WEBVTT
Kind: captions
Language: en

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In 1648, the Water Board of
Lekdijk Bovendams

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needed to repair these
embankments to make sure

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that this bit of the
Netherlands didn't flood.

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For that, they needed money,

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so they sold a bearer bond.

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Whoever owned that bond would get

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a little bit of money
back from them every year.

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But, unlike modern bonds, they didn't set

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a time limit on that.

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Perpetual debt can be a thing in finance.

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

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but normally perpetual just means

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until the company fails.

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But, this company didn't fail.

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

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GPS: "Take exit 47."

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

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and it's still paying interest.

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Perpetual bonds date
back to the Middle Ages.

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All bonds were perpetual bonds

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and the fact that bonds actually mature

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and pay back their principal
is a financial innovation.

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The flood plains of rivers,
they don't coincide

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with state boundaries or city boundaries,

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so they had separate governments

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that would oversee the levees.

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These organisations would
have the power of taxation.

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Everybody who was protected by a levee

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would pay taxes to pay for their upkeep.

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And they would never go to war,

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so the combination of being able

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to tax people and not going to war,

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which usually bankrupts governments,

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makes that these bonds

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are still paying interest until today.

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

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so they issued this bond.

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

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has been merged in larger
and larger organisations.

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They have recombined these water boards

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and now it's called Stichtse Rijnlanden

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which pays the interest on the bond.

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These annotations here are
the annual interest payments

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that have been taking place since 1648.

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As you go to the other side,

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you see that the whole other side

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is also full with little markings

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which are the interest payments

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that have taken back over the years.

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At some point, the bond was full.

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There was no more space,

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and they issued this piece of paper here

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which is a continued marking
of the interest payments.

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When Yale bought the bond in 2003,

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and we collected our interest payment,

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you see that the last interest payment

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had been taken place in 1976.

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

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We left the bond here for 12 years,

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

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all the way down to 2015.

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Well, there was actually
a picture somewhere

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

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and I got interest payments for Yale

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with my other hand as
the bearer of the bond.

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It's a little disappointing.

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The bond initially was for
1,000 carolus guilders.

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Carolus guilders became
other guilders, I think.

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They became, now, Euros.

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

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So, to make a long story short,

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every year, we get €11.35

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interest payment on this bond.

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You know, the value of this bond,

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

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It's probably just as exciting for them

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

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and have an opportunity to pay interest.

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Now, the Dutch water authority
could probably default

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on the debt if they wanted to.

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It costs more than the bond is worth

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to fly someone over
every couple of decades.

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And let's face it, Yale would be unlikely

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to launch an international lawsuit.

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But, for about one Euro a month,

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the Water Authority gets to be part

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of a weird bit of living
financial history,

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

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

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

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I think they have a
pretty good track record.

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They sound like a triple-A
organisation to me,

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