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Interests
Topic Started: Sep 2 2008, 10:51 AM (483 Views)
West Germany
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Einigkeit und Recht und Freiheit
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We all have depts and savings. We need for them a certain interest rate. I mean, if you have a certain dept sum, you have to pay interests of a certain percentage. I think it should be 7%. And for your own savings 5%.
This does not apply if these depts (or savings) are using different rates. If you have a WW2 loan with lower rates, these rates apply on these loans. Also if you give another player money for free he does not need to pay interests. Only for those depts and incomes you don't have other figures, we need a certain rate. Otherwise someone takes higher rates than the others.

Adler
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USSR
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Proletarii vsekh stran, soyedinyaytes!
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I personally think, 5 % saving interest is a bit to high and 7 % is a bit too low.

I suggest between 3.5 % and 4.0 % for savings and 8.0 to 35.0 % for debts. This depends on the rating of the different countries.

Current ratings in overview

Argentine would has to pay 30.0 % or more whereas the United States or other, more reliable countries mainly in the western hemisphere have to pay lesser rates of interest. The risk of default is priced into the rate of interest. Thus third world and developing countries have to pay higher interests.
Soviet Union
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Argentina
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The Third Way
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Shouldn't paying off all your debts (as Peron did in 1948) reduce the future interest rate, due to good credit history? It wouldn't just be about the political instability in Third World nations. Argentina should not suffer a huge 30% penalty because it has just paid off all its debts and has good credit.

I admit I am a tad biased in this regard. :P
Viva Perón!
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Peoples Republic of China
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Not at all- in the case of debts, then the nation giving the loan will and does decide on the rate of interest that they want the money returned at. As to savings- unless you are specifically investing them, then they would not generate any interest.

If on the other hand you are using them to generate more money (ie investment, at home or abroad, generally quite unlikely with govt. money) then you dont have any savings- merely money that is used for investment instead of something else.

In short- no, we dont, because both situations are taken care of.
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USSR
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I think it is natural, that you invest the money that you dont need. Thus we do not have to say it explicit. If you have surplus in your budget, we should assume, that this money is invested as short term investment at about 3.5 to 4.0 % annual interest.

It is correct, that the rate of interest is decided by the emitter. But nobody would buy an argentinian loan with only 2.0 % intererst per year. So 30.0 % interest are a very realistic number.

If you want to make this game more realistic, than I would suggest we introduce a rating system, which shows the rate for saving interest and debt s interest.

Sorry for using you as an example, but it is a very up to date issue, Argentina :P
Soviet Union
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Peoples Republic of China
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Don't be ridiculous- there is nothing unusual about low, or even nonexistent interest rates between nations. It is commonplace, because the aim of loans has nothing to do with income, but with politics.

As to it being natural, that is absolutely incorrect- first of all, it varies from government to government, while most will chose either safe investments or safekeeping. For the most part, when there is spare budget income, it is held back as an "Emergency" fund- for any projects or costs that might pop up during the budgetary year. IF a government wants to invest that, then thats their choice- hence why many national banks are equally equipped for investment on the market. Bear in mind here that, if that is done,the chances are equally pretty good that the money might simply disappear with the swing of cash.

And before someone says "yeah but they wouldn't lose money cause they can do it". Thats bull, everyone, even the best, fucks up from time to time on the share market- or on any investment for that matter. The result is that money can equally go missing, because there is no such thing as a safe investment, merely good ones and bad ones. Based on margins and percentages.

Overall- investing budgetary surplus isn't a standard idea anyway. While I would hardly complain if I got income back from my spare budget money, since it could potentially be gigantic sums, it just doesn't work. Not least because it would be extremely difficult to do.
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USSR
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Quote:
 
Don't be ridiculous- there is nothing unusual about low, or even nonexistent interest rates between nations. It is commonplace, because the aim of loans has nothing to do with income, but with politics.


Nobody has ever denied, that loans are also used to reach political aims. BUT loan is defined as "an amount of money that you borrow from a bank, state etc". And regulary you have to pay interests for this loan. The amount of interest depends on your credit standing. This rating decides which amount you have to pay annualy. And if a third world country like Gambia or even China or India wants a loan, they have to pay significant higher interests than the US or Germany. Current Argentinian loans have a rate of interest between 8.0 and 12.0 % with a B rating.

Quote:
 
As to it being natural, that is absolutely incorrect- first of all, it varies from government to government, while most will chose either safe investments or safekeeping. For the most part, when there is spare budget income, it is held back as an "Emergency" fund- for any projects or costs that might pop up during the budgetary year. IF a government wants to invest that, then thats their choice- hence why many national banks are equally equipped for investment on the market. Bear in mind here that, if that is done,the chances are equally pretty good that the money might simply disappear with the swing of cash.


States, just like normal companies, indeed do investments with surplus money, even if they invest it only in short terms. Short term loans to companies, other states arent something very unusual. It is indeed very common. Or do you think, company chairman put their surplus budgetary money under the pillow? Of course not. They invest the money on the capital market, to gain interests and to gain further income. Thats why they are going to invest the money. Otherwise they will suffer a real loose due to inflation for example.

Quote:
 
And before someone says "yeah but they wouldn't lose money cause they can do it". Thats bull, everyone, even the best, fucks up from time to time on the share market- or on any investment for that matter. The result is that money can equally go missing, because there is no such thing as a safe investment, merely good ones and bad ones. Based on margins and percentages.


It is correct that even the best in the market loose money. But you cant miss money. It is somewhere, but you cant track it anymore. Mostly, if companies or states cant track money, it was used as bribe or became part of corruption or illegal activities.

Quote:
 
Overall- investing budgetary surplus isn't a standard idea anyway. While I would hardly complain if I got income back from my spare budget money, since it could potentially be gigantic sums, it just doesn't work. Not least because it would be extremely difficult to do.


As I already said, if you have a surplus, you will invest the money to gain advantages in the form of interest to get further incomes.

The most very common method to use budgetary surplus in industrial states is debt service to reduce the total amount of debts.
Soviet Union
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Peoples Republic of China
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To put this simply: Your argument is specious.

Not to cause offense, but you have successfully told us one possible variation, as well as some irrelevancies. First off, governments often do not have the luxury of budget surplus, particularly in developed countries (consider nations like the UK, Germany, France, and others in the modern day- they are all red lining budgets and working with loans that have, for lack of a better phrase, been bounced several times).

Yes, it is true that companies invest money instead of keeping it (to an extend, you will find that most have millions, billions, or whatever- depending on company size and specialization in 'secure' accounts. ie there is no risk, because it simply rests back). There is a reason that Swiss banks control the world's money supply, because their system works- a balance.

Oh, and just as a side- the company chairman rarely has any say in what happens with company funds, but thats irrelevant. The point is why we shouldn't begin imposing rules regarding interest.

I agree that it would be very nice to be able to invest some money 'safely' (however unlikely that is in the real world). That said, you will note that some nations, Sweden is I believe among them, have been actively loaning and are reaping the benefits of their decision to do so. It is that which is the loans you're talking about- the nation giving it not only should, but HAS to decide. Indeed, there is no such thing as a "world interest rate".

If Sweden wants to give a nation with bad credit rating an interest rate of 0% then that is their decision, just as it's their decision if they want a 50% interest rate. That not only has nothing to do with any other nation, but is a matter of Swedish policy rather than interest fixing.

To cut an otherwise long post short: even if it were plausible, then how would it be implemented? Across the board decisions? Not just a bad idea, its a catastrophic one. I would say the best bet is to permit investment of surplus budget when the budget is done, to be evaluated by the admins (when they analyze the rest of the budgets) based on the type and market that investment is to be made in.
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Great Britain
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Land of Hope and Glory
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All I know is that I put some extra money from the Australian and New Zealand budgets in a National Savings Fund, and add 1.5 % a year, hardly anything, but it seemed to make sense.. (I assume some bank would be holding it for me).
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USSR
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:o

Quote:
 
Not to cause offense, but you have successfully told us one possible variation, as well as some irrelevancies. First off, governments often do not have the luxury of budget surplus, particularly in developed countries (consider nations like the UK, Germany, France, and others in the modern day- they are all red lining budgets and working with loans that have, for lack of a better phrase, been bounced several times).


It is true that many countries work near the red line. But that's just because they are often using inappropriated numbers, underestimate the risks or just act like fools. But that is indeed a different matter. The fact is, they use this surplus money for another purpose. And if all budgets are properly calculated, they use it for the reduction of debts. And if this country does not have any debts, they invest the money no matter in which shape and gain interests.

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Oh, and just as a side- the company chairman rarely has any say in what happens with company funds, but thats irrelevant. The point is why we shouldn't begin imposing rules regarding interest.


:huh: Who else than the CEO (Chairman) has the rights to decide what happens to the money? Yeah I know, the CFO (Chief Financial Officier). :rolleyes:

Quote:
 
I agree that it would be very nice to be able to invest some money 'safely' (however unlikely that is in the real world). That said, you will note that some nations, Sweden is I believe among them, have been actively loaning and are reaping the benefits of their decision to do so. It is that which is the loans you're talking about- the nation giving it not only should, but HAS to decide. Indeed, there is no such thing as a "world interest rate".


I have never said, that there should be a world interest rate. It depends on each country. On the risks, the ratings and other factors. The rate of interest is made of these factors to meet all these factors. Further I already agreed to, that countries or banks may give away loans without any interest. But this is not the regular use of loans. Otherwise all banks would have been bankrupt long time ago.

Quote:
 
To cut an otherwise long post short: even if it were plausible, then how would it be implemented? Across the board decisions? Not just a bad idea, its a catastrophic one. I would say the best bet is to permit investment of surplus budget when the budget is done, to be evaluated by the admins (when they analyze the rest of the budgets) based on the type and market that investment is to be made in.


So, if you have surplus money at the end of the year, you will have to put it into a shoebox and set it on fire. Your bank account will be 24,000 $ at the end of the year and on January 1st it is 0 again. Very realistic.... :lol:
Soviet Union
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Peoples Republic of China
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Ok, before I even bother answering that: please re-read that post you made. The argument and every point is so full of holes that I can see through it! Its like friggin' Swiss Cheese!

No offense, but it seems to me that the nations that are what we consider the "financial giants" of the international stage might know what they are doing, regarding their monetary resources, as compared to your opinion. They redline not because they are "using inappropriated numbers, underestimate the risks or just act like fools." but because they have to, through shortage or on the assumption that the budget can be balanced by those investments.

As to the CEO- the CEO is simply the Chief Executive Officer, and in most companies (and certainly Corporations) he may well have a word in the decision, but the final word, particularly in regard to large sums of money is more likely to come from the Board or owner (whether or not they coincide is another matter).

If, as you say it depends on the different nations, then what is different from now? Nothing. Right now, each nation giving a loan has to decide for themselves the ratings, etc- and then whether or not to give a loan, and at what rate. Thats how it should be. Once you start implementing system to regulate what and how they can do that, then what is the point.

I think you may also be confusing the uses of loans- international loans (ie loans between countries) are very rarely to do with money, and contrary to what you've stated, their most common use is with no interest, or no expectation to ever see that money again (for real world examples, consider the WW2 loans, the Afghanistan Loans, and others). Yes, often enough the money will be repayed, but not at high rates.

A bank loan on the otherhand is internal, and can have high loans if they so wish, since the sums tend to be alot smaller (the difference between millions and billions to thounsands and hundreds of thousands).

Then there is the third 'type'- namely the investments made by companies. I am guessing that these are the ones you're talking about- when a company invests or loans, or a mineral resource, or a nation, or whatever. These are VERY different in nature to international loans, since they are purely for profit, and have to have the associated things (interest, reliability, etc).

And not to split hairs- but many banks DID go bankrupt a long time ago :P Moreover, we're not talking about banks here. We're talking about taxpayer's money, that exist in hard form.

Quote:
 
So, if you have surplus money at the end of the year, you will have to put it into a shoebox and set it on fire. Your bank account will be 24,000 $ at the end of the year and on January 1st it is 0 again. Very realistic....
You realize, of course, that what you said there had absolutely nothing at all to do with what was suggested, right?

You would, quite obviously, have that available, as with any returned investment. Its one of the few ways we could actually run a system here- otherwise we're arguing semantics, and this entire idea should be scrapped poste haste.
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USSR
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Quote:
 
As to the CEO- the CEO is simply the Chief Executive Officer, and in most companies (and certainly Corporations) he may well have a word in the decision, but the final word, particularly in regard to large sums of money is more likely to come from the Board or owner (whether or not they coincide is another matter).


Thats why the CEO of Exxon has to take care of $404 billion revenue. Owners keep themself out of the business. The CEO has the responsibility and normally the trust of the owner to act, even with large amounts. If he makes a wrong decission in investing the money, he will get fired.

Quote:
 
If, as you say it depends on the different nations, then what is different from now? Nothing. Right now, each nation giving a loan has to decide for themselves the ratings, etc- and then whether or not to give a loan, and at what rate. Thats how it should be. Once you start implementing system to regulate what and how they can do that, then what is the point.


Every state CAN do it. But there is a ranking, there are risks. Nobody would buy an argentinian loan with 2 % interest. It is much too risky. You cant give yourself saving interest rates of 20 %. So we need a limit, keep it in proper dimensions. Do you really think, that the Queens goverment would give a state like Argentina its money? No. Not even the best friends do so.

I just read an article about Argentina. Chavez, the guy from Venezuela, bought Argentinian loans, under the special condition of 15 % interest per year.

Once again, if your interest is too low, and the risks, especially in your case, I am thinking about the hostages, are too high, or the repayment is not assured, you won't get any money. Thats why would have to pay about 30 to 40 % of interest and your rating of current communist china would be C.
Soviet Union
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Peoples Republic of China
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Ah, but thats just the point isn't it? Each nation makes its own decisions, not some foolish rule we impose about it. If a nation wants to blow its money out the window, that is their right, just as it is virtually inevitable that many loans made by the superpowers in their struggle aren't 'safe' as such.

To continue your example using PRC. Yes, PRC might not be a safe investment, due to various circumstances, but politcally such a loan is a good bet, indeed an issue decided before it comes to question.

In short: imposing limits and rules is not only pointless, but also against the entire principle.
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USSR
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Quote:
 
To continue your example using PRC. Yes, PRC might not be a safe investment, due to various circumstances, but politcally such a loan is a good bet, indeed an issue decided before it comes to question.

And thats the problem. Personally said, would you give your money to a guy who cant assure the repayment? You wont, or you will demand an enormous high interest rate. Thats how the international financial market works.

Of course there are some examples where loans have been given without interest, but that is the minority. You cant assume that you get every loan for free. You need money, you will have to pay appropriate interests which reflect the current situation in your country, the risk of default and the level of trust towards your country. And I think, nobody currently trusts the PRC at this point of the game. Logically you have to pay more interests than other states.

Take a look at loan overviews. Good rated, stabile and reliable country who pay their interests have good ratings and lower interests unlike insecure countries which could not pay the interests.
Soviet Union
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Peoples Republic of China
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I hate to tell you this, but there is no such thing as an international financial market in the set of circumstances we are talking about. Of course you would give money to someone who cannot assure payment, you aren't thinking about financial interests when making a political loan. You're looking at the bigger picture.

You'd be way wrong to suggest that safe loans are the majority, if you check you'll find most loans to nations are decidedly unsafe, done for political reasons. A company cannot afford to do such things, nor can a businessman, but a government has more to worry about.

IF it is in my interests to give a loan with low interest and to an unsecured location, then that is exactly what is done. Thats not to say its the only reason that loans are given- other loans, for investment in the hope of returns, for political, social, humanitarian or any number of other reasons are equally likely. The common factor: a self serving interest.

Point here? IF the USSR wants to use only High Interest loans to safe sources, then thats their choice. It may or may not be a big mistake, but it is their choice all the same.

Result: No need for any rules or changes, its fine the way it is, because you can already decide to do that.
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