Cash in Traveller

[FreeTrav]

I would look to the financial system of 1600s Europe as a general guide to what the interstellar financial system in the Traveller milieu would look like - generally, monetary transfers between worlds are done by letters-of-credit issued by banking institutions or families that are known and respected at both origin and destination, and accounts are generally periodically balanced by transfer of goods at standard valuations, or by transfer of specie/valuta (however specie/valuta turns out to be defined). Use-currencies are local; the Imperial Credit is a currency-of-account, used for denominating the letters-of-credit and the eventual balancing of accounts, and defining the value of specie or the standard valuations of goods for account balancing.

Imperially-levied taxes are collected at the 'local' level (e.g., by the 'government' of the most local Imperial noble), and generally applied locally, with any surplus or deficit being applied at the balancing-of-accounts level.

Letters-of-credit may be technological in nature (e.g., the equivalent of a smartcard), but need not be; in general, the letter-of-credit will be issued in a form that the destination world can reliably validate.

No banking organization will accept a letter-of-credit issued more than two jumps away (even if issued by a branch of the same organization); only large LICs (subsector-sized or larger) will accept them if issued more than one jump away, and then only if issued by a branch of their own organization or one that they have a specific agreement of exchange with. A Traveller moving along can (and will need to) exchange a letter of credit when moving past the one- or two-jump limit; this is a routine task.

 

[FreeTrav]

. o O ( Did I just kill the thread, or merely increase the pseudomass of the BHQ? )

 

[Whipsnade]

Don't fret Jeff.

Zewardson stepped in 3 weeks after the last post had been made and you responded to him a day after that. You both were just a wee bit late as all.


Regards,
Bill

 

[jatay3]

I would look to the financial system of 1600s Europe as a general guide to what the interstellar financial system in the Traveller milieu would look like - generally, monetary transfers between worlds are done by letters-of-credit issued by banking institutions or families that are known and respected at both origin and destination, and accounts are generally periodically balanced by transfer of goods at standard valuations, or by transfer of specie/valuta (however specie/valuta turns out to be defined). Use-currencies are local; the Imperial Credit is a currency-of-account, used for denominating the letters-of-credit and the eventual balancing of accounts, and defining the value of specie or the standard valuations of goods for account balancing.

Imperially-levied taxes are collected at the 'local' level (e.g., by the 'government' of the most local Imperial noble), and generally applied locally, with any surplus or deficit being applied at the balancing-of-accounts level.

Letters-of-credit may be technological in nature (e.g., the equivalent of a smartcard), but need not be; in general, the letter-of-credit will be issued in a form that the destination world can reliably validate.

No banking organization will accept a letter-of-credit issued more than two jumps away (even if issued by a branch of the same organization); only large LICs (subsector-sized or larger) will accept them if issued more than one jump away, and then only if issued by a branch of their own organization or one that they have a specific agreement of exchange with. A Traveller moving along can (and will need to) exchange a letter of credit when moving past the one- or two-jump limit; this is a routine task.

Isn't two jumps a little to close for that? That's often just the planet next door.

 

[aramis]

Isn't two jumps a little to close for that? That's often just the planet next door.

Keep in mind: that's 29-33 days round trip for info; Most modern banks want to be able to have resolved within 7 days... extending that by 4 fold is a major issue in terms of trust.

Also, unless the setting is TL9, TLA, or early TLB, the bank can afford a weekly J2 carrier to another major bank, and maybe even a J3... because the courier can still carry a big chunk of cargo, and a bank can afford to finance a good high value spec lot (and thus pay for itself), and/or be operated on a subsidy contract. That pushes the range to 4-6 Pc... half a subsector.

J4 courriers are less profitable; big central banks, however, might finance a weekly courier run each way.

 

[Cryton]

I think the banks would forgoe the spec-lot , and use the J-4 Imperial mail system. prolly cheaper for them and near universaly available in the OTU.

 

[aramis]

For J4, yeah, they'll use XBoats when they are present and useful.

but that's not always doable; They often go less than J4, go in funky directions, and don't carry cargo...

Under Mongoose I can get 45 tons of cargo on a 200 ton courier at J4 4G. Or 10 tons less per 4 AV. ANd it's just about MCr110, with 2 triple pop-turrets (no weapons mounted).

 

[rancke]

Keep in mind: that's 29-33 days round trip for info; Most modern banks want to be able to have resolved within 7 days... extending that by 4 fold is a major issue in terms of trust.

Historical banks used bank drafts across distances that took months to cross. Interstellar banking will not have the same practises as modern banks have.

Also, unless the setting is TL9, TLA, or early TLB, the bank can afford a weekly J2 carrier to another major bank, and maybe even a J3... because the courier can still carry a big chunk of cargo, and a bank can afford to finance a good high value spec lot (and thus pay for itself), and/or be operated on a subsidy contract. That pushes the range to 4-6 Pc... half a subsector.

Alternatively, the bank can get together with the umpteen hundreds of other banks in the sector that handle interstellar transactions and finance an efficient jump-6 courier service.


Hans

 

[rancke]

For J4, yeah, they'll use XBoats when they are present and useful.

but that's not always doable; They often go less than J4, go in funky directions, and don't carry cargo...

There's also commercial traffic. Jump-3 is the cheapest way to move goods long distance (or at least the best -- jump-2 may be a tiny bit cheaper (depending on your ship-building assumptions), but jump-3 is 50% faster). Jump-4 is only 25% more expensive, and surely there will be people willing to pay extra to get their goods faster. Even jump-6 is "only" four times more expensive than jump-3, and what millionaire or corporate executive wouldn't be willing to pay four times as much to get there in half the time? These people's time is valuable, you know.


Hans

 

[aramis]

There's also commercial traffic. Jump-3 is the cheapest way to move goods long distance (or at least the best -- jump-2 may be a tiny bit cheaper (depending on your ship-building assumptions), but jump-3 is 50% faster). Jump-4 is only 25% more expensive, and surely there will be people willing to pay extra to get their goods faster. Even jump-6 is "only" four times more expensive than jump-3, and what millionaire or corporate executive wouldn't be willing to pay four times as much to get there in half the time? These people's time is valuable, you know.


Hans

Jump 3 is NOT the most cost effective. J2 is, per ton-parsec, ignoring "standard rates". For vertical integration, under both CT HG and MGT, the costs of jumping a ton of cargo over distance are best for J2, not J3.

 

[rancke]

Jump 3 is NOT the most cost effective. J2 is, per ton-parsec, ignoring "standard rates". For vertical integration, under both CT HG and MGT, the costs of jumping a ton of cargo over distance are best for J2, not J3.

As I said, it depends on the assumptions. One of my assumptions is that MT, T4, and GT are right about power plant fuel consumption and HG is wrong.

However, even under HG, jump-2 and jump-3 are very close in effective per-parsec cost. Since jump-3 is also 50% faster, I feel justified in saying that it is the best.

Also, actual astrography has a huge impact on the question. If you have intermediate stars at two and four parsecs distance, jump-2 will be a lot cheaper than jump-3 across six parsecs. OTOH, if you only have an intermediate star at three parsecs, jump-3 will be a lot cheaper than jump-2.


Hans

 

[FreeTrav]

Two jumps is two-to-three weeks; that represents an amount of time that really does sorta increase the risk of accepting a LOC from a firm that you don't recognize. If it's a branch of your own organization, the risk is theoretically lower - but there's still the fact that they're going to be operating largely independently, and there's still a nontrivial amount of risk. Remember, in the Traveller milieu, the Abrabanel Bank of Regina can't just pick up the phone and call up the Abrabanel Bank of Mora to find out if a Letter of Credit is good or not; they've got to send a courier, which would take as long to get there as the person with the letter took to get FROM there...

If the receiving bank is willing to accept the LOC, then accepting it, crediting an account for the presenter, and then debiting the presenter's account for a new LOC, issued by them, for the presenter to go on, is going to be essentially a non-event, just like exchanging cash today at a Thomas Cook or American Express office is. I can spend my dollars in the US, but have to convert them to Sterling to make purchases in London, and then convert my Pounds Sterling to Euros to spend them in Dublin. The LOC is, at least in theory, more like a Bank Check, where the funds can theoretically be relied on - except that, again, a bank redeeming one has to trust the issuing bank, in the absence of some mechanism for immediate verification.

It's OK to postulate such a mechanism - but now you have to be able to handle it in multiple tech levels, to allow for those TL-7 worlds with Class-D starports.

Of course, you can decide that two jumps IS "too close", and push it out a bit more; I was using the two weeks as a first cut at a rule of thumb, based on what I've read about this sort of banking and money transfer in an age where instant communication wasn't available.

 

[rancke]

Two jumps is two-to-three weeks; that represents an amount of time that really does sorta increase the risk of accepting a LOC from a firm that you don't recognize. If it's a branch of your own organization, the risk is theoretically lower - but there's still the fact that they're going to be operating largely independently, and there's still a nontrivial amount of risk. Remember, in the Traveller milieu, the Abrabanel Bank of Regina can't just pick up the phone and call up the Abrabanel Bank of Mora to find out if a Letter of Credit is good or not; they've got to send a courier, which would take as long to get there as the person with the letter took to get FROM there...

Or they could use cryptograhy techniques like one-time pads to verify the LoC.

There's also the possibility of operating with the concept of acceptable losses. If the bank earns more money cashing legitimate LoCs than it loses cashing fake ones, it may accept less than perfect security.


Hans

 

[aramis]

Historically, only one's own familial LOC's were accepted much past a few weeks out, and it was quite possible for letters to be denied or even held off for some time.

Thing is, 90% of the banks we're talking about ARE going to be "modern" banks, at least on-world.

Off-world LOC's are going to be major issues. Unless the bank can either verify the funds by prior notice of issue or by specific non-public details, then round-trip verification is the most viable route. And even then, it's likely that most of the money won't be available for some time.

 

[jatay3]

Keep in mind: that's 29-33 days round trip for info; Most modern banks want to be able to have resolved within 7 days... extending that by 4 fold is a major issue in terms of trust.

Also, unless the setting is TL9, TLA, or early TLB, the bank can afford a weekly J2 carrier to another major bank, and maybe even a J3... because the courier can still carry a big chunk of cargo, and a bank can afford to finance a good high value spec lot (and thus pay for itself), and/or be operated on a subsidy contract. That pushes the range to 4-6 Pc... half a subsector.

J4 courriers are less profitable; big central banks, however, might finance a weekly courier run each way.

Most modern banks have lived with the luxury of instant communication for at least a hundred years. Nontheless, it is hard to picture subsector wide trade networks that don't recognize letters of credit at a longer distance.

 

[aramis]

Most modern banks have lived with the luxury of instant communication for at least a hundred years. Nontheless, it is hard to picture subsector wide trade networks that don't recognize letters of credit at a longer distance.

I suspect most of them will accept further away, on a "present for payment, wait until the cash* arrives, and then get it"...

*Or Specie, or reciprocating instruments. Banks as we know them essentially are functions of highly communicative cultures. They are a feature of societies that (1) don't object to loaning money at interest, (2) don't mind making money from funding others' labor, and (3) have a rather high level of trust in ability to extract payment.

Not all are present in all societies, and in those societies, banks and banking is very different.

 

[rancke]

I suspect most of them will accept further away, on a "present for payment, wait until the cash* arrives, and then get it"...

*Or Specie, or reciprocating instruments. Banks as we know them essentially are functions of highly communicative cultures. They are a feature of societies that (1) don't object to loaning money at interest, (2) don't mind making money from funding others' labor, and (3) have a rather high level of trust in ability to extract payment.

Not all are present in all societies, and in those societies, banks and banking is very different.

I suspect interstellar banks will adapt to provide desired services in some manner. If people want to be able to transfer large sums of money in a safe manner across interstellar distances, banks will find a way to accomodate them... for a fee, of course.

And, to repeat myself, I don't see why verification should be such an insurmountable problem.


Hans

 

[aramis]

I suspect interstellar banks will adapt to provide desired services in some manner. If people want to be able to transfer large sums of money in a safe manner across interstellar distances, banks will find a way to accomodate them... for a fee, of course.

And, to repeat myself, I don't see why verification should be such an insurmountable problem.


Hans

Verification is at present the biggest "still quiet" issue the banking industry has. There have been a number of articles about the issues with EFT being more and more scammed as time progresses; likewise credit cards.

And it's getting worse, not better, because the crackers are able to scam so much more as computing power increases by comparison to what the banks can safely afford in defense.

It's a huge issue. And on an interstellar travel time-scale, it's slowed down enough to give the crackers a LOT more time to break the encryption, and to get away before verification can be completed, and the ability to get out of the jurisdiction before the news that you scammed the local bank can catch up.

It's why most banks didn't actually do wire transfers in the days of the horse and telegraph; it was too damned risky.

A bank's purpose is to loan money at interest. It's NOT to transfer funds from point A to point B. It's about getting people to lend the bank money at X APR, and other people to borrow at X+Y APR, and to make a profit on the difference even after accounting for the inevitable defaults.

The funds transfer systems in present use are almost all immediate verification, and rely on strong government interaction to protect them. An interstellar government without instant communications is FAR less able to strongly protect the banks, because it can't react quickly.

It all compounds. The interstellar government NEEDS some form of transfer; the banks only need it when making loans to people who might travel. And even then, most are not going to travel too far, unless the loan is on a ship, as travel is quite expensive. (a LP is roughly 250 hours of base level labor... 5-6 weeks pay... and potentially lethal. A mid passage is 8x that... about a year's pay for a laborer, or a month's for a well established professional.

 

[Lycanorukke]

Out of curiosity - could the starport authority itself act as a 'interstellar bank'? (at least for A-C classes).

A traveller gets a credit note from a starport and then cashes it in on the next one. That way you dont have to trust the word of an external agency, but are essentially transferring internal funds (the SPA). As the starport is an Imperial facility, any credit/debits to onworld banking houses would be backed by the Imperium and as such would also have a high level of trust. By the same token a starport is worth millions to billions of credits so there is no lacking in hard assets.

An additional benefit is that the starport controls interstellar travel, you are not going to be able to get offworld again without going through the starport wether as a passanger or crewman. If your credit note turns out the be fake/overdrawn and the verification catches up after you have cashed it, the moment you try to get offworld they are going to catch you and have a 'serious talk'. And in the event you do slip the net, within a few weeks every starport in the region is going to be looking for you. This would definetly enhance the "confidence level" in trusting the starport.

If the port also acts as the 'galactic exchange' it seriously enchances the Imperial control of the planet, which would be most desirable from the Imperiums point if view. And any transaction fees would be a great source of revenue to keep the port running.

 

[rancke]

Verification is at present the biggest "still quiet" issue the banking industry has. There have been a number of articles about the issues with EFT being more and more scammed as time progresses; likewise credit cards.

What's the problem with using a scheme similar to one-time pads?


Hans