“Is this a disaster waiting to happen? No. Not yet. But the trend lines are now definitely pointing in a suboptimal direction.” — Robin Wigglesworth on a potential bond bust
Amidst all the talk of an AI bubble, bonds are back in the news. The world’s two leading business newspapers, The Wall Street Journal and The Financial Times, both feature stories this weekend warning about bond ructions and surging yields. While these warnings might only interfere with the sleep of bond geeks, they are a good reminder of the centrality of the bond market to our prosperity.
For all their financial geekiness, Robin Wigglesworth knows that bonds matter. He edits Alphaville, the Financial Times’ splendidly geekish markets blog, and he’s the author of A Fabulous Debt, a new book that tells the “epic” story of how bonds built the modern world. The bond market matters, Wigglesworth reminds us, because when it breaks — as in 1873, 2008 and very nearly in 2020 — then the whole world suffers.
So what, exactly, is a bond? Wigglesworth explains that it’s a tradable loan which the Venetians accidentally invented in 1171 to pay for a war with Constantinople. In Venice, it became a forced levy on every citizen, sweetened by its annual 5% interest payments and by the right to sell its paper on the Rialto. From there it runs through Amsterdam with the Dutch East India Company to modern America, where Thomas Jefferson’s Louisiana Purchase was financed by bonds sold by the London merchant bank Baring Brothers — remarkably, while Britain was at war with the France it was paying, and earning Barings what may have been the largest banking fee in history. Then there’s the deliciously named Scottish adventurer Gregor MacGregor, a bond bad boy who invented an entire country, Poyais, and successfully sold its bonds in London.
In spite of the shady MacGregor, the moral of the bond story, Wigglesworth reassures us, is that transparency pays. Britain could borrow more cheaply than its rivals because parliament controlled the purse and published its accounts. Europe’s greatest banker, the London-based Nathan Mayer Rothschild, who brought Prussia, Spain, Russia and the new Latin American republics to the London market after Waterloo, thus cajoled other governments into opening their books to get the same rates. Accountability was, literally, cheaper. And so the modern world — with its leviathan state and the financial muscle to conduct global wars — was born.
Does Wigglesworth lose sleep about today’s bond ructions and surging yields? Not exactly. But he is a tad nervous about the fact that tech giants have issued over $500 billion of bonds this year to build data centers. So rather than the feared AI stock market bust, Wigglesworth does raise the more apocalyptic specter of a bond bust. Not an imminent fabulous crisis, he reassures. Not yet, anyway.
Further Reading:
• A Fabulous Debt: The Epic Story of How Bonds Built the Modern World by Robin Wigglesworth (Portfolio, 2026).
• Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever by Robin Wigglesworth (Portfolio, 2021) — his first book, on the rise of passive investing.
• Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed (Penguin, 2009), which won the Pulitzer Prize for History — the story of the four central bankers whose decisions in the 1920s helped produce the Great Depression, and the source of the tale of Charlie Chaplin heckling Churchill over Britain’s return to the gold standard. Ahamed has been a guest on the show talking about the long depression of 1873
• The Bond (1918), Chaplin’s propaganda short for the Liberty Loan drive, in which he beats the Kaiser over the head with a mallet marked Liberty Bonds — made at his own expense, and now in the public domain.
• Yesterday on Keen On: the weekly tech editorial on Huang, the UN and who really governs AI, including Azeem Azhar and Nick Thompson on whether we are in an AI bubble.
