Economics of time travel

[Technical Ben]

Also, also, AFAIK, they offset the borrowing against inflation. Being really cheeky, they borrow 1 million, and wait until inflation reduces it to 750 thousand, then pay it back.

[charonme]

weeel, ok, but first, they don't "wait" for the inflation, they do the inflation. Second, they never pay everything back completely (when they pay back some part, they have already borrowed even more than they paid back). The debt constantly increases.

[blademan9999]

The problem is the cost of the antimatter or such, so you'd have to do it for a very, very, very long time, which risks losing everything if something happens to the bank, and you'd have no friends left etc.

[Quizatzhaderac]

Also, also, AFAIK, they offset the borrowing against inflation. Being really cheeky, they borrow 1 million, and wait until inflation reduces it to 750 thousand, then pay it back.

That can only work once, and only if the inflation is unexpected. Investors won't lend money out at less or equal to what they expect inflation to be. Once a government inflates it''s monetary supply to pay off debt investors will expect them to do so for decades afterwards.

Also be aware of how long civil contracts and trusts are good for in the countries you create them. I think trusts are only good for 100 years in the US.

[WarDaft]

Also, also, AFAIK, they offset the borrowing against inflation. Being really cheeky, they borrow 1 million, and wait until inflation reduces it to 750 thousand, then pay it back.

That can only work once, and only if the inflation is unexpected. Investors won't lend money out at less or equal to what they expect inflation to be. Once a government inflates it''s monetary supply to pay off debt investors will expect them to do so for decades afterwards.

Also be aware of how long civil contracts and trusts are good for in the countries you create them. I think trusts are only good for 100 years in the US.

Don't governments primarily borrow from the kind of banks that can just quietly define more money in their accounts, but restrain from doing so when a government isn't borrowing from them because they like being in charge of a currency that actually has value?

[HungryHobo]

that and governments can mandate that their own citizens loan them money.

I heard somewhere tha the yield on some US treasuries are bellow the rate of inflation if anyone can confirm/refute and that the SS fund is legally obliged to use it's funds to buy US treasuries.

[Zamfir]

Don't governments primarily borrow from the kind of banks that can just quietly define more money in their accounts, but restrain from doing so when a government isn't borrowing from them because they like being in charge of a currency that actually has value?

That's not how it works.

[Quizatzhaderac]

that and governments can mandate that their own citizens loan them money.

I heard somewhere tha the yield on some US treasuries are bellow the rate of inflation if anyone can confirm/refute and that the SS fund is legally obliged to use it's funds to buy US treasuries.

According to the US the treasury department's website ten year bond rates are 0.41% above inflation. That's a pretty lousy return but it's still positive.

[HungryHobo]

Hmm. I might be a bit out of date.

Apparently last september US inflation was 3.8% per year while The United States' Government Bond Yield for 10 Year Notes hit a record low of 1.72%.

[Quizatzhaderac]

At any rate the reason anybody buys government bonds (or any bonds or any kind of capital) is because they expect interest to outweigh inflation.

[HungryHobo]

well last september they were apparently buying them for some other reason....

probably as a stable store of wealth but the were effectively paying the US government for loaning money to it.

[sehkzychic]

Investing with time dilation is essentually the same as without (only you have less ability to moniter your investments). Since no information from the future is available you still have to make speculative choices that could either be right or wrong. Given the increased time of the planned investment and the lessened ability to "bail" if things go bad I'd expect near-light investing to be higher risk than normal investing.

Actually, I beg to differ. Sure, if you only invested in one company or commodity, the chances of it paying off in the long run are low (cf. Gambler's Ruin). But that would be be an inadvisable strategy over any time frame. I think the word they use is "diversify." Let's say you have $100,000 that you split amongst 100 companies that you picked from a variety of industries and for various reasons (e.g. Campbell's Soup for its longevity, Google for its current promise, and P&G for its pervasiveness). You can only lose $1,000 from each investment, but if even a handful of those companies lasts until you get back, your shares could be worth quite a lot. Even a very modest growth rate maintained over a century or two would be huge. ($1000 to start, 4% interest, compounded monthly, after 300 years would yield nearly $160 million. If you get lucky and find a 5% annual return, that number goes up to over $3 billion.) I'm sure some of the more mathematically inclined here would be able to figure out a formula to plan future diversification so you don't wind up dry. Perhaps if the number of companies in your portfolio drops below 50, $50,000 dollars from your remaining investments gets distributed to 50 more companies, unless you have over $1 million, in which case each company gets $5,000. Or something. Like I said, someone with more math-smarts than I have could probably optimize the formulas here. Point is, investing with time dilation could actually be useful.

Also, to answer the OP, there's no reason banks shouldn't pay you the full value of your interest...They pay you interest because you loan them the money to invest in other things. Regardless of how much time has passed for you, they've had all that time to use your money, so you're entitled to a share of the profits they made with your money. The only caveat is that the FDIC only insures your money to a certain threshold...if you're hoping to make serious money, you'll need a strategy to put your investment into multiple accounts as the money piles up.

[gmalivuk]

If you were alive in 1700, which companies would you have invested in to make a consistent 4%? What companies from that time even still exist today? If you take the long-running average, such as over the course of 300 years, most investment schemes will work out to be pretty much indistinguishable from inflation.

[mathmannix]

If you were alive in 1700, which companies would you have invested in to make a consistent 4%? What companies from that time even still exist today?

There's a few on http://en.wikipedia.org/wiki/List_of_oldest_companies...

[Edit] I like Suzuki, Towle Silversmiths, or the Bank of Scotland, depending on where you were in 1700.

[gmalivuk]

I know some exist, but what fraction are they of all companies someone in 1700 could have invested in? What fraction are companies someone at that time with a long view of investment strategies likely *would* have invested in? Would money invested in those companies really have earned a consistent 4% average over the whole period?

[Quizatzhaderac]

well last september they were apparently buying them for some other reason....

No offense intended, but without a citation I"m going to assume you're making some mistake like confusing current interest rates, with rates expected at issuing.

The only caveat is that the FDIC only insures your money to a certain threshold...

In the time period that the FDIC has existed it's been exceeding rare that anybody has lost a penny due to that limit. When a bank goes under, the FDIC generally arranges for another bank to take over it's liabilities (and assets). Over the long term the bigger concern is if organizations like the FDIC exist.

If you take the long-running average, such as over the course of 300 years, most investment schemes will work out to be pretty much indistinguishable from inflation.

If you bought a Dow Jones index at it's 1929 peak, and sold it at it's 2008 bottom, and adjusted for inflation you'd get a 36% gain. That's lousy for a 79 year period, however 1) This is cherry picking the worst local time time buy and the worst local time to sell 2) This is ignoring dividends.

As for existing/not at the end of the time period: that's not nearly as big a concern as it might seem. Suppose that the US government decided tomorrow that Microsoft was super illegal and needed to be liquidated. The company's assets certainly wouldn't sell at full value, and the first couple of billion would go to whoever the government decided Microsoft screwed over. Billions, however, would still wind up in the hands of shareholders. Someone who bought Microsoft shares today would lose most, but not all, of their money. A person would bought IPO would have done quite well overall, if from nothing else that fact that a dollar at IPO has meant $4.38/year in dividends since 2005.

[snowyowl]

I can't remember the name of the book right now, but I read one once where there was a class of people who lived outside of time and facilitated trade between times. So, for example, times with lots of trees could trade with times that had huge industrial complexes.

Would this work at all? It seems like weird things would keep happening, but I can't really wrap my mind around it enough to figure out exactly where everything would go wrong.

Besides every time travel paradox possible?

Three years later: This was a minor plot point in End Of Eternity by Isaac Asimov. In it, the organisation called Eternity is responsible for editing history to maximise human happiness. They prefer not to draw attention to this fact, because most people don't know that history can be altered, so they tell everyone they manage intertemporal trade. (Which they do, but it's not their main activity.)

There were indeed downsides.

[HungryHobo]

well last september they were apparently buying them for some other reason....

No offense intended, but without a citation I"m going to assume you're making some mistake like confusing current interest rates, with rates expected at issuing.

http://bonds.about.com/od/Issues-in-the ... gative.htm

Beginning in late 2010, Treasury Inflation Protected Securities (TIPS) began trading with a negative yield – meaning that investors were paying the government for the privlege of holding its debt, rather than the other way around. For example, on July 17, 2012, the 5-year TIPS had a yield of -1.21% while the 10-year stood at -0.64%, the 20-year at -0.01%, and the 30-year at 0.37%. How can this be? And why would investors accept a negative yield?

The answer is that the yield on a TIPS bond is equal to the Treasury bond yield minus the rate of expected inflation. As a result, when standard Treasury bonds are trading at yields that are below the expected inflation rate – as has been the case since late 2010 – TIPS yields will fall into negative territory.

Let’s look at July 17 again as an example. On that day, the 10-year Treasury note was yielding 1.49%. However, based on the comparative yields of TIPS versus plain-vanilla Treasuries, investors were expecting inflation of about 2.13% in the next ten years. If you subtract this 2.13% from the 10-year yield of 1.49%, the result is a negative number for the 10-year TIPS: -0.64%. As long as Treasuries continue to offer yields below the rate of expected inflation, TIPS will remain in negative territory.

Why are investors accepting negative real (after inflation) returns in Treasuries? The answer is that investors’ quest for safe investments amid concerns about the debt crisis in Europe drove the yield on plain-vanilla Treasuries below the rate of inflation. In other words, safety is such a high priority that investors are willing to accept a negative real (after inflation) return on Treasuries in exchange for a guaranteed return of principal.

[Quizatzhaderac]

That is odd. I have to admit you're right in that there is a government security that's generally expected to 1) have a negative real return 2) underperform relative to your sock draw.

That said, there is a difference between what the market in general expects, and what the purchasers of a particular security expect. Even the author of your linked article doesn't believe the purchasers of TIPS expect a negative return:

Looked at another way, a buyer of the 10-year TIPS at -0.64% expects that the inflation adjustment on TIPS will be more than 2.13%, which would allow he or she to come out ahead of the 2.13% on the 10-year plain-vanilla Treasury note.

Or in general, the purchasers of a security expect more returns from it than the general population expects.

By way of analogy: Economists generally believe a dollar lottery ticket has a 33 cent expected return. The population of lottery ticket purchasers informally expects more than a dollar return.

[makc]

Why would bank even care?

• Invest money in a bank
• Fly near the speed of light away from Earth, then back againPut yourself in anabiosis or cryostasis, or go hike in himalayan mountains (ohmmmm).
• You experience a week or so, the bank experiences say a year
• So you get loads of interest in a short time (for you)

[Quizatzhaderac]

They wouldn't care how short a time it is for any one investor. But if the cost of waiting one year (in opportunity, financial, aging, ect) becomes trivial, everyone would just wait rather than doing anything else, creating a situation like in #989. The natural equilibrium probably being the real return on investment coming to equal the "cost" of waiting a year.