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Advocating for a real Eve banking system

Author
warzonetemp
Aliastra
Gallente Federation
#1 - 2012-05-28 15:08:55 UTC  |  Edited by: warzonetemp
With the retooling of contracts a few updates ago and the focus now at ship balancing, I've wondered why hasn't there been more significant changes to eve finance system, in terms of banking.

I've got an idea that is scary, but would make this part of game much more realistic. Eliminate personal private isk accounts for individual players and instead hold the isk within corporations set up as banks in Eve. Of course, NPC's like the Caldari will have banks that basically wouldn't change the framework of the current economy, you start off with a certain NPC and use their bank, which would be protected 100% by the game, sort of like real world Federally insured deposit banks in the US. However, NPC banks have a limit to how much personal wealth you can secure, thus you must divest into player owned banks, sort of like the limit that is insurable for bank deposits.

Where the system becomes fun is in private corporations, players can set up a corporate bank at their alliance offices and offer interest rates on the returns for the deposit, while the corporation gains capital for fleet expansion, POS, and other stuff.

Can you imagine the amount of isk that could be flowing through eve or the possibility of actually creating real economic upswings and downturns? With a true banking system, plus the margin call ability already in existence, players with some financial know how can leverage about 1 billion isk into 4 billion, the banks can turn 100 billion worth in deposits into 400 billion in market orders. This can all be from the same money that the player placed into the bank.

If 100 players placed 1 billion isk into a bank and each had margin trade ability, then used their accounts to place market orders worth 4 billion. Basically, you've just added 400 billion into the eve economy. Then, if corporations wanting to buy capital ship parts and minerals leverage their 100 billion isk in deposits and their own funds into the market as well, you have another 400 billion isks in the market. In all, you could probably create over 1 trillion isk out of 100 players after interest is factored in to the Eve economy.

In essence, half the world's real money is leveraged that way, so why can't eve do the same?
sabre906
The Scope
Gallente Federation
#2 - 2012-05-28 15:19:39 UTC
Internet spaceship economy has little to do with real economy. Adding that kind of isk faucet will make ponies cry.
Michael Harari
Genos Occidere
HYDRA RELOADED
#3 - 2012-05-28 16:13:04 UTC
This is already in the game. Nothing prevents you from starting up a bank.
warzonetemp
Aliastra
Gallente Federation
#4 - 2012-05-28 17:42:41 UTC  |  Edited by: warzonetemp
However, at the moment, money is in the hands of individual players, sitting there unused or only partially used if they are traders. Even in the real world, when you don't use your money in your checking accounts, banks can reinvest it and make money out of investments. We don't have a real banking system in eve right now, just a patchwork of loose organizations and people offering loans.

It would add in a whole new level of market manipulation and power into eve. Even if your alliance can dominate based on PvP in certain regions, your wallet would be dependent on another.

Industrialists keep crying and ****, but in all reality they hold more than 70% of all isk in the game in liquid assets. While PvP alliances hold hard assets like caps and systems, they still require cash to keep their operations and building projects going, very few can operate asteroid mining, wormhole, and moon mining to a degree to keep up with the demands of PvP.

By doing this, you get more money into the market if everything is operating. As I said before, you can leverage a **** ton of cash due to how Eve market dynamics works.

However, in any banking system, if industrialists realize their liquidity as a weapon could undertake "banking raids" to cripple their enemies through spies that gain access to be depositors within the new corporate banks.

A Bank raid is simple, you put in a load of cash into a bank, while the bank leverages out the money by making buy orders and other purchases in the short term. Then, within the right time span at their weakest liquidity, you pull all your deposits out of the bank. Since much of the banks money is in market escrow and assets, they can't payback the depositors; thus, collapsing the bank's cashflow and zeroing out it's accounts. Basically, the entire bank and corporation becomes insolvent as a result. It doesn't mean that the corp is killed, but without hard currency, it's operations become harder as its internal minerals and taxes would need to rebuild from such a raid.

To counter a banking raid, you need bankers to keep an eye on the deposits and outflows of corporate purchases to make sure that you are not over exposed. However, the loyalty of these bankers and how they report numbers are also questionable and they could be bought off by your enemies, making for some great dynamic raids.
Callic Veratar
#5 - 2012-05-28 17:57:05 UTC
The problem with the idea, and it's pretty big, is that in the real world, there are real laws and regulations set up to keep the system mostly in check. EVE has no such laws or regulations. Even if it did, what are you going to do to me if I take 300 trillion from a bank? Ban me from the game? Then why should I be interested in setting up a bank? Take it back by force? Nothing is forcing me to log in.

Unfortunately, Internet Anonymity destroys this idea completely.
warzonetemp
Aliastra
Gallente Federation
#6 - 2012-05-28 18:29:47 UTC  |  Edited by: warzonetemp
Here's the thing, you can't take 300 trillion from the bank without putting it into another bank and bank raiding only means you're collapsing the bank by taking back what you put in, not more. Even if you somehow robbed the bank as director and say, I am never going to come on again, the money you stole is still in the active market as you need to put it into another bank. Of course this can't happen that easily, It sounds like scammer's dream, but also to set up a bank to be a scam take months to do as you need to set up a client base and other things. Most scammers only think in terms of the short term and sell relatively fast; they aren't patient enough to try for something this big.

Even the best thieves in eve cannot execute something as big as a bank heist without a lot of time sunk into it and it is not a guarantee that you will get clients.

Besides, bank raiding and robbery is different, one is considered a technical business strategy, though dubiously legal, and the other is plain illegal unless your on eve. I think both in this new banking system should be fair game as it doesn't seem like CCP would really get riled over either.

If you don't rob your clients, you will be looking at some huge numbers in terms of leveraged funds. Why risk 300 trillion, when you can gain 3 quadrillion in terms of your market positions.

Eve is mainly deregulated, when it comes to finance, it can borrow certain ideas from Hong Kong before they began integrating back into China. An free banking system can function in eve and everyone can make a lot of isk from it.
AM Boveri
420 Enterprises.
#7 - 2012-05-28 18:46:02 UTC
But what's stopping me from just keeping my own money myself? I can do that in real life. I can choose not to use a bank at all. The current system is much more realistic than what you're proposing. Players who choose to invest, do. Those who don't, keep all their isk in their wallets. What's the issue?
warzonetemp
Aliastra
Gallente Federation
#8 - 2012-05-28 18:55:03 UTC  |  Edited by: warzonetemp
AM Boveri wrote:
But what's stopping me from just keeping my own money myself? I can do that in real life. I can choose not to use a bank at all. The current system is much more realistic than what you're proposing. Players who choose to invest, do. Those who don't, keep all their isk in their wallets. What's the issue?


Actually, do you have like $10,000 in you wallet? I'd be surprised if you do. Very few people keep money to themselves in the real world, we believe we do, but the monthly bank statements are only showing you one side of the equation, not the banking side of where your money is pooled for use.

After a certain point, you basically should be putting money into a bank, which is a real world example of how modern banking works. These deposits are then reinvested by the banks in businesses or other areas to generate more funds.

In eve, you have players with billions or even trillions of isk in wallets, sitting as static cash. After a certain amount inside your wallet, you should be putting money into banks, imagine if the game dynamics had it that you would lose your entire wallet if you get pod'ed. That would be the real world example of losing a $10,000 wallet :D

Right now, most of eve is static in terms of unused money, there's a good deal of capital that could be used.
AM Boveri
420 Enterprises.
#9 - 2012-05-28 19:15:31 UTC  |  Edited by: AM Boveri
Whether or not I have that in my wallet currently shouldn't stop me from doing it. While the idea of banks is smart, especially on investment ideas, you shouldn't be forced to use them. The players have the choice, you shouldn't be taking that away. If I wanted to keep $10,000 under my mattress in a cigar box at home, nobody's going to stop me. Just like nobody is stopping you from investing in one of these banking corporations.

Like others have said, a banking system already exists from multiple corporations. This should stay player-driven as it is now.
Barbara Nichole
Cryogenic Consultancy
#10 - 2012-05-28 20:28:30 UTC
do we really want more npc run infrastructure?

  - remove the cloaked from local; free intel is the real problem, not  "afk" cloaking -

[IMG]http://i12.photobucket.com/albums/a208/DawnFrostbringer/consultsig.jpg[/IMG]

warzonetemp
Aliastra
Gallente Federation
#11 - 2012-05-28 22:25:33 UTC
Barbara Nichole wrote:
do we really want more npc run infrastructure?


:P Only Cause no infrastructure exists right now.

As for the question of individual choice, if you want to keep that money in your wallet, careful which street you are going down, because a few nasty goons (lol!) might just jump you. The reason why real world banking is the first and best choice for keeping money safe is that you reduce your personal risk of losing it in one or more locations. Investment opportunity sweeten the deal and makes you wealthier as a result of the decision.

For those of you saying that banking exists in Eve, can I ask where are the banking centers, where are the investment brokers, where are the loan officers, and where are the collateral collecting Repo groups?

As I said, what we have in Eve today is a patchwork of deals between corps and individuals, nothing big or truly visible beyond small deals. You can loan someone isk, but how do you know you can trust this person?
AM Boveri
420 Enterprises.
#12 - 2012-05-28 22:53:51 UTC
My only response is, why not start it up? There's no reason you can't get this going through player-driven means. Great idea, truly, but I don't think we need CCP to step in to make it happen. Any determined individual or group can lay the groundwork for this. If there's a certain mechanic that you feel you might need to help create this infrastructure, that's different. Talk to the current banking, investment, and loan corporations and see what's what. We have a system in place, albeit not to the complexity you've described, but one is there. Might be worthwhile to build off that as a playerbase than ask CCP to revamp everything on their own.
ShahFluffers
Ice Fire Warriors
Infinite Pew
#13 - 2012-05-29 00:13:46 UTC
OP... a couple years ago there was an organization that did exactly what you are proposing. It was called EIB (EVE Interstellar Bank).

People invested, loans were made, payment was enforced (by a squad of crack suicide gankers), and interest was applied on all investments and loans.

Then... after a year... the CEO of the bank "fulfilled the secret fantasy of every bank manager in history, when one day, he walked in and just took all the money. All the money was 790 billion ISK ...He posted a 15-minute video bragging about how he got away with it, mocking his loyal employees at EIB, enemies who failed to stop him and the suckers who basically paid for a second job."

Also...
Quote:
By doing this, you get more money into the market if everything is operating. As I said before, you can leverage a **** ton of cash due to how Eve market dynamics works.

This is NOT a good thing. There are already too many "ISK faucets" (i.e. things that magically bring new new ISK into the system) and CCP is trying mightily to avoid runaway inflation.

Quote:
do you have like $10,000 in you wallet? I'd be surprised if you do. Very few people keep money to themselves in the real world, we believe we do, but the monthly bank statements are only showing you one side of the equation, not the banking side of where your money is pooled for use.

Go to any other country on the planet that is NOT in western Europe or North America. You'll find that people possess an EXTREME distrust for banks in general and that many keep a good chunk of their wealth "under their mattress," in property, and/or in jewelry.

Sometimes people keep their wealth out of banks for completely different reasons. During my time in Japan, almost no one I knew kept the majority of their money in bank accounts because they didn't want their money to be locked up where they did not have direct access to it (also, credit/debit cards were almost unheard of and you couldn't withdraw money from a bank that was different from the one you kept your money in... banks were HIGHLY localized to each city).


Overall... it sounds like you want to create mechanics that are HIDEOUSLY complicated to your average layman. Most people can't really wrap their heads around the CURRENT system... why make that worse?
warzonetemp
Aliastra
Gallente Federation
#14 - 2012-05-29 01:42:37 UTC  |  Edited by: warzonetemp
We learned a lesson from EIB, Banking cannot be attempted half assed. Currently, there is no reserve system or depository insurance in Eve banks to prevent something like this happening and decimating any eve players with deposits in these "banks". In most western nations, there is a fundamental bottom amount that government and in our case CCP, would insure for deposits to keep the trust of the people.

Bank's cannot be be operated like a standard corporation, there needs to be new skills, new jobs, and new positions within these banks. A Banking CEO for instance cannot unilaterally steal 700 billion isk in one act, if he tries to, he would need to form a massive conspiracy with the investment leaders in his banking corp and use buy orders to funnel the bank's money out before the depositors realize based on the bank's operating liquidity that he's attempting it. If even one depositor realizes what you are up to you will see a run for the bank and the depositors and bank CEO would both be racing to clear their bank before it collapses. Under such limitations, even the best scammer cannot win 100% if the depositors keep an eye on the finances and with the insurance on deposits, you will be assured a minimum level of protection.

That's how the real world solves the banking confidence issue back in the 1930's, so why not 2010's on Eve?
AM Boveri
420 Enterprises.
#15 - 2012-05-29 02:36:50 UTC  |  Edited by: AM Boveri
I'm not really seeing a suggestion for a new game mechanic though. Don't get me wrong I'm very intrigued by the idea, and think it could do well, but the only 2 things I'm gathering is that either #1 you want CCP to enforce banks on the players, or #2 you want CCP to assume liability for player actions. Neither of these really is feasible. Not to say this idea doesn't have merit, but like this it's never going to fly. You may want to sit back and think how to run a banking corp in Eve, and what's preventing you from doing it successfully (either as the bank or as the investor) and work from there. Right now all you're doing is crying about the lack of forced income distribution, and whining about Eve not being fair.
warzonetemp
Aliastra
Gallente Federation
#16 - 2012-05-29 03:22:19 UTC
Capitalism is never fair, just market forces interacting with one another in a way to generate more productivity. What I am suggesting isn't that far out like a buff to missiles, or bonuses to hulks like the industrialist pilots keep whining about.

I am advocating a point that an eve banking infrastructure can be not only beneficial, but also something that we lack for a long time now.

The idea is sound and could if made into practice increase economic potential for everyone in Eve. CCP's worries about inflation would be solved the same way the real world can do it as it is happening right now, write-off liability within banks if it exceeds insurable amounts (Deflation not inflation is happening with this act). CCP right now is only controlling inflation by what amounts to fiscal policy, while ignoring monetary policy completely.

As I said earlier, I am advocating this point, it's an idea that is broad in its reach and needs a type of in-game development to really make it work. Both players and CCP have to come together on banking, not one or the other, unless you want a repeat of EIB or what we have right now with so much decentralization and wasted capital.
Soto ShinDo
HeroinPixelSpace
#17 - 2012-05-29 08:38:54 UTC  |  Edited by: Soto ShinDo
The real world banking system already sucks big time.

No need to shove it down my throat in my virtual spaceship world.

In short words - your idea is terrible and you have been told why already by other posters so stop arguing.

Quote:
CCP right now is only controlling inflation by what amounts to fiscal policy, while ignoring monetary policy completely.


Oh hai, we've seen who great 'monetary policy' works - NOT

Quote:
Capitalism is never fair, just market forces interacting with one another in a way to generate more productivity.


This is pure theory. In reality it does NOT work this way. The investment banking system only creates insane amounts of virtual money having absolutely no influence on the productivity of an economy. It creates bubbles bound to collapse sooner or later impoverishing the majority of the population while a small fraction gets richer and richer.
Colonel Xaven
Perkone
Caldari State
#18 - 2012-05-29 08:40:51 UTC
Soto ShinDo wrote:
The real world banking system already sucks big time.

No need to shove it down my throat in my virtual spaceship world.

In short words - your idea is terrible and you have been told why already by other posters so stop arguing.

Quote:
CCP right now is only controlling inflation by what amounts to fiscal policy, while ignoring monetary policy completely.


Oh hai, we've seen who great 'monetary policy' works - NOT


Pretty much this.

www.facebook.com/RazorAlliance

Kaelie Onren
Native Freshfood
Minmatar Republic
#19 - 2012-05-29 12:05:53 UTC
You seem intelligent so I will not make any sarcastic remarks that came to mind.

This won't work. Unless npc baks paid interest. And we don't need any more isk faucets.

"1 billion banked turns into 4 billion via margin orders adds money to the economy"

No it doesn't.

Interest adds money to the economy.
Central bank printing cash adds to the economy.

Margin and leverage does NOT. It adds demand. Not the same thing.

As someone already mentioned you can do all of this already. Start a corp and take corp deposits. Pay out interest.

As somebody else said already, this can't work in eve because we har no monetary control laws nor enforcement. No backruptcy court, ( no courts at all! ) so who comes after a corp after bankruptcy to try to reclaim value to creditors? No one.

So until all of these basis financial institutions and governing bodies are put in place, good idea ( thought not entirely original ) but can't be done.
warzonetemp
Aliastra
Gallente Federation
#20 - 2012-05-29 14:28:01 UTC
Soto ShinDo wrote:
The real world banking system already sucks big time.

No need to shove it down my throat in my virtual spaceship world.

In short words - your idea is terrible and you have been told why already by other posters so stop arguing.

Quote:
CCP right now is only controlling inflation by what amounts to fiscal policy, while ignoring monetary policy completely.


Oh hai, we've seen who great 'monetary policy' works - NOT

Quote:
Capitalism is never fair, just market forces interacting with one another in a way to generate more productivity.


This is pure theory. In reality it does NOT work this way. The investment banking system only creates insane amounts of virtual money having absolutely no influence on the productivity of an economy. It creates bubbles bound to collapse sooner or later impoverishing the majority of the population while a small fraction gets richer and richer.


So the last 500 years and especially the last 200 years never happened, we don't have highways, trains, or even buildings, because capitalism doesn't work.

Look i know many people nowadays don't like how banks work, nor do i ever since derivative trading on mortgages. However, without banking, you would not have any stuff at all. You can say capitalism breeds materialism, but there is nothing wrong with it. Inflation can be controlled, look no further than ccp home Iceland for how a recovery is suppose to look.

I have already countered your points against my idea on banking, ccp just needs to setup basic infrastructure for banking corps i.e. Rules and regulations for them, then the rest is market driven by choice and clients.

Now as for kaelie point on banking drive in margin values only working for demand, i would counter that you are increasing leveraged capital in the market by a maximum factor of 4-1 even if cash supply is expanding slower. Leveraged capital in this case is just as good as cash up to a certain level of efficiency as eve is operating below optimum in terms of cash.

In terms of justice and enforcement, there i agree is where the problem comes in. Corporate bounty hunters could fill in the void as they have before. However i see your point collections without bankruptcy protection could be a problem. Without a player base dedicated to financial security, you can't overcome enforcement issues as i said earlier.

This is as much an in game infrastructure build up as well as a player one.
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