Bonds and government debt in Italian city-states, 1250-1650

This paper tells an extraordinary story – the history of the earliest government bond financings in world history, and the origins of the current system of government finance used by the world today. The basic thesis of the paper is that the three main Italian city-states of the early Renaissance developed related but distinctly different modes of financing, reflecting the political foundations on which each was ruled. It shows in addition, that government debt financing developed as a financial technology to support military and economic competition, and that the bond yields of these early states reflected the relative success of their issuers.