Post by waltdisney on Oct 5, 2021 7:31:02 GMT
Dear all,
I propose a Computer-Controlled Simco Central Bank. This bank will determine minimum and maximum interest rates of a new proposed building called The Commercial Bank, which will depend largely on the economic status (boom, normal, recession). This will not determine the interest rates of bonds at all.
Let me first explain to you that the interest rates here are the rates that The Commercial Bank can lend to the total number of workers in the Simco game (based on all player building level X 100 = number of people)
During boom, the Central Bank will curve inflation by increasing lending interest rate while during recession, the Central Bank will push for inflation by decreasing lending interest rates.
During normal, it will play around the interest rates based on the total money supply of all players in the game (all the cash on hand of all players combined -> Can be placed in newspaper) If the money supply is too high based on the average daily money supply per company/player, then lending interest rates increase and vice versa.
The Central Bank will also determine the fractional reserve rate. I will explain more on this later. During boom, the fractional reserve rate will increase and the opposite will happen during recession. This is connected to the interest rates and money supply. Basically, the Central Bank will create monetary policy for all the workers in the game.
How will the Commercial Bank work?
This will be a late game building. The starting capitalization to create the Commercial Bank will be $20,000,000 deposit which you cannot pull out. The Central Bank will then set a fractional reserve rate which will be done daily. If the normal fractional reserve rate is 18-20% meaning 18-20% of ALL deposits (starting deposit of the player and the total deposits of the simco people) will be deposited to the Central Bank. During recession, fractional reserve rates will be 10-15%. During boom, fractional reserve rates will be 25-30%.
$20,000,000 is only the deposit and not the cost of the building and the building upgrades. What will building upgrades do? Increase the number of potential depositors.
Simco people (population of all workers in the game) will deposit in your bank. How many people that will deposit to your bank will depend on the deposit interest rate that you will give them (do not be confused to lending rates). Meaning if the simco people deposit their savings in your bank, you give them a certain interest rate.
For example:
You have 10,000 depositors with $1,000 is savings each = $10m. Fractional reserve rate is 20%. Total amount of cash deposited to the Central Bank is 20% of ($20m + $10m) = $6m ($4m from you & $2m from depositors) The Central Bank dictates that the lending interest rate is 2%/day.
What do you do with this information? This means that the maximum interest you can charge simco people is 2%. The player will set their lending rates but it must be lower than the Central Bank lending rate.
Also, you must pay interest to the depositors ($10m). The player decides the deposit interest rate which will in turn, affect the number of depositors into his Commercial Bank. All players who own Commercial Banks will be compared to each other based on their deposit interest rate and this will dictate the popularity of your Commercial Banks to othere. The higher the deposit interest rate, the more depositors.
So here in this example, if you give a deposit interest rate of 1% then your Commercial Bank will have to pay daily deposit interest or 1% of $10m or $100,000. If you set your lending rate to 1.5%, then you can lend $30m - (20% of $30m) = $24m. The higher your lending rate, the lower the chances that simco people will take a loan and vice versa.
Also, the fractional reserve rate plays a part. The player sets their own fractional reserve rate that must be equal or higher than the Central Bank fractional reserve rate. If you bank lacks money due to overlending and lack of deposits…. Then your bank will automatically loan from the Central Bank at 5%/day of the amount. The amount lend is to make sure your fractional reserve rate is on the Central Bank Standard. So if you lack $5m to meet the fractional reserve rate of the Central Bank, you will automatically need to pay 5% or 5m = $250,000 to the Central Bank while making sure that your fractional reserve rate is up to standard that day or else, another debt will be taken out and will compound until bankruptcy of your Commercial Bank and will force the Commercial Bank to be scrapped
Lastly, how much do the simco people deposit? First it depends on your deposit interest rate. But it also depends on the economy… during recession, lending rates are lower to encourage spending so simco people will not save their money and instead take out more loans due to lower lending rates. During boom, people are encouraged to save money to decrease inflation. Lending rates will be more expensive in boom while deposit interest rates will be increased to encourage saving.
I know it’s complex but that’s banking for you!
[Ex Walt Disney Conglomerate]
I propose a Computer-Controlled Simco Central Bank. This bank will determine minimum and maximum interest rates of a new proposed building called The Commercial Bank, which will depend largely on the economic status (boom, normal, recession). This will not determine the interest rates of bonds at all.
Let me first explain to you that the interest rates here are the rates that The Commercial Bank can lend to the total number of workers in the Simco game (based on all player building level X 100 = number of people)
During boom, the Central Bank will curve inflation by increasing lending interest rate while during recession, the Central Bank will push for inflation by decreasing lending interest rates.
During normal, it will play around the interest rates based on the total money supply of all players in the game (all the cash on hand of all players combined -> Can be placed in newspaper) If the money supply is too high based on the average daily money supply per company/player, then lending interest rates increase and vice versa.
The Central Bank will also determine the fractional reserve rate. I will explain more on this later. During boom, the fractional reserve rate will increase and the opposite will happen during recession. This is connected to the interest rates and money supply. Basically, the Central Bank will create monetary policy for all the workers in the game.
How will the Commercial Bank work?
This will be a late game building. The starting capitalization to create the Commercial Bank will be $20,000,000 deposit which you cannot pull out. The Central Bank will then set a fractional reserve rate which will be done daily. If the normal fractional reserve rate is 18-20% meaning 18-20% of ALL deposits (starting deposit of the player and the total deposits of the simco people) will be deposited to the Central Bank. During recession, fractional reserve rates will be 10-15%. During boom, fractional reserve rates will be 25-30%.
$20,000,000 is only the deposit and not the cost of the building and the building upgrades. What will building upgrades do? Increase the number of potential depositors.
Simco people (population of all workers in the game) will deposit in your bank. How many people that will deposit to your bank will depend on the deposit interest rate that you will give them (do not be confused to lending rates). Meaning if the simco people deposit their savings in your bank, you give them a certain interest rate.
For example:
You have 10,000 depositors with $1,000 is savings each = $10m. Fractional reserve rate is 20%. Total amount of cash deposited to the Central Bank is 20% of ($20m + $10m) = $6m ($4m from you & $2m from depositors) The Central Bank dictates that the lending interest rate is 2%/day.
What do you do with this information? This means that the maximum interest you can charge simco people is 2%. The player will set their lending rates but it must be lower than the Central Bank lending rate.
Also, you must pay interest to the depositors ($10m). The player decides the deposit interest rate which will in turn, affect the number of depositors into his Commercial Bank. All players who own Commercial Banks will be compared to each other based on their deposit interest rate and this will dictate the popularity of your Commercial Banks to othere. The higher the deposit interest rate, the more depositors.
So here in this example, if you give a deposit interest rate of 1% then your Commercial Bank will have to pay daily deposit interest or 1% of $10m or $100,000. If you set your lending rate to 1.5%, then you can lend $30m - (20% of $30m) = $24m. The higher your lending rate, the lower the chances that simco people will take a loan and vice versa.
Also, the fractional reserve rate plays a part. The player sets their own fractional reserve rate that must be equal or higher than the Central Bank fractional reserve rate. If you bank lacks money due to overlending and lack of deposits…. Then your bank will automatically loan from the Central Bank at 5%/day of the amount. The amount lend is to make sure your fractional reserve rate is on the Central Bank Standard. So if you lack $5m to meet the fractional reserve rate of the Central Bank, you will automatically need to pay 5% or 5m = $250,000 to the Central Bank while making sure that your fractional reserve rate is up to standard that day or else, another debt will be taken out and will compound until bankruptcy of your Commercial Bank and will force the Commercial Bank to be scrapped
Lastly, how much do the simco people deposit? First it depends on your deposit interest rate. But it also depends on the economy… during recession, lending rates are lower to encourage spending so simco people will not save their money and instead take out more loans due to lower lending rates. During boom, people are encouraged to save money to decrease inflation. Lending rates will be more expensive in boom while deposit interest rates will be increased to encourage saving.
I know it’s complex but that’s banking for you!
[Ex Walt Disney Conglomerate]