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. 3½ 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.