Funds, public, the name given to the public funded debt due by Government. The practice of borrow-ing money to defray a part of the war expenditure began, with us, in the reign of William III. In the infancy of the practice it was customary to borrow upon the security of some tax, or portion of a tax, set apart as a fund for discharging the principal and interest of the sum borrowed. This discharge was rarely effected. The public exigencies still continuing, the loans were continued, or the taxes again mortgaged for fresh ones. At length the practice of borrowing for a fixed period, or, as it is called, upon terminable annuities, was abandoned, and loans made upon interminable annuities, or until it might be convenient for the Government to pay off the principal. Such loans are called Funded Debt, or 'The Funds'; loans for a fixed period are said to be 'Unfunded'.
In the beginning of the funding system the term 'fund' meant the taxes or funds appropriated to the discharge of the principal and interest of loans. Those who held Government securities and sold them to others, selling, of course, a corresponding claim upon such fund. But after the debt began to grow large and the practice of borrowing upon interminable annuities had been introduced, the meaning of 'fund' was changed, and instead of signifying the security upon which loans were advanced, it has, for a long time, signified the principal of the loans themselves.
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