Happy 400th birthday to the world’s oldest bond

Original Article ↗ Hacker News Discussion ↗

Bond terms, interest rate, and “perpetual” nature

  • Commenters dissect the original Dutch text: it grants a “heritable annuity” of 75 Carolus guilders per year on a principal of 1,200 guilders (6.25%).
  • The issuer can extinguish the annuity at any time by repaying the 1,200-guilder principal in one lump sum.
  • Later history (per Wikipedia and the article) shows rate reductions (e.g., to 2.5%), so “in perpetuity” applies to the obligation, not a fixed rate.
  • Some note that the article may conflate different similar bonds (e.g., Yale’s 1648 bond with different terms).

Currency conversion and why it wasn’t redeemed

  • Discussion on how to map Carolus guilders to euros:
    • One line traces historical guilder → modern guilder → euro.
    • Another looks at collectible coin prices vs metal content.
  • At today’s cited payment (~€13.61/year), the principal would be roughly €500–600.
  • People speculate the issuer never redeemed it because: the amount is trivial, many coupons went uncollected for decades, and its value as a historical curiosity now outweighs the cost.

Inflation, real value, and intergenerational effects

  • Several note that inflation effectively eroded the real burden on the issuer; the bond is now almost symbolic.
  • Debate over whether inflation “hurts the current generation” or can benefit borrowers and hurt lenders, especially with fixed-rate debt.
  • Long thread on wages lagging inflation, personal vs official inflation rates, and how housing and mortgages can make some generations (e.g., property owners) big winners.
  • Others stress that interest rates already embed inflation expectations, and that properly reinvested coupons could make the bond a decent historical investment.

Perpetual bonds, accounting, and regulation

  • Perpetuals are said to be rare now due to legal, accounting, and regulatory headaches (e.g., perpetual liabilities, LEI requirements).
  • Comparison with UK consols, gift cards, coupons, and other long-lived liabilities; breakage and expiry are used to avoid infinite bookkeeping.
  • One view: credit markets and instruments like these were crucial to the economic development that made such 400‑year infrastructure projects possible.

Thought experiments and side topics

  • Multiple back-of-the-envelope calculations for 400-year compounding at 3–4% show astronomical sums, used to illustrate the power of compounding and how extreme long horizons are.
  • Skepticism that any realistic, safe asset could have been continuously held for 400 years.
  • Mentions of crypto as a de facto return of bearer-style instruments.