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[Spoilers] When will we see fiat currency and modern econ?

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[Spoilers] When will we see fiat currency and modern econ?
Post by johnmoser   » Sat Jan 19, 2019 7:23 pm

johnmoser
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Will we see a move to fiat currency and modern economics?

Thus far there's been a lot of focus on the heavy expenses of war. War costs a lot, in real terms: you can't just print money and magic up productivity; you actually need productive capacity backing what you spend. It wouldn't make sense to introduce fiat during the jihad because it doesn't help.

Printing money works in the real world when you have a liquidity crisis—people in a depressed area (poor inner cities with extremely-high unemployment and poverty) want to work, but people are poor and not spending, so those people don't work and don't produce wealth. Throw money at the problem and it fixes itself.

This doesn't work when your economy is healthy and you want everyone to be a billionaire: where does the labor come from? How are you making all this stuff you're going to buy?

So far, I know the proscriptions prohibit the adulteration of gold—and the Church. That doesn't mean you can't print paper. In fact, the Church violated the proscriptions already; fiat currency avoids adulteration because you don't have to alloy your gold: simply keep your unadulterated marks as reserve in case the State wants a hard-cash guarantee, or in case you want to trade with Mother Church.

It would do well to not call the new currency a substitute for gold, as well. It's not a Mark Note, Pound, or Peso de Ocho; rather you would want to call the note something like an Imperial Euro.

In the political sphere, it would make sense for other nations to distrust the Charisian Imperial Euro and not want to trade their gold for paper or, God forbid, an entry in the ledger of the Central Bank of Charis. Instead, Charis might suggest that, while they can certainly facilitate trade by exchanging Charisian notes for silver and gold in mercantile matters, the Charisian empire will happily charter an international monetary council operated by a board of members appointed by with authority independent of the rulers of each Kingdom for the purpose of identifying the fiat currencies in which they have confidence and their rates of exchange.

Fiat currency negotiations as such have a few politically-interesting aspects.

If a currency is considered weak, it can't import as much, and so the affected market sells a lot of labor and exports many products, acquiring wealth. If the currency is strong, it can purchase much, thus also acquiring wealth. Thus there will be a need to understand the economics of currencies in the domestic and foreign contexts.

The thing I said about fiat currencies and liquidity crises above is paramount: a fiat currency allows you to expand currency to meet your labor force. Your supply of gold doesn't restrict your level of wealth, and so a large middle-class can form—so long as minimum wages are managed and other issues are handled.

In the real world, I've been pushing to align the United States minimum wage to the 1950-1970 levels of 2/3 GNI/C. Australia's is currently 58% GNI/C. This is because of a minimum wage asymmetry (a topic of a paper I'm writing).

As minimum wage rises, other wages increase; labor shifts from some high-productivity jobs into other jobs as less labor can be purchased at the high end, because low-end labor is becoming more-costly; and low-end labor shifts to higher-productivity jobs, with once-costly forms of technology becoming less-costly than the labor-based alternatives.

As minimum wages fall, however, the lower-middle-class and up become swiftly capable of purchasing more low-wage labor. More purchasing power means more job availability, drawing immigrant labor and boomer generations. Population expands, and middle wages spread and shift downwards, amplifying the effect. The result is poverty and lower productivity.

The economics of fiat currency, debt management, inflation management, and a strong, structural minimum wage thus act as an incredibly-powerful economic driver pushing productivity forward and, thus, advancing technology.

Which is probably why Langhorn and Bedard only gave them gold.

If you really want to fuck shit up, integrate a small Universal Dividend. That's a type of policy I created which implements a Negative Income Tax as a social insurance, removing all the complexity and making it self-managing.

Think of it like this: as these industrial revolutions continue, people will start to move jobs around. Countries will start specializing because the economy of scaling up e.g. the building of enormous mercantile ships makes it cheaper to have only one or two of such manufactories in the world. Some entire local areas will face high unemployment and it will never go away.

Well, that's happened in the real world.

If we ensure that every step of wealth-gain pays out to everyone, we can fix this. Specifically, if we take, say, 2% of all earned wage income and business profits specifically to account, divide up equally among all adults, and then pay in even monthly (or twice-monthly—every two fivedays) increments, then the poorest will have a net-gain of money, the richest have a small net-loss, and those areas of unemployment have spending which creates local economic activity and jobs, further increasing overall productivity.

In Maryland, United States, such a program would pay around $1,500-$1,800 in one year to every adult. This pours around a net $465,000,000 into Baltimore City, mainly in the most poverty-stricken, highest-unemployment areas, creating 13,000-15,000 local jobs at $15/hr plus 50% cost of employment overhead. Baltimore has around 17,000 resident unemployed.

Because this puts idle workers back to work, it increases productivity: such a program isn't net-neutral, but rather a GDP boost. It also doesn't overheat an economy because its impacts are on the dead and destroyed areas, not the ones running hot.

The impact of fiat currency, modern monetary theory, modern trade theory, and a liberalization of minimum wage and social insurances would be enormous. Imagine what happens when Charisians stop trading their labor for gold and, instead, trade their labor for labor—Charisian labor has become far more productive than Charisian gold.

(And yes, for those who are going to ask, I'm doing the same thing to the real world—we have a few things in the pipeline over here that will…essentially do to the United States something similar to what Merlin's intervention did to Charis.
300 years of advancement in a generation will be interesting.)
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