The Bond Market Is the One That Scares Presidents: Notes on Robin Wigglesworth's Thousand-Year History of Bonds
Listening notes on The Meb Faber Show #650 with the FT's Robin Wigglesworth: from a Venetian war loan to a British prime minister ousted in 50 days, and what duration, leverage, and dressed-up 'income' mean for reading markets. Educational commentary, not investment advice or a recommendation to buy or sell anything.
“My meaning in saying he is a good man is to have you understand me that he is sufficient.” “…ships are but boards, sailors but men.”
— William Shakespeare, The Merchant of Venice, Act 1 Scene 3 (c. 1598)
Shylock is weighing a loan in Venice. First he asks whether the borrower can pay, then he remembers that everything the man owns is floating at sea. This episode starts in the same city, which in 1171 created the first bonds that could be traded.
What this episode is about
On September 11, 2026, episode #650 of The Meb Faber Show featured Robin Wigglesworth, editor of FT Alphaville at the Financial Times. His last book told the history of index funds. His new one goes back a thousand years to show how bonds built the modern world.
He opens with his core claim. People treat bonds as the boring corner of finance: TV tells you what the Dow did today, and nobody tells you what the aggregate bond index did. Yet the price of bonds is the price of money, and the whole financial system rests on it. Meb adds a fact that surprises most people: bonds make up a larger share of global assets than stocks.
Key takeaways
1. Stocks fell 20% and policy held; bonds wobbled for two days and policy changed
Robin points to the Liberation Day tariff episode. The S&P 500 fell almost 20% and Trump didn’t care much. Then Treasuries had two bad days, the tariffs were put on pause, and Trump described the bond market as getting “yippy.” The UK example is harsher: in 2022 the bond market pushed out Prime Minister Liz Truss in fifty days.
I thought about why the two reactions differ so much. When stocks fall, the people who hold stocks feel it. When government bond yields rise, mortgage rates, credit card rates, and corporate borrowing costs rise with them, and so does the government’s own interest bill. The government is the biggest borrower in the bond market. Meb quoted Clinton strategist James Carville, who once wanted to be reincarnated as the president, the pope, or a .400 hitter, and later decided he wanted to come back as the bond market, because it can intimidate everybody.
2. The first bond was a war loan nobody could repay
In 1171, the Byzantine Empire imprisoned thousands of Venetian merchants. Venice wanted to strike back, but states back then had no taxes in the modern sense, and the treasury was empty. The Doge imposed a forced loan on the whole city in proportion to wealth, so the rich paid more. It paid 5% a year, would be repaid after victory, and the receipts could be sold.
The fleet sailed, caught the plague, lost the war, and brought the plague home, and the Doge was murdered by his own citizens. The loan couldn’t be repaid for years, so it became long-term debt. Then it turned into something useful. The paper paid income, could change hands, and could be pledged as collateral, and merchants loved it. Even after Venice could afford to repay, it kept the debt as a semi-permanent stock that greased finance and behaved a bit like money. Genoa, Florence, and Milan copied the idea.
Meb singles out tradability as the key step. Robin adds the other half: there’s a limit to what one lender can give you, but a bond lets you borrow from hundreds or thousands of people, and today from millions, pooling small sums into a large one. The little wooden tables of the Rialto moneylenders gave us the word “bank.”
3. How long a country can fight depends on what it pays to borrow
Much of the Netherlands sits below sea level, and its dikes and waterways were financed with bonds. When the Dutch took on Spain, the superpower of the day, the fight took close to a hundred years, and bonds paid for that too. Britain copied the Dutch and consolidated its debts into consols, which became the world’s first risk-free rate. Robin, who is half British, argues that the consol market beat Napoleon, with Nelson and Wellington coming second. Britain could keep borrowing at about 3%. France had poor credit and had to scrape together small bank loans. In the young United States, Hamilton had the federal government take over the state debts, which tied the states into one country. The South resisted and got the capital in return.
My favorite detail from this part: the Netherlands still has 400-year-old bonds written on goatskin that pay interest today, and one of them is owned by the New York Stock Exchange. When the oldest turned 400 in December 2024, Robin skipped time with his family to go to the birthday party. There was no cake and the coffee was bad. He did get to see the dike the bond had paid for, which he calls thrilling in a weird, understated way. He admits it probably won’t compete with Disneyland.
4. Each crash washes out the dumb ideas and the frauds
During the Civil War, Jay Cooke sold bonds so fast that the South was stunned, and his sales helped fund the North. After the war he threw himself into the transcontinental railways, which Robin calls “the AI projects of the nineteenth century.” When his railway venture collapsed in 1873, his bank failed and set off the longest economic downturn in US history. Stranger still is Gregor MacGregor, a Scottish mercenary who invented a country called Poyais. He sold its bonds in London and recruited settlers. The settlers landed on the Mosquito Coast and found barren land. Robin’s figure is around 900 who went, and most died of dysentery, famine, and malaria.
His conclusion: financial innovation overheats, big downturns flush out the dumb ideas and the frauds, and the good ideas fix their flaws and survive. Michael Milken took junk bonds from a small corner for fallen companies to a leveraged-finance market of at least $5 trillion. Securitization’s name was mud after 2008, and today Europeans openly envy America’s mortgage-backed securities market.
5. The safest government bond can still lose you 80%
This was the most counterintuitive stretch of the episode. Austria has never defaulted. Around 2020 it issued a century bond with about the skinniest coupon imaginable. When inflation and rates came back in 2022, the bond lost over 80% of its value at one point. Argentina issued a century bond in the same era to show it had become a normal country, and it defaulted within a few years. Because its coupon was so high, holders still came out ahead of the Austrian bond, which is still paying normally. Robin says the worst performer of 2022 was a 40-year UK inflation-linked gilt, which did worse than Bitcoin.
The mechanism is duration. The lower the coupon and the longer the maturity, the more the price moves when rates move. Many people bought TIPS as an inflation hedge and saw them “taken to the woodshed” in 2022 because of their long duration. In bonds, “safe” usually describes default risk alone. Rate risk is a separate bill.
6. The safe haven is now held by leveraged hands
Repo, the market for borrowing short-term cash against bonds, began when the Fed helped banks finance Treasury purchases during World War I. Today the US repo market alone is about $12 trillion. Robin calls it the dark matter of finance: you can’t see it, yet it explains how the celestial bodies move. Lehman and Bear Stearns died in repo runs in 2008. Depositors never lined up.
His biggest worry now is the basis trade. Hedge funds buy Treasuries, short Treasury futures, and pocket the thin gap between them. The gap is so small that the trade only pays at 10 to 50 times leverage, and he has heard anecdotes of 100 times. The UK’s 2022 crisis ran on the same kind of fuel. Pension funds had used leverage and futures to extend the duration of their assets. When gilts fell, margin calls forced them to sell more gilts, which pushed prices down further. The Bank of England ended up buying bonds while it was still running quantitative tightening, just to stop the spiral. People run to government bonds when stocks are on fire, and those bonds are now held by a crowd that may be forced to sell.
On the other side, he describes a shift he admits he didn’t predict. Everyone feared that bond ETFs, which trade all day, would blow up on the mismatch with the rarely traded bonds inside them. Instead, ETFs have sped up electronic and portfolio trading in bonds and made corporate credit easier to trade. He thinks the bond market will act more like the stock market over the next five years.
7. The debt level is survivable; the trajectory isn’t
Government debt worldwide is well over $100 trillion. Robin calls himself one of the relaxed ones, though about 10% less relaxed than five years ago. What changed his mind: debt used to jump in a crisis and get repaired afterward. Now the economy is fine, the US is strong, and deficits are at levels once seen only during major wars. He quotes Jay Powell, speaking to students shortly before he left the Fed: the level is not unsustainable, the trajectory is. Back in the 1990s, people worried about what would happen if the US paid off its debt and there weren’t enough Treasuries to go around.
Further thoughts
”I get a payout every month, so why is my principal shrinking?”
When Meb went off on this, I thought of all the payout products people hold. He named covered call funds and products that sell a Bitcoin strategy as “yield,” and said part of what they pay is your own capital handed back. Robin’s image was better: dressing a fox up as a goose, or the other way around.
Taken apart, bond interest has a clear source. The borrower uses the money, then pays interest out of future income and repays at maturity. Other “income” can come from three places: real interest or dividends; option premium, which you earn by selling away your upside; or your own principal. The third one also shows up as a distribution, but your total wealth doesn’t grow.
The check that seems practical to me is total return: add a year’s distributions to the change in the fund’s value, and that’s what you actually made or lost that year. Funds usually disclose how distributions break down, including a line for return of capital, and it takes a minute to look up.
Robin’s comments on private credit fit here. He knew private credit had gotten frothy when salespeople started cold-calling a journalist to offer him loans. When borrowers can’t pay cash interest, lenders can switch to payment-in-kind notes, and outsiders can’t see it. He doesn’t think this will bring down the system, but plenty of people will lose money. He also holds a less common view: the promise of same-day or next-day liquidity is itself a systemic danger, and we’ve built the whole financial system on the idea that you can get your money back tomorrow. So when I see high payouts next to “redeem anytime,” I ask two more questions: where does the cash come from, and how wide is the door if everyone leaves at once?
”Aren’t bonds supposed to be the safe part? Why did both fall together?”
Many people hold bonds so that something holds up when stocks fall. That only works if two things are true. First, money has to flee into government bonds when stocks drop, pushing bond prices up. Second, the duration of your bonds has to be short enough that a rise in rates doesn’t wreck them.
In the Liberation Day selloff, the first condition broke down. Stocks fell, Treasuries didn’t rally, and yields went up. Robin ties this to the leverage above: some of the people holding Treasuries are borrowing to scale up, and when the market shakes, they’re forced to sell. The Austrian century bond is the extreme case of the second condition. Its default risk was close to zero, and it still lost 80%, all of it through duration.
So I’ve given myself one thing to watch. The next time stocks drop hard, I’ll look at where long-term government bond yields go. If they fall, the safe haven is working. If they rise, someone is being forced to sell, and the bonds in a portfolio won’t cushion much. The other step is to look up the duration of whatever bonds or bond funds I hold. With a 20-year duration, a one-percentage-point rise in rates means roughly a 20% price drop, and I want that order of magnitude in my head beforehand. That rule of thumb is my own math. The episode didn’t go this far.
Resources
- The Meb Faber Show #650 (2026-09-11), Robin Wigglesworth on the thousand-year history of bonds
- Robin Wigglesworth, Trillions: the history of how index funds changed investing
- FT Alphaville, the Financial Times finance blog he edits
- The Bank of England’s emergency purchases of long-dated gilts in September 2022; searching “LDI crisis” turns up plenty of post-mortems
- Die Hard: Hans Gruber is after bearer bonds so he can sit on a beach earning 20%, which was what 1980s yields looked like. Robin also brought up Trading Places, where Jamie Lee Curtis’s character keeps her money in Treasury bills and figures she can retire in a few more years. He redid the math in 2015 and found she’d need to work four thousand years to earn the same interest.
One thing to take away
The one idea I kept from this episode: for every payment you receive on a schedule, you should be able to say what the payer is paying you with. Bond interest comes out of the borrower’s future income. If the answer is “the money you put in,” the payout just moves cash from one of your pockets to another, maybe with a fee taken along the way.
Here’s something I’ve tried. Pick anything that pays you on a schedule, like a savings-type insurance policy, an annuity, or a distributing fund, and find two numbers: how much you’ve received so far, and how much you’d get back if you cashed out today. Add the two together and put the total next to what you paid in. If you can’t find one of the numbers, call whoever is sending you the money and ask.
This article is an educational discussion of investment method. It is not advice to buy or sell any individual security, offers no target prices, and does not analyze any current holding. Investing carries risk; make your own decisions or consult a qualified professional.