A bond is a debt instrument that is guaranteed by a specific asset in addition to the company’s credit. A debenture is a debt instrument that is just guaranteed by the issuer’s general credit.
Whatever happened to debentures? Apparently, they don’t exist anymore. Why? Because although almost all debt instruments are debentures today, they’re now called bonds—which are better than debentures. It’s subtle, dishonest, and indicative of what’s happened to the credit universe in general. Things are made to look better than they, in fact, are.
Another one. Time deposits and demand deposits. Some of you may remember the proper use of those terms. But, now, they’re completely conflated. Banking is actually two totally separate and different businesses combined into one. With time deposits, you give the bank X number of dollars for a specific length of time, and then the bank guarantees you a specific amount of interest.
Why? So it can lend it out at a higher rate of interest for an identical amount of time, generally in a self-liquidating, secured business loan to somebody of substance. Consumer and mortgage loans are out of the question to a sound banker.
