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Perpetual bond

In 1648 a Dutch water board issued a bond that paid 5% interest annually, with no maturity date. That water board still pays interest on the bond today.

Oh boy, I could write a lot about the water boards of the Netherlands… but that may not be interesting to most people. A very brief overview: in the Netherlands lots of land (known as polders) has been reclaimed from wetlands or the ocean by dikes. These dikes and other water control measures require constant vigilance to keep the land intact, and the water boards were formed to organise that maintenance.

(Dikes, it turns out, are damn expensive, and there was some freeloading by inland farmers who left all the expense to the residents closest to the barriers.)

Anyway, the water boards were effectively local government organisations that had the authority to levy taxes, prosecute offenders, and raise money for public works. In 1648,  the water board overseeing Lekdijk Bovendams needed to raise some quick cash. They wanted to pay workers who were constructing a series of river piers, and they did so by issuing a bond.

Bonds are simple: give us some money now, and we’ll pay you interest every year. So far, no problem. The hitch for the water board of Lekdijk Bovendams: their bonds did not expire. They had no maturity date; they would continue to pay interest forever, to whomever owned the bond.

Fast forward 355 years. Yale University’s rare book library acquired a Lekdijk Bovendams bond in 2003. That means they are now entitled to interest payments – as long as they present the bond to the water board in person. In 2015 they flew to the Netherlands and did just that, collecting twelve years’ worth of interest for their twelve years of ownership. It came to a grand total of 11.35 Euros a year: 136.20 Euros in all. And presumably they’ll be able to do that again in another twelve years.

[Thanks to Gareth E. for suggesting this topic.]

Categories: Early modern history Economics & business Europe History Places

The Generalist

I live in Auckland, New Zealand, and am curious about most things.

2 replies

  1. Heh. Thanks for this wiki-rabbit-hole-fact:

    “Early flood control in the Netherlands is often called the Teerschouw, which loosely translated means “consumption during observation”.[1] This technique was a periodic check of the local dike system by the Dike-reeve and his men. If they found a problem, they would simply go to the nearest house or inn, and stay there for free until the problem was fixed. This was a fairly direct and simple form of water management.”


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