21

I was watching the Extra Credits series on the South Sea Bubble. In there they say that the UK is still paying off the debt from the incident. However, given how old the debt is, I have to ask: who exactly is getting paid in scenarios like this? Who does the government owe money to?

  • 3
    To the legal successor of the creditor. – Trilarion Aug 14 '17 at 16:27
  • 1
    Whoever has title to the paper on which it is confirmed. – WS2 Aug 15 '17 at 6:36
  • Lol, why is this question getting so much attention? – Tirous Aug 15 '17 at 17:46
31

According to the Guardian, the debt is in the form of a bond. The government is redeeming some of the bonds, which is just to say that each bond holder will receive the value of their bond from the government.

The money will go to each bond holder. Bonds are a literal physical document which can be redeemed for money. Bonds can be transferred to new owners (bought, sold, or given). This is often done for boring financial reasons (such as an investor valuing bonds more highly than another instrument because of their low risk).

So long story short - the money goes to whoever the current owner of each bond is.

  • 5
    It sounds like you're describing Bearer bonds. That's a common subtype. Modern bonds are traded electronically and are no longer physical documents. – MSalters Aug 14 '17 at 11:12
  • 4
    @MSalters - Good point. These bonds were issued more than a hundred years ago. I am not sure if they can be 'modernized'. Any idea how I can find out? – indigochild Aug 14 '17 at 11:27
  • 1
    @indigochild - the easiest way would be as a re-securitization (e.g. pass-through vehicle that's a typical modern fixed income instrument but pays out the same profile as original bond). if it really has a typical bond profile, I guess it'd simply be a sovereign debt as any other; if it's something weirder then It is a typical alternative investment and as such would probably have some liquidity, but more likely than not it'd be traded to some alt fund and not really need any 'modernization' in the first place. – user4012 Aug 14 '17 at 13:48
  • I was actually about to point out the same thing as @MSalters - in many jurisdictions (such as the U.S.) it's not legal to issue bearer bonds anymore because they were an easy way for criminals to move around large amounts of cash without drawing as much attention to themselves. – EJoshuaS Aug 14 '17 at 21:50

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.