Forever is a long time to finance anyone

The writer is an FT contributing editor

In July of 1595, the brothers Francisco and Pedro de Maluenda made a loan to Philip II, the Habsburg king of Castile, Aragón, Naples, Sicily, New Spain, Peru and at times England, Ireland, Portugal and the Netherlands. The brothers were financiers, from the Castilian market city of Burgos.

The king had obligations all over Europe, but no administrative way to pay them regularly, so he relied on lenders like the de Maluendas to do it for him. The loan was an asiento, a short-term agreement to make 12 monthly payments to Philip’s army in Lisbon. Philip was to pay the brothers back with the arrival of the silver fleet the next year. Instead of waiting for the fleet, however, they exercised a clause that allowed them to pay themselves back for the short-term asiento by selling juros, long-term loans on which the king paid interest. These included a few perpetual juros — loans on which the king would pay interest forever.

In October of this year, the financier George Soros proposed that Rishi Sunak issue perpetual gilts — bonds that pay interest forever. Sunak is the prime minister of only England, Scotland, Wales and Northern Ireland, but Soros argued that the perpetual would satisfy perplexed institutional investors looking for a stable long-term asset, and he reached back to England’s 1752 consolidated loans, also perpetuals, as a precedent.

There are plenty of other perpetual bonds — including the ones sold by…