[HN Gopher] Yale's 367-year-old water bond still pays interest (... ___________________________________________________________________ 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. ___________________________________________________________________ (page generated 2022-12-10 23:00 UTC)