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First step to create a real bond market in EVE

First post
Author
Alexander wulfgard
Korrupted Gaming
#1 - 2013-06-14 12:21:40 UTC  |  Edited by: Alexander wulfgard
With the recent development and expansions of EVE I believe its time to take the step to create a better capital market.


Creation of a "risk free" rate.

In order to value all other financial products in Eve, a risk free rate is essential.

The major and minor factions all pay ISK to players via missions & bounty prizes and they receive ISK via transaction taxes, skill books etc. However they are running a deficit which is covered by "printing" ISK and hence increasing the money supply.

Instead of printing ISK, CCP can create a risk free rate by selling bonds through EVE market (at NPC bank stations) to cover the defecit.

I suggest 3 types of bonds: 1 week, 1mth and 3mth bonds, which are sold every Sunday.

All bonds will have a notional of 10mio ISK and the rate determined by selling price. Players can enter market orders at fx 99.00 which means that the player pay 9.9mio for the bond and receive 10mio at maturity. CCP start filling highest bids first and fill them until the deficit have been covered. If rates get to high or market orders cannot cover the deficit , CCP central bank will buy the outstanding bonds by printing.


To make the system more realistic and incorporated with EVE universe the current currency ISK which is completely unrealistic need to be replaced. ( https://forums.eveonline.com/default.aspx?g=posts&m=2974285#post2974285 )


Instead of 1 currency (ISK) , 4 new currencies wud need to be created , each printed and regulated by the major factions: Caldari yen ¥ , Gallente Mark , Minmatar pund £ and Amarr franc ₣.


We need these changes to create a free banking system and later a efficient stock & bond market. I will create another thread on these topics later.


EDIT:
I have been criticised by some players not to outline the bigger picture, so I will try to outline it here:
(This thread is only based on step 1-5, but i hope we can discuss some of the next steps in other threads)

Step 1. Creation of 1 active central bank which issue fixed income securities based on the deficit.

2. Creation of a secondary market for state securities.

3. The One central bank is divided into 4 banks, each issuing securities within their respective area but in the same currency (ISK).

4. FX Market: 4 new currencies are introduced. To avoid distorting the market, NPC banks will act as FX Brokers and FX exchange rates are pegged to each and Plex. Bid-ask spread will be set at <0.5% keeping transaction costs very low in the beginning.

5. When players have gotten more use to the new concepts FX rates can be widen to a band of maybe 5-10% (later maybe even more). Players can then start acting as FX dealers and brokers.

6. When the first 5 steps have been implemented, the state securities will now hold both FX risk and Inflation Risk.

7. Creation of active NPC banks reporting to their respective central bank. NPC banks already exist in EVE, but they do not play any role.

Players would have to actively choose a banking relationship - as all the banks are NPCs no difference will exist and interest will not have to be paid on accounts.

8. Player Corporation debt issues. The framework for private debt issues have been created, however private issues are much more complex than the ones of the state and it raises following concerns which need to be dealt with:

A genuine need for public money are needed. Almost anything in EVE are not more expensive than a dedicated player can earn the money fairly easy.

In RL public money are needed because no single individual (excluding maybe the richest families on the planet) will be able to fund and operate their own car factory or large ship yard.

Covenants – as it has been raised early in the thread, No investor protection exist in EVE. This will have to change.

9. Player corporation equity issues (IPOs).

10. Most of my ideas here are based on the foundation that Eve players (corps) should have the freedom to pursue the career they want.

Hence Player customers should always have a choice between expensive NPC goods and services or Player operated industries which can offer better and cheaper products if they are well managed.

Final remark will be that if a FX system gets to complicated to implement due to CCP programming costs or lack of liquidity the rest of the steps would be achievable anyhow.
RAW23
#2 - 2013-06-14 13:07:21 UTC  |  Edited by: RAW23
Alexander wulfgard wrote:
With the recent development and expansions of EVE I believe its time to take the step to create a better capital market.


Creation of a "risk free" rate.

In order to value all other financial products in Eve, a risk free rate is essential.

The major and minor factions all pay ISK to players via missions & bounty prizes and they receive ISK via transaction taxes, skill books etc. However they are running a deficit which is covered by "printing" ISK and hence increasing the money supply.

Instead of printing ISK, CCP can create a risk free rate by selling bonds through EVE market (at NPC bank stations) to cover the defecit.

I suggest 3 types of bonds: 1 week, 1mth and 3mth bonds, which are sold every Sunday.

All bonds will have a notional of 10mio ISK and the rate determined by selling price. Players can enter market orders at fx 99.00 which means that the player pay 9.9mio for the bond and receive 10mio at maturity. CCP start filling highest bids first and fill them until the deficit have been covered. If rates get to high or market orders cannot cover the deficit , CCP central bank will buy the outstanding bonds by printing.


To make the system more realistic and incorporated with EVE universe the current currency ISK which is completely unrealistic need to be replaced. ( https://forums.eveonline.com/default.aspx?g=posts&m=2974285#post2974285 )


Instead of 1 currency (ISK) , 4 new currencies wud need to be created , each printed and regulated by the major factions: Caldari yen ¥ , Gallente Mark , Minmatar pund £ and Amarr franc ₣.


We need these changes to create a free banking system and later a efficient stock & bond market. I will create another thread on these topics later.


a) This would create an extra isk faucet.

b) Lots of other issues but I'll sum up by saying: What the hell are you thinking?!

The idea of introducing a risk and effort free way of making money that will also serve as an isk faucet (and which also depends on the introduction of four new currencies) must be one of the most spectacularly bad ideas I have seen floated on this forum. Ever.

Edit - Apologies for the overly harsh initial reaction. I think the reason your suggestion struck me as staggeringly bad is because you didn’t actually outline any possible positive effect of your suggested changes. I guess there might be some potential payoff but the idea of risk free bonds by itself is appalling. If there is some payoff it will need to be pretty significant in order to counteract this.

There are two types of EVE player:

those who believe there are two types of EVE player and those who do not.

Alexander wulfgard
Korrupted Gaming
#3 - 2013-06-14 13:27:14 UTC  |  Edited by: Alexander wulfgard
RAW23 you have no substance behind what you are saying.
The only thing you can say, is that its a bad idea. If you have no arguements please remove your post and refrain from participate in the future.

One topic you raise (without any substance) is that you are affraid that players receive a return on an investment.
I dont see your point in that, its a principle derrived from RL economics and a compensation for not having access to your money in a period of time.
Yes people get a return but as the money is not availeble for them inflation will go lower. Also people generally invest their money into ships and equipment which might give them a return. This will just be an alternative.

Finally, It will put pressure on the State (CCP) to get a balanced fiscal policy in EVE and not running large defecits forever.



EDIT: The benefits of this change will be the first baby step toward creating a free banking system and capital markets in EVE.
RAW23
#4 - 2013-06-14 13:39:04 UTC
Alexander wulfgard wrote:
RAW23 you have no substance behind what you are saying.
The only thing you can say, is that its a bad idea. If you have no arguements please remove your post and refrain from participate in the future.

One topic you raise (without any substance) is that you are affraid that players receive a return on an investment.
I dont see your point in that, its a principle derrived from RL economics and a compensation for not having access to your money in a period of time.
Yes people get a return but as the money is not availeble for them inflation will go lower. Also people generally invest their money into ships and equipment which might give them a return. This will just be an alternative.

Finally, It will put pressure on the State (CCP) to get a balanced fiscal policy in EVE and not running large defecits forever.



You haven't suggested any substantial end result at all other than some nebulous 'free banking system' and 'an efficient stock and bond market' with no indication of what you actually mean by these. So, the goal of your proposal is not at all apparent; all we have are a bunch of radical changes with no real motivation for them. The fundamental change – risk free bonds – is one that I find completely abhorrent and not at all in keeping with the spirit of the game. The giveaway is in the phrase ‘risk free’, a phrase that is not at all at home in a game in which the central ethos is that actions have consequences and that nothing is perfectly safe. What you are proposing is a completely safe CCP backed form of investment. But not only does CCP secure the investment, they will also pay the interest on it, introducing new sources of isk to an economy that is already overflowing with it. So, removal of risk and the introduction of an isk faucet with no indication of why this might be useful. The idea of introducing currencies has certain merits and has been discussed a great deal on this forum but it does not depend on your central idea and so can be left aside.

So, I say again, these are awful ideas unless you can show that they will lead to some spectacular addition to the game that could not otherwise be achieved and this is something you have not done.

Quote:

If you have no arguements please remove your post and refrain from participate in the future.


I think you can probably guess my answer to this request. Big smile

There are two types of EVE player:

those who believe there are two types of EVE player and those who do not.

RAW23
#5 - 2013-06-14 13:47:50 UTC  |  Edited by: RAW23
Alexander wulfgard wrote:


One topic you raise (without any substance) is that you are affraid that players receive a return on an investment.
I dont see your point in that, its a principle derrived from RL economics and a compensation for not having access to your money in a period of time.


The objection is that they get a risk-free return, not just some return.

Quote:

Yes people get a return but as the money is not availeble for them inflation will go lower.


This shows that you have little idea about the quantity of idle isk in eve. Providing new investment opportunities for isk that would, in most cases, be sitting idle anyway, will not decrease inflation.

Quote:

Also people generally invest their money into ships and equipment which might give them a return. This will just be an alternative.


Investing in ships and equipment has risks. The value of your investment may go up or down and it takes skill to gauge the likely trajectories of the market. What you are suggesting is not comparable at all, since there will be no risk of loss and no skill involved. In addition, profits will not be earned through interaction within the player driven economy (i.e. transferred from one player to another) but will be created out of thin air.

Quote:

Finally, It will put pressure on the State (CCP) to get a balanced fiscal policy in EVE and not running large defecits forever.


No. What you are suggesting is based on a baffling conflation of CCP with the fictional states in eve. The only thing your suggestion will do is introduce another way for players to receive isk from CCP. It will not, in any way shape or form balance anyone's budget because ... and this is amazing stuff ... the NPCs will not be making money from any invested isk. It will simply sit idle outside the game economy for a while and then be returned with interest. What you are suggesting will actually exacerbate the problem you want to solve.

There are two types of EVE player:

those who believe there are two types of EVE player and those who do not.

Daniel Plain
Doomheim
#6 - 2013-06-14 13:49:56 UTC
...wow. just wow.

I should buy an Ishtar.

Alexander wulfgard
Korrupted Gaming
#7 - 2013-06-14 14:03:43 UTC
Your post is getting better. Smile

Let me outline the end goal first:
In the future I would like to see player owned factories, banks, research facilities, universities etc. all build on RL principles.
These instituions will give players in EVE more choices and be the foundations for PVE wars over real assets not just ganking and griefing.
These institutions would have to be so expensive to build and maintain that you would have to go to the capital markets in order to secure the funds needed.
The foundation for capital markets go back to the most basics cost of capital and hence the need for a "risk free " benchmark.

Its true that Investors in state backed assets will receive a return and it will be a cash flow stream into the EVE economy. However as CCP now will have to balance the books it would properly have to create other income streams elsewhere to offset this.
Further this is why we need more currencies, if one faction is borrowing or printing more money than the other, their currency will be put under pressure and the "risk free" assets is suddenly not that risk free anymore.
Finally a risk free assets proberly will not yield that much that you will see a spike in inflation based on this. The liquidity they drain from the system will properly be more inflation dampening if anything.

Greatest benefit of this system is that it will be based on RL principles and hance more realistic than the current system.

When we have created a good sound foundation for currency and government issued assets we can move on to create a banking system which means that players will could get access to money in more ways: cash, credit cards, debit cards.
RAW23
#8 - 2013-06-14 14:14:28 UTC
Alexander wulfgard wrote:


Let me outline the end goal first:
In the future I would like to see player owned factories, banks, research facilities, universities etc. all build on RL principles.



Have you played eve? We have all those things.

Quote:

These instituions will give players in EVE more choices and be the foundations for PVE wars over real assets not just ganking and griefing.
These institutions would have to be so expensive to build and maintain that you would have to go to the capital markets in order to secure the funds needed.


errr ... ???

Quote:

The foundation for capital markets go back to the most basics cost of capital and hence the need for a "risk free " benchmark.


Why? We have capital markets already in eve and just as in the real world they don't depend on a risk free benchmark that is secured by god.

Quote:

Its true that Investors in state backed assets will receive a return and it will be a cash flow stream into the EVE economy. However as CCP now will have to balance the books it would properly have to create other income streams elsewhere to offset this.


No no no ... You are confusing ingame stories with game mechanics. CCP doesn't have to 'balance the books' of ingame entities.

Quote:

Finally a risk free assets proberly will not yield that much that you will see a spike in inflation based on this. The liquidity they drain from the system will properly be more inflation dampening if anything.


What are your grounds for this claim? From my experience of the eve capital markets there are vast quantities of excess isk in the game doing nothing and earning nothing. Providing a venue for this isk to earn money will not take any money out of the active economy. It will just sit idle in a different location while at the same time also creating new streams of isk into the economy.


There are two types of EVE player:

those who believe there are two types of EVE player and those who do not.

Alexander wulfgard
Korrupted Gaming
#9 - 2013-06-14 14:34:12 UTC
Quote:

The objection is that they get a risk-free return, not just some return.


Firstly its not completly risk free as you are expsosed to currency risk and inflation risk.
I see it completly reseaonable to receive compensation for not having access to you money for a period of time.

RAW23 wrote:

This shows that you have little idea about the quantity of idle isk in eve. Providing new investment opportunities for isk that would, in most cases, be sitting idle anyway, will not decrease inflation.


I disagree, and just show you lack of understaning for economics.



RAW23 wrote:

Investing in ships and equipment has risks. The value of your investment may go up or down and it takes skill to gauge the likely trajectories of the market. What you are suggesting is not comparable at all, since there will be no risk of loss and no skill involved. In addition, profits will not be earned through interaction within the player driven economy (i.e. transferred from one player to another) but will be created out of thin air.


Fixed Income assets are expossed to currency risk and inflation risk. They also have expossure to other risks which we however can disregard here.


RAW23 wrote:

No. What you are suggesting is based on a baffling conflation of CCP with the fictional states in eve. The only thing your suggestion will do is introduce another way for players to receive isk from CCP. It will not, in any way shape or form balance anyone's budget because ... and this is amazing stuff ... the NPCs will not be making money from any invested isk. It will simply sit idle outside the game economy for a while and then be returned with interest. What you are suggesting will actually exacerbate the problem you want to solve.


Your argument do not make any sense at all.
Alexander wulfgard
Korrupted Gaming
#10 - 2013-06-14 14:41:48 UTC
Quote:

Have you played eve? We have all those things.


Have you played?


Quote:

Why? We have capital markets already in eve and just as in the real world they don't depend on a risk free benchmark that is secured by god.


Only a small unsecured OTC market exist.


Quote:

No no no ... You are confusing ingame stories with game mechanics. CCP doesn't have to 'balance the books' of ingame entities.


No they dont have to. But if you want to create a realistic universe they should do.



Quote:

What are your grounds for this claim? From my experience of the eve capital markets there are vast quantities of excess isk in the game doing nothing and earning nothing. Providing a venue for this isk to earn money will not take any money out of the active economy. It will just sit idle in a different location while at the same time also creating new streams of isk into the economy.


If its true what you say that there are "vast quantities of isk in the game" then the yield will be low on the assets.
Some will just be sitting there, others will not. You have no way of telling either.

RAW23
#11 - 2013-06-14 14:50:09 UTC
At this point I’m just going to back slowly out of the thread and leave you and your ideas together.

As Caleb said in your previous thread, you are somehow managing to confuse ingame lore and game mechanics and you show little evidence of any practical experience in eve's capital markets.

I don't think it's really worth discussing these ideas any further.

There are two types of EVE player:

those who believe there are two types of EVE player and those who do not.

Zaxix
State War Academy
Caldari State
#12 - 2013-06-14 15:04:55 UTC
posting in a uniquely garbled MD troll thread. I can't believe you got taken in, Raw.

Bokononist

 

RAW23
#13 - 2013-06-14 15:15:16 UTC
Zaxix wrote:
posting in a uniquely garbled MD troll thread. I can't believe you got taken in, Raw.


I did wonder if it was a troll but his posting history starts with him floating similar ideas in F&I and I'm generally sympathetic to people posting in a second language. Sometimes what looks like muck turns up brass. Other times it's just muck all the way down.

Also, I may be a bit out of practice. Oops

There are two types of EVE player:

those who believe there are two types of EVE player and those who do not.

arabella blood
Keyboard Jihad
#14 - 2013-06-14 15:16:41 UTC
/popcorn Big smile

I counted -

Alexander wulfgard: 0 |||| RAW23: 15

For real, we want to play spaceships & spreadsheets and not real life horrible economics...

Troll for hire. Cheap prices.

Bad Bobby
Bring Me Sunshine
In Tea We Trust
#15 - 2013-06-14 15:22:35 UTC
This had better be a troll.

In related news the supply of niave, ignorant and stupid far exceeds demand.
Blueprint Seller
Bring Me Sunshine
#16 - 2013-06-14 15:28:36 UTC
This appears to be the new thread for collecting together bad ideas and the exasperated responses to those ideas.
I LIKE IT
HIGH RISK INVESTMENT
#17 - 2013-06-14 15:31:53 UTC
Alexander wulfgard wrote:
risk free

GET OUT
Alex Grison
Grison Universal
#18 - 2013-06-14 18:25:06 UTC
This is a weird thing.

yes

Shizuken
Venerated Stars
#19 - 2013-06-14 19:32:08 UTC
Alexander wulfgard wrote:

When we have created a good sound foundation for currency and government issued assets we can move on to create a banking system which means that players will could get access to money in more ways: cash, credit cards, debit cards.


I am all for making games more realistic but the problem here is that participation in eve is completly voluntary. This is why credit will never work. At the very least a toon that borrows a ****-ton of ISK can just dump the cash to another toon (probably an alt) and just stop logging in.

This ability for the same conscious RL person to assume multiple identities creates gigantic problems. Simply, there is no tool that CCP could create, short of a real life credit agreement, that would allow any recourse, whatsoever, that could not easily be avoided by simply making a new account, or buying one (which is already allowed).

I would love the complexity and realism, but this is, afterall, a game based on a virtual program. It will never work within any reasonable development budget, or an international legal context.
Syrk
Caldari Militia Supply Corps
#20 - 2013-06-14 20:13:13 UTC
OP must be a troll.

Solving an increase in money supply by selling bonds (creating an increase in the money supply)? And buying back high-interest bonds? Dude, do you work for the Federal Reserve?
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