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Abstract
History shows that public debt is a powerful tool for societies to trade with themselves in the future. Debt allows governments to spread the costs of public goods over time, while taxes provide the revenue needed for debt service. History also shows that there are limits to the power of public borrowing. Effective debt management requires balancing borrowing, interest rates, growth and inflation. Failure to do so results in unsustainable debt levels and fiscal crises. However, this essay argues that we need to reevaluate the balance of risks and benefits of sovereign debt. While the stated aim is to understand the past, the essay also speaks to current debates.