# Why would an immortal make good on his loan?

## Premise

My world that has undergone a transformative breakthrough in biology and genetics. It's not just the ultra-rich who have it; rather, everyone is immortal. However, this world's understanding of economics is roughly that of Earth's. The public finance tools available to this world is also the same as Earth's. This creates a rather perplexing finance-related challenge for the society.

On Earth, it's not unheard of for countries to go into debt and take a long time to pay it off. Strictly theoretically speaking, countries don't ever have to pay off 100% of their debt. There are a few reasons for this, but one of the most chief of which is: countries do not have a finite lifespan.

[ EDIT: As per the suggestions in the answers/comments, I might reconsider my word choice. Instead of saying countries have no finite lifespan, let's just say they have no predetermined lifespan, or even better a lifespan with no upper ceiling ]

Creditor countries take this into consideration. Yet, the same does not hold true for Earthlings; most Earthlings are presumed to have a finite life span and cannot incur debt indefinitely without some form of punishment along the way.

Similarly, in my world, the immortals also do not have a finite lifespan; creditors get peace of mind that said immortal has all of eternity to pay up. This line of logic became the official policy in my world -- there is no explicit loan payment date.

Assume the immortals go into debt for the following financial incentives:

• Driving growth of investments: it would be risky, but ultimately more profitable to borrow money into debt in order to get higher returns from investments (real estate, stock market, ect)
• Inflation: assuming inflation increases over time; it's always going to be cheaper to pay off debt at a later date.

Given there are sufficient financial incentives for immortals to incur debt, and creditors allot an infinite amount of time to pay back the loan, everyone stands to make profit. It seems too good to be true... In such a scenario where money can be borrowed and spent indefinitely, the immortals could drive up inflation infinitely. The world doesn't want hyper inflation. Yet the world is also not budging on their ethos:

Ethos: "you have eternity to pay back the loan."

## Question

If there is no explicit due date, the immortals could abuse the world's ethos/policy as articulated above. Essentially, the question then becomes why bother paying the loan back at all? The immortals could say to their creditors: "I'll pay you back later." for all eternity.

Assumptions:

• the world ideally wants a functioning/healthy financial system (hyper-inflation is undesirable for this world)
• the percentage of the population in debt is anywhere from 80% to 99.99%
• over-population and other non-finance related notions are out of scope for this question

Immortality Details

• limb regrowth, starvation, disease, trauma

So as not to invalidate any existing answers, I will leave this as optional. To keep the logic used thus far as consistent as possible, we can assume these afflictions have minimal effects on the individuals. Assume immortals are impervious to all afflictions. Side Note: I originally considered a more humble form of immortality by which they have a full recovery in 48 hours or less, but I thought that could have a loop-hole where creditors could cut off a limb at regular intervals. Again, this isn't mandatory for the answer, but if the answerers feel so inclined to include a note about this, that's fine. However, I have included these details mostly in the interest of elevating the general discussion.

Success Metric: incentivize as many immortals as possible to make good on their loans without imposing a due date

Keynes: "In the long run, we're all dead."

Immortal: "Wrong."

• Comments are not for extended discussion; this conversation has been moved to chat.
– L.Dutch
Jul 24 '18 at 8:32
• What kind of immortality is this? Can you starve? Can you die of poisoning/injuries? Can you die of cancer/infectious disease/stroke? Will limbs regrow? Will lost function be regained? Can we learn/forget/ be traumatized? Can we reproduce? When do people stop aging? The details are very important to get a handle on how much steady state is to be expected, and what industries will thrive/survive, and thus how the economy might work. Jul 24 '18 at 16:42

Credit ratings should take care of this. Yes, an immortal might technically have eternity to pay off their loans - but nobody will want to lend any more money to an immortal who is currently millions of credits in debt. There may be other social ramifications as well; until you pay off your debt you may suffer from a general lack of privileges and/or respect.

As for dealing with inflation, this is one of the main purposes of interest. The reason why moneylenders generally require interest payments is because they want the value owed to remain the same even when the exact dollar amount does not; interest rates are based on expected inflation. As long as this value remains accurate, it will not benefit an immortal to wait longer to pay off their loan.

• Agree wholeheartedly, and with this angle, there's another piece that would benefit for early payoffs. The longer they wait, the more interest they accrue. Compounding interest is no joke, and your people have infinite time to accrue infinite interest. I could see some VERY torturous loan sharks in the future.... Jul 23 '18 at 14:32
• @IndigoFenix On the one hand it seems challenging to measure expected inflation since we could be dealing with thousands of years (maybe more) into the future, but on the other hand compounding interest is a beast in its own right. Jul 24 '18 at 10:29
• It's not entirely clearly in your answer, but interest serves two purposes for a money-lender: firstly, as you say, it compensates for inflation; secondly, it provides the money lender with a profit! (And the longer they lend to a solvent client, the more profit they make.) Jul 24 '18 at 12:41
• For loans to high-risk clients, you can also view interest payments as compensation for the risk of default. Jul 24 '18 at 14:13

You're conflating the idea of always being in debt with not paying off individual notes. The US, for example, has been in debt for decades but you better believe that if you go redeem some savings bonds that they'll have your money. You just have to realize that on the back side they're reissuing another one. A person could have \$10k in credit card debt but as long as they're paying it every month, they're in good standing. On the other hand someone could have \$1k in credit card debt but if they don't ever pay it, they'll be in bad standing. It's easy to see in this example that aggregate debt levels aren't enough of a measure of someone's credit worthiness. The person's ability and willingness to service their debt is also very important.

In other words an immortal could always be in debt but as long as they continue to service all of their loans per the agreed upon terms then there's no reason why they couldn't take on new debt when the old debt is due to pay off the old debt.

• And of course, if they go on for long enough, eventually there will no longer be anyone willing to give them another loan to cover their previous loan. This has also happened to countries in the past, which is one of the reasons why allowing countries to print money at will is so powerful (until people stop using your money altogether, mandatory or not). Jul 23 '18 at 13:21
• @Luaan Nitpicking, but again, it's not a matter of how long or how much, or the US and most other western nations would have been cut off long ago. It's about their ability to pay. You probably mean debt-spiral for long enough, where it constantly gets worse and spirals out of control. Jul 23 '18 at 15:37
• @wedstrom If you keep borrowing money to cover the previous debt, at some point people will stop trusting you're capable of paying them. I'm assuming those debts have interest, so you need to keep borrowing more each time. As for the countries, I'm not exactly talking about modern history there. It wasn't the debt that spiralled out of control - rather, the increasing expenses that couldn't be (reasonably) avoided. Things changed a lot after we started using fiat currency (among many other important things). Jul 23 '18 at 17:07
• @luaan but you're assuming that the immortal would not be not covering the interest. Paying interest is also called servicing the debt. You're right that if your debt is always growing that eventually the house of cards will fall but always having the same stable debt is plausible and fine. Jul 23 '18 at 17:11
• @DeanMacGregor Sure. But then you don't need to cover the debt with another debt - you can just keep paying interest and nobody cares. Interest is the cost of borrowing the money, so there's no problem as long as you keep paying it - as long as the interest rates remain the same or lower. Of course, banks would want protection against the reverse - e.g. if rates doubled, their lent money could be more profitably used elsewhere; so due dates would probably still be a thing, or there'd be an accommodation to change in rates over the lifetime of the debt (common with mortgages today). Jul 24 '18 at 6:21

In your world humans are immortal. But their institutions are not, bank included.

If you today walk down the street and search for a bank, do you find the Fugger or the Medici anywhere? They were among the biggest banks in late medieval time, and now they are gone.

Banks that always lend money and never get it back won't have any other way to get other money and go bankrupt. That means no more loans, as the entire business model of bank lending money goes down the drain. And even if banks would take the risk, they would promptly blacklist an immortal not paying back.

Therefore better pay your debts back to make more.

• I'm confused: why does "Banks that always borrow money and never get it back [...] go bankrupt" means for the immortal "Therefore better pay your debts back to make more" - wouldn't it make more sense for him to not pay his debt and just wait for the bank to die out? This way he gets to keep his loaned money - so where's the problem? Jul 22 '18 at 19:26
• @G0BLiN, do it the first time, and then spend the whole eternity waiting for another bank to give their money to charity/you
– L.Dutch
Jul 22 '18 at 19:28
• So when a bank goes bankrupt because too many defaulted on their debts payments, all those who didn't pay somehow get "blacklisted"? - That makes more sense to me, maybe add that explicitly to the answer? Jul 22 '18 at 19:32
• @G0BLiN, explained better in the answer
– L.Dutch
Jul 22 '18 at 19:36
• Honestly, this answer is a frame challenge. It explains why the loan system would just plain collapse under this rule. The last sentence trying to shoe-horn the system into working really hurts it; you'd be far better off just saying it's not possible. Jul 23 '18 at 22:30

As recently as WW2, debt was considered a moral failure. An immortal should have no need for debt, and one who goes into debt is automatically a poor risk because they obviously don't know how to manage their finances.

Speaking from experience, debt of any sort is a kind of self imposed slavery. Living debt free is much more fun and it's much easier. An immortal is likely to learn this in the first lifetime

A payment due at some (specified) future date has a present-day worth. Calculating it requires either knowledge of the national or global interest rates until the payment is due, or an educated guess what the interest will be.

Example: I promise to pay you £100 a year from now. The annual interest rate in the UK is 2%. Then I could take £98 out of my wallet today, put it into a bank account, and transfer the entire balance of the account to you when the year is over -- £100. So the future £100 payment is worth £98 today.

If you tack on many more years, the present-day worth of the future payment will be much lower.

Example: I promise to pay you £100 a thousand years from now. The annual interest rate in the UK is 2% and I (foolishly) assume that it will average around that for the entire time. Then I could take £0.00000025 out of my wallet today, put it into a bank account, and transfer the entire balance of the account to you when the thousand years are over -- £100. So the future £100 payment is worth less than one pound today.

So an "IOU" due in the far future will not be worth the paper it is written on today.

And the same applies to an "IOU" with an unspecified date.

• Easy to neutralise by having interest accrue on the unpaid part of the debt.
– dig
Jul 22 '18 at 19:52
• @dig, my calculation even assumed compound interest.
– o.m.
Jul 23 '18 at 4:35

In our world, one of the subtle (?) social forces towards people paying their debts is the shame process whereby moral failing is ascribed, externally or internally, to people whom the dominant social actors believe to have taken more debt than appropriate for their social standing. In the last century, this has taken the shape of credit rating systems, but David Graeber's Debt: The First 5'000 Years shows other fascinating approaches from history. Once the moral failing has been ascribed, various rights or privileges can be denied, formally or informally, to "over-debted" people, nudging them towards paying them. Furthermore, even fear of falling into this category may nudge people towards limiting their debts.

Considering the reasons why such social forces arose, one would reasonably expect similar ideas could have been firmly in place in your world long before the development of immortality, and remained in place even as indefinite-term debts became commonplace.

• Welcome to Worldbuilding, dig! If you have a moment, please take the tour and visit the help center to learn more about the site. You may also find Worldbuilding Meta and The Sandbox (both of which require 5 rep to post on) useful. Here is a meta post on the culture and style of Worldbuilding.SE, just to help you understand our scope and methods. Have fun! Jul 22 '18 at 19:50

Loans don't just extend indefinitely. Even for a country, a loan always has a specified duration - otherwise why would anyone ever lend someone money?

You're also wrong that countries do not have a finite lifespan. They absolutely do. The Roman Empire lasted for 1500 years, which I believe is the absolute longest lifespan there ever was. Most countries don't even remotely reach that age, especially modern ones. They aren't better at getting loans because they have long lifespans, they are better at getting loans because they have a much lower default risk thanks to the sheer total value circulating around.

Now of course this doesn't answer your question to incentivize as many immortals as possible to make good on their loans without imposing a due date - because that's, if I may be so bold, the wrong question. You absolutely have to impose a due date, always. Loans don't work any other way. You can pay back a loan with a new loan, but every loan by itself always has to end at some point, because banks aren't dumb.

Or, in other words, why do you need to incentivize the debitor to pay? It's simply not his call. A loan is a mutual agreement, and the debtee definitely has incentive to want their money back; so they'll make sure the loan contract has a due date or any other regulations they deem necessary.

What incentive do you have to pay for food instead of getting it for free? You don't, the other partner of the trade demands it.

As for the issue of inflation, that's not a problem of immortal species - all economies with fiat money and fractional reserves suffer from that. After all, to the debtee, a multi-generational dynasty is functionally no different from a long-living person. You have to solve that problem independently of immortality; with sound money or monetary policy.

You seem to assume that death of old age is the only reason that a loan could get defaulted on, or failed to pay. It isn't. There are a number of other reasons that a lending institute would take into consideration:

• death by various other means (accident, disease, suicide, etc.)
• moving beyond the legal systems reach (a country without the proper contracts)
• bancruptcy or otherwise disappearance of the credit institute
• the sun becoming a red giant
• heat death of the universe

The last two are there for chuckles but also to drive home a point: There is no such thing as eternity or immortality. There are just very, very long periods of time. And in a world that still has some chaos, on a long enough timespan, the probability of everything approaches one. Including the guy not paying back his debt.

The other more practical reason is that if nobody pays back their debts, the bank will run out of money to lend out. In todays banking system, there is a leverage factor, but the bank still needs to have some money in order to lend money (it's a couple %, depending on country). So if nobody ever pays it back, the whole business disappears. Which is why the bank has an incentive to collect and the best way to ensure that is to pass on the incentive - loans would be structured so that the immortals have an incentive to pay them back promptly. For example, interest could accumulate instead of being paid off.

Why not allow a due date.. Immortality also allows for a better repayment method. Infinite periods of slave repayment labor. Instead of repo of property, debt recovery can allow for Immortals to pay off their debts by forced labor, of which it can extend to the end of time.

A few other answers have suggested compounding debt, meaning that if you don't pay it then it just keeps getting worse. That lets things spiral out of control, but there is a simpler way to do it.

## The loan model

You borrow $100000 from me. You can pay back as much or as little of that that as you want whenever you want. You don't even have to pay it back, ever, if you don't want to, and I don't care if you do because I don't make money off of you repaying your loan; I make money off of you not paying your loan. I charge you a yearly interest of$1000 until the loan is repayed.

That's it. Simple, easy to understand. You must pay me the interest yearly; that much is required. But there are no due dates for paying back the loan principle. If after 1000 years you still have not paid a single dollar back, that's fine, as I just made \$1000 dollars times 1000 years =$1 million off of you.

Perhaps even have it be a percentage of the remaining principle, which gives the loan taker even more incentive to pay it back...

You have been paying for 1000 years, and you realize you are out \$1 million for the \$100000 loan, 10-to-1. So you want to start paying back. You start by paying back \$20000 this year, so now you still owe me \$80000. If the interest is a percentage of principle, then you now owe me \$800 per year instead of \$1000, so you are immediately benefiting from paying back the loan.

I have a reason to loan, and I don't care if you ever repay or not. You may have a reason to borrow, and you also have incentive to repay... though it won't break you if you never do repay.

Adjust the yearly interest amount accordingly to make it work out. I just used 1%, but you could use anything reasonable.

## The ramifications

Some irresponsible people will never repay anything and will push themselves into poverty. As long as they can keep paying their interest, the system works. Banks probably will not loan to people who cannot pay at least the interest.

Once someone is so far in debt that their yearly salary is equal to their yearly interest payments plus the minimum amount of money needed to stay alive, then they are forever stuck in that exact situation as long as that debt-to-salary ratio is maintained. For this reason, there are probably laws for humanitarian reasons about not loaning to someone if it would put them in that situation. If there are no such laws, it could allow for a world with major poverty problems, possibly a good setting for a dystopian story.

There is also the possibility that you could become over-indebted, even with loan laws in place, if your salary changes. This would happen if you quit a job or were fired, among other things. If you are over-indebted, banks need some way to collect on their interest, and there are so many ways you could go with this...

• Government assistance (or church assistance, or whatever... some form of assistance)
• Imprisonment where you are forced to work off the debt under some prison-work system
• Slavery - The banks can work you beyond what normal humanitarian laws allow to get their worth back from you, though in a non-dystopian society only if part of the slave work compensation goes to the principle too to reduce the debt ratio
• And the list could go on; I'm not going to create a giant list

For those with maxed debts who are not over-indebted, the above things could be allowed as optional for the one in debt to get out.

## The patient, immortal way to get out of debt

Of course you can pay your debts back normally as long as you are not maxed out. But if your salary is only \$1 more than your debts, who wants to wait 10 million years to pay off a \$10 million debt? That would be sooo boring. Fortunately, that's not quite how it would work...

If interest is proportional to principle, every century you are $1 farther ahead... in 100 years of paying \$1/year to your principle, you now make \$2/year more than your debt, and 100 years later, \$4, and so on, so it would not really take 10 million years. It would be only ("only" used loosely) 10-100 thousand years (I just did a quick, rough estimate, not sure where in that range it is).

So anyone who is even remotely responsible could get out of debt if they were patient on an immortal scale even given \\$1/year originally to do so. And those who are fiscally responsible will be loaning money to others more often than taking loans, so that their income will snowball and they will become rich over a long time span.

## Comparison to today

So the financial system would end up similar to how it is today. There would still be poor people at the bottom and rich people at the top.

Although debts are no big deal, and people will still incur them, the responsible are not likely to abuse this debt model since they will be better off and have a better life if they minimize their debts since that would increase their purchasing power in the immortal long term. Contrast to today when people don't mind taking out extra mortgages or equity loans for retirement because they have little incentive not to since there is an end in sight and the loan increases their purchasing power for the next few decades.

The poor people would likely be almost exclusively the financially irresponsible and impatient people. Those people are often poor today, yes, but the point is it would be almost exclusively them.

The people who get ahead and plan for the future and do more loaning than borrowing will all need someone to loan to. That might be to each other to a small degree when business situations arise, but that is not likely unless the business venture is a time-critical one.

But the people that are fine with breaking even, and to some extent the poor, will still be taking out loans. And as long as reproduction keeps happening there will always be new people that want to take those loans out. So this might be a big loan market, predation on the less fortunate, much like today.

As a creditor, I would impose at least two controls, and perhaps even a third:

• Most if not all loans will be secured loans. If you do not pay up by the agreed date, I'll take your stuff.
• Create a credit ratings agency that keeps track of your credit history and warns me that you are a risk of regularly defaulting on your loans.
• Lobby to introduce Debtor's Prison for repeat defaulters. Have a nice time spending eternity locked up.

Storywise, I think a creative solution would be to segregate the power of banks from their loans. While in today's world we know that banks hold their intimidating financial power from the profit they make from their lending, perhaps in this world, they gain power differently. You state that all the banks need to follow the same rules, so lending can be equated to a public utility.

However, the loan itself can be considered secondary. Think of how major tech companies today make their money; lots of them run free services that the majority of people use, and make no direct profit from the user. However, they sell their data to advertisers to make massive profits.

How much data could an immortal human provide, I wonder?

Another thought I had would be that money lent to the person would somehow be tied back to the bank, but not the person. In a way, they would be at the behest of the bank in how they spend their money, or even their life. This would maintain the power dynamic where bankers hold an upper class in society, even though everyone is on the same footing.

I believe these solutions could help answer the question, because both of them provide incentives to pay off the loan: the first in that you would no longer have your data mined, which may be a much more serious thing when your life is not finite, and the second in that you would have to buy your freedom a la the Roman gladiators.

Compound interest will grow so much that even if he lives beyond the heat death of the universe the immortal won't be able to pay the debt. That's why he will try to pay: because if he doesn't the compound interest will guarantee that he will never take another loan again. If the society has debtor's prision with forced labor your immortal became an immortal indentured servant.

We take out loans for one basic reason - to get something that we want now, because we don't want to (or can't) wait to have them later. But loans aren't money for nothing. We're willing to pay more in the long run in order to not have to wait.

Lenders give out loans for one basic reason - in order to receive rent (interest) on the borrowed money. The fact that what they're lending out is the same thing as what they accept as rent payment is coincidental. They could be renting cowry shells for all it matters, as long as you pay rent and eventually return what you've borrowed so they can lend it out to someone else.

It's possible to rent something forever, paying rent every month until they end of time, but eventually you'll reach a point where you could have purchased the thing outright a dozen (or a million) times with the money you've spent on its rent. Most sensible people would rather stop paying rent eventually, so they buy the thing outright.

An immortal would make good on their loan for the same reason a mortal would - because they don't want to keep paying rent forever, and they don't want their stuff taken away for defaulting.

Related, the sort of immortal who would consider never making good on a loan is the same sort of mortal who would consider it.

The answer here boils down to one simple fact:

You can't make money if it is never paid back.

So lenders would NEVER EVER do what you are suggesting.

But this is your premise so let's do the gymnastics necessary to make this viable!

So, terms:

You have an infinity to pay back the loan. If we do not get regular minum payments of X you cannot borrow anything else on the whole planet.

If it's as much of a borrow economy as it appears, this will matter greatly...

I can see longer terms--but an infinity is ridic. The flipside might be that though the terms are infinity--they don't give out many loans. There might actually be an upper limit on the amount total that is allowed to be lent to everyone over the whole country. Because inflation.

This might be yearly, this might be overall. If people aren't paying back, the banks and lending insitutions can't lend out. These people can be shamed publicly as a device.

Honor, Pride and Fun reward systems

You've got some great answers providing financial incentives and negative feedback social deterrents. Here's reasons of a different sort.

Honor and pride

Your world experienced transformative evolution to the point of immortality. At this stage in species growth the intelligent beings will also have manipulated genetics to the point that intelligence levels have mostly eliminated undesirable human behaviors generally, including willingness to shirk a debt specifically. All have inherent honor and careful pride in any business dealings.

Fun Reward Systems

Competition can be healthy, so that trait is kept within the genetic transformation. There's going to be some spectacular rewards for those who repay a loan in full and achieve certain levels of creditworthiness. However that level is measured, you better believe there will be excitement and fun getting to the next level. When you become the first person in the neighborhood to be allowed to create the next newest species or build the only bridge to a new world and that is because, among other things, your creditworthiness level is higher than anyone else...needless to say, that's quite an incentive!

I challenge you to tell me why an immortal needs a loan in the first place.

My understanding of immortal is having no need for food, shelter, nor healthcare so what is the purpose of the loan?

Why go into debt if you can literally save every single dime at minimum wage to buy your wants in life.

Your society simply stops needing loans because everyone is able to live long enough to achieve their goals.

In fact, immortality undermines the basis of currency. You've totally uprooted society and new principles must be established.

Perhaps a more important question - why would a mortal (you know - like us in the real world) pay back a loan?

You're living for a limited amount of time, and someone has offered to provide you some money... if you don't pay it back before you die, there's no way for them to get it back and you finished your life with their money and there's literally nothing they can do to get it from you.

If you can avoid paying it back and avoid the negative consequences for long enough, you get away with it completely!

An immortal however can still have their legs broken, repeatedly, when they don't pay; and there's no limit on how long the creditor has to hunt them down.

# TL;DR

With a longer lifespan, it becomes more important to make good on your debts, not less.

# The Longer Version

## Death Due to Accident

No death due to age or disease doesn't equate to no death. A good actuary could calculate it, but removing these as a cause of death would simply raise the average age of death. I've seen estimates that the average age of death would ultimately stabilize as low as 800 years and as high as 2000 years, but I don't have the background to validate those. As a result, you wouldn't be able to push repayment out indefinitely, even if that's how credit worked.

## Reputation Becomes More Important

If your expected lifespan is 800 years, 8,000 years, or even 80,000 years, it becomes more (not less) important to pay off your debt. Poor financial decisions made at 200 may well damage your reputation sufficiently that people will be reluctant to lend you money 2,000 or 20,000 years later. And, after all, a credit rating is just quantified reputation in a specific area.

Very simply, those with a better credit rating are able to borrow more.

As loans are paid back as soon as possible regardless of how long may be available to do so an ever-increasing stream of credit is opened to the individual with the increase in their substance. While they could only borrow enough for a small car initially, their good history and equity enables them to borrow progressively larger amounts.

Of course, given the standard level of inflation and unlimited time it is probably smarter given enough time to think about it to save and invest rather than debt finance all things. The richest of all do this and it is much a thorn in the side of those choosing to smurf wealth by borrowing.