A 1648 scrap of parchment still pays interest every year

Geert Rouwenhorst, a finance professor at Yale, flew to Amsterdam in September 2015 with a piece of goatskin parchment tucked inside a rigid folder. He took it to the offices of a Dutch water authority, laid it on the counter and collected the back interest: about 136 euros for twelve years. The document had been issued in 1648, the same year the Eighty Years' War ended, and it still pays.

It is a perpetual bond: a loan that never returns the money borrowed and that, in exchange, pays a coupon —the annual interest— for as long as the issuer exists. There is no maturity date because none was ever meant to exist. As long as the institution lives, the paper keeps yielding.

It was issued by the Lekdijk Bovendams, a water board in charge of a stretch of dike on the river Lek, south of Utrecht. Dutch water boards are local administrations dedicated exclusively to keeping the land from flooding: they repair dikes, maintain locks and levy a charge on the owners they protect. That year the board needed money to build groynes —stone walls set perpendicular to the bank to slow the current and keep the water from eating away the dike— near Honswijk. Instead of raising the levy all at once, it did what small administrations did back then: borrow from wealthy neighbours and promise them a rent.

The bond went out for 1,000 carolus guilders, the accounting currency of the day, and promised 5 percent a year. Over the centuries the rate was trimmed: first to 3.5 percent, then to 2.5 percent, which still holds. At today's prices that comes to about 11.35 euros a year, less than the cost of getting to the counter. The interest is no longer the business; the business is that the paper still works.

And it works because the Lekdijk Bovendams did not vanish: it merged. Dutch water boards have spent two hundred years combining into larger units, and each merger passes the rights and debts of the old body on to the new one. The current heir is called Hoogheemraadschap De Stichtse Rijnlanden, manages the water of an area of nearly half a million inhabitants and, among its obligations, has that of paying the coupon to whoever shows up with the parchment.

Who shows up, since 2003, is Yale University. That year the Beinecke library, the one for rare books and manuscripts, bought the bond for about 24,000 euros. It did not buy it as an investment —at 11 euros a year you would have to wait more than two thousand years to break even— but as a teaching object: it is a financial instrument from 1648 that still does what it promised. At the business school they use it to explain to students what "perpetual" means when it is not a metaphor.

Collecting has its own ritual. The interest is not paid into an account: you have to bring the physical document, because the payment is written by hand on the back, one entry under another, since the seventeenth century. Each visit adds a line to a list that began six years after Rembrandt finished The Night Watch. That is why Rouwenhorst travelled in person in 2015, and why the 136 euros he collected cost far more in plane tickets than they were worth.

It is not the only survivor. The New York Stock Exchange keeps another bond from the same family, issued in 1624 by a neighbouring water board, that is also still paid; it arrived there in 1938 as a donation. They are two pieces of paper, three and a half and four centuries old, still keeping the exact promise written on them.

What is strange about the 1648 bond is the chain of hands it has passed through: for a piece of goatskin to still work today, none of the dozens of institutions that inherited it could decide that it was no longer their concern. The dike is still there, the water is still pushing and the coupon is paid: 11.35 euros a year, at the counter, with the date written by hand.