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  • In 1648, the Water Board of Lekdijk Bovendams

  • needed to repair these embankments to make sure

  • that this bit of the Netherlands didn't flood.

  • For that, they needed money,

  • so they sold a bearer bond.

  • Whoever owned that bond would get

  • a little bit of money back from them every year.

  • But, unlike modern bonds, they didn't set

  • a time limit on that.

  • Perpetual debt can be a thing in finance.

  • It's kind of like selling stock in a company,

  • but normally perpetual just means

  • until the company fails.

  • But, this company didn't fail.

  • centuries later, that original bond ended up....

  • GPS: "Take exit 47."

  • ...here, at Yale University in New Haven, Connecticut, USA,

  • and it's still paying interest.

  • Perpetual bonds date back to the Middle Ages.

  • All bonds were perpetual bonds

  • and the fact that bonds actually mature

  • and pay back their principal is a financial innovation.

  • The flood plains of rivers, they don't coincide

  • with state boundaries or city boundaries,

  • so they had separate governments

  • that would oversee the levees.

  • These organisations would have the power of taxation.

  • Everybody who was protected by a levee

  • would pay taxes to pay for their upkeep.

  • And they would never go to war,

  • so the combination of being able

  • to tax people and not going to war,

  • which usually bankrupts governments,

  • makes that these bonds

  • are still paying interest until today.

  • Tax collections would have fell short of the budget they needed,

  • so they issued this bond.

  • The water board, which dates back to, I think, 1328

  • has been merged in larger and larger organisations.

  • They have recombined these water boards

  • and now it's called Stichtse Rijnlanden

  • which pays the interest on the bond.

  • These annotations here are the annual interest payments

  • that have been taking place since 1648.

  • As you go to the other side,

  • you see that the whole other side

  • is also full with little markings

  • which are the interest payments

  • that have taken back over the years.

  • At some point, the bond was full.

  • There was no more space,

  • and they issued this piece of paper here

  • which is a continued marking of the interest payments.

  • When Yale bought the bond in 2003,

  • and we collected our interest payment,

  • you see that the last interest payment

  • had been taken place in 1976.

  • So, there was 27 years of back interest that was due.

  • We left the bond here for 12 years,

  • and then, in 2015, we collected '04, '05, '06,

  • all the way down to 2015.

  • Well, there was actually a picture somewhere

  • of me in Holland where I hold the bond in one hand

  • and I got interest payments for Yale

  • with my other hand as the bearer of the bond.

  • It's a little disappointing.

  • The bond initially was for 1,000 carolus guilders.

  • Carolus guilders became other guilders, I think.

  • They became, now, Euros.

  • At some point, they lowered the interest payments a bit.

  • So, to make a long story short,

  • every year, we get €11.35

  • interest payment on this bond.

  • You know, the value of this bond,

  • obviously, is in the fact that it's live.

  • It's probably just as exciting for them

  • as it is for us to be able to present the bond

  • and have an opportunity to pay interest.

  • Now, the Dutch water authority could probably default

  • on the debt if they wanted to.

  • It costs more than the bond is worth

  • to fly someone over every couple of decades.

  • And let's face it, Yale would be unlikely

  • to launch an international lawsuit.

  • But, for about one Euro a month,

  • the Water Authority gets to be part

  • of a weird bit of living financial history,

  • and get a bit of good publicity out of it too.

  • It might not be a subscription they'd take out deliberately,

  • but apparently, for them, it's worth it.

  • I think they have a pretty good track record.

  • They sound like a triple-A organisation to me,

  • and I think we're going to be good for a while.

In 1648, the Water Board of Lekdijk Bovendams

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B1 bond interest perpetual yale payment debt

The Centuries-Old Debt That's Still Paying Interest

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    林宜悉 posted on 2020/04/01
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