Some comments on the economics of the series

Lord Skimper wrote:This all assumes only one person is withdrawing money from a personal account. A corporate account with multiple withdrawers spanning multiple systems, simultaneously or with a few days of each other could clear out 100 times what is in the account. Plus this whole finance thing assumes that hated enemies are going to honour each others transactions. I'm sure the Alignment (do we still need call them Mesan?) Willn't care if the money system fails. Especially the GA or even SL systems. Not like they need money.

Think of how current funds availability policy controls risk. Thansaction is instantaneous but funds not available until cleared through the system.

Lord Skimper wrote:This all assumes only one person is withdrawing money from a personal account. A corporate account with multiple withdrawers spanning multiple systems, simultaneously or with a few days of each other could clear out 100 times what is in the account. Plus this whole finance thing assumes that hated enemies are going to honour each others transactions. I'm sure the Alignment (do we still need call them Mesan?) Willn't care if the money system fails. Especially the GA or even SL systems. Not like they need money.

Lets posit that there would be two types 'businesses' with corporate accounts.
Businesses which establish local subsidiaries (think McDonald's) on each planet and Businesses which do not have fixed assets at distant planets (maybe only a small factor office with a handful of people) such as interstellar shipping cartels.
Now I doubt a well-run bank is going to allow someone to walk into the branch on the planet Podunk in the Star System of Backcountry and withdraw 100% of Toyota or Apple's accounts. That would be an open invitation to fraud. So there would be limitations on how big a withdrawal could be made without higher authorisation. What about REALLY big withdrawals? Businesses (at least those that don't specialise in white powder) tend not to conduct transactions in the present day using suitcases full of cash. This will most likely remain true in the future. Big transfers would just involve the funds being transferred from the account of one company to another. Big transfers like this would probably occur in the star system of the Bank's head office (main branch, clearinghouse etc.) Most likely a trans-stellar corporation would also have headquarters on such a planet as well.
Okay so back on the topic of what happens at the branches. Subsidiaries with physical assets would have their account's collateralised by the value of their assets in system. Subsidiaries without physical assets (in system) would be collateralised by the value of their cargo (and ships). The size of the withdrawals would be very sharply limited. Instead funds would be transferred from the corporate account to other accounts to pay for B2B purchases, to pay wages and salaries and to pay fees and taxes etc.
So the scenario you are suggesting where a corporate account might be overdrawn by a large factor or multiple is unlikely to occur and if it did, it would nevertheless be collateralised by the corporate accountholder's assets (and possibly shipping insurance).

Flakey wrote:

BobfromSydney wrote:>>>> A quick digression about the trillion hyperbucks on the datachip:
Now those with devious minds might be thinking: with a little help from my friends copy and paste, I could easily turn that trillion hyperbucks into TWO trillion hyperbucks! In fact, if I was willing to put a little wear on my Ctrl-C and V keys I could have as many hyperbucks as I could spend!

Though you already seen in the books both letters of credit ((Bearer bonds)) and credit chips, issued by various interstellar banks. Even slavers use the credit chips, using a verifier to check they are real. If they consider them a secure method of payment I do not think it as easy as using cntl c to copy them.

As some one else mentioned above. 99.99 % of all transactions are going to be either instantaneous, are a hour or 2 delay at most. With the case of going far enough off planet the above two mentioned uses are already in place to be used, I see no need for cheques in the Harrington universe.

Given how motivated people would be to try and find ways to duplicate these credit chips and letters of credit and the level of technology available (remember the Mesan agent that changed from the woman to a man between attending a meeting and going back to their car?) I find it hard to believe that unrestricted 'cash' could stay secure.

However these things are made, they must have god-like anti-copy, anti-modification and anti-tamper features.

They would have to have some sort of scramble/wipe/self-destruct feature if they are scanned, opened etc.
But not self-destruct from day-to-day physical handling or being in someone's pocket when they walk through the equivalent of an airport security scan.
The would have to have nano-tech level counter-measures.

Also the 'cash' used by a lower tech level star system would have to be immune to tampering by the most advanced technology that exists in the Honorverse. Since Honorverse tech is capable of scanning molycircs for faults and fixing those faults, this would be a very tall order.

They would also have to be readable and verifiable by any merchant or bank so they would be useable at the end of the day.

Considering the size of the potential returns, criminal organisations (or rogue governments) would certainly be willing to invest billions into finding ways to hack and duplicate unrestricted cash. This is why I don't believe it could exist physically.

I think in-system transactions would occur electronically within the banking system and inter-stellar transactions would be protected by a combination of encryption and record-keeping.

The other possibility is for credit chips to contain an equivalent value of some rare element - specie. But the impracticality of using this type of 'coin' would tend to prevent its adoption I think. For example every merchant would need to use a spectrometer (at the very least) to verify the 'authenticity' of the coins.

Real Time vs real time. When you are dealing with the banking system you have to take into account how it got to where it is in paying "checks" (any draft or withdrawal from an account. Checks refer to withdrawals (historicaly physical items) agains "Demand Deposit Accounts" vs drafts which done against either savings or other types of asset holding accounts which may or not be that quickly available at time of presentation of the draft.

Also, if you are dealing within one institution (bank) with an electronicaly connected network, you CAN move money out of an account either as "cash" (a physical currency) or some tangible asset such as a volume of precious metal (like a gold coin) or some other valuable commodity. HOWEVER, if you don't have this wonderfull electronic transfer system we are using today, you fall back on have to a daily balancing of accounts to make sure you can pay on checks etc. I have been there, have the scars. That is why banks had their own sets of rules about paying checks for customers. At the "main" branch they could consult the physical ledgers to see if the customer had enough to pay the account and not be over drawn and attach a temp not to the ledger about the pending withdrawal. Then you get to where you have telephones and either calls to other people "downtown" to check the ledgers or your computer (and a touchpad on the phone) could give you an electronic answer about blance in the account AND you could hold (make an electronic note to reserve an amount) till the end of day settlement.

This is somewhat oversimplified.

However, when you get to the point where it is going to take something like more than to the end of the (local) day to settle accounts you have to change. In this case, with interstellar travel, they PROBABLY will go back to the "old" style of issuing drafts against an account of the Bank or financial house with which a person does business with in the other star system. It doesn't have to be a branch of the same bank but it does have to be either (in general) 1) a "bank" or financial house with whom the individual has funds on deposit or has an arrangement to advance funds against a line of credit OR 2) the individual asks his bank "here" to issue him a draft or letter of credit to his credit for negotiation with that bank's correspondent bank in the other star syste.

NONE of these banks or financial houses hold all that "money" in cash (currency). NONE, NEVER. They have enough for what they expect or predict that they will need in a given time frame which can vary widely over a year. Electronics has made it simpler because notational transfer of death- wires, act- mean that you don't have to move physical cash around but you do have to go the equevelent of a daily settlement and balancing of accounts. I said NONE, NEVER because whatever is not being held agains expected withdrawl or transfer by customers is held in some other form of asset. That could be gold but more usually in either loans made to still other customers (which -the loans- are then assets of the bank) or investments. They might be stocks or bonds of various types expecting to be held for various times for dividends or gain (appreciation )in value. Or they could be direct investment in …..well…. the expected returning cargos on trading ships that went out to China or Eta Ceti Beta….and the Bank or the financial house or the brokerage firm doesn't have the funds back just yet (presuming they are going to make money on them) and they may just have to go borrow the cash or sell some future asset to meet a required withdrawal.

Did that make sense? How about this. NO Bank will have the equal value in the total amount of "cash" its customers have on deposit with the Bank at any one time. They can't because the primary way they make money is by getting interest or making it grow to a larger amount by investing it in something. That can be loans to customers or other things….like buying a cargo of Montana Beef but they have to send a few million credits worth of money or it's equivelent to Montana and then wait for the seller on Montana ships the beef back AND THEN THEY HAVE TO SELL THE BEEF- all of that and at a profit.

Real time become "relative". Electrons get to the home office from the branch on the other side of the continent really dam fast. It takes a sight longer to make it to the home office from the branch on Pluto - and the confirmation or denial to bet back to Pluto.
Then a really long time to have a message and the responce make the round trip from Earth to Vulcan (even if you can use Manticorain FTL in-system.) That's Real-Time in practical terms.

Just like dealing trans-atlantic or Europe to China in the 17th and 18th Century, hell just like in the 1st century BC across the Roman Empire and beyond.

BobfromSydney wrote:Businesses (at least those that don't specialise in white powder) tend not to conduct transactions in the present day using suitcases full of cash. This will most likely remain true in the future. Big transfers would just involve the funds being transferred from the account of one company to another. Big transfers like this would probably occur in the star system of the Bank's head office (main branch, clearinghouse etc.) Most likely a trans-stellar corporation would also have headquarters on such a planet as well.

And while most of what we've seen firsthand have been credit chips which are payable to the bearer (funds are withdrawn when the chip is created; you lose it they're gone) for more normal large transactions the bank should be able to use the same type of crypto systems to create transfers that can be more directed and even canceled if lost.

Basically instead of digitally signing the transaction as "pay to bearer" they could just as easily sign it "transaction #xyz, for deposit only at branch A in account 123". Then they'd either put a hold on those funds until they got notification that the transfer had completed, or transfer them to the bank's general account. But it doesn't do any good to steal the transfer because it'll only be accepted one place and into one account.

And because it's a specific traceable transaction to a specific destination you can (if necessary) send a follow-up message to that same branch A notifying them that transaction #xyz has been canceled and must not be accepted if received after that date. So a lost or stolen transfer wouldn't sit out there indefinitely tying up your money. Once they receive an acknowledgement the cancellation has been received and applied by the destination branch they can reissue the transfer, or just refund the money into the original account. (Or they might hear back that the transfer showed up before the cancel notice and the money's already deposited; in which case the cancel notice is void)

Jonathan_S wrote:
Basically instead of digitally signing the transaction as "pay to bearer" they could just as easily sign it "transaction #xyz, for deposit only at branch A in account 123". Then they'd either put a hold on those funds until they got notification that the transfer had completed, or transfer them to the bank's general account. But it doesn't do any good to steal the transfer because it'll only be accepted one place and into one account.

That's the kind of system I've been talking about earlier in this thread. 'Pay to bearer' is equivalent to 'pay only to such and such' because it's not really transferable (except to gullible fools).

If Alice had a 'pay to bearer' note and offered it to Bob, Bob would not be able to trust that the 'pay to bearer' note was:
1. The 'original' copy
2. Not already 'cashed'
3. Not going to be 'cashed' by Alice or her associate Carol before Bob got a chance to cash it first

Now this is moot if all parties (including the bank) are on the same planet. But in this case why are they futzing around with bearer bonds instead of just using electronic funds transfers?

niethil wrote:I have no ideas why so many people posting in this thread think that commercial transactions are cleared in real time. It's not true at all, it is in fact very unusual. Most transactions are cleared only once a day.

Hi Niethil, The way the current system works is actually a two-step process: first a real-time request to check, and then (and that's the once-a-day part) a final message to actually collect the money. So, in a way you have a point, but not as much as you think..

OK, about the micro-jump idea to move stuff from the WJ to Manticore, it won't work, micro-jumps have pretty much the highest accuracy problems of all jump types, sooner or later it's not going to end well, as in a ship gets it's translation wrong and never comes back.

As for the silly idea about using 3D Printers and making money, forget it. The old paper/fabric notes the US used to make/use (I'm guessing some are still in circulation), the hard part of making them is getting some of the paper their printed on, the mixture is basically a State Secrete and probably can't be reproduced on a 3D Printer, and the government LIKES it that way, it makes the notes virtually impossible to forge

Plastic notes, I don't know if there's anything special about the plastic, but the actual note is printed on top of it, old style.

As for coins, they likely aren't homogenous and the way the other coating is applied is important.

I think the person who first brought them up was thinking that's how the government in the future might make them, but I ask the question: Why? If a 3D Printer is going to be in every home in the future why make your currency printable on one?

And also note that 3D Printing was NOT designed with mass production in mind, it was developed to make creating one off test parts cheaper, not to get rid of mass production

I bought a new car last week using my own money made up of funds from two institutions. The long term investment house required me to submit a hard copy application with ID by snail mail, and it took 8 days to clear. My own bank only provided the rest immediately because I gave a day's notice that I would be withdrawing it.
Small transactions are immediate but significant ones have time consuming safeguards.

On the broader issue of economic pain, I've wondered why Manticore citizens facing a national survival war didn't seem to have their personal financial situations as affected as for example the WW2 UK people did. Life seemed to go on as if they weren't fighting for their survival.

SCC wrote:OK, about the micro-jump idea to move stuff from the WJ to Manticore, it won't work, micro-jumps have pretty much the highest accuracy problems of all jump types, sooner or later it's not going to end well, as in a ship gets it's translation wrong and never comes back.

As for the silly idea about using 3D Printers and making money, forget it. The old paper/fabric notes the US used to make/use (I'm guessing some are still in circulation), the hard part of making them is getting some of the paper their printed on, the mixture is basically a State Secrete and probably can't be reproduced on a 3D Printer, and the government LIKES it that way, it makes the notes virtually impossible to forge

Plastic notes, I don't know if there's anything special about the plastic, but the actual note is printed on top of it, old style.

As for coins, they likely aren't homogenous and the way the other coating is applied is important.

I think the person who first brought them up was thinking that's how the government in the future might make them, but I ask the question: Why? If a 3D Printer is going to be in every home in the future why make your currency printable on one?

And also note that 3D Printing was NOT designed with mass production in mind, it was developed to make creating one off test parts cheaper, not to get rid of mass production

I was not suggesting that 40th century humans would try to make forgeries of 40th century currency using [early] 21st century 3d printers. That is almost as absurd as imagining them trying to forge identity papers using a 20th century mechanical typewriter.

Yes I imagine if governments were stubborn enough to try and create 'cash' currency tokens they would use every type of safeguard they could come up with.

Then some criminal organisation would develop a way to duplicate that currency. Remember that nanotech exists that can change a sexy woman into a plain middle aged guy between the time he/she walks out of a room and get to his/her car. They can print, scan and repair molecular circuitry (that's everyone, including Haven or Silesia).

The 3d printing capability of the 40th century is dozens or hundreds of generations ahead of the crude 3d printing we have today.

Daryl wrote:On the broader issue of economic pain, I've wondered why Manticore citizens facing a national survival war didn't seem to have their personal financial situations as affected as for example the WW2 UK people did. Life seemed to go on as if they weren't fighting for their survival.

I asked a similar question and David answered in HoS in the FAQ section at the back.