Financing the navy

I also can do pounds shillings and pence in my head but not with roman numerals . My mother told me tales of working in a payroll department when they paid cash, and had to figure the number of coins they had to get from the bank, in farthings, half-pennies (pronounced hapennines), pennies, thrupences, sixpences, shillings, half-crowns, and (I think) crowns.

John Prigent wrote:None of we old fogies who were brought up on pounds, shillings and pence had any problem at all in adding up the groceries bill, thank you very much.

Keith_w wrote:I also can do pounds shillings and pence in my head but not with roman numerals . My mother told me tales of working in a payroll department when they paid cash, and had to figure the number of coins they had to get from the bank, in farthings, half-pennies (pronounced hapennines), pennies, thrupences, sixpences, shillings, half-crowns, and (I think) crowns.

John Prigent wrote:None of we old fogies who were brought up on pounds, shillings and pence had any problem at all in adding up the groceries bill, thank you very much.

Even when I was working in the UK in the 70's (post decimalization), there were still references to computer programs that you would input the individual wages for every worker, and it would spit out the number of coins of each denomination required to make up the cash pay packets. Crowns were the equivalent of a quarter of a pound (or 5 shillings) and the half crown was half that (or 2 shillings 6 pence).

Hi HighJohn,

The computer evidently ate my first couple responses, so here's an attempt to reconstruct them.

The term inflation covers a lot of ground and apparently was first used about a 150 years ago to describe the currency depreciation of the confederate dollar [which was worse than the revolutionary continental], which is what I was referencing that you're disputing.

Granted many but not all economists figure only price increases means inflation, which is what RFC has Duchairn thinking about on page 72 of HFaF [HB] in reaction to Clyntahn's embargo:

"The only reason the empire was making ends meet was the depth and richness of its gold mines, and that gold was running like water, as the rest of the Desnarian economy slowed drastically. The result was a drastic rise in prices, which was crushing the poor and the limited Desnarian middle class, and in the end far more of the total tithe came from those two classes than from the aristocracy. If they could not make ends meet, if their incomes dropped, then so did their ability to pay their tithes, and Duchairn could already see the downward spiral starting to set in."

I'd say that's pretty conclusive proof that price inflation is known and understood on Safehold, at least by people like Duchairn, ie bankers and people who have to pay attention to the markets.

Which shouldn't be a surprise in the ~800 years since the War of the Fallen, indeed RFC references how smart Safeholdian bankers generally are in seeing those potential train wrecks [inflation and deflation] coming in the Silverlode thread from a post at 4:21 am October 21, 2013.

What Duchairn confessed to Trynair on page 230 of MTaT [which I've had tabbed for a couple of years, thank you] was that the CoGA had already inflated the money supply by selling more church drafts and notes than it could cover [by almost 18%], in violation of the archangels' teachings, and that the depreciation of church paper was about to get a lot worse [ie explode] because many other people knew the temple was cheating and were moving away from Church paper as quietly and as quickly as possible, preferring hard currency whenever they could, yet without causing the church notes' to be publicly lose too much value until they had dumped theirs.

That hard currency doesn't have to be temple marks as RFC detailed in his post on currency values of 11:57 PM on August 13, 2013; which among others ought to be reviewed by some posters who've been making lots of assumptions regarding what Safehold transactions can and can't use here or there for exchange.

Remember how all Safeholdians are to make a pilgrimage to the temple at least once in their life?

Even spread out over a lifetime, a billion people means ~15 million every year or averaging 50,000 per day even all through the winter, if they could; so the figure is closer to 100,000 per day for the pilgrimage season of probably ~150 days; ie from April 15th to September 15th; who need their money changed all along their way.

There are still other concepts the term 'inflation' has embraced over time, but getting wrapped up in defining economic terms will make this post too long and tedious when I'm confident you already know them.

Regarding the continental nations like Desnar sending the tithe overland, you again misconstrued what I posted.

I never suggested Desnar never sent it physically especially overland, rather that sending it by sea was unusual for Desnar.

Especially since it was going only as far as Silk Town according to another of RFC's post's ["Economic advantage of tithes for the CoG's building program", April 26, 2012; 12:03 am], ie it was more a naval exercise than a perennial practice to send it by sea, especially when by canal barges and coasters it'd be far safer.

What I thought I was pointing out was that we have no direct textev or implication for the island nations [now all part of the EoC] ever physically sending theirs, although it was certainly collected, and even if it had been sent, an escort should have been expected to accompany it just in case etc, and then been remarked upon at some point, like someone one having served in the escort etc.

RFC has posted he can't and won't fill in every detail, there's not enough space to be explicit about everything.

Since RFC has also posted that the shipments by sea are as short as possible to avoid any risks, by implication the island nations apparently did ship hard currency every year, which only shows my caution where textev is absent [partly due to past experience with RFC's penchant for misdirection ], and a simpler solution [ie a treasury book transaction] seemed more likely.

I hope this further explains my previous post.

L

Highjohn wrote:Lyonheart. Re-ceck your book. Here is the quote from Duchairn(Found on page 230 Midst Toil and Tribulation, Hard back).

"Form our perspective, though," the treasurer continued, "What matters is even without that sort of, ah questionable approach, were effectively putting money that doesn't exist into the economy, and everyone knows it. Put another way were about to see an explosive ... inflation, for want of a better word, in the cost of everything we buy because a temple mark is going to be worth less and,...."


Notes: The questionable approach Duchairn was referring to was the lowing of the bullion content of newly minted coins(which would be a considerable amount, as old coins would need to be reminted).

However the point of that quote was that first, the word inflation was new. At least used in that way. The second point was yes Duchairn did have to explain inflation. He does so in the next sentence. Also the explanation of exchange rates is not an explanation of inflation. The two are vary different concepts which describe different things.


Also I would like to point out that your wrong about this

lyonheart wrote:
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.

Re-check the book. There are mentions of the tithe needing to be sent by land this year. So they were obviously sending tithe in previous years. Sending being the operative word.

Hi PeterZ,

Kudos for the excellent post!

I think you've hit where RFC is going with Charis's financial policy.

The promissory notes, besides helping to pay for the war now can also expand the money supply safely, being backed in ten years by the bullion that will then be safely in Tellesburg, Cherayth, Erastor, Manchyr, Tranjyr, and Carmyn etc; which can then be minted by the crown as needed to meet further recognised increases in the money supply as the economy continues to expand, possibly on a monthly basis if they can be that timely, without violating the financial proscriptions in any way because they have so much bullion to back it all up with, which is what Shan-wei knew and hoped for.

Of course once the business community becomes as confident the crown can meet its bills as Ironhill is now (possibly sometime this spring), he can sell far more promissory notes to pay off his most critical immediate debts.

Again I'll bet the Imperial Charisian marks will have more precious metal than anyone else's after the war, to ensure the people's confidence in their currency.

When you've got ten trillion marks in hard currency, in a planetary system that hasn't yet used the term 'billions', you can afford to have more valuable coins than everybody else.

L

PeterZ wrote:Don,

EoC promissory notes can perform another very useful function. Those notes can establish a risk free interest rate. Notes backed by future gold/silver production are essentially risk free so long as no more notes are issued than gold can be produced.

The benefit of a universally accepted risk free interest rate will be to standardize risk premiums for various securities. Standardized risk premiums makes it easier for smaller investors to understand and value securities and investments. That means more people will invest directly in promissory notes/bonds which leads to lower interest rates for non EoC issued securities.

Best of both worlds here. Paper notes to establish a risk free rate and bullion to secure trust in the currency.

lyonheart wrote:Hi PeterZ,

Kudos for the excellent post!

I think you've hit where RFC is going with Charis's financial policy.

The promissory notes, besides helping to pay for the war now can also expand the money supply safely, being backed in ten years by the bullion that will then be safely in Tellesburg, Cherayth, Erastor, Manchyr, Tranjyr, and Carmyn etc; which can then be minted by the crown as needed to meet further recognised increases in the money supply as the economy continues to expand, possibly on a monthly basis if they can be that timely, without violating the financial proscriptions in any way because they have so much bullion to back it all up with, which is what Shan-wei knew and hoped for.

Of course once the business community becomes as confident the crown can meet its bills as Underhill is now (possibly sometime this spring), he can sell far more promissory notes to pay off his most critical immediate debts.

Again I'll bet the Imperial Charisian marks will have more precious metal than anyone else's after the war, to ensure the people's confidence in their currency.

When you've got ten trillion marks in hard currency, in a planetary system that hasn't yet used the term 'billions', you can afford to have more valuable coins than everybody else.

L

PeterZ wrote:Don,

EoC promissory notes can perform another very useful function. Those notes can establish a risk free interest rate. Notes backed by future gold/silver production are essentially risk free so long as no more notes are issued than gold can be produced.

The benefit of a universally accepted risk free interest rate will be to standardize risk premiums for various securities. Standardized risk premiums makes it easier for smaller investors to understand and value securities and investments. That means more people will invest directly in promissory notes/bonds which leads to lower interest rates for non EoC issued securities.

Best of both worlds here. Paper notes to establish a risk free rate and bullion to secure trust in the currency.

Hi guys,

Nice posts. Lyonheart, great post but minor nit: It's Ironhill, not Underhill

Don

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.

Remember Langhorne etc didn't want any standard measurements, and so didn't provide any guidance for coins except they be of "honest value"; which deliberately leaves lots of wiggle room.

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.

There are also general coin ratio's of 5 copper [bronze actually] to one silver, and 20 silver to one gold mark.

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.

The fact that the CoGA mark has fallen 25 points in five years against the Charisian mark in open trading in Zion and around the continents despite the temple's prestige and the inquisition is very impressive; that its just the beginning of the avalanche some of us see from RFC's guarded comments makes HFQ more enticing.

Will Duchairn be able to trigger (or let it happen) the explosive inflation he's predicting [and probably arranged] or does he need Nynian remains to be seen.

For more great glimpses of RFC's thinking and hints, go to his posts then search to your heart's content, if you haven't already.

Enjoy!

L

Graydon wrote:

n7axw wrote:Hi Graydon,

You commented that Laghorne forbade certain financial practices:

"Charis can't use the real world solutions--fractional banking...etc."

Is there textev for this, a pearl I've missed, a post from RFC?? If so, Id be interested to see it....

Hi Don --

It's a direct consequence of the Writ's strict and narrow definition of money. We don't see textev that Langhorne forbade these things in specific detail. (Which would be a lot like forbidding people to build steam engines by precisely describing building one and saying "never do that", so I'd be surprised if there are specific prohibitions.)

The Writ sets out coinage standards and forbids adulteration of metallic content; they've got a divinely mandated hard gold standard with the only licit form of money being coined metal. (As opposed to a soft gold standard, where there's more gold-backed money in circulation than gold to back it, which is OK (or not!) because everybody knows the real backing is the economy. Duchairn is in the position of being compelled to move to a soft gold standard under the economic pressures of the war.)

This kind of hard-money-is-the-only-money setup is right back there in historical financial development with something like the Mortgage of Normandy where Red William sent actual barrels of silver pennies to Robert Curthose. (And eventually got Normandy when brother Robert's crusade wasn't profitable.) It's the sort of thing which secures the power of large landowners with reliable tax bases because under such a system that's about the only reliable way to get a lot of money.

If you've got that hard money gold standard with a divine mandate, fractional reserve banking -- where the bank creates money by making the loan -- is a heresy.

Fractional reserve banking is the observation that, as a bank, almost all your loans are good; you only need bank reserves to cover your default rate, not all your loans. That way you can make many more loans and the economy can expand much faster, which is a benefit to everybody. The money you create in making the loan gets a corresponding amount of debt created next to it at the same time, like matter and antimatter; as the debt gets paid off, both the money and the debt are annihilated, but the interest payments aren't, and that money enters the economy. (like the energy generated by the matter-antimatter reactor. If you've got a hard gold standard you can't do that, because it forces you to have actual gold to make the loan in the first place. (and of course if you get greedy or are badly surprised fractional reserve banking goes bad, which is where bank regulation and a central bank start getting involved.)

If you can't do fractional reserve banking, you can't do any of the other stuff -- fiat currency, central bank lender-of-last-resort stability mechanisms, trading government debt to set interest rates appropriate to the market perception of risk, etc. -- we do to have a global economy much, much larger than the supply of gold. All that "modern" stuff got invented by the UK as a means of financing the Napoleonic Wars. (and the concomitant beginning of industrialization.) This is just what Charis needs to do, and can't, per the Writ telling them the only allowable money is coined gold. Langhorne (or someone on staff) certainly intended that. (I'm pretty sure silver circulates but doesn't have a fixed exchange rate with gold. Can't remember any specifics.)

You can see in the text various attempts to work around the strict definition of money a bit to apply capital to projects, but promissory notes and such don't have the status of money. Even temple notes don't have the status of money. (Money, by definition, doesn't trade at a discount in its own currency, which is what the Temple notes are doing. You don't get people voluntarily taking "I'll give you ninety bucks for that hundred dollar bill" offers about actual money; you do about the future value of promissory notes, because the note has risk.(Just being in the future is a risk.))

Because the author is on their side, Charis has Silverlode Island. (It's not without historical precedent; the UK got the Transvaal, and the US got the California Gold Strike during the Civil War.) They're going to be able to expand their economy enough while staying on the Writ's restrictions about what money really is.

Hi Graydon,

Actually the CoGA did it deliberately, as I've previously posted, and again RFC's details are in LaMA's snippet #15.

Given this thread has almost entirely different posters than a year ago last August, its not surprising so many are ignorant of that discussion.

Besides the ~100,000 pilgrims who need their national currency exchanged every day during their season, lots of businesses and the church need to use all the coins, paper and notes they have regardless of origin, despite their different value [Sodar and Delferahk's etc coins don't have as much precious metal as others] so trading openly is the quickest and easiest arbiter of value.

Remember the US was still using every hard currency available [pieces of eight, etc] ten years after the California gold rush, because the money supply was still too small for the growing economy.

Once you wrap your mind around the new data, I'll be fascinated by your new insights.

L

Graydon wrote:

fallsfromtrees wrote:There is textev that not all of the currencies are the same. At one point Duchairn says the the Temple mark was once worth 14% more than a Charisan mark, but that it was now worth 11% less. This tends to indicate that the relative value of currencies fluctuates between them.

I don't think that's evidence that the currencies, in the sense of "this gold coin from a Temple Lands mint" and "this gold coin from a Charisian Royal mint" are different. I can't imagine that the Church would ever have tolerated that; one standard currency for taxation, laid out in the Holy Writ.

What I think that's an indication of is the selling price premium of coins physically located in either Charis or the Temple Lands. The utility of the coins varies by location (if you're shipwrecked and have the Marine Regiment Pay chest and a spare pair of socks, the gold in the pay chest isn't going to do you much good on your desert island; it's a lot more useful where there's something to buy) as does the perceived security of the money. I take Duchairn to be saying "there used to be a premium on gold being useful and safe in the Temple Lands, and now there's a premium on gold being useful and safe in Charis".

This is something his Group of Four colleagues don't take anything like seriously enough. That's literally the smart money betting -- not by much, but some -- Charis is going to win.

So a banker in the Temple Lands who wanted to purchase gold in Charis by letter of credit (for the Archbishop's vestment fund or whatever) would once have been able to say to a banker in Charis, I will deposit 100 marks in your Temple Lands account and you will deposit 114 marks in the Archbishop's Charisian account and we'll call it even and the banker would have agreed, that's the rate and it's much, much safer to do it that way the semaphore than to put gold on a ship where a storm can sink it.

When Duchairn says that about the rate change, a very circumspect Temple Lands banker who is perhaps considering hedging the family wealth just a little would have to offer a 111 mark deposit in the Temple Lands account of an equally circumspect Charisian banker to get a 100 mark deposit credited to them in Charis. (This is a lot of what depository banks used to do; move ownership labels on gold around.)

Only of course it's going to be even less formal than that and involve smugglers and plausible deniability and intermediate goods of some sort, but that's the idea. There's an increasing general perception that a gold coin in Charis is safer and more useful than one in the Temple Lands.

Hi Graydon,

Duchairn obviously has his own sources of information, but it appears that Clyntahn hasn't paid any attention to such financial and economic indicators, evidently assuming they're Duchairn's job, ie very dry, boring, and not at all threatening to the temple or the inquisition.

The longer he doesn't realise all that they reveal, the better Duchairn can prepare his coup or revolt.

One wonders if Trynair or Magwair will recognise or stumble over these facts of life first.

Smuggling isn't large enough to seriously impact the jihad directly, but expensive commodities and news however late are quite valuable in many different ways to the whole society.

But suppose the smugglers don't tell Clyntahn everything they know, or he doesn't bother reading that boring stuff?

Duchairn's reaction to Ironhill's promissory notes will be very interesting, while his sharing the news of the Mohryah Lode with Clyntahn will be absolutely delicious!

News of the alliance victories will do wonders for the SR's mark's value.

I've previously suggested it probably rose up around 33-50% after the victories last summer staved off the AoG.

Destroying almost the whole of the AoS will kick it still higher, perhaps to around double its bottom value .70-.72 CM, so those who held onto it wherever will recoup much of its value.

Now suppose some of Clyntahn's supporters in the vicarate, or staff etc know its value will rise and buy all they can in advance of the announcement, but Duchairn catches them at it and forces Clyntahn to punish them as the HW demands?

Imagine if Rayno were one of those caught.

Oh, the fun that's possible in HFQ!

Again I look forward to more of your excellent posts!

L

Graydon wrote:

isaac_newton wrote:That does imply that Duchairn has treasury sources of information independant of Clyntahn too and maybe in Charis itself.

Yes. Duchairn more or less can't do the job unless the Treasury is getting information about all trade, including the black and grey market trade, since in a hard gold standard world, any trade will tend to move gold. (It's unlikely both sides of smuggled trade have something compact and durable and suitable for smuggling; the purchaser probably pays gold.)

It's going to be very scattered information and not all of a piece, time-wise; it will show up by communications channels of highly varying length. It won't be anything like as good as modern market pricing, but it should be good enough that Duchairn can look at trends and lose stomach lining.

(Not that Safehold knows about the history, but when your side is imposing on its upper class and its lower class economically during a war -- everybody in the Temple Lands thinks they're getting poorer -- and the other side is experiencing a noticeable increase in general prosperity, you aren't winning.)

All the way through the Napoleonic Wars, dolls dressed in the latest Parisian fashion somehow made it to England every season; it's not like this sub-rosa trade will be restricted to vitally needed parts for the agricultural machinery. So it's possible Duchairn has some significant leverage available by making sure Clinton finds out about something the Grand Inquisitor can't publicly approve of.

Hi Don,

So I remembered before I got to review your post.

L

n7axw wrote:*quote="lyonheart"*Hi PeterZ,

Kudos for the excellent post!

I think you've hit where RFC is going with Charis's financial policy.

The promissory notes, besides helping to pay for the war now can also expand the money supply safely, being backed in ten years by the bullion that will then be safely in Tellesburg, Cherayth, Erastor, Manchyr, Tranjyr, and Carmyn etc; which can then be minted by the crown as needed to meet further recognised increases in the money supply as the economy continues to expand, possibly on a monthly basis if they can be that timely, without violating the financial proscriptions in any way because they have so much bullion to back it all up with, which is what Shan-wei knew and hoped for.

Of course once the business community becomes as confident the crown can meet its bills as Underhill is now (possibly sometime this spring), he can sell far more promissory notes to pay off his most critical immediate debts.

Again I'll bet the Imperial Charisian marks will have more precious metal than anyone else's after the war, to ensure the people's confidence in their currency.

When you've got ten trillion marks in hard currency, in a planetary system that hasn't yet used the term 'billions', you can afford to have more valuable coins than everybody else.

L

PeterZ wrote:Don,

EoC promissory notes can perform another very useful function. Those notes can establish a risk free interest rate. Notes backed by future gold/silver production are essentially risk free so long as no more notes are issued than gold can be produced.

The benefit of a universally accepted risk free interest rate will be to standardize risk premiums for various securities. Standardized risk premiums makes it easier for smaller investors to understand and value securities and investments. That means more people will invest directly in promissory notes/bonds which leads to lower interest rates for non EoC issued securities.

Best of both worlds here. Paper notes to establish a risk free rate and bullion to secure trust in the currency.

*quote*

Hi guys,

Nice posts. Lyonheart, great post but minor nit: It's Ironhill, not Underhill

Don

And here I thought you were overwhelmed with anticipation for the Tolkien inspired movie coming out this month, Lyonheart.

lyonheart wrote:Hi Don,

So I remembered before I got to review your post.

L

n7axw wrote:

*quote*

Hi guys,

Nice posts. Lyonheart, great post but minor nit: It's Ironhill, not Underhill

Don