Rules for the CP
Econ Money System
Basic
Principles:
Loans and
Interest:
All loans must be
made using these rules. Although it is
very consistent with Christian character to give money to those in need, this
is a class in economics and the money represents student grades. Please do not give money away.
If you know of a
student that has financial trouble, or is unhappy with his or her grade,
contact the instructor. There are many
things that can be done to deal with these problems legally.
Loans cost $5 to
process. Register them with the
instructor. The $5 represents bank
processing charges that would occur in the real world. Lenders pay this fee upfront and pass it on
to the borrower when payment is made.
We are going to
set the prime rate (the interest rate paid by the most reliable repayers) at
10% per week, compounded weekly.
Lenders may charge a higher rate, but they may not charge a lower rate. A week, in our class represents a year in
the real world, and 10% is an easy number to work with.
If the loan is
made to an individual spans several weeks, the interest payments compound. This means that if a student borrows
$100 for two week the interest on the
loan becomes $10 for the first week plus $11 for the second week. The interest for the second week is $11
because the loan is now for the original principal plus the $10 of interest for
the first week. When the student pays
back the loan he or she will pay $121 plus the $5 banking fee, for a total of
$126.
If payment is made
before the week is up, all the interest for the week is still owed. If payment is late, there are two options
for the lender.
The lender can
grant a continuance of the loan. In
that case, the borrower needs to pay interest for another week using the
compounding rules outlined above and will also be charged a penalty of 50% of the first week’s interest payment.
A second option
for a late loan is to require immediate payment of the loan through
bankruptcy. This option will give the
lender some of the money owed immediately, so he or she will be able to meet
any payment obligations that depended upon repayment of the loan. See the bankruptcy rules below.
If a lender needs
the money he or she loaned out, and the borrower’s week is not up, the lender
may not require early payment. (Loans
are not as liquid as cash.) That lender
may need to borrow money to cover his or her short term needs.
Paying
Classmates:
There are two ways
classmates may be reimbursed; they may be made partners or may be paid a wage
using the rules for outsourcing outlined below.
If you take a
classmate as a partner, all earnings are split evenly, unless one of you has
the Rights of the First Born.
In the Bible, the
first born son gets an extra share of the inheritance. That honor was Esau’s until Jacob snagged it
from him. That honor is Jesus’ in
heaven. In our class, that honor is
given to students by the teacher for performing some outstanding task, usually
winning an economic debate by overwhelming popular vote.
Outsourcing
Work to Parents or Non-Class Members:
Pay outside
workers a wage similar to the wage system in the real world.
Bankruptcy:
Bankruptcy occurs
when a student debt is overdue and debt referral is not possible and no credit
options are available. In other words,
someone cannot pay what they owe.
When a student
goes bankrupt, all the money they have in the bank or in cash is taken from
them and distributed to his or her creditors on a prorated basis. That is everyone gets his or her share of
what there is.
The bankrupt
student is restarted owing no debt and is given some starting cash. An F is entered into the grade book as one
of the student’s participation grades.
This is to discourage the practice of harming other student’s grades by
failing to pay them what is due to them.
The Bank:
Our class has an
electronic banking system designed and developed right here at WCS. It allows you to save money in a secure
savings account, electronically pay other students, message other students and
to buy your grade in class.
Additionally, our
class has a paper money system that allows the free exchange of cash for goods
and services in an informal way.
Although the
electronic bank is open to students whenever computers are being used in class,
cash transfers to and from the bank must be handled during banking hours. Banking hours will be posted in the
class. Just as with real banks, you must
be present for cash transactions, and just as with real banks, the password to
your electronic account should be kept a secret.
If you forget your
password, the instructor is able to retrieve it for you.