Hi HighJohn,
RFC has commented on a few of our previous attempts to fill in the gaps, like the lack of any mention of RCN escorts for any annual treasury fleets, however much of a simple courtesy they would have been, indicating the amounts sent to Zion from the island nations were more paper transactions than coins or bullion.
Destiny's little escapade in AMF proves the Desnar attempt to send its CoGA payments by sea was the exception since Destiny wasn't expecting such an attempt, such shipments being unexpected like the subsidized pirates' encounter in BSRA.
Inflation has been known on Safehold since Duchairn didn't have to explain the concept to Trynair, ie it has been experienced and seen from afar somewhere in their lifetimes, if not in the temple lands directly, which isn't impossible as various nations 'adjusted' the value of their coinage, including the amount of precious metal and the ratios of brass to silver and gold etc.
Duchairn's references to increased numbers of 'clipped' and 'underweight' coins in the same conversation indicates the principle concept of inflation is very well known on Safehold, as demonstrated by RFC's post on the relative value of the respective national marks over the past 6 years.
Coins do wear out over decades if not centuries, so replacement rates are important, but increases in the money supply are crucial to economic expansion, which has been happening all over Safehold for some decades, so figuring what the precious metal production rate has been of some interest.
Apparently the Mohryah Lode potentially could easily outproduce Desnar's gold mines, if Cayleb cared about that.
The ten year promissory notes being offered at 6% compound interest indicates some of the intended limits of the production, but perhaps more importantly those promissory notes can be traded and exchanged as an adjunct to the coins in circulation, to help the money supply expand given the potential explosion in production and productivity given the advent of steam engines and assembly lines.
I suspect the church was and still is the largest creditor, and almost all international banks like the House of Qwentyn were and are far larger creditors than Howsmyn, however large his personal fortune.
Then there's the CoC, which is spending far less than its nominal 20% double tithe, despite spending more on local problems than ever before.
Suggestions of how the CoC is spending its vast income are very welcome here since its been years since I made some attempts at priorities and their allocated portions.
I've previously suggested it has loaned the crown a considerable amount of that unspent wealth at very low interest rates, and were Maikel so inclined might have increased the money supply by depositing other considerable sums in banks it approves of so they can lend more, if they meet the CoC's stringent standards, to meet the boom all the innovation since 890 YoG has created.
I imagine Underhill has borrowed all he could from the reputable banks as well, and having the wherewithal to begin paying his debts soon has been more than a vast relief, but giving him time to take a longer view of all the various aspects of the economy and the treasury's role.
Will he pay his debts immediately in bullion?
I doubt it, because it might be then dumped on the market creating the explosive inflation so feared, so it probably will be in treasury notes and fresh minted coins, perhaps on a pro-rated basis according to how much has been borrowed, allowing bankers to calculate the payoff rate, for their own planning and profit etc.
Given the amount of gold and silver, I could see Charis actually increasing the amount of precious metal in its coins, at a time when everyone else is reducing theirs, to insure confidence remains high.
of course the effect of that on the international exchange rates will be fascinating to watch.
L
Highjohn wrote:We do know that paper currency isn't used. Here are the evidences I base that on:
1: It hasn't ever been mention, ever. All transactions are either made in marks(blank number of marks, like the cost of galleon) or in some form of coins. Examples would be several passages where someone needs to pay for a meal or tip a waitress. Coins are used.
2: The issue of debasing coinage and inflation. Rhobair Duchairn talks about both. In either How Firm a Foundation or in Midst Toil and Tribulation. I forget which. But the relevant points are he is talking about lowering the precious metal content of coins which is not an issue with paper money. He talks about inflationin fact he invents the use of the word inflation to describe the concept since it is unknown on Safehold. If paper money were used inflation would already be known about. Finally he talks about how the are issuing more notes than they had the money to back. If this were a fractional reserve system that would be par for the course. Rhobair would be talking about how they were decreasing their reserves not how they didn't have the money back up there notes.
3: Again it hasn't ever been mentioned. This is really important as there is a vocabulary to paper money that doesn't work with coins. Folding it. Putting it in a 'bill fold'. 'Folding' it into a wallet. Crumpling it up in anger. A 'crumpled' bill. An old worn out bill(Use of words like faded, rather than worn down. Coins get worn down, bill get ripped and fade).
Note about money and payments. The problem you are talking about is equivalent to a payday loan for a state. I can see three different options for how this can be resolved.
One:
If the Charisian crown is short one month and cannot pay hard cash they might defer payment until another month. This could be a partially done by deferring big payments(Such as a full payment for 10,000 rifles) until next month. If your word can be trusted this isn't an issue as long as the receiver of the payment has enough reserves to make payroll themselves. This couldn't be done to pay off sailors who just got off the ship. But the larger purchases from foundry owners and shipwrights probably make up the majority of payments anyway.
Two:
A better way of dealing with this is to maintain a month's(or more) reserve. So if you fall short one month you still have the cash to pay out and as long as the shipments of bullion from the mines do get to the treasury eventually it will even out and you will be fine.
This is the best way as the reserve can be built up over pervious decades and once built up will not cost any income to maintain unlike the other options which could cost money in either interest or late fees of some sort.
Three:
Get a loan. From a bank. This is what banks do if they are a bit short at the end of the day and need to balance their books and meet the required reserve percentage. A government could also do this, though it should noted that such a system would require time to set up and couldn't be created in a month.
Edit:
anwi, you are correct about Ehdwyrd Howsmyn. I would also like to add that payments to him are probably figured out months in advance and the money to make the payments gathered accordingly. So it is unlikely that the Charisian crown would find itself without the money to pay them as they would know they needed to make the payment far in advance. Unless of course the crown is actually running out of money all together. But that is a different issue.
