Was playing Red Dead 2 and the gang comes into some Bonds. Apparently they’re worth money but idk how the gang gets a profit from it, or how bonds work in civilian life.
In: Economics
A bond is essentially a loan that you give to an entity — this could be a corporation, a government, whatever.
As part of that agreement, the entity promises to pay you a certain amount of interest every year for a certain number of years, at which point you get back the *face value* of the bond — what you paid for it. The paper bond symbolizes this promise, and it’s how it would be negotiated.
In the early 1900s, when RDR 2 is set, these would be “[bearer bonds](https://en.wikipedia.org/wiki/Bearer_bond)” — that is, whoever bears (possesses) the bond could claim payment. They were a lot like cash in that respect — you’d take the coupons to an authorized agent, and because you physically had them, you could redeem however much they were worth.
The gang would be able to take the bearer bonds and convert them for cash in exactly that way, and there would be no proof as to who rightfully owned them.
Bearer bonds used to give you ownership of an IOU for money in the future, as long as you can hand in the piece of paper it’s held on.
They’re illegal now because they’re very easy to do crime with, as the game evidences.
They’re basically government loans. You buy a bond, and it costs X dollars which you pay the government for. It has a date printed on it, and on that date, you give it back get Y dollars back from the government. Obviously Y is the bigger number, but the date is several years in the future.
As a bond is basically an IOU from the government, it could be transferred to someone else, and conceivably you could find a stash of them. They’re only officially worth anything on or after their maturity date, but you could sell them to someone else who could hold onto them until said date if you really need cash and they were willing to take them.
From a citizen’s standpoint, it’s an investment that is very safe, but maybe not particularly high interest. From a government’s standpoint it’s a loan from your own citizens. If you wondered where all that government debt came from, quite a lot of it is here.
Basically, a bond is the legal document a company or government gives you in return for you lending them money. You give the company a loan of $1000, and in return you get a bond for $1000 that “matures” after 5 years and pays you back your money plus interest when the maturity date is reached.
They used to issue the bonds like they were currency, and whoever held them could collect their value on demand – like currency. They were often referred to as bearer-bonds, as in they’re paid off to the bearer of the paper. Nowadays I believe all bonds are tracked on exchanges with ownership handled by a broker, like stocks.
A bond works like a loan.
Some entity (like a government), needs money now to fund some project. So, it sells bonds to raise that money. The bond is a promise saying that the bond owner will be paid that money within a certain time frame.
People want to buy the bonds because they include interest in addition to original price sold for. When the bond seller is a very reputable entity like the U.S. government, buying bonds is a guaranteed, low risk way to store and make money as long as you are willing to wait until the bond’s payout date.
Bonds are a security the government sells to generate funds. It’s basically selling debt- a promise of “you buy this now and we’ll pay you a set amount in some number of years, which is your initial amount + interest”. The US government sells all sorts of bonds to raise money for all kinds of things- you may have heard of “war bonds”. Effectively it’s a way for the government to take out a loan from anyone willing to buy a bond. And it’s generally considered a safe investment because the US government and US dollar isn’t likely to go anywhere anytime soon. In fact, the US government is such low-risk investment that it can literally sell bonds with interest rates *less* than inflation, meaning it’s effectively borrowing money for literally less than free.
Nowadays, a lot of US bonds are electronic. Back in the day, everything had to be on paper- and physically possessing the paper bond meant you could cash it in. This means you can buy and sell bonds by literally exchanging the bond paper for whatever you were trading it for, and they directly have a value associated with them so you could just cash it in. Still works that way in the digital era, more or less.
I haven’t played Red Dead 2, but yeah, getting bonds means the gang members could cash those in directly for cold hard cash, or sell it to someone else for cash (at a discount) and they could cash it in. Either way, they could convert that bond to cash, and for criminals, “Cash is king”.
A bond is essentially a loan. A bond pays out interest in exchange for having loaned the issuing entity money by buying the bond. The bond will eventually mature at which point you are paid back the bond. As an example, you can buy a new 10 year US treasury bond from the US federal government at 5% for say $1k. It pays out $25 semi annually (twice per year) ($1k * 5% / 2). It keeps doing that for 10 years after which the bond matures and you get back the $1k.
Lots of entities issue bonds: federal, state, city governments, banks, companies.
There is also a secondary market where you can buy bonds that were already in circulation. If you have the 10 year 1k bond and then interest rates for new bonds goes down, your bond becomes more valuable since its interest rate is higher than what someone can get new, so you can decide it is worth just selling it now for an immediate profit than to have to wait for interest payments.
Some bonds have a fixed rate for their lifetime and some have a variable one, such as I bonds that pay a fixed percentage plus a variable percent tied to inflation.
Basically they are loans that you give to the government, which slowly gain interest. Many are linked to one person and only they can redeem them, meaning that there’s no real reason to steal them. They generally ‘mature’ and reach double their original purchase price in twenty years, and can be held onto for up to 30 years while still earning more interest.
On the spectrum of using money to make money, they are pretty much the slowest, but safest investment. They’re not dependent on the stock market in any way- as long as the country still exists they’ll be fine and worth the amount you expect them to be worth.
Of course, if someone in a video game is selling them for money, they’re probably ‘bearer bonds’ which is the same idea, but not tied to a specific person. In that case, they’re just certificates that are redeemable for cash, and potentially a lot of it. Just money that is easier to transport and earns interest over time.
Bonds used to be sheets of paper that said that the holder of this bond (or technically, the bearer of the bond) would be due regular interest. On the outside of the bond were small coupons with dates printed on them that the bond bearer would tear off and bring to a bank to get cash. Once all the coupons were turned in over the period of the loan, the big sheet would then be brought back to the bank and the original loan amount would then be returned.
So you might have a bond for 100 dollars, and you might have fourty coupons each for 1 dollar. Once every quarter for ten years you’d get a dollar and at the end of the time you would get your 100 bucks back. Now, it didn’t matter who bought the loan, it mattered who bore the bond. They didn’t have a way to know if someone legitimately purchased that bond from someone else or it was stolen, so locking up your bearer bonds was very important.
Others have mentioned that these are “bearer bonds,” but not the most critical part of it:
A bearer bond is paid to ***whoever currently has the bond in their hands.*** That is, whoever “bears” the bond. They aren’t assigned to any named person, they aren’t handled by any special protocol or having any password or whatever. It’s literally just, “Whoever has this certificate, can come collect a certain amount of money at a specified time.”
THAT’S why they’re so lucrative. A bearer bond is effectively a gold brick you can keep in your pocket. Gold bricks don’t care where they came from, they’re just valuable. Same thing with bearer bonds. Such bonds aren’t used anymore because they make money laundering trivially easy.
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