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Hartwick College didn’t really mean to annihilate the U.S. economy. A small liberal-arts school in the Catskills, Hartwick is the kind of sleepy institution that local worthies were in the habit of founding back in the 1790s; it counts a former ambassador to Belize among its more prominent alumni, and placidly reclines in its berth as the number-174-ranked liberal-arts college in the country. But along with charming buildings and a spring-fed lake, the college once possessed a rather more unusual feature: a slumbering giant of compound interest.

With bank rates currently bottomed out, it’s hard to imagine compound interest raising anyone much of a fortune these days. A hundred-dollar account at 5 percent in simple interest doggedly adds five bucks each year: you have $105 after one year, $110 after two, and so on. With compound interest, that interest itself get rolled into the principal and earns interest atop interest: with annual compounding, after one year you have $105, after two you have $110.25. Granted, the extra quarter isn’t much; mathematically, compound interest is a pretty modest-looking exponential function.

Modest, that is, at first. Because thanks to an eccentric New York lawyer in the 1930s, this college in a corner of the Catskills inherited a thousand-year trust that would not mature until the year 2936: a gift whose accumulated compound interest, the New York Times reported in 1961, “could ultimately shatter the nation’s financial structure.” The mossy stone walls and ivy-covered brickwork of Hartwick College were a ticking time-bomb of compounding interest—a very, very slowly ticking time bomb.

One suspects they’d have rather gotten a new squash court.

The notion of a “Methuselah” trust has a long history—and as with many peculiar notions, Benjamin Franklin got there first. Upon his death in 1790, Franklin’s will contained a peculiar codicil setting aside £1,000 (about $4,550) each for the cities of Boston and Philadelphia to provide loans for apprentices to start their businesses. The money was to be invested at compound interest for one hundred years, then a portion of the fund was to be used in Boston for a trade school. For Philadelphia, he recommended using the money for “bringing, by pipes, the water of Wissahickon Creek into the town”—or perhaps “making the Schuylkill completely navigable.” The whole scheme was perfectly suited for a man who once half-jokingly proposed that, in preference “to any ordinary death” he be “immersed in a cask of Madeira wine” for later revival, as he had “a very ardent desire to see and observe the state of America a hundred years hence.”

Franklin’s plans soared beyond a mere century, though. After a portion of the funds were to be paid out for a first set of public works, the remainder was then to grow for another century—until, by Franklin’s estimate, in 1990 both cities would receive a £4,061,000 windfall from their most famous native son.

“Considering the accidents to which all human affairs and projects are subject in such a length of time,” Franklin admitted, “I have, perhaps, too much flattered myself with a vain fancy that these dispositions, if carried into execution, will be continued without interruption and have the effects proposed.”

Nonetheless, Franklin’s experiment inspired Peter Thellusson, a London merchant and a director of the Bank of England, to even dizzier heights. Thellusson had an impressive fortune of some £600,000 by his death in July 1797, worth about $68 million today. But at the reading of the old financier’s will, his reckless sons received the shock of their lives. “It is my earnest wish and desire,” he lectured them from beyond the grave, “that they will avoid ostentation, vanity, and pompous shew; as that will be the best fortune they can possess.”

It would also be almost the only fortune they’d possess. Most of the estate was to be invested at compound interest until every currently existing heir was dead, whereupon upward of £19 million would cascade onto their distant descendants. It was as if, one legal scholar marveled, Thellusson had “locked his treasure in a mausoleum and flung the key to some distant descendant yet unborn.”

His heirs did not take the news well: one took out a pistol and shot the old man’s portrait.

It was the opening salvo of an immense legal battle. The Thellusson will occupied courts for decades, involving the country’s top legal talent; law professor Patrick Polden of Brunel University, who authored a monograph on the case, has tallied over one hundred lawyers involved in the judgment. Politicians and gentry waded in out of concerns far beyond the heirs’ resentments. “There was a major political dimension too,” he explains. “The fear was that when the trust expired these two or three mega-rich men would be able to exert a massive influence through buying up seats in the House of Commons and that they would establish dynasties of peers; worse, that others would follow suit.”

By the time the case was resolved sixty-two years later in 1859, much of the fortune had been consumed in legal fees, and Parliament enacted the Perpetuities Act barring Britons from ever attempting Thellusson’s stunt again. Perhaps, in the end, a dynastic trust that locked up money for generations simply smacked too much of feudalism for Britain’s new industrial economy.

“A fortune in circulation,” explained one judge from the case, “even if spent in luxuries, waste, and dissipation, did more good to the public.”

If Peter Thellusson left any real legacy, it was in inspiring Charles Dickens to create the endless case of Jarndyce v. Jarndyce in his 1853 novel Bleak House:

This scarecrow of a suit has, in course of time, become so complicated that no man alive knows what it means…Innumerable children have been born into the cause…Innumerable old people have died out of it. Scores of persons have deliriously found themselves made parties in Jarndyce and Jarndyce, without knowing how or why; whole families have inherited legendary hatreds with the suit. The little plaintiff or defendant, who was promised a new rocking horse when Jarndyce and Jarndyce should be settled, has grown up, possessed himself of a real horse, and trotted away into the other world.

The unimpeded growth of a huge sum of money, central to the Thellusson case, was even more fascinating to authors. The 1899 H. G. Wells novel When the Sleeper Wakes features a wealthy young man who sleeps for 203 years after an 1897 drug overdose, only to discover upon his revival that his unattended bank account has funded an entire totalitarian society. Like the bank account and the society it created, Wells later deemed the story “one of the most ambitious and least satisfactory of my books.” That didn’t keep the eccentric pulp writer Harry S. Keeler from going even further with the 1914 story “John Jones’ Dollar,” in which a solar system’s economy is built around a single silver dollar left to accumulate until the year 2921 to the astounding sum of $6.3 trillion—an amount deemed roughly equal to “the wealth on Neptune, Uran­us, Saturn, Jupiter, Mars, Venus, Mercury, and likewise Earth, together with an accurate calculation of the remaining heat in the sun and an appraisement of that heat at a very decent valuation per calorie.” Instead of bankrupting the solar system, though, it finances an interplanetary socialist paradise.

The story may be absurd, but it was just that kind of mathematical absurdity that had captured Franklin’s fancy in the first place. A few years before Franklin drafted his will, philosopher Richard Price rhapsodized in a sober treatise on the national debt, “One penny, put out at our Savior’s birth to 5 percent compound interest, would, in the present year 1781, have increased to a greater sum than would be contained in two hundred millions of earths, all solid gold. But, if put out to simple interest, it would, in the same time, have amounted to no more than seven shillings and sixpence.”

When the first century of Franklin’s rather more practical plan arrived in 1891, it bore $572,000 for Boston and Philadelphia. That was hardly one earth of solid gold, let alone 200 million of them, but Franklin had made his point—and in particular, he’d made it to a New York lawyer named Jonathan Holden.

Trained in law at Colgate and a multimillionaire through property investments, Holden was the sort of fellow who gave himself haircuts to save money, advocated the use of phonetic spelling in English, and lived on a diet of prunes and shredded wheat. By 1912, as the founder of what he christened “The Futurite Cult”—a few of its publications still survive in far-flung libraries—he’d concluded that the earth had achieved “a stage of civilization when vested property rights will be unmolested even in the case of conquest.” The time was right, he decided, to take Franklin’s grand economic experiment to its next logical step.

“One of the first American statesmen performed an act which is suggestive of possibilities,” Holden said of Franklin in a 1912 pamphlet, wondering whether “some citizen of the present day felt disposed to carry the ‘Franklin Plan’ still further.”

That citizen would be Holden himself. Beginning in 1936, he sluiced $2.8 million into a series of five-hundred- and thousand-year trusts—just one of which, allocated to the Unitarian Church, would be worth $2.5 quadrillion upon its maturation in the twenty-fifth century. A thousand-year fund dedicated to the state of Pennsylvania would yield $424 trillion; the money was to be applied to abolishing the state’s taxes. Holden didn’t even live in Pennsylvania—he’d picked the state as an homage to Franklin.

And then, of course, there was Hartwick College. Choosing them for a thousand-year trust was more straightforward: Holden had two children and one grandchild attend the school. Then again, as a man fixated by compound interest, perhaps Jonathan Holden was simply enchanted with the college’s motto of Ad Altiora Semper: “Ever Upward.”

The trustees overseeing these immense funds would be Holden’s own children, and perhaps in turn their own descendants. Though not necessarily rich themselves, they would control great riches—and so, long before passing away in 1967 at the age of eighty-six, Holden decided that after his death, the world would still need a way to clearly distinguish the next fifty generations or so of these munificent descendants. Holden was a common name, but Holdeen was not; with a trip to the courthouse, the lawyer added an “e” to his last name.

The old man never did manage to talk any of his children into adding the extra “e” to their names as well. But it hardly mattered: as far as he was concerned, the Holdeen dynasty had begun.

Ten years after Holdeen’s death, in a Pennsylvania courtroom in 1977, economist Jack Rothwell laid out the Armageddon that awaited the state. As the trustees of an increasingly vast fund, Holdeen’s descendants would gradually control ever-larger swaths of currency. The Holdeen Trusts, he argued, would grow until “They would absolutely own the world.”

“Any time you wanted to make a telephone call or take a trip…You would be paying money to the Holdeens,” added economic forecaster Michael Evans. “Everyone in the world would work for the Holdeens.”

It wasn’t the first time the court had heard this argument. Even within his own lifetime, Holdeen’s plans nearly disappeared into a maze of lawsuits. In some cases the federal government had opposed the trusts on tax grounds, while in others the state government of Pennsylvania had defended them out of self-interest; some beneficiaries of the funds opposed their breakup, while others wanted to smash open the piggy bank a thousand years early. More ominously, in 1958 the IRS had clashed with Holdeen, arguing in court that it had rightly demanded taxes off of what it considered an invalid tax shelter. The trusts, the IRS argued, would in any case wreck “the tax base of the nation, if not the world.”

Although the judge in that case mused the eventual size of the funds meant that “in this day of space exploration…Possibly other worlds will have to be discovered for the plaintiff’s future investments,” the funds nonetheless survived a number of early challenges. Their survival owed much to their being more high-minded than Thellusson’s scheme for enriching his family. Although nearly all states had perpetuity laws like Britain’s, there was more leeway given to charitable trusts like Holdeen’s. One hundred-year account, set up by suffragette Anna C. Mott, dumped $215,000 on Toledo in 2002—rather more than the thousand dollars she started with—and similar funds were created in the 1920s to relieve Britain from its national debt. In 1919, the Indiana legislature even passed a law to allow a charitable five-hundred-year trust by Charles Fairbanks, an Indiana senator who had also served as vice president under Teddy Roosevelt.

But while some trusts accumulated for a century or two, and others were created with yearly payouts in perpetuity, none were accumulating in near perpetuity. Even Franklin’s fund, after a solid two-hundred-year run, finally ended in 1990 with a bounty for the Franklin Institute in Philadelphia and the Benjamin Franklin Institute of Technology in Boston. The roughly $7-million-dollar total payout didn’t quite attain the heights that Franklin predicted; such plans rarely factor in the cost of trustees’ fees, taxes, or legal battles. But if Franklin’s trusts survived at least relatively unscathed, it was the sheer ambition of the Holdeen trusts that would finally give America a decades-long legal fight worthy of Jarndyce v. Jarndyce.

“This stuff is endless,” one court staffer groaned to a Philadelphia Inquirer reporter in 1994. “It truly is endless.”

Eventually the Holdeen trusts were allowed to stand, but they paid out yearly instead of accumulating and compounding. The matter was not truly settled until 2005, a full ninety-two years after Jonathan Holdeen first wrote his will. That was when Haldis Holden MacPherson, the sole surviving original trustee, died in Poughkeepsie. With her, the last defender of the Holdeen dream died as well.

These days, perpetual trusts are old hat: American laws against them have been steadily rolled back in the last two decades, thanks to a banking lobby that rather likes the idea of keeping your money forever. For those with less to spend, there’s even a Time Travel Fund website puckishly set up for would-be travelers who shell out ten bucks by Paypal—money that would be compounded to pay future peoples to retrieve you from your present cash-poor existence. Perpetually accumulating trusts, though, are not much more likely to be allowed to take over the world now than they were in 1912.

And so, after decades in the courts, Holdeen’s economic Armageddon ended not with a bang, but with a whimper—and a dividend check.

Hartwick College got its thousand-year trust, still bearing its maturation date of 2936; the principal now stands at an impressive $9 million. Rather than accumulating and compounding, though, the trust pays out roughly $450,000 a year to the college. This, a 2008 Hartwick press release announced, “represents the second largest gift to the college” in its history.

“It’s an enormous gift,” enthused Hartwick’s president to their local newspaper. “This is going to be of tremendous benefit to the college.”

And then it disappeared. Not the money, mind you. But visit Hartwick’s website today, and you’ll no longer find that press release, or much else relating to Holdeen. No dormitory wing, no scholarship, not even a luncheon—nothing. So what happened?

“The College utilizes the income to fund annual expenditures related to our physical plant,” the school’s director of donor relations explained in an email to me. In short, the money is liable to go toward paying for water bills and groundskeeper carts and the like: when you turn on a light at Hartwick, Holdeen’s bright idea is helping to pay for it. But the man who changed his name so that it would last a thousand years? He forgot to ask that it be attached to anything. And nobody alive today, it seems, could care less.

“There is no recognition currently,” the director said, “and I am not aware of an event recognizing the gift.”

The past can dictate the terms of a will, but the future dictates who it actually cares to remember. And so it is that Jonathan Holdeen—the man whose trusts were once said to threaten the U.S. economy with annihilation—does not have so much as a picnic table named after him.

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  • Heh. You've forgotten the, pun intended, other side of the coin which has *also* been commented on in science/speculative fiction stories.
    "My interest has matured, and I now have five million dollars!"
    "Just enough to by a small soda, huh?"

    Posted by ChrisForsyth on Fri 16 Sep 2011

  • I am a former student at Hartwick and I am pretty sure that the Resident Hall That is now called "Wilder" was up until around 2001 or 2002 called Holden Hall, I could be wrong but I am pretty sure I remember it being Holden when I came in and them Changing it my Junior or Senior year. http://www.hartwick.edu/admissions/virtual-tour/interactive-map

    Posted by Colin M Dougherty on Fri 16 Sep 2011

  • sorry, my mistake. old name for Wilder was "Alumni"

    Posted by Colin M Dougherty on Fri 16 Sep 2011

  • Another amusing example of compound interest in fiction occurs in Douglas Adams' Restaurant at the End of the Universe, the second book in the "Hitch-Hiker's Guide to the Galaxy" series. To pay for a dinner reservation at the end of all time and creation, "All you have to do is deposit one penny in a savings account in your own era, and when you arrive at the End of Time the operations of compound interest means that the fabulous cost of your meal has been paid for."

    Posted by Scott Fitzgerald Gray on Mon 19 Sep 2011

  • From this account, we can see the conceptual problem with trusts: they allow the dead to continue to live. And control wealth. That's stupid (and potentially mindbogglingly mischievous in effect). That was the criticism of trusts that led to there being perpetuities laws. All states (and, in fact, there should be a federal law) should have laws requiring that trusts terminate after a "reasonable" term, and I mean reasonable to mean short.

    Posted by Ted Fontenot on Mon 19 Sep 2011

  • Maybe the best example of a Jarndyce v. Jarndyce case occurred this year in Michigan, when a 19th century timber millionaire finally settled his estate ... 21 years after the death of his last grandchild. The key thing is, his trust actually did its job superbly in his absence, growing a $100 million legacy while generations of relatives fought to break the will.

    http://today.msnbc.msn.com/id/43098220/ns/today-today_people/t/after-years-millionaire-misers-heirs-finally-split-m/

    Posted by Dave on Mon 19 Sep 2011

  • The idea that you can create a perpetual trust and somehow it will accumulate enough money to take over the world shows a severe lack of economic literacy, both on the part of this article's author and also 19th century English lawmakers... to say nothing of the claims of the supposed economist Jack Rothwell (I've studied economics for 12 years and never heard of him, nor has Google) and "economic forecaster" Michael Evans (also never heard of him. You should treat his 1000 year "forecast" with about as much seriousness as a weather forecaster's prediction of partial cloudiness 1,000 years from today).

    Interest just doesn't magically accrue, it is a payment from someone for the use of capital. That capital will be in the economy, being lent and used to grow the economy. Over that long of a time span, any trust or fund would be hard pressed to grow at a rate faster than the real growth rate of the economy. Quadrillions of dollars, if they do manage to accumulate (I am dubious of everything in this article because of its conceptual misunderstanding of interest), will be a hefty sum, but inflation will make it seem much less daunting.

    Posted by Peter on Mon 19 Sep 2011

  • Dear Peter,

    Jack Rothwell was a VP and economist at the New England Merchants National Bank. Michael Evans was the president of the Chase Econometrics unit of Chase Manhattan Bank.

    I wish you all the best in your future Google searches.

    -- PC

    Posted by Paul Collins on Mon 19 Sep 2011

  • Peter's response is correct. The fear that this trust would take over the world is an extreme case of money illusion (http://en.wikipedia.org/wiki/Money_illusion) brought about by the very long time horizon.

    I bought some items off of McDonald's dollar menu today. If the inflation rate is 3% per year, do you know how much those dollar menu items will cost in 1,000 years? $6.9 trillion dollars each! That certainly is an enormous sum of money in today's dollars, but remember, all it gets you in 1,000 years is about 5 chicken nuggets.

    The economists who argued against the trust were either incompetent or were well paid by someone who wanted to bust the trusts.

    Posted by Matt on Mon 19 Sep 2011

  • This story and the saga of the Barnes foundation should remind anyone with delusions of perpetuity that if you leave a really worthwhile sum in trust, it will be taken, if not by your heirs, then by somebody.

    Posted by Walter Sobchak on Mon 19 Sep 2011

  • Eugene Sue's 1844 novel "The Wandering Jew" uses the same plot, with the Vatican plotting to get its hands on the trust.

    Posted by Bruno Cattivabrutto on Tue 20 Sep 2011

  • If the trust is with my bank, there'll be nothing there after the bank deducts its various fees, charges and miscellaneous items.

    Posted by LenL on Wed 21 Sep 2011

  • Obviously, as pointed out above, the calculations have not taken account of inflation. I would guess the reason being that inflation under the gold standard was pretty much nonexistent.

    Between the Great Re-coinage of Sir Isaac Newton in 1707, and the end of the gold standard in 1913, inflation of the pound sterling was around 30% spanning two hundred years.

    Posted by MadNumismatist on Thu 22 Sep 2011

  • Franklin's trust paid for an IMAX theater at the Franklin Institute as well as an 8 minute IMAX film that was quite lavish in deed. In 1989, I worked on that film, and I racal unloading the film stock off the truck and looking at the manifest and seeing that the film stock was $40,000. It was a great gig. There was no fussy client present (Ben having passed away 200 years earlier). It was the only job I ever worked on where we had Heineken as the lunch beverage.

    Posted by Bradley on Fri 23 Sep 2011

  • I'm not an economist, but as far as I know, you can't just set up a trust and demand that it earn a certain amount every year. If you could, we'd all take whatever cash we've got lying around and put it in trust at a million percent interest. To outpace inflation, the trust's investments (which, as noted above, would be circulating through the economy) would have to have a risk premium, i.e. they would sometimes lose as well as gain. So the trust's actual value would accumulate much more slowly than these straight-line compounding calculations suggest.

    And then, even if a quadrillion dollars suddenly emerged out of a bank vault someday (and even if by that time a quadrillion dollars hadn't been reduced by inflation to today's equivalent of a million dollars), it could not be spent without inflating the economy then. In other words, its very existence would drastically lower its value. I'm reminded of an idiotic thing some interviewee once said on Thom Hartmann's radio show. He said the solution to poverty was for everyone to do what he (the interviewee) had done: start a business and become a millionaire. It hadn't dawned on the guy that that solution is not scalable, because if everyone suddenly had a million dollars, prices would rise so that "a million dollars" wouldn't buy any more than a few thousand dollars does today.

    Posted by Jeff on Sat 24 Sep 2011

  • In the late 1920s there was an article in some women's magazine (I forget the name) which is now considered to be an indication of how idiotic the bubble had become. The title was "Everyone can become a "millionaire" and explained in all seriousness how if she saved a certain reasonable amount every week the magic of compound interest would make any woman super rich. The problem of course that the total wealth of the economy is equal to the total amount of production, and if being rich means being able to consume more than anyone else, than it is impossible for us all to be rich.

    This article exhibits the same kind of misunderstanding. To see why let us put in trust $1 dollar for every man women and child on earth (with 9 billion that is easy enough to do).. Since we may be well at our capacity population level, it isn't too crazy to assume for the sake of argument that our population stays sort of constant. Can it really be true that after X number of years every one of us will be fabulously wealthy and will, presumably, have no need to work? How, by the way, would we acquire our servants? There's no point in being fabulously wealthy if you don't have someone to prepare your food and clean your clothes, is there?

    Posted by TedSteipke on Mon 26 Sep 2011

  • My name is Lynn Holden MacPherson. Haldis Holden was my grandmother. The Holdeen trust fund allowed me to attend the College of William & Mary. You may have heard of it. Jonathon may have been a businessman, but he was also a family man. He established the trust fund in part so that no Holden descendent could ever be denied a good education. The "dream" is still very much alive; I graduated Phi Beta Kappa with a 3.97. I will be certain to share this article with my Holden cousins. Good day.

    Posted by Lynn MacPherson on Sat 18 May 2013

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Paul Collins teaches creative writing at Portland State University, appears on NPR as its “literary detective,” and is the author of The Murder of The Century, published in June by Crown Books. His last essay for Lapham’s Quarterly appeared in the Winter 2011 issue, Celebrity.

The day the world ends, no one will be there, just as no one was there when it began. This is a scandal. Such a scandal for the human race that it is indeed capable collectively, out of spite, of hastening the end of the world by all means just so it can enjoy the show.
Jean Baudrillard, 1987
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