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I was reading this answer to a recent question about a planet traveling at the speed of light, which contained the lines:

Since time is money, this could be exploited for various economic effects. The simple example of a person collecting compound interest in the outside galaxy while residing on the planet shows some of what is possible, and eventually many more subtle and complex financial instruments could be devised based on the time differential between the planet and the remainder of the galaxy.

In this hypothetical universe, civilisations have the capability to feasibly travel to various parts of the galaxy where they would experience significant time dilation (e.g. planets traveling at the speed of light, close to the central black hole, etc) and safely return home.

If banks/financial institutions were aware of this, what sort of "complex financial instruments" would they devise to prevent situations like the one in the quote from destroying their economies? I am chiefly interested in what would replace the concept of "interest", since if time is cheap/almost free it seems rather meaningless to earn money for essentially nothing.

(Edit: removed speculation about currency zones as distracting to the main question)

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closed as too broad by bilbo_pingouin, Aify, James, Green, Hohmannfan Jun 22 '16 at 14:07

Please edit the question to limit it to a specific problem with enough detail to identify an adequate answer. Avoid asking multiple distinct questions at once. See the How to Ask page for help clarifying this question. If this question can be reworded to fit the rules in the help center, please edit the question.

  • $\begingroup$ Hi krman, welcome to Worldbuilding. There are many questions at once, which generally makes it hard to answer. Furthermore, there could be many various answers and could you indicate which would be prefered? And finally, we miss some information: yeah you might get time dilation effects, which may allow you to speculate, but maybe the cost of doing so by far overpass the potential market gain... I would recommend to ask separate follow up questions. Maybe first, you need to build your market and monetary system. And then build your way up until you get to your main question. $\endgroup$ – bilbo_pingouin Jun 22 '16 at 7:31
  • $\begingroup$ Thanks bilbo_pingouin, I'll try to refine the question :) $\endgroup$ – krman Jun 22 '16 at 7:37
  • $\begingroup$ You're welcome. That how curiosity leads to building worlds. :-) You might consider reading the tour, or various sections on the help center. You can also post your question on the Sandbox. And finally, once you'll reach 20 repuration points (two upvotes on an answer), you'll be able to join us on Worldbuilding Chat. $\endgroup$ – bilbo_pingouin Jun 22 '16 at 7:41
  • $\begingroup$ I don't see the difference from the perspective of the banks. Some person deposits money and returns later to withdraw it, with interest. Whether that person was going about daily life or on a time-suspended holiday doesn't matter to the bank, it makes money by investing or lending the deposit in the meantime. Also, imagine coming back from dilation-land to reclaim the money that you deposited at Lehman Brothers... $\endgroup$ – Cyrus Jun 22 '16 at 12:23
  • $\begingroup$ I'm still struggling to word this question to not be too broad. Answers like user21969's and Murphy's almost perfectly answer the question I have in my head (particularly the distinction between the people who have access to time dilation and the regular people, but I don't know if specifying that is too specific). $\endgroup$ – krman Jun 22 '16 at 14:28
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I see no reason why it would destroy the economy.

It would however have various effects.

Most investments are not risk free. It sounds like a neat idea to go wait near a black hole while your investments earn a return but you also might come back to find that in the last million years the hedge funds you invested in have gone bust or the banks have failed or the planet has suffered a war or extinction event.

So managed long term investment funds with a focus on extremely low risk are likely to be a thing.

If there's a significant number of wealthy people trying to earn long term returns on investments the capital market is going to be extremely cheap. It'll be really hard to get a big return on investment if you're trying to invest money because you've got lots of competition while if you're trying to borrow money you could do so very cheaply.

The people with the money are still having to do something: risk their money if they want a return on investment. The bigger the risk the bigger the return. I imagine that that element would actually be good for the economy. The only way to beat inflation (if there is any) would be for the fund managers to take risks investing the money into companies likely to beat inflation.

It might hit things like pension funds of "normal people". If you can't afford to take a trip to a black hole then a 0.01% average return on investment per year isn't much use for building up a pension pot if you live less than 10,000 years but someone who can wait a million years could do well. On the other hand these same normal people will have far easier access to rock bottom cheap loans.

The rich in this universe will have an extreme incentive to promote stability and avoid war of any kind. It's the only way their investments could last while they're in stasis.

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In our world, banks pay interest on deposits because there is a cost associated with storing money away where you cannot access it (the cost being precisely that you cannot spend money while it is deposited). Since in fiat monetary systems, there is no direct link between physical assets and money, removing money from circulation by depositing it in a bank robs you of what physical assets you could have purchased with that money instead. As a result, those assets become available to others, resulting in a benefit to them, which justifies paying interest on deposits.

When waiting becomes essentially free via time dilation, the exact opposite is true. Depositing money and then disappearing for a million-year vacation is now an obvious choice, since there is no cost associated with it for the individual. As a result, you would expect money to more or less disappear from circulation entirely, paralyzing the economy and coming at a great cost, not benefit, to society.

It is therefore very likely that a financial system operating in a free-time world would be based on demurrage, not interest – that is, it would penalize, rather than incentivize, the storing away of money. This could easily be achieved by negative interest rates or inflation exceeding base interest, but there are other possibilities as well, like deposits being automatically forfeit if the owner fails to "check in" to claim them at least once per year or so.

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  • $\begingroup$ Saw this after my edit - am reading and trying to get my head around the demurrage page, great link! $\endgroup$ – krman Jun 22 '16 at 7:49
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    $\begingroup$ Waiting would be free, but not risk-free. The average banker would accept a million-year deposit eagerly, then immediately spend it on whatever they liked, figuring someone 999,999 years from then would be stuck with the repayment. Instead, the bank would sell off that debt along the way to some entity which promptly goes bankrupt upon the first attempted withdrawal. Nothing changes. $\endgroup$ – Cyrus Jun 22 '16 at 12:26
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    $\begingroup$ Normally, banks pay money (=interest) to people with long-term accounts because then the bank can use the money to make investments. The reason you need to pay for credit cards is that you need to pay for the potential risk that you withdraw more than you have and then can't pay it back. But since it is clear you are on a 100year vacation you should at least make sure you have put your money into the proper account type... $\endgroup$ – subrunner Jun 22 '16 at 14:20
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If you and your home is in near-stasis, you sit there for a year without buying any food, having the trash carted away, etc. You don’t have to fix the roof or otherwise keep up the fight against entropy. So you spend nothing and lose nothing.

Meanwhile your savings account has grown for a year. Or crops grew, or whatever: a year outside to collect sparse resources, without consuming any.

There was a novel, Lockstep by Karl Schroeder, where people stayed awake for a month and then went into stasis for 30 years. It explores the economic ramifications of this, and having societies run at different rates.

Now, I said you don’t consume resources. But the big stasis bubble over where your house used to be will still owe property taxes for the year! I expect businesses and governments will set up storage facilities for this purpose, and adjust rules for people and property so-stored.

Whether "zones" of civilizations develop (as in Lockstep) is not something answerable ("opinion based", no right answer). See that book for ideas, and when you get a specific idea you can ask questions here concerning it.

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  • $\begingroup$ The Worthing Saga, by Orson Scott Card, has some "skipping" in it as well. It's not the main focus of the story arc, but it is key to some of the plot. A society where the rich "skip" and the poor don't has some "interesting" social dynamics. $\endgroup$ – Ghotir Jun 22 '16 at 15:18
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Banking side:

I would say it doesn't change at all.

The reason you get interest on an account is that you lend your money to the bank, and they can invest it however they want for their own much higher profit. Let's assume the bank can make an average of about 5% per year on their investments. Then it is only proper that they give you at least 2% because, after all, you lent them your money.

For accounts where it is certain that there will be no user-based movement for years because the customer is away on their time-dilated journey, the bank can treat it like a fixed-term deposit account. That meanst that for a certain period of time the bank can be absolutely certain that nobody will touch the money. Meaning that the percentage of the entire fixed-term money sum that can be invested is a lot higher.

So even if you have an account with no movement for 100 years, it is no problem for the bank to pay it back including all interests. For one, interest is added anually (important for the balances of the bank to know how much worth the account is at every point of time). And for another, the bank has easily made a multiple of the interest with their investments.


Some details on banking and interest rates for different account types:

Let's say you are a bank owner. Assume that all your clients together have 1 Billion in savings in your bank. But you don't need to keep that billion in cash ready to pay the withdrawals because you're always getting some deposits at the same time, too. So, effectively you've only got to keep let's say 100 Million in ready cash. The other 900 Million you can invest safely even in long-term investments because it is very unlikely that all your customers suddenly want to withdraw all their cash and nobody deposits anything.

The exact percentage you need to keep in 'ready cash' varies depending on account type. It is a lot higher on credit accounts because you've got to be prepared to have tons and tons of withdrawals and deposits every day -- the fluctuation is very high. So you can safely invest maybe only half the money. On fixed-term accounts, the fluctuation is not very high, and additionally you know the exact date when you need to return the money -- you can safely invest easily 90% of the money. Meaning: you can make more money with fixed-term accounts, so you can give your fixed-term account holders a higher interest rate.


Client side:

Here, I would be a lot more careful. For one, I haven't yet seen a banking/money system that lasts more than a 200 years without severe inflation / deflation / currency change upsets. For another, there are plenty of banks that go belly-up in such long timespans and you would only get a small percentage of your investments back.

Just imagine you deposited $40 back in 1900. How much would it be worth in 2000? Depends on whether your bank survived the Great Depression. What if you invested it in a German bank? First the hyperinflation in the early 20s, and then either the bank was seized because the owner was Jewish, or it was destroyed during war efforts.

Not to mention that interest rates barely balance out regular inflation even in good years.

So, no, unless you don't need the money I would not leave it alone for a hundred years. If you are lucky, you do get a great increase of money (which is then made a lot smaller by the inflation). If you are not, you lose a great percentage or all of it.

It would be a lot safer to carry your money with you in gold bullions in your space ship and hope that the gold price has increased during your absence...

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