Eli5: How do Bonds work?

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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

14 Answers

Anonymous 0 Comments

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.

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