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Happy 400th birthday to the world’s oldest bond
- throw0101b 2y agoSee also Tom Scott on a different perpetual bond: * https://www.youtube.com/watch?v=cfSIC8jwbQs https://www.youtube.com/watch?v=cfSIC8jwbQs * Also: https://en.wikipedia.org/wiki/Perpetual_bond https://en.wikipedia.org/wiki/Perpetual_bond
- recursive4 2y agoBond, Perpetual Bond
- dotancohen 2y agoInterest compounded, not simple.
- hk__2 2y ago> In return for her money, the water board promised Jorisdochter, her descendants or anyone who owned the bearer bond 2.5 per cent interest in perpetuity. This is inaccurate; it was 5%: > According to its original terms, the bond would pay 5% interest in perpetuity, although the interest rate was reduced to 3.5% and then 2.5% during the 18th century. [1] [1]: https://en.wikipedia.org/wiki/Perpetual_bond https://en.wikipedia.org/wiki/Perpetual_bond
- 77pt77 2y agoSo, not in perpetuity.
- d0liver 2y agoSounds like the Wikipedia article is talking about a different set of bonds, "Another of these bonds, issued in 1648, is currently in the possession of Yale University." From the article, it looks like the original interest on this one was 6.25% (75/1200) though.
- trgn 2y agoWhere is the in perpetuity language in the bond terms? Doesnt it say until full repayment?
- d0liver 2y agoYes, but they never repaid it. They have just been paying out the interest.
- trgn 2y agoah thanks, I think I get it now. "heritable annuity" is the perpetual interest. "until repayment" threw me off. 75/1200 = 6.25% though. Where does the 2.5% interest rate quoted in the article come from?
- d0liver 2y agoNot sure. From other comments, it sounds like that's an adjustment that they made later.
- evanb 2y ago> [I also declare] to have awarded and given 75 Carolus guilders of twenty stivers apiece per year as heritable annuity, to be paid one half of the annuity aforesaid on the 9 th of June 1625 and the other half the 9th of December following and so on every six months until repayment with all payments entirely free of all taxes, impositions or burdens of whatever name or title none excepted. It is confusingly written, but what it means by repayment in the above paragraph is not "until you get your 1200 guilders back in these 75-guilder installments", its meaning is clarified by the next paragraph, > On such conditions that I or my successors [unreadable] of the aforesaid Leckendijck may, at any time when it pleases us, extinguish, repay, and buy back the said annuity in full at once and not in parts or fractions with the sum of one thousand two hundred Carolus guilders which explains how the board can get itself out of this obligation: by paying the original principal of 1200 guilders back.
- trgn 2y ago
- jandrese 2y agoDo I understand this right that this is a public works project with effectively a 400 year old interest only loan?
- andylynch 2y agoPretty much! (Securities like this are also something of a headache for compliance people since _technically_ they can be caught by current regulations not written with them in mind. Good luck getting an LEI for this bond’s issuer. (An actual concern I’ve seen raised by people responsible for such things)
- bagels 2y agoFor those like me that didn't know "The Legal Entity Identifier (LEI) is a reference code — like a bar code — used across markets and jurisdictions to uniquely identify a legally distinct entity that engages in a financial transaction."
- crote 2y agoI checked it, and the issuer of this bond (Hoogheemraadschap De Stichtse Rijnlanden) indeed does not seem to have a LEI!
- deleted 2y ago[deleted]
- gip 2y agoThis story also shows another facet of inflation: the amount currently paid is €13.61 a year. Effectively, that debt was killed by inflation over the years. Inflation makes it harder for the current generation but also free future generations from your debts.
- mitthrowaway2 2y agoDoesn't that depend on which generation collects payments on the bond, and which makes the payments?
- fsckboy 2y agothe view you are describing could be described as (or at least, i would describe as) "newtonian" interest/inflation, where modern thinking is more "einsteinian". the interest rate of a bond isn't just "liquidity/the time value of money", it also contains expectations for future inflation rates. However, we never know the future, so inflation risk cannot be eliminated/hedged by any means, so being "wrong" about the future might harm or reward you. furthermore, by portfolio theory, you would have needed to reinvest all the interest received from this bond immediately upon receipt as part of your evaluation of the performance of the bond (which, that being difficult to do is why we evaluate bonds at "present value"). All those past interest payments made would have been reinvested at prevailing (e.g. so-called "inflationary") rates and might have done extraordinarily well. If you include all factors, this bond might have been the best investment she could have made, and it would be wrong to describe it as somehow "ravaged by inflation"; with nothing any better to do with her savings, it's the idea that money is somehow "fixed" and potentially permanent unless "eroded" that we should see as damaged, not the value of this bond.
- deleted 2y ago[deleted]
- raldi 2y agoHN headline in the year 2400: "I SSHed into a box with a 146923-day uptime and found a cronjob still running"
- qingcharles 2y agoI found a server I used to host in 1996 still online, but I don't know where it is. Looks like it is running a 2010 version of Apache, though, so it was at least updated 14 years ago: http://resworld.eolith.net/res.html http://resworld.eolith.net/res.html
- gerdesj 2y agoIt's in the UK somewhere: https://bgp.he.net/AS13037 https://bgp.he.net/AS13037
- jackcosgrove 2y agoI'm curious if anyone has run the numbers and looked at what the interest payments of this bond over the past 400 years would have amounted to had they been invested in some theoretical basket of typical assets that were available at the time. It sounds like a pittance now but 400 years of a compounding pittance could be a lot of money. Edit: with an annual contribution of €13.61 and a real rate of return of 3%, 400 years of annual compounding would be over €7 million. With a rate of 4% it would be €280 million.
- PepperdineG 2y ago> with an annual contribution of €13.61 and a real rate of return of 3%, 400 years of annual compounding would be over €7 million. With a rate of 4% it would be €280 million. Reminds of Futurama with billionaire Philip J Fry after unintentionally leaving 93 cents in the bank for 1000 years.
- dgfitz 2y agoI asked a bot to do the math for me (if anyone was as curious as I was): 93 cents would turn into approximately $17.88 trillion with compound interest of 3% over 1000 years. 93 cents would turn into approximately $4.28 billion with compound interest of 2% over 1000 years. 93 cents would turn into approximately $19,482.22 with compound interest of 1% over 1000 years.
- scubbo 2y agoIs a bot really necessary in order to calculate 0.93*(1 + n%)^1000?
- dotancohen 2y agoNot if you know the formula. I suspect that GP didn't.
- dgfitz 2y ago
- scyclow 2y agoThis is amazing, but I find it disappointing that the NYSE (current owner) hasn't collected interest on it since 2004. Given that most of the charm is that this is still an active financial document, I don't understand why they wouldn't keep it going. Otherwise it's just another defunct historical document.
- caseysoftware 2y agoBecause the bond has to be physically presented. Moving such a document is extremely risky and a lot of work so not worth it in almost any case short of the PR bump/curiousity of having the "world's oldest bond"
- bagels 2y agoEven if you didn't have to move it, getting a taxi to some meeting place would exceed the interest payments, let alone traveling to Europe.
- seizethecheese 2y agoGiven this, we should be thankful that the NYSE is maintaining this at a loss. It occurs to me that NYSE might be the best owner of this bond, as the primary value isn’t monetary, but the demonstration of stable financial institutions.
- mmiyer 2y agoThe article is about them collecting interest a couple weeks ago on the 400th anniversary? They clearly are keeping it going, just only collecting interest irregularly at PR milestones.
- yieldcrv 2y agoBearer bonds exist in crypto and are extremely popular there, for anyone lamenting the loss of the concept What I love about this is how in just the last 20 years, a lot of work has been done to jettison bearer bonds from existence in jurisdictions across the globe, and cause the “registration” of any existing bearer bonds so that they couldnt be grandfathered in But no sooner than this advancement in global geopolitical hegemony was developed and leveraged, the crypto market reinvented bearer bonds and they work even better
- kchoudhu 2y agoCUSIP?
- liliiavyshnska 2y ago[dead]
- robterrell 2y agoThis has me hoping the Vesuvius prize finds an ancient Roman bond that needs to get paid out.
- brnt 2y agoPity that the Holy Roman Empire dissolved a while ago.
- axus 2y agoIt was neither Holy, nor Roman, nor an Empire.
- patall 2y agoGiven that several states claim to be Rom's successor, it shouldn't be that hard to find someone to take the responsibility.
- wbl 2y agoNo state does. The Russian state started in 1917 and disclaimed all debts of the Czar. The Ottoman empire ended and was replaced with the Republic of Turkey. Modern Germany doesn't inherit from any of the predecessor states after WWI and the Nazi era.
- Yeul 2y agoI'm currently reading a book about a war in the 17th century. One thing that is entirely different from today is how kings and governments could just stop paying back their lenders and there was nothing you could do about it but send angry letters... Ofcourse it worked the other way too. Entire armies of paid mercenaries could just take the money and run into the night.
- wbl 2y agoJust ask lenders to Argentina about how getting paid back is going.
- IAmGraydon 2y agoInteresting story, but as a bond holder, you're a lender. As a lender, you are exchanging inflation risk for interest. With this in mind, how could anyone think that a 400 year bond would be a good idea (specially at only 2.5%!). You have to remember that when buying a bond, your principal is tied up until maturity. On a 400 year bond, you're basically never getting it back. So you've handed your money to someone 15 generations in the future for what is initially a bad return and by the end of the bond's life is unbelievably bad. By the way, if you take the 1,200 Gilder and invest it in an investment vehicle at 4% compounding and wait 400 years, it's worth $7,807,589,396.13 This woman basically traded almost $8 Billion of future return for a total of $5,444 including that principal that is returned at maturity. Ouch.
- icegreentea2 2y agoThe original bond says 75 guilders per year until the principal of 1200 was repaid. That's 6.25% per year. I don't think this investment was anywhere as dire as you paint it as. Especially in a world where monetary inflation was very different... currency debasement didn't typically happen that quickly.
- pm215 2y agoThe lender in this case was living somewhere that was likely to flood if the repair works funded by the bond didn't get done, so they might have had some not purely financial motivation for it. Plus we don't know what other investments Elsken Jorisdochter owned; this was probably a small part of her assets. Finally, I'm not very convinced by the "400 years at 4% compounding" hypothetical -- could you actually buy an investment with that return at that date which was a safe non-risky one? And if you could, should you as a person with a lifespan much less than 400 years really prefer it over something which gives you a guaranteed income within your life?
- Animats 2y agoThe UK government finally bought back its old consols, their perpetual bonds, in 2015.[1] "Never sell consols" was good advice in the Jane Austen era. [1] https://uk.finance.yahoo.com/news/uk-says-redeem-post-world-075633454.html https://uk.finance.yahoo.com/news/uk-says-redeem-post-world-...
- joshlemer 2y agoI wonder if there's a market for novelty collector bonds like this.
- jimnotgym 2y agoThere was a Tom Scott video about a similar bond https://youtu.be/cfSIC8jwbQs?si=352fpBnjG_2gs4CZ https://youtu.be/cfSIC8jwbQs?si=352fpBnjG_2gs4CZ
- spaceguillotine 2y agoi have to laugh at their proposition that Bonds built the modern world... that was slavery buddy, all that stolen labor funded the markets of the world.
- dotancohen 2y agoYou are using a very modern lens to look at history - not recommended. I say that as someone whose grandfather was a slave.
- Beijinger 2y agoHey, you could buy a stock from Berlin Zoo. I don't think they every paid a dividend and it is difficult to buy one. Trading volume last month: 7 stocks. But AFAIK it gives you free entrance in the zoo... https://www.finanzen.net/aktien/zoologischer_garten_berlin_1-aktie https://www.finanzen.net/aktien/zoologischer_garten_berlin_1...
- mensetmanusman 2y ago“Help us now please, don’t worry our children will pay your children”