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
They are bearer bonds. Bonds are loans investors give out to institutions (banks/governments etc) with the promise that they’ll get their money back with interest. Bearer bonds, as the name suggests, are anonymous. Normally an investor’s investment in an instrument would be recorded and visible to institutions but with bearer bonds the owner of the physical bonds is the presumptive owner to whom the money is paid out if they take those bonds to the issuer. So basically stealing bonds was like stealing cash but even more untraceable than cash.
Bearer bonds were popular because they afforded anonymity but they could also very easily be abused for money laundering. At the time they caught on the need for money by the issuers was greater than their commitment to transparency in such transactions but nowadays bearer bonds are no longer issued for obvious reasons.
Bonds are sheets of paper that are issued for fixed amounts. Loads of people here mention interest, but they don’t need to. Loads mention governments, but they don’t need to. Modern bonds are issued by governments and always include interest, but they don’t have to.
Bonds can been issued by just about any organisation. Pre paper money and especially pre cheques, they were ways of transporting money. It was a nightmare lugging around a load of gold/silver. So banks and companies issued bonds. There were two types. One with a name, one without. The ones with names could only be redeemed by the persons who’s name was on it. The others were called bearer bonds because whoever had it could cash them in.
so if you wanted to transport 50,000 dollars from New York to San Francisco, you do it in the form of bonds.
It’s a loan, with a different type of pay structure.
– I give you $100.
– You give me a $100 bond with 12% for a term of 1 year(or whatever).
– You pay me $1 each month as an interest payment.
– At the end of the 1 year, you give me my original $100 back, all at once.
Meanwhile, during the year, at any point, I can sell that bond back to you or someone else at an adjusted rate based on how much time is left on the term.
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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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.
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 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 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.
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