The King’s Promise: A Tale of Government Bonds
Once upon a time, in the prosperous Kingdom of Financia, the wise King Arithmos had a
grand vision—to build roads, schools, and magnificent bridges across the land. However,
there was one problem: the royal treasury did not have enough gold to fund these ambitious
projects.
Rather than raising taxes and burdening his people, the King summoned his royal advisors.
"We need a way to raise money without taking from the people unfairly," he declared.
One of his wisest advisors, Lady Numera, stepped forward. "Your Majesty, what if we ask
our citizens to lend us gold now, and in return, we promise to repay them later with interest?"
The King stroked his beard. "Tell me more, Lady Numera."
She explained, "We can issue Royal Promise Scrolls—let's call them ‘bonds.’ Each bond will
have a value, say 100 gold coins. Anyone who buys one will be lending money to the
kingdom. In return, we promise to pay them a little extra over time, say 5 gold coins every
year. And after a certain period, let’s say ten years, we will repay the entire 100 gold coins."
The King nodded. "So, our people give us money now, we use it for important projects, and
they get back their money with interest later? Brilliant!"
Word spread across the kingdom. Citizens and merchants eagerly bought the bonds, knowing
their money was safe with the King and they would earn extra gold over time. Even wealthy
traders from neighboring lands found this idea promising and invested in these bonds.
Years passed, and the roads, schools, and bridges were built. True to his word, the King
repaid his people along with their promised interest. The economy flourished, and the
kingdom prospered.
And thus, the concept of government bonds was born—where governments raise funds by
issuing bonds to the public, promising periodic interest payments and full repayment at
maturity.
The Merchant’s Pledge: A Tale of Corporate Bonds
In the bustling city of Tradehaven, there lived a wealthy and ambitious merchant named
Magnus. He owned a thriving spice and textile business but had even grander dreams—he
wanted to expand his empire by building new trade routes and setting up warehouses in
distant lands.
However, there was one problem: Magnus did not have enough gold to fund this expansion.
He could ask the banks for a loan, but the interest rates were high, and the repayment terms
were rigid. So, he gathered his trusted advisors to seek an alternative.
One of his sharpest advisors, Master Aurelius, suggested, “Why not invite investors to lend
us gold? In return, we give them written promises that we will repay their money with a little
extra over time.”
Magnus was intrigued. “You mean I borrow from people instead of banks?”
“Yes, exactly,” Aurelius said. “We call these promises Merchant’s Pledges—or what modern
traders call corporate bonds. Here’s how it works:
1. We issue bonds in different amounts, say 100 gold coins each.
2. Investors—wealthy merchants, traders, and even common folk—can buy these bonds,
lending us their gold.
3. In return, we promise to pay them an annual interest, say 7 gold coins per bond, because
businesses carry more risk than kingdoms.
4. After a fixed period, say five years, we return their full investment.”
Magnus clapped his hands in excitement. “This is brilliant! We raise money without losing
control of our business, and investors benefit from earning more gold!”
Soon, Tradehaven’s investors eagerly bought Magnus’ corporate bonds, drawn by the higher
interest rates compared to government bonds. With the raised funds, Magnus expanded his
trade empire, setting up new warehouses and increasing his profits.
But not all stories end happily—some merchants failed to keep their promises, leading to
losses for investors. Over time, investors learned to check a merchant’s reputation and
financial health before buying bonds.
