Mini-Stories: Volume 8

The Forever Bond by Joe Rosenberg

Fun fact: the British government only recently finished paying for World War I.  How could it possibly still have been paying for The Great War a hundred years after it ended?  Because, in an early bid to raise cash for the war effort, the British government offered a rare and beautiful thing called a perpetual bond.  

The way a bond typically works is that when a government or a company wants to fund something that they don’t have the cash on hand for, they ask regular individuals for a loan of X amount, and, in addition to paying back that principal amount after some fixed amount of time, they also pay you back some small amount of interest. They do that in regular payments to you over the course of anywhere between three months and 30 years. Usually after a maximum of thirty years, the bond “matures,”  at which point the government has “redeemed” the bond. Meaning it’s all paid up and you and the government are now square.  You’ve gotten your principal back plus interest and they are no longer in your debt.

A perpetual bond is, quite simply, a bond that never matures. Issued usually only in periods of fiscal desperation, it promises that instead of paying you back your principal in full plus interest after 30 years, instead, the government will keep the principal and instead pay you, your children and your children’s children’s children’s children a small amount of interest every year for all eternity.  

The biggest problem with perpetual loans was that when it came to bonds issued by governments and companies, these types of bonds carried a lot of risk with them because governments and companies often collapse. When that happens, not only do the payments stop, but you don’t get your principal back either. Geert Rouwenhurst, professor of finance at Yale, says this happened all the time. There were bonds issued by France before the French Revolution, and by Russia before the Russian Revolution, so most perpetual bonds are now lost to history.

A war loan poster from the first world war shown at the Bank of England Museum’s WW1 exhibition. Photograph: Bank of England

Not surprisingly, perpetual bonds are incredibly rare, and as such are coveted among certain “scripophiles” — people who go about collecting old stock and bond certificates.  Most old bond certificates have long since matured and are therefore collected purely for their historical significance and aesthetic quality, but perpetual bonds are in a category of their own. They are unique financial instruments, ones that form a living bridge from our present to the deep financial past.  

Rouwenhurst, on behalf of Yale’s Center for International Finance, actually purchased one of the oldest active bonds to date — a 1648 corporate Dutch water authority bond written on goatskin that was originally issued to raise money for the construction of a pier. Most of the oldest active perpetual bonds are from this very same Dutch water board, because this board has been in charge of maintaining all of the dams and levees and dikes in a given corner of the Netherlands for hundreds of years and is very stable. You don’t need a record of ownership to keep the bond active, but the catch is that the bearer of the bond needs to travel to the water board’s registrar’s office to have it notated, meaning a staff member at Yale needs to travel all the way to Holland to maintain it.

1648 Dutch water bond that was to pay the possessor 5 percent annual interest in perpetuity. Photo via Beinecke Rare Book And Manuscript Library, Yale University.

The Dutch water bond is now in the custody of Tim Young, a curator at Yale’s Beinecke Rare Book and Manuscript Library, who traveled back to Holland to collect on the bond in 2015. Yale first purchased the bond at an auction for $24,000, and when Young recouped the payment plus interest from the water board, his total payout came out to a whopping 136 euros plus change. Big money.

  1. Susan Nace

    RE: Concert Pitch by Sean Real

    RE: Concert Pitch now
    Orchestra directors are still playing with concert pitch. Not certain, but I heard San Francisco is A=441, many are at 442, and Von Karajan pushed his orchestras as high A=452.

    RE: Temperament – A great area to explore
    Great book about temperaments, which is even more fascinating than tuning pitches, is Temperament by Stuart Isacoff. There were huge arguments over it and J.S. Bach’s “Well-Tempered Clavier” was a theoretical work (although it is a series of 48 Preludes and Fugues in every key) because equal temperament was a controversial idea in Bach’s day. There are several different temperament systems and several are used now. Choirs and Instruments use either just or a combination of just and Pythagorean tuning. Ragnar Bohlin with the SF Symphony Chorus is all about tunings and his choirs (generally toward the end of the season) show it!

    Finally, glad you posted Vivaldi in A=415 Youtube
    Historically Informed Performance (HIP) has been around for a long time in the 20th/21st centuries and Early Music musicians are all over the tuning, techniques, and using instruments of the period (or facsimilies) Andrew Parrott’s groups do original tuning. I had the opportunity of hearing Mozart’s “Marriage of Figaro” with period instruments and lowered tuning. I am not a Mozart afficionado, but with period instruments and lowered tuning ,I fell in love with Mozart. It was a completely different experience! The San Francisco Early Music Society can link you up with performers and scholars!

    Cheers! Keep exploring: Music has a lot of “invisibleness” by design!

  2. On the Dutch bond value: A Dutch guilder (‘Gulden’ in Dutch) is valued in 100 ‘cent’. And a ‘stuiver’ is simply 5 cent! In the report is was mentioned that a guilder is „20 stuivers“, 20 times 5 cent equals 100 cent, which gives one guilder.
    This has been the case until the introduction of the Euro also in Holland.

    1. Stephane Famelaer

      So 1 stuiver was almost the same as one Belgian Frank. Interesting 🤔 never knew this!

  3. Charles Wu

    The concert pitch story is totally missing any mention of the Historically Informed Performance (HIP) movement in classical music which aims to play classical music as the original composers had heard it, on historically-accurate instruments and using historical tuning (usually around A=415). Even a layperson can hear the differences in tuning and style:

    Beethoven’s 3rd Symphony played by the Orchestra of the 18th Century under Frans Bruggen on period instruments and tuning:

    The same piece played by the Vienna Philharmonic under Leonard Bernstein on modern instruments and tuning:

    There are at least a dozen world-class period orchestras who specialize in historical performance (see, the best-known of which are the Academy of Ancient Music, Concentus Musicus Wien, the English Concert, the Orchestra of the Age of Enlightenment, and the Orchestra of the 18th Century.

    There’s also a number of soloists who similarly play on period equipment (Rachel Podger and Andrew Manze are the most famous violinists). For piano pieces, Robert Levin has recorded most of Mozart’s best known piano concertos on period-accurate fortepiano instruments. This just scratches the surface, and would make a great 99PI story.

    So you don’t need computer modification to hear period-accurate tuning, you just need to fire up Youtube or Spotify and listen to some great musicians who are keeping old music alive today.

  4. Tim Harris

    Not precisely bearer bonds but, to this day, the design of English bank notes includes a printed promise from the Bank, such as “I promise to pay the bearer on demand the sum of ten pounds”. I have always been curious what the Bank of England would give me if I arrive and ask them to make good on this.

  5. Sheryl

    On concert pitch, being obsessed with Bach at one point I was well aware of baroque music ensembles that tune their instruments to the appropriate historical tuning. I also was looking this up and found that contemporary musicians like Jimi Hendrix and U2 tune down a semitone for greater resonance. When I tune my violin by ear I always end up about a semitone flat from A440. I wonder if that is a somewhat “unnatural” tuning to my ear?
    Something else to explore: Temper. Around Bach’s time there were many ways to tune a piano/ klavier. Not just in terms of the central pitch but how far each tone is space from the others. Perfectly “even” temper (equal spacing of tones) ends up sounding out of tune to our ears. So thus Bach’s “well tempered Clavier”. I’m far from an expert, but I think there is a whole show’s worth of stuff to explore w/r/t tuning and pitch!

  6. Jim Crigler

    Parts of Richard Feynman’s memoir, “Surely You’re Joking, Mr. Feynman” talk about life at Los Alamos during the war.

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