Perpetual Bond • Hacker News Board

Re: Perpetual Bond

#31

Post by karpierz » Mon, Apr 25, 2022, 1:25 PM UTC

joosters wrote: post #21

karpierz wrote: post #12

Earlier quoted context omitted.

That is true, but the pertinent question is: how much less? If the world is ending tomorrow, then much less. If we discover immortality tomorrow, then much more.

How does immortality affect the discount rate? Just because you or I will die, doesn't stop our heirs (or companies) from collecting income from assets. I'd suggest that discovering immortality might have the opposite effect, it would only bring more uncertainty about the future.

Sure, I'm not trying to argue about how to appropriately price the rate; just that it's variable.

Re: Perpetual Bond

#32

Post by pdog » Mon, Apr 25, 2022, 4:44 PM UTC

chillpenguin wrote: post #10

The TLDR for how a bond that continues to pay interest forever can be valued at less than infinity dollars is due to the "time value of money", which states that $X in the future is worth less than $X today. This makes sense intuitively if you consider that if you had that money today, you could invest it and earn interest on it. So since money in your hands is worth more than that same amount of money in the future,…

You don't need the concept of "time value of money" to value a perpetual stream of payments.

Intuitively, only a sucker would pay $1,000,000,000,000 for the promise of $1 per year in perpetuity, even in the absence of discounted cash flows.

Re: Perpetual Bond

#33

Post by FrenchAmerican » Mon, Apr 25, 2022, 7:17 PM UTC

barry-cotter wrote: post #7

rkagerer wrote: post #4

An example from the article of one of the oldest perpetual bonds still paying out: https://indroyc.com/2015/09/17/a-367-year-old-bond-still-pay... It's written on goat skin and must be physically presented in the Netherlands to collect interest of 11.34 euros per year. Yale University bought it in 2003 for 24,000 euros. One part I don't understand: According to its original terms, the bond would pay 5% interest in pe…

> How's that work? Did the bondholder agree to new terms or did the issuer just unilaterally "change" them? The government can always unilaterally change the terms. That’s the defining feature of a government, the monopoly on the legitimate use of force. See when the US went off the gold standard [1]. [1] https://www.history.com/this-day-in-history/fdr-takes-united...

The rule of law applies to a government as well as any other body, organization, firm or person.

That's the most fundamental difference between a democratic country and authoritarian & tyrannical regimes.

You can sue the US government in US courts and to some extent in international courts.

Not that democratic governments don't abuse their power. They do quite regularly, but still: even their use of force is limited by the law.

Re: Perpetual Bond

#34

Post by [deleted] » Tue, Apr 26, 2022, 1:01 PM UTC

skybrian wrote: post #9

prionassembly wrote: post #6

Thus money and capital are different things with different cardinalities. (More: https://asemic-horizon.com/2021/07/31/zero-chroma-infinity/ )

That's just confusion about discount rates. Money in the future is worth less than money in the present, so an infinite sequence can have a finite sum when it's priced in today's money.

[deleted]

Re: Perpetual Bond

#35

Post by OscarCunningham » Sat, Apr 30, 2022, 3:07 PM UTC

OscarCunningham wrote: post #22

It's a shame they don't still sell these. They're so much simpler than a bond with a coupon and principal. Was the reason they stopped just because people mistakenly thought that they were 'infinite debt'?

Actually, consols were more complicated than I imagined. They were 'redeemable at the option of the government'. So they're not just a simple income flow; they're some form of option.