Ten Trillion gold or silver marks?

lyonheart wrote:I expect Underhill to start reducing taxes, slowly at first until a sufficient reserve has been received to cover possible emergencies, then paying debts as quietly as possible, thus letting the private sector then make new investments as they see fit, while ensuring the Crown's fiscal reputation is very sound.

The sum of 500 million marks for the first year, roughly 200 tons of silver and 125 tons of gold, approximately 2 tons per day from June 17th, ought to be sufficient over last year's income and expenses, while keeping speculation on the size of the strike low.

Keep in mind a troy ounce may be almost 10% bigger than avoirdupois, but at 22 carats etc or ~90% alloy, its back to the avoirdupois ounce size.

Eventually, spreading the amount spent around, throughout the empire as well as allies, ought to muddy if not obscure just how much is being spent for quite some time, including some quiet outright gifts to Siddarmark [which will insist on debts to its banks being paid as part of any treaties with its enemies].

The crown might consider becoming a silent or quiet pardner in several if not most major empire banks [as I've suggested for the CoC previously], as well as the best foreign, working through them to make the investments required while avoiding being too obvious, until the financial sector is big enough to handle greater changes.

And why will he be reducing taxes? All this gold and silver that's being mined isn't going to be turned into coinage

You guys are equating the value of Safeholdian gold to present times. I can remember a time when gold was not all that expensive relatively speaking in the early 1980's gold was trading for $200-250 an once to as high as $800.

This is the average price of gold per year over the last 160 years or so taken every 5 years.

1850 $18.93
1855 $18.93
1860 $18.93
1865 $18.93
1870 $18.93
1875 $18.94
1880 $18.94
1885 $18.94
1890 $18.94
1895 $18.93
1900 $18.96
1905 $18.92
1910 $18.92
1915 $18.99
1920 $20.68
1925 $20.64
1930 $20.65
1935 $34.84
1940 $33.85
1945 $34.71
1950 $34.72
1955 $35.03
1960 $35.27
1965 $35.12
1970 $36.02
1975 $160.86
1980 $615.00
1985 $317.00
1990 $383.51
1995 $383.79
2000 $279.11
2005 $444.74
2010 $1224.53

So until 1920 when you got a $20 gold piece you got roughly $20 worth of gold. It has only been since 1975 has gold been a roller coaster ride.

saber964 wrote:You guys are equating the value of Safeholdian gold to present times. I can remember a time when gold was not all that expensive relatively speaking in the early 1980's gold was trading for $200-250 an once to as high as $800.
*snip*

So until 1920 when you got a $20 gold piece you got roughly $20 worth of gold. It has only been since 1975 has gold been a roller coaster ride.

I will still argue that the largest denomination that most of the population ever sees would be a one mark silver coin. In the US prior to WWI a one dollar coin was silver, and it could buy you a lot compared to $1 today.

saber964 wrote:You guys are equating the value of Safeholdian gold to present times. I can remember a time when gold was not all that expensive relatively speaking in the early 1980's gold was trading for $200-250 an once to as high as $800.

This is the average price of gold per year over the last 160 years or so taken every 5 years.

1850 $18.93
1855 $18.93
1860 $18.93
1865 $18.93
1870 $18.93
1875 $18.94
1880 $18.94
1885 $18.94
1890 $18.94
1895 $18.93
1900 $18.96
1905 $18.92
1910 $18.92
1915 $18.99
1920 $20.68
1925 $20.64
1930 $20.65
1935 $34.84
1940 $33.85
1945 $34.71
1950 $34.72
1955 $35.03
1960 $35.27
1965 $35.12
1970 $36.02
1975 $160.86
1980 $615.00
1985 $317.00
1990 $383.51
1995 $383.79
2000 $279.11
2005 $444.74
2010 $1224.53

So until 1920 when you got a $20 gold piece you got roughly $20 worth of gold. It has only been since 1975 has gold been a roller coaster ride.

There is a really good reason for that - most developed nations were explicitly valuing their currency based on gold, aka being on the Gold Standard. The only reason it isn't $20 cash for $20 gold is that for much of that time the Pound Sterling was the international medium of exchange.
Notice how there are basically two price levels pre- the breakdown of Bretton Woods in the '70s, of ~$20 an ounce, and then ~$35. This took active effort by governments and central banks to maintain, and was only abandoned relatively recently.
However, that's a result of a system with a lot of paper money (and much of the money supply was purely notional, on balance sheets and in accounts), but which is at least notionally convertible to gold.
In Safehold, while there is some banking, most money appears to be actual metal coins; there is convertibility between gold and money; and so mining substantial amounts of gold is effectively directly changing the money supply. If you increase the money supply, in an economy that isn't at the zero lower bound (which Charis in wartime certainly is not), you cause inflation. If you have too much inflation, you cause all kinds of ructions. As an example:
There will be contracts across Charis that specify fixed rents. If medieval/early modern England is anything to go by, most rents will be paid a few times a year, in customary amounts.
If inflation within a few years has caused a doubling of the money supply, a traditional rent of one mark a year will get you half of what it used to, and people depending on those rents will be in severe economic difficulty. Multiply those difficulties across Charisian society, and you have a whole lot of avoidable problems, in exchange for having a whole lot of shiny metal that can't do much.
In all seriousness, as long as the Crown can tax enough to pay its bills, and raise enough money through establishing a national debt to avoid an interest spiral and bankruptcy, the gold is better off in the ground, waiting for people to rediscover high-level electronics and need and excellent conductor. Silver likewise will have industrial uses in due course.

Now maybe, as Charis' economy expands, there will be a need for a greater supply of money to keep things moving. And maybe there'll be enough resistance to paper scrip that they need to mint more coin. But that should be all that is "found", and all that is mined, the rest just isn't worth the trouble.

Incognitia wrote:snip

Now maybe, as Charis' economy expands, there will be a need for a greater supply of money to keep things moving. And maybe there'll be enough resistance to paper scrip that they need to mint more coin. But that should be all that is "found", and all that is mined, the rest just isn't worth the trouble.

Safehold is using gold, silver and copper coins as the primary means of exchange. That argues for an anemic velocity of money compared to modern economies using paper money, credit and electronic transfers. That anemic velocity of money means that Safehold requires more currency to sustain a given unit of GDP. Charis is in the process of growing its productivity and hence its overall economy by some massive amount over a relatively short period of time. That creates a few problems for Charis that RFC has a limited menu of options to fix.

Our dear writer could have Charis move quickly to a gold backed paper currency. Langehorn understood the limiting factors of using actual coins for currency. I suspect that The Writ's requirements of using honest measures of bullion in coins was one of the many ways Langehorn and Bedard tried to keep stasis. By limiting ways to increase the velocity of money economic growth requires the labor intensive efforts to mine more currency and allowed the CoGA to more easily limit the amount of currency in circulation. So, the option of using a largely paper currency is made more likely to run afoul of religious taboos. Overcoming those taboos will take time.

That leaves digging up more bullion for coinage and increasing the speed and reliability of transferring coins between parties. Steam ships and absolute control over the oceans certainly helps but it doesn't speed up the velocity of money sufficiently to allow the current currency base to support 10x to 100x the size of the pre-Jihad Charisian economy. Which brings us back to digging up more bullion.

Bottom line is that in order to support a massive increase in the Charisian economy, Cayleb at al. need a massive increase in coinage. In order to foster economic growth in Siddermark, they need even more. As the rest of Safehold becomes more productive, they too need more coinage. Assuming a 20 year period of some sort of cold war that leads to economic competition and economic improvement for much of Safehold, the money supply will need to be able to grow quickly to support the upcoming economic growth. Without a ready supply of coinage ready to be put into circulation, economic growth would be slower than it otherwise would be.

Charis has to dig up as much of that Silverlode bullion as it can as soon as it can.

I love these forums. I learn so much from such a wide group of people. And they are a good mental one minute vacation when my job makes me want to throw my computer through a window.

Cheers. You know it's a good day because nobody is shooting at you.

Hi PeterZ,

Kudos for another great exposition.

People should keep in mind that hard currency was so rare in the US from the founding that it wasn't until the late 1850's after enough of the California gold and silver had been minted that pre-revolutionary war Spanish 'pieces of eight' which had still been widely used and accepted across the US until then because there was too little hard currency available, and paper bank notes so distrusted after the many failures of the 1830's.

So more hard currency is definitely needed, in part to reassure the public the there's enough currency to back all the other financial innovations that will increase the the velocity of money and the economy as well, thus generating its own opportunities by such 'drafting' etc.

L

PeterZ wrote:

Incognitia wrote:snip

Now maybe, as Charis' economy expands, there will be a need for a greater supply of money to keep things moving. And maybe there'll be enough resistance to paper scrip that they need to mint more coin. But that should be all that is "found", and all that is mined, the rest just isn't worth the trouble.

Safehold is using gold, silver and copper coins as the primary means of exchange. That argues for an anemic velocity of money compared to modern economies using paper money, credit and electronic transfers. That anemic velocity of money means that Safehold requires more currency to sustain a given unit of GDP. Charis is in the process of growing its productivity and hence its overall economy by some massive amount over a relatively short period of time. That creates a few problems for Charis that RFC has a limited menu of options to fix.

Our dear writer could have Charis move quickly to a gold backed paper currency. Langehorn understood the limiting factors of using actual coins for currency. I suspect that The Writ's requirements of using honest measures of bullion in coins was one of the many ways Langehorn and Bedard tried to keep stasis. By limiting ways to increase the velocity of money economic growth requires the labor intensive efforts to mine more currency and allowed the CoGA to more easily limit the amount of currency in circulation. So, the option of using a largely paper currency is made more likely to run afoul of religious taboos. Overcoming those taboos will take time.

That leaves digging up more bullion for coinage and increasing the speed and reliability of transferring coins between parties. Steam ships and absolute control over the oceans certainly helps but it doesn't speed up the velocity of money sufficiently to allow the current currency base to support 10x to 100x the size of the pre-Jihad Charisian economy. Which brings us back to digging up more bullion.

Bottom line is that in order to support a massive increase in the Charisian economy, Cayleb at al. need a massive increase in coinage. In order to foster economic growth in Siddermark, they need even more. As the rest of Safehold becomes more productive, they too need more coinage. Assuming a 20 year period of some sort of cold war that leads to economic competition and economic improvement for much of Safehold, the money supply will need to be able to grow quickly to support the upcoming economic growth. Without a ready supply of coinage ready to be put into circulation, economic growth would be slower than it otherwise would be.

Charis has to dig up as much of that Silverlode bullion as it can as soon as it can.