A weird bit of financial history

December 1, 2017 2:01 AM

Tom Scott explains the strange case of Yale having a 367 year old bond originally issued by a Dutch waterschap in its archives, that's still paying interest. (slyt)
posted by MartinWisse (14 comments total)

With an €11.35 coupon at a 2% discount rate (roughly current inflation rate), that perpetual bond has a present value of €567.50 (or $673.59).

That's literally the only time I can think that the present value of a perpetuity calculation (PV=D/r) has been relevant to the real world.
posted by leotrotsky at 6:29 AM on December 1, 2017 [13 favorites]

The Jolly Long Bond, UK war loans also still going strong
posted by Damienmce at 7:23 AM on December 1, 2017 [2 favorites]

Thanks - I sent this to our special collections people here at The Big Library with an admonition to get on the ball and start making us some money.
posted by lagomorphius at 8:04 AM on December 1, 2017 [1 favorite]

I have questions! This was a fun little video, now I want to know a lot more about this whole process. Here's the article that was written about it at Yale.

The acquisition of the 1648 bond raised a challenge for the Beinecke, which does not typically catalog and house “living” documents.

“The question was how to consider the status of the bond,” says Young. “In order to for the bond remain live, we need to take it to the issuing authority in the Netherlands every couple of decades to collect the interest, but unless we’re loaning an item to another institution, we don’t allow collection material to leave the library.”

A compromise resolved the issue. By 1944, there was no longer any space on the vellum to list interest payments. A paper addendum was added to record new payments. The library permits the paper addendum to travel to the Netherlands to collect the interest, which allows the bond to remain live.

According to the article, librarian Timothy Young was the one who actually traveled with the document to the Netherlands.
posted by jessamyn at 8:56 AM on December 1, 2017 [15 favorites]

I had no idea that perpetual bonds existed as a real-world concept, except when someone makes the mistake of borrowing money from members of organized crime syndicates and lands in a kind of permanent debt. In one light, it is interesting to see the Skull and Bones crew send a bagman every couple of decades to collect juice off the vig.
posted by a lungful of dragon at 10:47 AM on December 1, 2017

I had no idea that perpetual bonds existed as a real-world concept

Reasonably common in a certain time period. The British only redeemed their last outstanding ones a couple of years ago. When those Austen heroines are talking about their three percents, that's what they're talking about.
posted by praemunire at 10:55 AM on December 1, 2017 [9 favorites]

Neat stuff. Apparently the Carolus Guilder was named after Charles V and this tasty beer was named after the coins.
posted by exogenous at 11:01 AM on December 1, 2017

I mean - cash is just a zero coupon perpetual, really.
posted by PMdixon at 12:08 PM on December 1, 2017 [2 favorites]

(in which BoJ officials agree with me)
posted by PMdixon at 12:12 PM on December 1, 2017 [2 favorites]

I mean - cash is just a zero coupon perpetual, really.

Please tell me where you're buying newly issued dollars at a discount.
posted by leotrotsky at 12:26 PM on December 1, 2017 [1 favorite]

College dorms on laundry day, in exchange for quarters.
posted by PMdixon at 12:51 PM on December 1, 2017 [4 favorites]

(alright I'm cheating on newly issued there)
posted by PMdixon at 12:51 PM on December 1, 2017

I'm kinda surprised that this wasn't mentioned in Yale professor Shiller's lectures on Financial Markets, because he claims to enjoy studying the history of finance, and peppers the lectures with references to the catholic church, Dutch tulips, and ancient Sumeria.
posted by pwnguin at 5:24 PM on December 1, 2017 [1 favorite]

Hoogheemraadschappen are institutions with a really long history. Here's a bit of history on the Hoogheemraadschap Lekdijk-Bovendams that issued the bond (in Dutch).
The house in Utrecht of the hoogheemraadschap is rather nice.
posted by jouke at 8:36 PM on December 1, 2017