you turn to the Jews, or the Venetians, or maybe even the faraway Dutch, and you ask
00:34them for money.
00:35They're always eager to oblige, in return for modest interest rates in the, er, low
00:40twenties.
00:41Naturally, you take the money and hire some local stonemasons, and they build whatever
00:46it is you wanted to build, and then the Ottoman Turks show up, conquering your kingdom, deposing
00:52your dynasty, and subjugating your people for the next three hundred years.
00:57All the best with that, by the way.
00:59Now, as far as the moneylenders are concerned, the benevolent construction projects they had
01:04paid for were, well, still around, even if slightly modified.
01:09The problem for them was that they had lent their money to Serbia, and Serbia no longer
01:14existed.
01:15Then again, they could ask the Ottomans to pay back this loan, but extracting payments from
01:21someone with this many swords and cannons was never a simple affair.
01:25Now, this somewhat hypothetical example of ours illustrates the core conflict in the history
01:31of debt succession.
01:32Lenders would demand repayment for debts that conquerors had nothing to do with.
01:37I had nothing to do with it, but I'd like to keep the wall, please.
01:42It's important to note that prior to the 17th century or so, debts weren't really held
01:47by countries, but rather by people.
01:50Thus, our imaginary Venetian friends weren't really lending money to Serbia, but rather to
01:56its ruler.
01:57So, they'd have little cause in pursuing that debt against the Ottoman Empire, for example.
02:02Sometimes, you'd find provisions for debt inheritance within the family or dynasty.
02:08But when it came to foreign conquest, well, all bets were off.
02:12But as philosophy and law progressed, some started arguing that maybe the conquerors were indeed
02:18responsible for the debts of their newly obtained territories.
02:22This line of thinking emerged from Germany.
02:24Ah, the Germans!
02:26There's the right way, and then there's the German way, you know.
02:28Or, as it was then known, the Holy Roman Empire.
02:33This nominally gargantuan state was in fact made up of hundreds of smaller countries, each
02:39vying for power with its neighbors.
02:42When about half of those countries decided that the Pope was no longer cruel, the other
02:47half decided to murder them.
02:49Hmm, that's one solution, I guess.
02:51Thirty years, and five million casualties later, and you've got France, Sweden, and her Protestant
02:58allies carving up territory from the HRE .
03:04But this time around, certain bright philosophers made a compelling argument.
03:09Since the debts of the lost territories were backed by physical assets, the debts should follow
03:15those assets to their new owner.
03:18France reluctantly agreed, and so when it annexed the region of Alsace, it also took over its
03:24debts.
03:25Let me have those debts.
03:27Thank you very much.
03:28Oh dear.
03:29What have I done?
03:29Sweden, on the other hand, argued that the territory it had gained was merely a thief.
03:35So it didn't pay anything.
03:37History is rife with cases such as these, where shaky legal arguments and implicit military threat
03:43ultimately decide whether the debts get paid.
03:47A great example comes from the good ol' USA, when Texas declared its independence from Mexico
03:53and petitioned to become a state.
03:56One of the big questions was what would happen to its debts.
03:59I say, in exchange for all those debts, why don't you have a couple of my calves?
04:05Now that's a deal right there.
04:06Over the next decade, as pro- and anti-annexation factions struggled for power in Congress, market
04:13speculators bought Texan bonds for cents on the dollar, hoping to cash in on a US annexation.
04:19The US eventually went to war with Mexico over Texas, and when it won, it agreed to pay off
04:26those bonds, minting many a millionaire in the process.
04:31A similar situation unfolded a few decades later, when the US purchased Alaska, and again
04:37when it annexed the Kingdom of Hawaii.
04:40In both cases, the US footed the bill.
04:43Back in Europe, when the Kingdom of Sardinia was conquering its neighbors and creating modern-day
04:49Italy in the mid-1800s, it agreed to take on the debts of all the countries it was unifying.
04:56When it was finished, the collective debts became Italian bonds.
05:04Again, leading to a healthy dose of speculation.
05:07They just didn't have options back then, so gambling on bonds was the best they could
05:12do.
05:13In general, from the 19th century onwards, whenever a conquering country could afford the expense,
05:18it would either directly take on the debt, or it would at least pay it off partially.
05:24That's how you get seemingly contradictory situations like when Japan annexed Korea.
05:30Even though the Japanese were intent on assimilating the Korean people and erasing their culture,
05:35they still paid off all their debts.
05:38It does make sense in a way.
05:40Creditors are usually foreign and rich, so it's a good idea to keep them on your side when
05:45you decide to conquer someone.
05:47The only country that was consistently inconsistent in its debt successions was the British Empire,
05:54which would alternate between paying everything off and hunting down the creditors, depending
05:59on the Queen's mood.
06:00Off with their heads!
06:02Except him.
06:03And them.
06:04I like them.
06:05This, of course, is extremely understandable, considering the hegemonic power of the British
06:10Empire.
06:11After all, when you've got a track record of invading 9 out of every 10 countries on the
06:16earth, you're free to do with the foreign creditors as you please, I tell you.
06:20I mean, what could possibly be wrong with that?
06:22Well, my friends, I hope you enjoyed this impromptu lesson on the history of debt succession.
06:29If this knowledge ever proves useful in your mercantile adventures, do keep me in mind when
06:35you're rich and famous, and maybe even consider supporting me on Patreon.
06:39In any case, be on the lookout two weeks from now for the next avariciously enlightening episode
06:47of SideQuest.
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