Money Lessons with Andrew Temte, PhD, CFA

Episode Title: Ancient IOUs: The Origin of Debt Instruments
Release Date: December 6, 2025
Host: Andrew Temte

Episode Overview

This episode marks the beginning of a new series on the history of debt securities. Dr. Andrew Temte explores the roots of debt—tracing its origins from ancient Mesopotamia to the sophisticated bond markets of Europe—while highlighting how debt instruments predate equity ownership and have shaped the financial world we know today. The episode explains why understanding debt is fundamental for sound financial literacy and wealth-building.

Key Discussion Points & Insights

1. Debt Predates Equity in Human History

• Debt existed millennia before stocks:
  • Early societies were lending, borrowing, and formalizing repayment long before concepts of stock ownership (00:20–00:42).
  • "Debt instruments are far older than equity securities. Thousands of years before anyone owned shares in a company, people were already lending and borrowing..." (Temte, 00:20)

2. Mesopotamia and the Origins of Formalized Lending

• The Code of Hammurabi set precise loan standards:
  • Ancient legal codes didn’t just regulate commerce, but also debt, specifying terms, interest, and collateral (01:05–02:00).
  • Example loan: “10 shekels of silver lent at 20% interest due at harvest with your barley field as collateral.” (Temte, 01:24)
  • Tri-party record system: one tablet for the lender, one for the borrower, and one for the temple as witness (02:01–02:15).
• Consequences for default were severe:
  • Loss of collateral, debt servitude, or even family members working off the debt (02:20–02:35).

3. Why Ancient Debt Instruments Were Revolutionary

• Changed the nature of consumption and payment:
  • Debt separated immediate consumption from later payment, solving barter’s timing issue (02:38–03:10).
  • "This time-shifting of resources was absolutely revolutionary and remains fundamental to how modern economies function today." (Temte, 03:07)

4. Rome’s Government Debt and Tradable IOUs

• Systematic State Borrowing:
  • Rome borrowed from citizens to finance wars and public works (03:20–04:00).
  • Debt certificates issued by the Roman Senate could be traded, marking the origin of secondary markets (04:10–04:25).
  • "When you held Roman debt certificates, you were a creditor with a legal claim to repayment. Regardless of Rome’s fortunes." (Temte, 04:36)

5. Distinguishing Debt from Equity

• Ownership vs. Lending:
  • Equity holders profit (or lose) with the company’s success; bondholders have a fixed claim (04:39–05:00).

6. Medieval Europe and Religious Workarounds

• The challenge of charging interest:
  • Moral and religious prohibitions led city-states, like Venice, to disguise interest as voluntary “donations” (05:12–05:45).
  • Creation of tradable government bonds, with prices reflecting the government’s creditworthiness (05:50–06:10).
  • "These Venetian bonds could be traded among investors, creating a secondary market where bonds changed hands based on Venice’s perceived creditworthiness." (Temte, 05:55)

7. Perpetual Bonds & The British Consol

• Perpetual Annuities:
  • British government introduced instruments paying interest “forever,” with no repayment of principal (06:20–06:50).
  • "Investors bought these bonds knowing that they’d never get their principal back, but their children and their grandchildren would keep receiving interest payments indefinitely." (Temte, 06:41)

8. Why Debt Came First

• Simplicity and human nature:
  • Debt aligns with basic reciprocation in human societies (07:05–07:37).
  • “I borrow 10 bushels of seed grain today. I repay 12 bushels after harvest. Simple, clear, direct.” (Temte, 07:22)
  • Explains why complex equity shares required more advanced legal systems that only came much later (07:41–07:58).
• Debt suited agricultural economies:
  • Seasonal borrowing and repayment fitted the yearly rhythm of farming (08:00–08:35).
  • Creditors had priority in repayment, making lending safer than equity investment (08:38–08:50).

9. The Enduring Nature of Debt Instruments

• Continuity from ancient times:
  • Modern bonds, T-bills, and corporate debt directly trace back to ancient clay tablets (08:53–09:10).
  • “The fundamental promise remains unchanged: I will repay what I borrowed with interest on a specified date.” (Temte, 09:12)

10. Preview of Upcoming Episodes

• Debt’s ongoing evolution:
  • Future episodes will cover how debt markets shaped economies, the role of credit ratings, and why understanding debt is vital for personal finance (09:20–09:37).

Notable Quotes & Memorable Moments

• “Debt instruments are far older than equity securities. Thousands of years before anyone owned shares in a company, people were already lending and borrowing...” —Andy Temte, 00:20
• “These were enforceable contracts backed by Babylonian law. The lender kept one tablet, the borrower kept another, and often a third was held by a temple as an independent record.” —Temte, 01:59
• “This time-shifting of resources was absolutely revolutionary and remains fundamental to how modern economies function today.” —Temte, 03:07
• “When you held Roman debt certificates, you were a creditor with a legal claim to repayment. Regardless of Rome’s fortunes. This distinction between ownership and lending remains fundamental to understanding stocks versus bonds.” —Temte, 04:36
• "Everyone understood that these were interest payments by another name. But the legal fiction satisfied the religious authorities." —Temte, 05:40
• “Investors bought these bonds knowing that they’d never get their principal back, but their children and their grandchildren would keep receiving interest payments indefinitely.” —Temte, 06:41
• “I borrow 10 bushels of seed grain today. I repay 12 bushels after harvest. Simple, clear, direct.” —Temte, 07:22
• “The fundamental promise remains unchanged: I will repay what I borrowed with interest on a specified date.” —Temte, 09:12

Important Timestamps

• 00:20: Debt’s history predating equity
• 01:05–02:35: Mesopotamian loans and the Code of Hammurabi
• 02:38–03:10: Debt’s revolutionary time-shifting
• 03:20–04:36: Roman government debt and tradable securities
• 05:12–06:10: Medieval European bonds and religious workarounds
• 06:20–06:50: British perpetual bonds (Consols)
• 07:05–08:50: Simplicity of debt and its dominance over equity
• 08:53–09:10: Ancient debt’s legacy in modern finance
• 09:20–09:37: Series preview—why debt knowledge matters today

Summary Takeaway

Debt instruments—a concept as old as civilization itself—form the backbone of both ancient and modern economies, enabling the separation of consumption from payment and the financing of large-scale projects. Their legacy shapes both markets and personal financial decisions today, making debt literacy as fundamental as understanding stocks for anyone looking to build wealth.