Feedback needed : Should cities be allowed to invest surplus cash in deposits / bonds?

[David]

On a separate note, I think that insurers should be able to deposit their money into banks. I took a look at the sneakpeek at the prototype and it looks really interesting! Creating a separate account for insurance funds is a great idea.

This is a good suggestion too. I will forward it to the dev team.

Now we just need to fix global stock market and I think we will be great! David, is there a link to a thread where I can share some thoughts on the global stock market?

Please create a new thread for it.

[JasonLJJ]

Can you ask the dev team to try to implement the government deposit sweeping tool into the banking DLC? I think this is something that should be applied to both the normal cities and federal government.

One consideration is how this is going to impact overall profitability of the banking industry vs. other industries in the long run. I believe that the government should be earning higher interest rate than regular depositors (maybe the interest rate should be benchmarked against making a 5 year deposit?) - perhaps you can create three deposit graphs? One for personal (the city deposits we have today), one for corporate (including the player depositing funds into the bank) and one for government (funds sweeped into the banking system)

The player can decide the interest rate given to personal and corporate through the normal mechanism we have now but the government one is fixed (according to the game setting)

For government funds, I believe they should only be allowed to be lent out to AA or AAA firms and in times of liquidity crisis, the government and customer deposits should be paid back first, ahead of the stockholders of the bank.

If you bank fails, there should be serious consequences to the group holding company - in fact, the failure of the bank should force the group having to "force sell" adequate amount of assets to pay off their debt and the player should be banned from re-entering the banking business for 3-5 years.

[David]

Separately, I think the concerns around the bond purchasing makes sense. However, I think there should be a mechanism to sweep the surplus cash governments have on hand back into the economy - perhaps that capital can be added to the total deposits available in that city, in proportion to the number of branches in the bank? I think this will serve to provide a safety net for weak banks (ensuring that the banking business isn't a "winner takes all" situation) while ensuring the government is earning some return on the investment.

Did you mean this one? Do you have some reference from sites such as Investopedia.com about how this works in the real world?

[JasonLJJ]

How are we coming along with the slider to invest in tech / operations? It seems to me that will be an important factor too enhance competition within the industry.

[JasonLJJ]

https://www.investopedia.com/articles/i ... -money.asp

https://www.investopedia.com/terms/q/qu ... easing.asp

The government is essentially acting as the central bank and controlling money supply via the deposit sweeping mechanism

In the real world, central banks will expand money supply (cut interest rates) or conduct quantitative easing (buy bonds) to boost GDP. Cutting rates and buying bonds will lower interest rates in the market and expand the supply of money available to be lent out which will boost GDP.

Since we don't have a mechanism that enables the government to influence money supply, the fund sweeping mechanism will do just that - today, if the gov. runs a large surplus, (through higher taxes and what not), it is depressing consumer GDP and hence, the demand for goods and services and vice versa. Hence, this new feature will do four things to the game:

1) Allow government action to "influence money supply" and hence, economic activity.
2) Enhance competition in the banking industry by "rewarding loser" to allow them to fight for another day
3) Reward/punish governments for their fiscal choices
4) Allow government to earn a return on its surplus capital

I think this is a much better way of emulating monetary policy rather than allowing the player to mess around with interest rates - Since under the scenario where there is no inflation, if you allow players to choose, they will always pick an interest rate that is most favorable to their firm, which will make the game quite unbalanced.