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Am I missing something? | |
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by Highjohn » Thu Apr 09, 2015 1:18 am | |
Highjohn
Posts: 221
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Their are exchange rates and they change. How exactly can this work? I was under the impression that Safehold had a gold(and possibly silver) backed currency or rather currencies. So how can exchange rates vary without the bullion content of the coins changing and if the exchange rate changes, doesn't that mean that the bullion content has changed and not that the balance of trade has altered?
http://www.davidweber.net/faqs/index/series:6 See the question below at the above link Safehold Currency exchange rates circa 896. (Posted Tue Aug 13, 2013) December 2013 |
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Re: Am I missing something? | |
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by JeffEngel » Thu Apr 09, 2015 7:17 am | |
JeffEngel
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Reading through that, the exchange rates vary because (1) bullion content in coins does vary, without people being able easily to tell how much it is off the nominal amount, and confidence in the rectitude of the issuing body is used to estimate how faithful they are to the supposed value of the coin, and (2) the amount of currency of a given state in circulation also includes paper and promissory notes, where confidence is an even more pronounced factor. So while there is gold or silver backing behind the metal coins and paper notes, just how much you can trust that backing does vary, producing the lion's share of the variance in exchange rates. How pronounced national chauvinism is may make a difference too - if no one wants your filthy Zion marks in Tellesberg, and you get suspected of being a Rakurai agent at every bar where you try to spend them, the money changers can really fleece you to change them. |
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Re: Am I missing something? | |
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by Joat42 » Thu Apr 09, 2015 10:17 am | |
Joat42
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The bolded part is the important one in the current context since the CoGA has been issuing promissory notes to finance the war that in essence doesn't have real, hard currency to back it up fully. If the takers of those notes believe that the church wont be able to cover them they will try to sell the notes to other interested parties at a price that's less than the stated value of the note. Another very important factor that influence the exchange ratio is inflation. If you have a high inflation your exchange rate will decline since the purchasing power decreases. Since the CoGA first forbade the faithful states to trade with Charis and then started the holy war the cost for items that was formerly imported cheaply from Charis got very expensive and since the CoGA need a lot of raw material (ores, coal, timber etc) for the war effort the price for commodities has soared also. This economic double-whammy has raised the inflation significantly which in turn hurt the value of the currency. --- Jack of all trades and destructive tinkerer. Anyone who have simple solutions for complex problems is a fool. |
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Re: Am I missing something? | |
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by PeterZ » Thu Apr 09, 2015 10:30 am | |
PeterZ
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Don't forget the effect Gresham's Law on exchange rates. The actual coins will be hoarded and the notes will circulate. The effect will be to shift the mix of currency in actual circulation to almost 100% notes vs. coins. The exchange rates then would reflect the greater amount of notes being traded vs. coins. |
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Re: Am I missing something? | |
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by Highjohn » Thu Apr 09, 2015 9:34 pm | |
Highjohn
Posts: 221
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A point, on the other hand Duchairn mentioned that the exchange rates for Temple Lands to Charisian marks were changing before the war. So this doesn't really apply. Charis had a long history of solvency and a promissory note issued by the Church was considered as good as the real thing. See BSRA, scene where Hector talks to his treasurer about how to get funding for the navy. Also the church had a long history crushing the debasement of coinage. So trust in the currency would not be an issue.
I had not considered the question of promissory notes. This does have the same problem of as point one. The pre-war period also saw a changing exchange rate. Also, promissory notes are not being exchanged between currencies. Cold hard cash is. So the exchange rates should be shielded from such factors. Not immune though. So you do have a point. Though the pre-war period is an extreme problem for this as neither Charis nor the temple were issuing promissory notes, except in the form of receipts. So it would only matter for people transferring enough money that they didn't carry it around.
Gold and silver are not backing the coinage. They are in the coinage. While the Safeholdian monetary system is technically gold(and possibly silver) backed. It is not in the same way the you seem to be thinking. The bullion is right there. You can melt the damn coins down if you want to make some jewelry. So while this can have an effect on paper money. It will not affect the coinage.
Point. On the other hand you still have the pre-war exchange rates. Which were changing. Just more slowly. So this cannot be the only problem.
No inflation doesn't, it can, but it isn't guaranteed to. The purchasing power of currency is irrelevant. What matters is the exchange rate. Which can be linked to purchasing power. But sometimes isn't. See the difference between measurements of purchasing power parity(PPP) and exchange rates. Also in currencies backed by bullion the exchange rate is determined by bullion content. According the Wikipedia http://en.wikipedia.org/wiki/Iran Iran's GDP in PPP is three times the size of the GDP at nominal exchange rates. Notes: 1: PeterZ I had not thought to apply Gresham's Law. On the other hand that law is a magnification of an existing problem, not the creation of a new one. 2: Due to honesty, I must point out that in Duchairn's conversation with the Chancellor where he mentioned exchange rates, that he said they were seeing an increasing amount of clipped(coins with edges cut off) and underweight coinage. So that could explain part of the problem and Gresham's Law would apply there. On the other hand you still have the pre-war period to deal with. |
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Re: Am I missing something? | |
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by McGuiness » Fri Apr 10, 2015 9:45 am | |
McGuiness
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At the risk of oversimplifying things, pre-war there were three entities (that we know of) who could issue paper notes and have them considered as good as gold: the CoGA, Charis, and the Republic of Siddarmark - especially the House of Qwentyn. Those two countries were the only ones who weren't in debt to the church, which fanned Clyntahn's innate distrust for both, although he was right about heresy in Charis but for the wrong reasons.
Every other country's coinage basically traded according to the size/weight/metal composition of the coinage, and whether any of those coins were underweight or clipped. There would be local variations, like in Desnair where they mine a great amount of gold, so a gold Desnairan mark might buy less in the capital (where rich nobles live) and more out in the countryside. The amount of debt a country has amassed comes into play as well - note that King Rahnyld of Dohlar is heavily in debt to the CoGA, and the Dohlaran mark has lost 1/4 of its value since OAR. That was before the ICA beat the stuffing out of its main army and turned the Gulf of Dohlar into its own bathtub, so look for the Dohlaran currency to slip even more. Still, a gold coin is a gold coin, although with no standard set of weights and measures I'm sure that newly minted Dohlaran currency isn't worth what it used to be based its metal content and weight. Since it's highly improbable that Rahnyld is ever going to be able to repay the church, the promissory notes the church has issued him have been heavily discounted, and if it weren't for the jihad paying for so much military hardware, of which Dohlar is the CoGA's best source for quality weapons, it's likely the relatively small country whose economy is heavily based on trade - or was, until those pesky Charisians showed up (or are about to) would be in a very deep recession, if not a depression right now. Desnair is about to take a very heavy hit, since it will soon be cut off by land and sea from all of its northern trading partners, and the CoGA within its borders doesn't have the ability to make loans that wouldn't trade at a major discount to face value, since the CoGA is losing the war. The major defensive port of Iythria, which received a great deal of church investment is gone, and the apparent church investment in naval ordinance was reduced to producing schooners to raid Charisian convoys, but those are being destroyed along with the infrastructure to build them thanks to Merlin's "spies." The Desnairan army has just been utterly destroyed, with a heavy toll on the nobility, which will certainly have some political backlash, and should the CoGA demand that Desnair produce a new army, the Desnairan mark would likely be further debased and church paper in Desnair would trade at an even steeper discount. Inflation would be rampant, making it even more difficult to pay for Desnair to remain a factor in the land war. Stick a fork in them, they're done! Harchong just lost control of its foundries, which is a good thing for the workers, since they'll probably be paid a reasonable salary now instead of having the funds embezzled by the bureaucracy. Since the church is paying those workers and the CoGA mark is taking a beating, it's likely that those areas of Harchong will see rising inflation, possibly faster than wages. South Harchong is about to be cut off entirely by the ICN, so look for a severe recession/depression there, since church investment will dry up and trading can only be conducted over land or by canal. No more trading with North Harchong, Dohlar, or any of the countries of the northern continent of Haven. North Harchong won't feel as great a fiscal impact, since the church will still be running its foundries, but the inability to ship goods by sea will make coal, iron ore, food, etc. more expensive, and it just lost two major trading partners. Since it doesn't have as extensive a canal network as the Temple Lands or Siddarmark or even the Border States, its trade will be heavily impacted. Again, a major recession/depression is looming. The Temple Lands are a bit of a wild card since so much of them is made up of huge estates owned by families who are basically church dynasties. It can theoretically feed itself, although its northern location probably reduces it to one or at most two crops per year. (And two would be stretching it.) It has extensive canal networks that allow it to trade with the eastern parts of North Harchong as well as the Border States, but it lost the ability to ship its goods by sea years ago, and lost Siddarmark as a major trading partner and supplier of cheap Charisian goods in the SoS. So it's been suffering at least a mild recession for years, and its about to lose Dohlar, South Harchong, and Desnair as trading partners. Despite its efficient foundries and growing manufactories, as well as having the Temple and Zion within its borders to pay for the needed weapons and supplies for the jihad, its tithes have slipped steadily since its fortunes are so closely allied with the CoGA. Plus super rich dynastic families tend to save money rather than spend it, and the serfs who toil on the farms can't leave them and are basically slaves, so the social fabric of the country will soon feel some severe strain if it hasn't already. It's also the one enemy country that will likely be invaded, if only the region around the Temple and Zion. It's probably in a recession, but that can get worse in a hurry. We don't know enough about the Border States to make much more than a guess as to how their economies and currencies are doing, but they relied heavily on the transport of Charisian goods into the Temple Lands for income, and that ended with the SoS. That must have dealt them a heavy blow, but they're getting lucrative church contracts for weapons and supplies, as well as being the primary route for the invasion of Siddarmark and the transport of supplies to the invading armies. I'd assume that the northern Border States which have less agriculture due to the cold climate there are suffering more than the southern ones, but their economies have slipped since the jihad and the SoS, and the CoGA is going bankrupt. They relied quite a bit on transporting goods from Siddarmark (coal especially) to the Temple Lands, and that trade is gone, although a goodly amount of it has probably been made up by supplying the troops passing through and supplying the war effort. Since that's going badly, look for their economies to slip into recession and their currencies to take a beating as the church contracts (paid with paper) run out and real coinage becomes scarce and probably debased. Finally we have the CoGA itself, which issues its own coinage, along with a boatload of paper over the past few years. As of MTaT it was running an 18% deficit, not including the interest owed on the money it borrowed, and it had been running a deficit for three years. Its promissory notes are trading at well below face value, and those notes are only going to trade lower as the church continues to lose the jihad. Duchairn has taken some rather drastic measures to generate emergency cash, but some of those actions can only be done once, such as selling off church properties. Even worse, there are fewer and fewer people with deep pockets available to buy those properties, so they're going to sell at a significant discount. (The bankers in Siddarmark and Cayleb would be drooling if they could buy all that cheap real estate!) The war may stagger to an end simply because the CoGA goes bankrupt. Once people refuse to accept church paper, even if the Inquisition makes that a terminal offense, it won't be able to supply or feed its troops in the field. How Duchairn manages to feed the MHoG will be interesting, as the MHoG is likely to be as bad a swarm of locusts where the church's finances are concerned as it will be in the unfortunate lands it passes through. When the CoGA loses the tithes from South Harchong, Desnair, Sodar, and Dohlar this year, I don't see how Duchairn can pay for the jihad no matter how he juggles the budget and bludgeons the faithful. "Oh bother", said Pooh as he glanced through the airlock window at the helmet he'd forgotten to wear. |
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Re: Am I missing something? | |
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by JeffEngel » Fri Apr 10, 2015 10:21 am | |
JeffEngel
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Wandering a little from the topic, but anyway -
I don't know that Dohlar's economy was "heavily based on trade". Certainly it had a lot more trade and urban craftsmen per capita than most mainland countries, and heck, maybe more than most of the Out Islands. And Rahnyld had ambitions for a lot more Dohlaran trade, thus the navy sent off to die at Armageddon Reef. But plenty of Dohlar remains rural and agricultural away from the cities and shores. It's not a substantive quibble with the analysis otherwise. On the other hand, renewing smuggling with Charis will be so much easier in South Harchong now. That should help.
I'd not discount Temple Land shipping quite yet, or for the past. They've got very good internal or largely internal bodies of water: Lake Pei, Temple Bay, and another huge lake northeast of Temple Bay (not named on the map of Safehold). The lakes are isolated entirely from Charisian privateers. Temple Bay is accessible only through Hsing-Wu's Passage, so privateers would have to get there after the winter thaw and leave before the freeze if they dare at all. It's ironic - if the Archangels had deepened and widened the canals and rivers linking Temple Bay to the Gulf of Dohlar, the Temple Lands may have been the natural naval power Charis became.
I imagine the Church of Charis and what-may-as-well-be-called the Church of Siddarmark claim those properties and don't recognize Zion's sales of them. But the excess ones may well be on the market at reasonable, not salivation-triggering prices; these are churches that are happy being a lot more austere than Zion's. |
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Re: Am I missing something? | |
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by PeterZ » Fri Apr 10, 2015 12:06 pm | |
PeterZ
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The prewar period was a time where the mainland was exchanging gold coins for charisian goods. Charis turned raw materials into finished goods and sold them to the mainland. The effect was to reduce the proportion of gold residing on the mainland relative to gold is Charis. Sure, the CoGA collected tithes, but that's only 1 coin in 5 that Charis gained from the mainland. Since exports were a major revenue source for Charis, the net flows of gold from trade were greater than tithes paid to the mainland. That means that the steady decline of bullion backing the CoGA issued paper would be reflected in the exchange rates with Charis. That would be increasingly magnified by Gresham's Law as exchange rates reduced the value of CoGA paper relative to their actual gold coins. The reduction in value would be driven by the preference for hoarding gold and circulating paper. Holders of CoGA paper will accept larger discounts for that paper in exchange for gold Charisian marks if the supply of unshaved gold CoGA marks were even more expensive to purchase. I believe RFC was correct to state exchange rates were moving in favor of Charis well before the jihad. |
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Re: Am I missing something? | |
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by tootall » Sat Apr 11, 2015 12:42 am | |
tootall
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McGuiness At the risk of oversimplifying things, pre-war there were three entities..... etc.etc
Really good oversimplification- Fascinating how the Church came within an eyelash several places of taking out Siddermark altogether, and failed. And that failure (besides giving Charis a mainland ally and base) resulted in the destruction of the war material, and the trained troops, the Church needed to win the war. It also allowed Charis to build enough naval power to shatter the Church economy, while the church was distracted from naval matters. S o Schueler, turns out to have been the turning point, since a "coordinated" offensive would have worked. (Makes me wonder how completely MWW had worked out the way the map hinders the church -given a failed Siddermark Campaign-before he started writing all this. Almost leads one to believe that he'd fought these battles before OAR hit the shelves.) |
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Re: Am I missing something? | |
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by McGuiness » Sat Apr 11, 2015 3:14 am | |
McGuiness
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I'm sure RFC had the series pretty well mapped out before he wrote OAR. He's left plenty of wiggle room of course, especially where maps are concerned, and a series which originally had envisioned leaping ahead a generation per book became an arms race once lovable characters like Cayleb and Sharleyan came along, who were simply too vibrant and dynamic to kill off, even through old age. RFC had planned to do the same thing in the Honorverse, and in fact intended to kill off Honor and have the series jump ahead a generation when her son would be involved, but events in the Talbott Quadrant, his Torch books with Eric Flint, and the backlash from us cranky, obnoxious fans evidently caused him to back away from that storyline, so Honor didn't die at Trafalgar, I mean "The Battle of Manticore," she won it instead. (And we all feel better knowing that "The Salamander" is available on the off chance that the Solarian League somehow gets its act together, catches up on 30 years of technical advancement, and sends a fleet after the Manties that has a snowball's chance of winning.) Turning back to Safehold, we've said it before and we'll say it again, Clyntahn is his own worst enemy. He started the war almost single-handed, his inquisitors fan the flames and unite the opposition, he approves every bit of EoC military hardware the CoGA manages to steal or reverse engineer, and he stabs his own cause in the back by secretly having the Inquisition engage in such skullduggery as the SoS and ordering Kaitswyrth to attack DE with no idea what he was getting into. There's a lot more examples I could cite if I took the time to remember them all. As much as I hate the guy, Merlin hates him even worse, and even RFC is on record as saying "I really don't like Clyntahn very much." Despite the well deserved hatred, Clyntahn has done more to further Merlin's cause than anyone alive. He's destroying the Proscriptions, he's created a worldwide jihad that's spurring innovation on both sides, and he's taught hundreds of millions (200 million anyway) to despise the Inquisition as the group of murderous thugs it is. Eventually his actions will lead to the downfall, dismemberment, and ultimate destruction of the CoGA. (Just don't hold your breath, that will probably require a few generations.) To keep this post on topic I should point out that Clyntahn's actions have gutted the Church's income stream, killed the wyvern that fetched the golden rabbit, spawned a jihad that the church can't afford, caused the church to run a deficit for the first time in history, and have deeply devalued the Temple mark. Oh - and over 20% of the planet has either joined the CoC or the unnamed reformist church in Siddarmark, so they don't pay tithes to the CoGA anymore - and that 20% paid tithes well above those of the average Safeholdian! Not that any of his unintended benefits for the good guys will prevent me from shouting "Woohoo!" when the morbidly obese Grand Fornicator finally bites the big one in a hopefully most satisfactorily gruesome and painful fashion, and is sent off to spend eternity in Hell with Langhorne and his cronies... Good times! "Oh bother", said Pooh as he glanced through the airlock window at the helmet he'd forgotten to wear. |
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