When a Dutch bond, written on goatskin in 1648 to fund the construction of a pier, was purchased by Yale at an auction in 2003, Timothy Young, who curates modern books and literature at the Beinecke Rare Book and Manuscript Library, did not know what to do with it.
“This kind of a document is a paradox for us,” Young said. “It’s such a curiosity that this thing is still a viable document. In teaching with this document, [Yale] presented it as a case study for students.”
The bond is part of the Beinecke’s Financial History Collection, a collaboration with the School of Management’s International Center for Finance that aims to promote the study of financial history. Economics and history professors at Yale said the Dutch bond and the revenue that it still generates are tools for teaching the origins of the modern world’s economic system. Yale paid roughly $27,000 for the bond.
Of the many archival documents in Yale’s collections, most are only valuable as historical artifacts; but the Dutch bond, which cost 1,000 Dutch guilders, or $509 in today’s prices, is still generating interest. When Yale asked the Dutch Water Authority to pay interest on the bond, in an attempt to keep the bond viable, Young flew to the Netherlands to pick up the money: 136 euros or $153.
In the 17th century, the low country surrounding the Lek River in the Netherlands was the most dynamic and commercially vibrant region of Europe, said History professor Steven Pincus. Dutch cities in the area of the river, including Amsterdam and Rotterdam, wanted to modernize, which required controlling the river’s flow, said Young. Therefore, these cities launched expensive projects to build dykes and piers, which were funded largely by bonds similar to the one in Yale’s collection.
This bond, which was issued in perpetuity — without an expiration date — was used to pay the workers who built a pier along the river to control the flow of water to nearby farmlands. Young visited a stretch of such piers on Monday with members of the water authority, walking together along a centuries-old dyke.
According to Pincus, the Dutch Republic pioneered the use of public money to build civic projects and, in the view of some historians, was the first modern economy. The bond suggests both the Dutch’s willingness to experiment with a variety of financial instruments and also the widely dispersed wealth in that society, he added. The Dutch were also among the first to issue these bonds on a large scale, said economics professor Jose-Antonio Espin-Sanchez.
At Yale, the bond has caught the interest of professors. Since the bond is both a historical artifact and a viable financial document, professors said the bond is a reminder of the permanence of financial documents. The bond offers students and professors a new way to see history not as something stored away, but as something vibrant, said Young.
“If we walk away and it’s never redeemed, it might as well be a dead bond,” Young said.
For a bond to be called alive, Dutch water authorities require that someone claim interest on a bond, said Young. The water authority Hoogheemraadschap De Stichtse Rijnlanden, which inherited the debt of previous water authorities several centuries ago, has records of six bonds from the same time period that are still generating interest. Yale must bring in the bond once every generation to keep the bond on the books, Young added. Because the bond is still alive, Young said the Beinecke staff had to create a new way to categorize it in its collection.
The guilder was the official currency of the Netherlands until it was replaced by the euro in 2000.