Loan interest

Why does loan interest rates show as a percentage for a real year, and not a game year? That's just asinine and makes giving loans worthless.

Loan interest used to be much higher a long time ago and people were making absurd amounts of money from loans. They ruined that with financial services tax and cutting down the interest rates for loans. Some players have insane amounts of cash in their accounts that would break the game if loan rates were higher.

The interest rate will not change the fact that few players have huge amount of money but will change the game for new players who would invest their money.

When player gives loans for interest he risks the money as during the war some other player may capture his country for that.

Great answers yall. But that still doesn't answer why it shows interest rates for a real year and not a game year? The interest rate they show is not helpful at all for figuring out how much money you'll make from a loan.

The right answer is that it would make some players too powerful in terms of income so GMs once decided to limit it to the point that nobody uses that feature today.

EnverHoxha,

There are 6 game months per real life day. So 1 game year takes 2 real life days. There are 365 days in a year. Meaning there are 182.5 game years per real life year. We can use this to work out the game year interest rate.

15% / 182.5 game years = ~0.0821% per game year.

Since most in game finance figures are displayed in game months, you'll probably want a game month figure as well.

15% / 182.5 game years / 12 months per year = ~0.0068% per game month.

I hope this helps.

Signed President of DanNation on LU

Daniel, thank you for that.

As far as I remember, loans are completely risk free, which is why they pay shit. If a country goes bust, the GM pays the loan back for you. I wouldn't be opposed to increasing the interest rate, but then having actual risk. There would need to be some sort of credit rating for countries and players could decide whether or not to loan to countries under a certain credit level. That would be cool.

I agree that would be really cool

The Current Loan system in Simcountry, is based off of the Reserve Banking system in the real world.

In the real world:

When large institutions have more cash than they need, they deposit it in the Reserve Bank. Utilising what is called the "deposit facility".

When financial institutions have less cash than they need, they borrow money from the Reserve Bank.

Usually there are more borrowers, than depositors. So the Reserve bank makes up the difference by printing money, increasing the money supply.

If there is to much money in the system. The Reserve Bank raises interest rates, to encourage more institutions to use the deposit facility, and fewer to borrow money. This reduces the Money Supply. Helping to control inflation and regulate the economy.

In Simcountry:

The Reserve Bank is represented by a "World Bank" (really a Reserve Bank) controlled by the GM's. When there are enough depositors (countries/enterprises willing to lend money), to cover requests from borrowers. The interest rate the game uses is dropped to 12% per real year, or 0.06575% per game year, for those transactions.

When there isn't enough money to cover borrowing requests. The "World Bank" (Reserve Bank), makes up the difference, at 15% per real year, or 0.08219% per game year. This helps to stabilise the money supply, by raising the interest rate paid, when there are to many people trying to spend more money than they have.

Follow up notes:

While 0.06%-0.08% per game year may seem like an extremely low rate. This rate is actually higher than the current rates, set but Reserve Banks in the real world, in the European Union, Japan, Switzerland, Denmark, and Sweden. Additionally even the US Federal Reserve Bank, had an interest rate equivalent to the levels in Simcountry, between 2009 and 2016. So the Simcoutry levels are actually pretty realistic for the transactions they are simulating.

Signed President of DanNation on LU