[HN Gopher] Yale's 367-year-old water bond still pays interest (...
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Yale's 367-year-old water bond still pays interest (2015)
Author : niklasbuschmann
Score : 136 points
Date : 2022-12-10 18:56 UTC (4 hours ago)
(HTM) web link (news.yale.edu)
(TXT) w3m dump (news.yale.edu)
| Ericson2314 wrote:
| History is cool, but this is gross rentier behavior. Perpetual
| bonds should be banned. Perpetual ownership comes next.
| alpark3 wrote:
| Doesn't matter if the other side enters into the transaction
| willingly, imo.
| leetcrew wrote:
| I mostly agree, but a 367 year old contract kinda stresses
| the concept of "other side" and "willingly". I may be missing
| some subtleties of how dutch water boards work, but they seem
| to be a sort of quasi-governmental organization that receives
| tax-payer funds. so in some sense, the people of the
| netherlands are bound to an american private university by a
| contract that far predates the birth of any living citizen's
| great-grandparents. in this case, the interest amounts to
| only a symbolic amount, but imo it would be pretty unfair if
| it were a more significant yearly payment. no one alive today
| consented to the contract.
| vasco wrote:
| Nobody alive today consented to a monarchy and we also have
| plenty of those around. One still in the Netherlands.
| kazen44 wrote:
| but people do consent to the monarchy?
|
| mind you, the netherlands is a constitutional monarchy in
| which the king is legally bound by the constitution.
| Changing the constitution to just absolve the monarchy is
| a possibility. One that just hasn't happened yet, because
| the monarchy in the netherlands is quite popular.
|
| Also, in the past two decades, the monarch had to resign
| some roles he still played in goverment. (like appointing
| the "informateur" and "formateur" during the formation of
| a new cabinet.) This all happens without his approval,
| because he doesn't have the power to draft and implement
| laws. That is done by both chambers of goverment.
| kergonath wrote:
| It's more of an argument against monarchy than for
| perpetual bonds.
| ghaff wrote:
| It's not perpetual--it's 100 years--but check out Listerine
| royalties.
|
| https://thehustle.co/the-people-making-millions-off-
| listerin...
| Ericson2314 wrote:
| Anyone can sign any piece of paper. The question is whether
| the state should spend effort on the enforcement of said
| contract.
|
| Liber(al,atarian) "Freedom of contract" is easily refuted
| child-philosophy. Society not choosing to spend communal
| resources enforcing your stupid contract is not an
| abridgement of individual rights.
|
| _That_ is the starting point, _then_ we can get into
| "contracts made under duress" with the understanding that its
| not incumbent on society to judge the situation perfectly
| every time, because ultimately society is extending a favor
| not a right to the contractees.
| Proven wrote:
| micromacrofoot wrote:
| As another commenter pointed out upthread, there are actual
| cases of perpetual ownership (Harvard being the example),
| though they're equally as rare as this 367 year old bond.
| max-ibel wrote:
| I believe you can set up "dynasty trusts" in some US states
| today that basically live forever:
|
| https://trustandwill.com/learn/dynasty-trust
| ghaff wrote:
| Going back to the Dartmouth College case:
|
| _In the opinion for the Court, Chief Justice John Marshall
| wrote that by establishing a corporation, Eleazar Wheelock
| had created "an artificial being, invisible, intangible, and
| existing only in contemplation of the law."
|
| He explained that "by these means, a perpetual succession of
| individuals are capable of acting for the promotion of the
| particular object, like one immortal being."_
|
| (Also, by the way, corporate personhood is nothing new.)
| Denvercoder9 wrote:
| I think the water board can spare ten bucks for interest out of
| their EUR130M budget.
| Ericson2314 wrote:
| It is still a waste of administrative labor.
| htkibar wrote:
| It has value in terms of being an example of how old these
| institutions are, not to mention how trustworthy and with
| lasting power they are.
|
| Administrative effort + 10 bucks is _nothing_ compared to
| that.
| none_to_remain wrote:
| Avoiding default is not a waste.
| rvba wrote:
| You mean stocks should be banned?
|
| Conceptyally they are kind of the same thing.
| chordalkeyboard wrote:
| conceptually they are different. stocks are equity and bonds
| are debt.
| rvba wrote:
| Stocks are equity that (at least in theory) allows you to
| have perpetual dividends.
|
| Of course most companies fail in longer time frame, also
| modern stocks are kind of a modern concept, but there are
| some really old companies here and there. Most dont pay
| dividends but conceptually they could.
|
| Also in 100 years people will probably still drink
| wine/beer, eat salt or will want to go to some respected
| restaurant or a traditional hotel near a japanese
| wellspring.
|
| https://en.wikipedia.org/wiki/List_of_oldest_companies
| ghaff wrote:
| If you dig into finance theory they're not as different as
| you might think. And it gets even fuzzier when you consider
| instruments like convertible bonds.
| chordalkeyboard wrote:
| if they weren't different then why would the bond need to
| be converted from one to the other?
| ghaff wrote:
| I wrote they weren't as different as you might think in
| terms of who has claims on the company etc. At the
| practical level there are obviously differences between
| different classes of stock, callable vs. not callable
| bonds, convertible bonds etc. I'm just saying that equity
| vs. debt is not binary.
| Ericson2314 wrote:
| Yes, they should be. Bonds-only is a great system.
|
| There is far too much inertia/permenance in development
| currently. Lot's of empiracle research like
| https://cepr.org/voxeu/columns/missionaries-human-capital-
| tr... on this.
|
| This is a design flaw. We should design economic systems that
| have less permanent state to remedy this.
| rvba wrote:
| So who should own the means od production? Vladimir Lenin?
| s1artibartfast wrote:
| Banning Perpetual ownership just reduces everyone to being a
| surf with leased land and possessions.
|
| I have very little interest in a return to a feudalism where
| higher authority owns the product of my labor
| Ericson2314 wrote:
| 1. It's spelled "Serf"
|
| 2. Serfs were _indefinitely_ tied to the land. Heritable
| Fiefs were also indefinite.
|
| In general you are exactly backwards, indefinitely
| arrangements are a holdover from Feudalism. Getting away from
| them is getting _further_ from Feudalism.
| OscarCunningham wrote:
| A perpetual bond has a finite present value. It's no more or
| less exploitative than a bond with finitely many payments and
| the same present value.
| Ericson2314 wrote:
| > A perpetual bond has a finite present value.
|
| You are onotologically correct but epistemologically
| confused.
|
| In the first order, bonds are just contacts that are fungible
| enough to trade.
|
| In the second order, we have markets for them which arrange
| prices.
|
| In the third order, based on the practice of those markets
| and theorizing about them, we can up with temporal
| discounting and thus a way to assign finite present value.
|
| ----
|
| > It's no more or less exploitative than a bond with finitely
| many payments and the same present value.
|
| And where was it said that the exploitation of the bond was
| solely a function of its present value?
|
| My complaint is not with present value. I am aware of these
| things. My complaint is with the nature of the contact in a
| way that is not captured by present value.
| AnimalMuppet wrote:
| And, given a finite present value, I'm pretty sure Yale has
| the money to buy it back if they want to...
| max-ibel wrote:
| Yale gets the money; the dutch pay. The dutch would love to
| terminate the load and do a balloon payment, but yale
| (correctly) thinks that a 'live' bearer bond is more
| valuable in their collection, so every 20 years or so they
| travel with the bond to the Netherlends to collect the (at
| this time nominal) payments.
| kgwgk wrote:
| Yale holds the bond and is being paid ~$30 per year.
| Apparently someone has to bring it to Amsterdam every
| couple of decades to collect the payments and keep the bond
| alive. They are losing money - I guess Yale has enough to
| do it just for fun, I mean, for the historical interest
| (pun intended).
| t0mas88 wrote:
| Not just to Amsterdam, Stichtse Rijn is further south
| (around Utrecht).
|
| It includes the area where the 16th century rich people
| from Amsterdam would build their out of town mansions.
| Traveling there by boat, on a water system that has been
| managed for over 900 years. So this 367 years is old, but
| the organisation paying has existed in some form for more
| than twice that.
| akavi wrote:
| If someone gifted me the bond, I'd happily pay many
| multiples of the interest payments in airfare to go
| collect, and I have far less money than Yale.
|
| It'd be fun story and a cool bit of financial history,
| and keeping it "alive" is definitely worth a few grand
| every 10 years or so.
| kibwen wrote:
| Similar fun fact: Harvard is immune to eminent domain, because
| the original constitution of Massachusetts ensured that all of
| Harvard's then-existing rights would remain in effect "forever",
| and apparently that includes a dusty old letter from King George
| or something stating that Harvard cannot be subject to eminent
| domain. Harvard has used this to reroute a subway tunnel that
| would otherwise have run under Harvard Yard. So the next time
| you're on the red line and wondering why the train slows to a
| crawl as it passes that sharp turn around the Harvard stop, now
| you know.
| yucky wrote:
| I always heard that this was so you could park your car in
| Harvard yard.
| goodcanadian wrote:
| I'm skeptical. I looked at google maps, and I allow that it may
| not be perfectly accurate, but the line appears to follow
| surface roads in the area which allows for cheap and easy
| (relatively) cut and cover tunnels. Further, if the line
| already existed to Harvard Square, there is no reasonable
| alignment that would take an extension under Harvard yard. The
| line turns because the road turns and that is the direction
| they wanted to go. They also had to deal with the pre-existing
| station and tracks. It was probably determined to be the best
| option as trains would already be stopping at the station,
| anyway.
| ghaff wrote:
| Yeah, it seems to basically follow Mass Ave from Harvard to
| Porter which makes perfect sense. (There's some one-way
| funkiness on the surface street--Boston/Cambridge, what can
| you say?) But given that the Hardware Square station existed
| at the time of the Red Line extension, I'm not sure why you
| would go under Harvard Yard. I'm willing to believe that
| Harvard Square station could have been located differently in
| a way that didn't require such a dogleg approaching Harvard
| Yard but that decision happened a very long time ago.
| ilamont wrote:
| _This is as far as the facts go, and only lore is left. Here,
| however, is how the story goes. When, in 1974, the
| Massachusetts Bay Transportation Authority sought to extend the
| Red Line beyond Harvard Square, the state began plans to dig
| underneath Harvard Yard. They got so far as to build a platform
| approximately underneath Wigglesworth Hall. In fact, you may
| see the ghost station when you ride the T, on the right side of
| the train as it slows down and nears the platform at Harvard
| station. However, Harvard would not tolerate the thought of a
| tunnel below its sacred grounds, disturbing the scholarly peace
| and quiet of the Yard. Allegedly, Harvard hired a team of
| lawyers who took the MBTA to court. According to lore, they
| presented before the judge a glass encased letter granting
| Harvard exemption from eminent domain signed by General George
| Washington.
|
| As for the veracity of the story, I have not found substantive
| proof other than repeated versions of the story told in forums.
| However, it is true that Harvard inexplicably convinced the
| MBTA to build around the Yard despite an astronomical increase
| in the cost of construction._
|
| https://www.thecrimson.com/column/the-snollygoster/article/2...
| sandworm101 wrote:
| Lol. Harvard hiring lawyers. Thats like hogwarts bringing in
| consultant wizards.
| CobrastanJorji wrote:
| Harvard has three kinds of law people. First, it has its
| own lawyers. They're fine, but they're mostly not the court
| kind of lawyers. Second, it has law students. Those aren't
| lawyers, so you don't want them either. Third, it has law
| professors, who are generally well known or renowned for
| past deeds or theoretical legal philosophy, but mostly
| they're either out of practice, never practiced, or they've
| got insane (for example, Alan Dershowitz is a professor
| there). You don't want any of those folks nearby when
| courtroom stuff needs to happen.
|
| Hogwarts has a similar problem, now that I think about it.
| Hugely powerful wizards defending a school from a tiny
| number of adversaries, they've got all the time in the
| world to prepare, and yet they're terrible at it. They
| build a huge multilayered vault that's bypassed by three
| unprepared kids. They should've brought in professionals.
| tetris11 wrote:
| Or Death Eaters, as they prefer to be called.
| loganc2342 wrote:
| The wizards or the lawyers?
| rd wrote:
| I lived in Wigglesworth last year. I swear this isn't true
| because I woke up damn near everynight from the rumbling
| below my room.
| objclxt wrote:
| That's the tunnel along Mass Ave, which Wigglesworth runs
| parallel to, rather than going through the yard itself.
| hn_throwaway_99 wrote:
| The part about "Harvard is immune to eminent domain" is
| definitely apocryphal.
|
| I'm quite positive the United States doesn't give legal
| credence to "dusty old letters from King George".
| ghaff wrote:
| Whether or not that particular claim is apocryphal or not,
| it's well established case law that dusty old royal charters
| from King George III very much have legal credence.
| temp12192021 wrote:
| Depends on the judges involved.
| indymike wrote:
| Has nothing to do with judges, and the fact the US adopted
| English common law and evolved it's judiciary from there.
| Retric wrote:
| In theory sure, in practice the legal system is run by
| people who somewhat regularly make technically incorrect
| decisions.
| zopa wrote:
| To be a little pedantic, individual states maintained
| systems based on English common law, rather than the US
| as a whole adopting it. There's famously no such thing as
| Federal common law.
|
| This matters in Louisiana, which has a civil and not a
| common law system, dating from the French period.
| NordSteve wrote:
| Not at all uncommon. Allow me to direct you to Article XIII
| of the Minnesota Constitution, which states:
|
| Sec. 3. University of Minnesota. All the rights, immunities,
| franchises and endowments heretofore granted or conferred
| upon the University of Minnesota are perpetuated unto the
| university.
|
| https://www.revisor.mn.gov/constitution/#article_13
| zopa wrote:
| https://en.m.wikipedia.org/wiki/Dartmouth_College_v._Woodwar.
| ..
|
| Different Ivy League school, but established a precedent that
| states must respect preexisting charters.
| JoeAltmaier wrote:
| Perhaps they do respect the constitution of Massachusetts?
| beambot wrote:
| Actually, it's entirely possible. I have friends out in
| California who still have Spanish land grants that predate
| the US and California statehood. They have successfully
| prosecuted their rights (eg water) again & again.
|
| For example, see the section about the Treaty of Guadalupe
| Hidalgo on this wiki page:
|
| https://en.m.wikipedia.org/wiki/Ranchos_of_California
| [deleted]
| retrac wrote:
| Yes, generally the laws in effect before a colony or
| territory became a US state remained the same after they
| became US states. Contracts signed before statehood
| remained valid after. Property deeds remained valid. The
| criminal laws remained in effect. And so on, at least until
| amended by the new state legislature. Doing anything else
| would just be chaos, really. Louisiana is another example;
| its legal system has a distinctly French character to this
| day.
| ghaff wrote:
| See also Dartmouth College v. Woodward argued for Dartmouth
| by none other but Daniel Webster.
|
| Among other things Supreme court chief justice "Marshall
| concluded that Dartmouth's [royal] charter constituted a
| contract and that New Hampshire had violated this contract
| in attempting to replace the original trustees."
| https://www.mtsu.edu/first-
| amendment/article/729/dartmouth-c...
| rayiner wrote:
| It definitely does:
| https://www.oyez.org/cases/1789-1850/14us304
| indymike wrote:
| The US did not reboot jurisprudence when it was established.
| We imported English common law.
| shagie wrote:
| > We imported English common law.
|
| In most places... which is your first point.
|
| One of the science fiction authors that I've read has run
| in to this -
| https://en.wikipedia.org/wiki/George_Alec_Effinger
|
| > Throughout his life, Effinger suffered from health
| problems. These resulted in enormous medical bills which he
| was unable to pay, resulting in a declaration of
| bankruptcy. Because Louisiana's system of law descends from
| the Napoleonic Code rather than English Common Law, the
| possibility existed that copyrights to Effinger's works and
| characters might revert to his creditors, in this case the
| hospital. However, no representative of the hospital showed
| up at the bankruptcy hearing, and Effinger regained the
| rights to all his intellectual property.
| bmitc wrote:
| Someone else mentioned the story they heard was from George
| Washington, which would carry more weight I suppose. But it
| also implies it's all a game of telephone.
| happyopossum wrote:
| > which would carry more weight I suppose.
|
| That would carry _less_ weight - George Washington never
| had monarchical or dictatorial powers to grant such an
| exemption.
| Spooky23 wrote:
| In some cases, we do. I worked for a farmer who won an
| eminent domain action on the basis of a Dutch deed covenant.
| There's a lot of crusty old law that protected the rights of
| landowners and others whose title predates the state or
| nation. In my boss's case, his title predated both the state
| and country.
|
| It worked in negative ways too. The Dutch setup a feudal
| system, but the state limited the ability of the landowner to
| collect rent in the 19th century. (Baltimore has a system
| like this too) In this case, the landlords abandoned the
| title, but many homeowners were in a legal limbo where they
| didn't have a clean title.
| mrbabbage wrote:
| Should have (2015) in the title, but I absolutely love stories
| like this. Even wilder is the detail at the end: they recorded
| interest payments _on the original goat skin_ until 1944.
| samwillis wrote:
| I wander at what point in time the value of the document as a
| historical artefact outweighed its value due to the bond it
| represents?
|
| It raises some interesting questions about the legitimacy of
| perpetual interest payments and bonds. I expect that exactly why
| the academic has gone through this process though, it creates an
| interesting point of discussion.
| AceJohnny2 wrote:
| Its value as a historical artifact already outweighs its
| financial value.
|
| Per the Tom Scott video mentioned in another comment, obtaining
| the interest is mostly for ceremonial and amusement value.
| jefftk wrote:
| _> Its value as a historical artifact already outweighs its
| financial value._
|
| I read your parent as asking how many years after it's
| creation that became the case
| JoeAltmaier wrote:
| Perhaps its historical uniqueness is tied to its active status
| as a valuable bond? They cannot be separated?
| dang wrote:
| Related:
|
| _Yale's 367-year-old water bond still pays interest (2015)_ -
| https://news.ycombinator.com/item?id=26556938 - March 2021 (127
| comments)
|
| _Yale to Be Paid Interest on Dutch Water Authority Bond from
| 1648_ - https://news.ycombinator.com/item?id=10226291 - Sept 2015
| (120 comments)
| phyzome wrote:
| Somewhat similarly, I recently became a Special Depositor at new
| mutual bank that's in organization (Walden Mutual). This involved
| sending them a few thousand dollars, which will be part of their
| pool of capital for making loans. I cannot withdraw the
| principal, although I should be able to sell ownership of the
| deposit to someone else, and of course I would also be considered
| a (subordinated) creditor if they fold. In exchange, as soon as
| they are profitable (in a few years) they will be paying
| dividends at a pretty good rate, indefinitely. The rate is not
| guaranteed, though.
|
| This feels like a good idea to me because this bank is in the
| business of making local agricultural loans, and the founders are
| aligned with my values -- this is an institution that I want to
| have exist. But also I think they're well positioned to make
| these loans, so it should be a good investment. Mutual banks also
| tend to be long-lived, so this is an investment that should
| continue to pay dividends for many decades.
| OscarCunningham wrote:
| I wish governments issued perpetual bonds. It would make thinking
| about finance much easier if you could directly convert a stock
| to a flow and vice-versa.
| justincormack wrote:
| The UK had some outstanding until recently, but I don't think
| there are any left
| https://www.gov.uk/government/news/chancellor-to-repay-the-n...
| OscarCunningham wrote:
| My understanding is that all British consols were callable;
| the government had the option to force redemption of the bond
| at a fixed price. This means that they're a slightly more
| complicated product than the direct stock-for-flow exchange
| that I'm imagining.
| robocat wrote:
| A perpetual bond with no inflation adjustment only really makes
| sense in a zero inflation environment.
|
| The mathematical Net Present Value is $20000 for a perpetual
| cash flow income of $1000 every year with 5% inflation.
| (convergent infinite geometric series).
|
| In most cases any income further than some decades away should
| be valued at near zero - stocks due to market risk - even
| government bonds are not risk free.
|
| The future is volatile.
| ghaff wrote:
| It "makes sense" to the same degree a 30 year non-callable
| bond makes sense--which is a long time but, in the US,
| 30-year fixed mortgages are obviously quite common.
| ahoef wrote:
| Also covered by the fantastic Tom Scott:
|
| https://youtu.be/cfSIC8jwbQs
| mbg721 wrote:
| It's not nearly as old, but the University of Cincinnati has a
| "Tanners' Lab" facility, because somebody gave them a bunch of
| money for it when leather tanning was still super-high-tech, and
| the money hasn't run out. I believe their recent work is stuff
| like Harley-Davidson contracting with them to stress-test
| jackets.
| gumby wrote:
| The article says, "In the 17th century, people sometimes issued
| perpetual debt." True, but not just in the 17th century; consols
| have been issued into the mid 20th century, mainly for war (from
| the Napoleonic wars up to WWII).
|
| The article also mentions, parenthetically, "The interest rate
| was reduced to 3.5% and then 2.5% during the 17th century." Does
| anyone know if this was specific or if some law alterered
| interest rates?
|
| The bond is older than Yale itself (though FWIW there are plenty
| of schools still operating that are older than this bond).
| e1g wrote:
| > ...there are plenty of schools still operating that are older
| than this bond
|
| At the time of the Aztecs, the University of Oxford was already
| an ancient institution older than the USA is today.
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