On Nov 26, 2014, at 12:49 PM, Kurt Feltenberger <kurt@thepaw.org> wrote:

> I received a credit card offer in the mail the other day and it got me to thinking about credit and debt in the 3I and how that might lead to travel restrictions in the way of a lien (for lack of a better term) placed against the borrower's passport. If an individual had a large amount of debt to a local bank, how would that bank be guaranteed that the borrower would repay it and not skip?
>
> The only answer I can think of is that there would be travel restrictions as part of the lending agreement. Once the debt dropped to a certain level, the restrictions would be lifted. Naturally, this would be for unsecured debt; debt secured with real property would not subject the borrower to such restrictions due to the forfeiture of the property if the debt wasn't paid.
>
> Thoughts?

Historically unsecured loans were held against the social reputation of the borrower; thus, people without significant rank or social status would find it difficult, if not impossible to borrow money without collateral. This is a double edged sword: Sir Eneri who welshes on a 10KCr debt may well be ruined socially. Duke Eneri, on the other hand, may simply be powerful enough to get away with it;

Also, historically this is the reason for the existence of pawnshops...they were the "poor mans bank".

Loan sharking only works while you can find the guys legs to break.

How this plays out in the OTU is kind of dependent on how prevalent travel is, and how widespread the banking and credit system is. Lending unsecured money as the banking arm of a megacorp will be safer for the megacorp than doing so as a local bank, if travel is cheap and easy. Also, only polities that control travel both ways across the extraterritoriality line can effectively use passports to secure debt.

Ultimately, however, skipping town to beat a debt is eminently doable; and absconding in the dark of has been a problem for banks since before banks existed. There are a lot of folks who emigrated to the colonial US to get away form debts.

This ties in more generally to 'how does the interstellar economy work?'

If credit is generally only available locally, trade is handled in cash or cash equivalents. This implies a LOT of things: There are always large amounts of cash in circulation (much of the 'money' in the economy in the present day exists only as magnetic domains on hard drives somewhere, actual hard cash is only part of the money supply.) and no real concept of 'credit cards' as we know them, which depend on instantaneous (or nearly so) communications networks.

In the age of sail, this was handled with chests of gold: bullion, currency or the equivalent. or 'Letters of Credit' which needed to be authenticated in a variety of ways.

We had a long and tortured discussion last year about handling money in the TU; I came down on the side that people had an electronic wallet that they could carry that was, essentially, their bank account. Credits go in, credits go out. There were advantages over hard cash (they're more difficult to steal or counterfeit), they could be lined to a variety of authentication mechanisms, and properly designed systems could even ensure anonymous cash transfers.

I think there will be a pretty sharp distinction in credit offered to local residents (who have fixed addresses, jobs, etc) and travelers. After all, I doubt that I could walk into a local bank in your neighborhood and get an unsecured loan; whereas you would have much better luck.

This is another perk of membership in TAS...who must have a staggering XBoat-Express bill, like megacorps, moving financial records form place to place.

But in general, look to the Age of Sail for answers, and those were gold and letters of credit. Pirates and forgers made out like, well, bandits :-)

--
Bruce Johnson

"Wherever you go, there you are." B. Banzai, PhD