In fact, you’re still a thief.
That C-note isn't worth the $20, Mystery Theif. Nice try.
The UPI reported that an elderly Seattle man who stole money from a store more than 60 years ago “returned it last week — with interest.”
Aw. Except he didn’t.
The manager of a downtown Sears store says the man handed over an envelope containing a hundred dollar bill and a note to the customer desk, reading..
“During the late [1940s] I stole some money from the cash register in the amount of $20-$30. I want to pay you back this money in the amount of $100 to put in your theft account.”
I’m not impressed. He’s had the use of the money for more than 60 years, and now he’s financially secure, so he thinks he can make everything square and clear his conscience. He can’t. Theft is a wrong when it occurs, and unless it is voluntarily undone before any consequences result, there is no going back that clears the ethical slate. But this guy didn’t even try very hard. According to the useful calculator you (and he) can find here, the current day worth of $20 in 1948 is…
$181.0 using the Consumer Price Index
$153.00 using the GDP deflator
$309.00 using the unskilled wage
$375.00 using the Production Worker Compensation
$510.00 using the nominal GDP per capita
$1,080.00 using the relative share of GDP
…and that’s without interest.
So now he’s stealing brownie points.
(By the way…nice work, UPI. Was it really such a stretch to check out the “with interest” claim?)
Ethics Alarms 
That’s $876 with a measly 6% interest. For a more typical 12% interest on a small loan, it works out to be $38,000. So, he paid about 2% interest on money he stole. How generous, reminds me of the recent SEC settlements and federal patent infringement decisions.
It seems to me that the actual ethical thing to have done would have been for the thief to identify himself/herself to the store manager and/or the police and accept whatever consequences might come.
And honestly, there likely wouldn’t have been ANY–not even $100–especially in the midst of a Christmas season. The police would likely do nothing because of statutes of limitations, and the store would likely do nothing other a hearty “thank you” and maybe try to squeeze some publicity out of it.
–Dwayne
Actually, Jack, you can’t adjust for inflation and then say “and that’s without interest.” One of the purposes for charging interest is to offset the loss due to inflation – aka the time value of money. If he stole $20 in 1948 and paid $100 in 2011, then he paid about 2.56% in interest, assuming monthly compounding. This rate of interest is obviously not enough to fully offset the inflation loss, as shown by your amounts – but it is still interest. Anything over the original $20 is interest.
I don’t understand your steps here. Agreed, interest is intended to compensate for inflation, but interest isn’t the same as inflation. Inflation occurs on a loan amount whether interest is charged on or or not.
And as I wrote to Eric “with interest” as generally understood and as used bu UPI means (to most people) with additional money sufficient to make up for the time it took to repay the loan, and not “some miniscule and symbolic amount that doesn’t come close to equaling what the original amount is worth now.” If the interest was the latter and the UPI represented it as the former, either it didn’t do its research or was intentionally misleading.
The UPI isn’t wrong, per se. The thief paid a negative real interest rate on his use of the money, that is to say, the rate of interest that he paid was less than the rate of inflation. Because he gave back more than he paid, he paid a positive nominal interest rate, that is, a positive rate without considering inflation. Since UPI didn’t specify whether they referred to a nominal or a real rate, they aren’t really wrong.
He didn’t even pay back the original value of what he stole! He couldin’t have possibly paid back the money PLUS interest, because he didn’t really pay back the money at all, but just a portion of it.
If he stole $20-$30 and paid back $100, he paid back what he stole. If I lend you money at a rate less than inflation and you pay me back the money at the agreed upon rate, then you have paid me back with interest.
How do you figure? The amounts I listed were the 2012 values of what $20 was worth when he stole it, and interest wasn’t included in any of those totals. All are more than $100 bucks. You would have to loan me the money at a rate of DEflation to get 100 dollars, and there hasn’t been deflation.
I figure because I am talking about nominal interest rates. Unless the country has changed currency, $20 dollars today is the same as $20 tomorrow is the same as $20 in 60 years. It is the value of $20 (measured in terms of the goods that it can buy) that has changed over time. If I borrow a cup of sugar from you today and give you back a cup of sugar in a week, I will have given you back exactly what I owe you, regardless of whether the price of sugar has doubled or halved in the intervening week. Likewise, If I lend you $20 at 10%/week and you pay me $22 at the end of the week, you will have paid back what you owe me, including the interest interest, even if intervening hyperinflation has made that $22 worthless over the week.
You were correct when you said that the thief did not pay back the value of what he stole, but this is not what UPI claimed. They claimed he paid back what he stole, plus interest, which he did.
But money is not sugar. Would you say that someone who steals a check for $100,000, keeps it until it can’t be cashed and returns it has returned what he stole? The intended meaning of the heart-warming story is that the thief returned what he stole, making Sears whole by adding lost interest. But he did not make Sears whole. He could only make Sears whole by paying back the equivalent value of what he stole.
If you steal my puppy and give me back a dying, arthritic old dog 18 years later, you haven’t paid me back because its “the same dog”. You owe me a puppy.
The article said that he paid back the money with interest. You disputed this and criticized UPI for reporting that he paid the money back, with interest. UPI was absolutely correct that he did. People borrow money at negative real interest rates all the time and no-one says that they did not pay back what they owed, with interest (although some might point out that the borrower came out ahead, adjusted for inflation).
I used the example of money and sugar because both are fungible. If I have a dollar, you can generally take it away give me back a different dollar and I won’t care. If I have some sugar, you can generally give me back the same amount of sugar (of the same grade) and I won’t care. Commodities can be worth different amounts at different times, but they generally don’t change. This is why we can have futures markets in wheat, oil, dollars, etc. The values go up and down, but I can still give you back what I borrowed without being accused of not giving you what I owe you.
Dogs are not fungible. I generally cannot borrow a dog and give you back a different dog such that you would be happy. In fact, I probably couldn’t even borrow your dog and give you back a different dog with a higher market value because you are attached to your dog.
A $100000 cheque really represents a claim of money on someone else. If I were to take away that claim from you and not give you back an equivalent claim, then I would not have paid you back what I owe you. Fiat money doesn’t really represent a claim on anything (except perhaps on future tax payments). I suppose you could argue that, when the thief stole the money, it was convertible to gold and thus their claims on gold were stolen but not returned. This argument is shaky, however. It would be a stretch to claim that someone who borrowed $100 on August 14th, 1971 and paid it back on August 16th, 1971 did not pay back what they owed.
But interest isn’t calculated on”What would that be worth today”; it’s based on the original amount. The interest rate may wind up being lower than, higher than, or equal to inflation, but it’s still interest.
When I make my mortgage payment every month, I don’t have to stop and figure, “okay, I borrowed $100,000 in 2010. That’s worth x today, and my interest rate is 4.875%, so my payment works out to y.” My payment is already fixed, because it’s based on the original amount I borrowed and the rate I agreed on with the bank. The bank tries to set a rate at which it will make money even after inflation, but even if inflation is higher than 4.875%, I’m still paying interest.
Yes, this is what I am trying to say.
But it’s not worth saying, because the money wasn’t borrowed—it was stolen. That means that the one who steals it can’t treat it as borrowed, which would mean that the lender has agreed to the payback value. If the money is STOLEN, them making the victim whole means returning the value of what was stolen. “Plus interest” is nonsense without an agreement that 1) the amount borrowed plus interest is acceptable to the lender and 2) that the rate is set at a given amount. Theft is called “conversion” in the law…taking something “converts:—eliminates—it. Borrowing is not conversion—the borrower still has the lender’s property, and it is as it was.
The guy suddenly deciding to treat stolen money as borrowed money is a joke. Too late!
The thief did not return the value of what he had stolen. He did return what he stole with interest. You implied that the UPI was incorrect when they said that he returned what he stole with interest, but they were not. That is my point.
$20 in 2011 is not “what he stole” in the 40’s. It may be called the same thing, but it is materially different. Calling a dollar 20 dollars doesn’t make it 20 dollars.
At best the thief returned only the interest–and inadequate too—without returning what was stolen at all. He returned only interest.
He returned what he stole, with interest, it was just worth considerably less when he returned it.
Interest, as a term and an economic concept, is intrinsically connected with borrowing. Applying it to theft, the rightful owner is made whole if the original amount is returned with sufficient interest to compensate for inflation. We all agree that did not happen here. The amount over the originald theft was not S%
Sorry, bad typing on phone.
The amount was not SUFFICIENT interest to make the company whole, but it was interest.
Would it have been better to just return the $20 without dragging the interest into it, simply as a symbolic gesture?
It also appears you’re making something of an assumption here:
“He’s had the use of the money for more than 60 years, and now he’s financially secure, so he thinks he can make everything square and clear his conscience.”
It seems just as reasonably possible that an elderly man in the current economic climate is far from financially secure. It doesn’t alter the wrongness of his original theft, of course, but does it somehow change your analysis if the $100 came from saving an additional $10 off a meager food budget for almost a year?
Also, “In fact, you’re still a thief.” Agreed that, as I said, nothing he does now can change what he did in the past. But is someone really defined by, as far as we know, a single act more than 60 years ago? Am I “still a thief” because, as a kid, I shoplifted a nifty highlighter set from a school supply store? (Full disclosure: my mom caught me, the item was returned before we left the store, and my punishment doesn’t bear discussing here.)
Yes, that was an assumption…one scenario. Maybe he stole another 100 bucks and thought he could use it to get some cheap praise.The point is, 100 bucks isn’t paying back what he stole, and that’s why he’s still a thief.
For this purpose, the GDP deflator is probably the best measure of inflation. The real treasury yield was about 0.9% last century, meaning that someone who borrowed $153 (in 2011 dollars) and kept it 63 years would now owe about $270. That’s a minimum. In some ways it would make more sense to use a market rate — i.e. the rate he would have had to offer to get someone to willingly loan him the money — in which case Michael’s calculation is more in the ballpark.
These are just wild estimates, because no one loans money like this. Just try to get someone to quote you a rate for a 60-year loan with only a single balloon payment at the end.
Not to mention my special, extra-high “you ‘borrowed’ my money without asking me first” rate.
To Eric’s last comment:
“AHHHHHHHHHHHHHHHHHHIIIIIIIIIIIIIIEEEEEEEE!!!
This is Humpty-Dumptyism par excellance. When what one steals is $20, defined by the value $20 signifies, arguing that what was stolen was returned when $20 is no longer what would be called $20 at the time it was taken is impossible. If I steal a golden crown, and 40 years later real golden crowns no longer exist but potatoes are called “golden crowns,” have I returned what was stolen by bringing back a potato?
I think not.
I find your logic a bit weird. There is continuity of U.S. currency. A dollar in 1940 is the same as a dollar in 2011. What that dollar could buy in each year is different, but it is still the same dollar. A potato is not a golden crown, and renaming them will not make them so.
Let me turn your logic around. When the Nazis occupied Austria in the 1930s, they stole Portrait of Adele Bloch-Bauer I (a painting by Gustav Klimt) from the Bloch-Bauer family. Ownership of the painting was later taken by Austria. In 2006 the painting was returned to a Bloch-Bauer heir. She then sold it at auction for $135 million dollars.
Adele Bloch-Bauer I definitely was not worth $135 million in the 1930s. Even if you adjusted the painting’s value in the 1930s for inflation and added on an interest rate, you still probably would not get close to a $135 million. When binding arbitration of an Austrian court ordered the Austrian government to return the painting to its rightful owner, could they have claimed that the painting was really a different painting from the one it was in the 1930s because its value had skyrocketed? Did they really give Maria Altman (the heir) a large gift because they were only obligated to return the value of what was stolen in the 1930s, adjusted for inflation plus interest. I would argue that they did not. The painting that they returned was the painting that was stolen, despite the change in value.
I make the same argument about the $20-$30 dollars that was stolen in this case. The thief returned the money that he had stolen, plus interest. You could argue that the physical notes were different, but money is a fungible. If you give me a no interest loan of a $100 bill and I return five $20s, I would say that I have paid back what I took. The thief did not return the value of what he stole, but that is not my point. I am not saying that he is ethical. I am saying that your criticism of UPI is unwarranted.
If it’s the same dollar, then why do we say “in 2011 dollars”? Obviously it’s not the same dollar.
UPI is either wrong or deceitful, take your pick. When they say he paid it back—“with interest!”—the meaning conveyed is , “Wow, he even made up for inflation!” Nobody thinks, reading this, “Gee, I wonder if he just paid a nominal interest of a penny, or paid a rate that brought the original amount up to its present day value. What they think, and what UPI meant, is the latter. If they meant that and it wasn’t true (and it wasn’t) then they were sloppy for not checking OR they were intentionally saying something that was literally true but actually misleading.
When people say “in 2011 dollars”, they are using a fiction to enhance their ability to compare prices across time. A dollar in 2010 that I save until 2011 is still a dollar. It is not worth more than a new 2011 dollar because it was printed in 2010 (assuming of course that there is nothing rare or special about the physical banknote). What has changed is its value, but the fact that something has changed value does not make it a different thing. To argue that it did would lead to logical absurdities. For example, a dollar could maintain its value against the euro today, but fall compared to the yen. Is my dollar tomorrow the same dollar because it is worth the same in euros, or a different dollar because its value has changed in yen?
Money is often used as a unit of account, e.g. I might say that a painting is worth $100 dollars even though its owner has no interest in selling it. One of the problems with using money as a unit of account is that its value is constantly changing. If the painting was bought two years ago for $50, I could just tell you that it was worth $50 dollars two years ago, but this might lead you to think that its value compared to other goods and services has doubled when in fact the prices of many other goods has likewise increased. To solve this problem, economists have created a fictional unit of account called the “2011 dollar”, or any year, for that matter, which measures what you could purchase with a dollar in 2011 (based on the price of a basket of goods and services in 2011) and compares it to what that basket of goods and services would have cost in a different year. Once you have the comparison, you can compare prices between the years based on how many baskets of the same set of goods it would take to buy the good in one year versus how many baskets of the same set of goods it would take to buy the good in the other. Rather than talking prices in terms of baskets of goods, economists talk about prices in terms of “year X” dollars.
There are no real “year X” dollars. The concept is obviously subject to a myriad of assumptions that do not hold (but that are often good enough for the purposes of comparison). For example, I could talk about the price of a TV set in the 1950s in terms of “2011 dollars”, but it is clear that TV sets have got better over the last 50-60 years. The comparison is clearly inexact. I could tell you the price of an iPod in “1964 dollars”, but you obviously could not have bought an iPod if you had that many real dollars in 1964. Another problem is with the choice of baskets. If I want to talk about government spending on warships in 2011 vs. spending in 1972, talking about them in terms of “2011 dollars” defined by comparing the prices of a set of consumer goods like eggs, milk and butter might not be too illuminating because the price of warships might not be very connected to the price of consumer goods.
As to your assertion about UPI’s deceitfulness or incorrectness, I don’t think their honesty depends on how you interpret their words. They are using the words “with interest” the way that it is most commonly used, i.e. to refer to nominal interest paid. They didn’t say that he made up for inflation, so I don’t think that is what they meant. I don’t understand why they are wrong to use financial terminology the way that it is most commonly used.
Your analogy doesn’t work.
There’s a fundamental, qualitative difference in nature between a golden crown and a potato.
The only difference between $20 in 1948 and its equivalent value in 2011 is one of amount. One of the very purposes of interest is to make up for that difference. (The other is to make a profit for the lender/investor, which isn’t applicable here.)
You take offense (if I interpret your reaction correctly) because you feel that the thief is being given credit for giving back more than he owes, when he in fact gave back less. I agree with you. However, that’s because the amount that he owes is the original amount of $20, plus some amount of interest that would bring the total to the equivalent value today. He did not pay this back, but by definition, anything over the nominal amount of $20 is interest – just not enough interest, in this case, to cover the full amount owed.
Instead of borrowing, here’s something related to what I do for a living that may be a little more applicable. When the IRS discovers that someone has not paid the full amount of taxes owed, essentially, that person has stolen money from (more precisely, withheld money that was rightfully owed to) the government. The IRS slaps on interest and penalties – interest to make up for the difference in the value of the nominal amount, and penalties, which are punitive and not really at issue here.
The “tax due” amount is the same, original amount, despite the fact that it is worth less now. The additional amount intended to make up for the lost value of that money is interest. If statutes of limitations did not exist and one of my clients owed $20 of tax in 1948, the IRS might assess $161 in interest, bringing the total excluding penalties to $181, which is one of your amounts above. If my client paid $100, the IRS would apply $20 to the tax due, and $80 to the interest. My client still owes money, but he did pay $80 worth of interest.
(By the way, I think I may have mistyped my name or email on a couple of comments when I was on a different computer earlier today, as they haven’t appeared whereas these have automatically gone through – I assume the others are held up for moderation. It is, of course, your choice whether to allow them through or not, but I did want to let you know they are indeed my comments. One of them wasn’t even about interest!)
Yes, for some reason two of your comments were spammed, and I don’t know why. This is why I spend time going through 300 idiotic spam comments every day, so real comments don’t get lost. I apologize for the delay in those tow getting through, but they are up now.
The key word is “material.” Different values when talking about something, like money, that is ONLY value—all it does is compensate for value—is a material difference, just like a potato is materially different from a crown. I might argue that a potato is more like a crown than $20 is like $1000—at least you can wear a potato as a crown, or try to.