lyonheart wrote:Hi Graydon,
While I'm impressed with several insights in your post, you should review RFC's various posts [and by other posters] on currency, finances, inflation, Silverlode, etc; because your assumptions regarding the Holy Writ setting a standard for all coins, are quite incorrect.
Hi Lyonheart --
Thanks!
the provisions of the Writ which forbid debasing the currency have always been interpreted to mean that while paper notes may be issued by a bank, a nation, an archbishopric, or Mother Church herself, the issuing institution cannot issue notes for more bullion than it has actually on hand.
That's RFC back in LAMA snippet 15's thread. It says what I thought I remembered it saying.
So we may be talking past each other a bit, but, really, the whole of Safehold have a hard gold currency standard set by the Writ and a divine prohibition of fractional reserve banking. That's what that interpretation does.
You might not have to carry the gold, but the only money is gold. This is what resulted in seventeenth and eighteenth and even nineteenth century (pre-telegraph...) bankers having big annual meetings where they paired up bank drafts and letters of credit and such by value across banks and then burned them. The paper that survived to the end of the meeting was what had to be settled up for cash before it went into the fire, too. (It typically wasn't much.)
That the different mints issue different weights and purities reproduces the conditions of the eighteenth century, where everybody prefers to deal by tare (weight) than tally, but this only really introduces annoyance into the book-keeping.
Promissory notes are NOT money. They trade at a discount in their own currency. Money doesn't; money is entirely liquid, that is, the amount to which it is traded doesn't alter its price. (Absent a currency collapse following on from complete failure of government, the 10 dollar bill you buy lunch with has precisely the same 10 dollar value whether you just got it from the mint or it's some scruffy old thing that has been exchanged thousands of times.)
Figuring this out was expensive, historically, and it looks like it's going to be expensive on Safehold, too. (For exactly the same reason; once you've got more economy than gold, you have to do something about your currency problem, but it takes a long time to figure out that currency is an abstraction of the economy, rather than a tangible thing in and of itself. And on Safehold, that's a heresy!)
It doesn't affect the underlying principles at all.
Ducharain's clerks and accountants, every Bishopric and Archbishopric, keep accounts in one currency; there's a conversion step to actual (for gold) or notional (for everything else) Temple marks when tithes are paid, and until very recently the whole planet paid tithes. So in effect Safehold has a single currency of account, though not a single circulating currency.
lyonheart wrote:From LaMA's Snippet 15 [August 13, 2013 page 9], Safehold is closer to your 'soft gold' standard than hard because paper and banknotes etc are issued but its mandated that they're covered by bullion, but that also still depends somewhat on your trust in that bank etc.
That's a hard gold standard being described. A real soft gold standard (like the US before 1933) lets you issue more actual money than you have bullion. That some people cheat, well, that doesn't affect the nature of the currency.
lyonheart wrote:There are also general coin ratio's of 5 copper [bronze actually] to one silver, and 20 silver to one gold mark.
And I failed to remember that; thanks for the reminder. (That's expensive copper.)
lyonheart wrote:Because coins, paper, banknotes and promissory notes are are widely traded, the currency exchange rate changes over 5 years are another fascinating glimpse into RFC's magnum opus.
Only they're not really banknotes. They're gold certificates. This is important, because if they were banknotes, Duchairn could run a deficit. (Promissory notes are like issuing stock that you promise to buy back with interest. They're an investment and capital-raising vehicle but not actual money.)
We see Duchairn selling off Temple property, conscripting labour from those in holy orders, introducing taxation of the historically untaxed Vicarate-class, doing the fiscal equivalent of "kiting a cheque", and forcing purchases of Temple paper on prosperous secular persons. We also see Duchairn get publicly angry with Clyntahn over Siddarmark and Charis because that's where so much tithe money comes from, and now it's just gone.
All of this indicates that Duchairn has to have as much coming in as going out, once whatever reserve money stocks available in the Temple treasuries are taken into account. The fiscal machinery of the modern world just isn't there; Duchairn has to pay in gold eventually.
If banknotes were allowed, Duchairn could deficit finance this war, and be much better off, because Duchairn's main problem (aside from the market perception the Temple is going to lose!) is that expanding the Temple-controlled economy to fight a semi-industrial war against a rising industrial power doesn't work unless you can expand the money supply to match the growth in your economy. Otherwise you've gone and created far more value than you have money, money appreciates in value relative to everything else (=deflation), and your economy kind of strangles.
To expand properly, you need money that's independent of the rate of gold mining (or to be incredibly lucky about your available mines...) and you need some kind of sufficient control mechanism (which strongly implies a market of some kind) to give you enough information to let you know how much money to add. Which in turn means you need the safe rate of interest, and you can't have that without the fractional reserve banking because "safe rate of interest" is set by how many people default on their loans. If you're not counting that stuff -- if there isn't any way to have something to count -- you can't do it.
Duchairn's further handicapped by the Inquisition, which is distorting the financial markets by practicing widespread extortion ("pay or we hurt you" being classic extortion.) So a hard problem is probably impossible.
I personally suspect recognition that the problem is impossible and letting everything go as long as possible will mean lots and lots of people starve as Mother Church's finances collapse is what's going to make Duchairn snap.
Mikhail Staynair might be quietly stacking up gold in the vaults of the Church of Charis against the day he needs to send shiploads of bullion to the mainland to stave off that starvation, too. If you want consider a scenario that has various Vicars we don't like dead of apoplexy....
