Tuesday, October 10, 2017

My corner grocer runs a savings and loan

The customers and the store owner have a debt scheme. He adds up the bill, puts it in the book and we pay him every two weeks.  He does other interesting stuff, he is a mathematician, formally.  All of his prices are quantized to the nearest quarter, and purchases rarely exceed $40, so addition only involves 160 integers in the set.  Given the limited set of goods he sells, addition is a breeze, so I just ride my bike past the counter on the way out, he counts.

Does my corner grocer run a savings an loan?

You bet.  He adjusts prices to cover probable losses due to his risk.  No transaction costs.  Spenders generally keep their trips to the store within their estimation off red.green; the safety bounds they need to clear the ledger every week or so.

And the grocer conserves inventory, at risk.  I go in and out, his trade book is as visible to him as it is to me.  His default rate is low and happens when someone moves out or up or down from the scene, generally he has about $50 at risk when that happens. But he becomes a one stop shop, banking and groceries. He saves his customers about 1.5% in ATM fees. He basically competes against the ATM machine he has in the store.

Techies could easily embody his transaction rules in a digital contract, he doesn't need the paper notebook.  And is pricing is a 7 bit  precision system.  On an ongoing basis, one could use a Redneck compatible, open architecture, fair trading pit and auto price based on prior sequences of transactions. Do this off line, as needed.  Just compute the price level needed to cover the odds of losses over the typical sequence.

But then again, if everyone has the intelligent cash card, then my grocer can run a formal S&L for us all.  Then keep his prices tied to typical inventory transaction costs, get a nearly constant margin and adjust customer queues with interest on pay ins and outs.   Our cards will give us the green light on this idea.

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