"Dormant securities":imperial guarantees for colonial loans, 1842-1934

Contemporaries and historians agree that British colonies did not borrow on their own credit but on imperial fiat. We explore the history of colonial bonds explicitly guaranteed by Britain to qualify this assertion. We find that markets priced guarantees above other colonial bonds and that colonial governments lobbied for them. The introduction of other regulatory enhancements reduced the value of guarantees in the late 19th century, but it recovered in the interwar. British authorities were ambivalent about guarantees—worrying about creating moral hazard while using guarantees to lower the costs of developmental and strategic projects in the colonies.