Mexican officials were bragging up their issue of 100-year bonds today, which puts them in rarified air on the international financial scene. And while it's all well and good that Mexico is able to issue such bonds, I can't help but wonder why the hell would anyone buy them. I'm well aware that you can calculate the present value of future earnings, but even so, isn't the utility of any windfall after you die basically zero? I guess you could take some satisfaction in gifting some Mexican bonds to your kids, but then, if you buy them after they are born, chances are your kids will never be able to cash them in either. In fact, chances are that by the time you are in any position to purchase a significant number of 100-year bonds, even your grandkids wouldn't be able to receive any benefit from them until well into old age. This seems like a very logical question to me (though maybe there's an explanation I'm missing), but the Financial Times write-up of the bond issue made only the most tangential reference to it, with the following quote:
But not everyone was excited. “I’m not seeing investor interest yet in 50-100 year bonds. This might create a market, but I’m sceptical,” Pierre-Yves Bareau, global head of emerging market debt at JPMorgan Asset Management, told the Financial Times. “Given the illiquidity, there are better uses for investors’ cash.”Ernesto Cordero's comments also make you wonder why this instrument exists.
The economic problems we are experiencing today have a solution, we are on a path for growth and in 100 years we'll be ready to pay the debts contracted.
Left unsaid is the point, But if we can't, it'll be someone else's problem. Furthermore, how can soothing people's fears about today's issues offer any indication of what will happen in 2070 or 2090 or 2105? The financial crisis fallout has about as much relevance to this bond's soundness as the debate over Free Silver does to today's financial regulation, which is to say, none.
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