Fictional monetary system: How's this sound...?

[Tarquelne]

Thanks! I'll be awhile digesting that. I have a quick question, and I apologize because I suspect there isn't a quick answer:

What if the government doesn't set an exchange rate between silver and shells? I specified that because I assumed it'd be required. From a quick reading of the above, perhaps it isn't. I don't see a benefit to the government, and it seems as if it opens the gov. to problems it'd rather not have.

A closed economy is the proper assumption, I believe.

 

[jackelgull]

The problems you pose is why, for simplicities sake, I propose that the central government's seat of power is located near the silver, allowing it to regulate the economy and that it's supply of silver be clumped in one location. I would imagine that the government would keep tight control over its currency only mining a certain amount of silver and injecting it into the economy when needed. The shells would be less regulated, I imagine due to distance and lack of worth. And while there might be more than there should be in the economy, there wouldn't necessarily be an abundance to them due to scarcity and government regulation. I imagine that in the cities would have an open market for the buying and selling of goods with shells, while more rural parts of the country, there would be bartering.

 

[Hygro]

Thanks! I'll be awhile digesting that. I have a quick question, and I apologize because I suspect there isn't a quick answer:

What if the government doesn't set an exchange rate between silver and shells? I specified that because I assumed it'd be required. From a quick reading of the above, perhaps it isn't. I don't see a benefit to the government, and it seems as if it opens the gov. to problems it'd rather not have.

A closed economy is the proper assumption, I believe.

My pleasure. Closed economy makes economics a lot simpler

Say there's no fixed exchange between shells and silver, and it's determined by the market. Are they both money? Does the government accept taxes in both, or just one? Are both legal tender for settling all debts? Are there banks? Can they issue loans in both, or just one?

 

[jackelgull]

Thanks! I'll be awhile digesting that. I have a quick question, and I apologize because I suspect there isn't a quick answer:

What if the government doesn't set an exchange rate between silver and shells? I specified that because I assumed it'd be required. From a quick reading of the above, perhaps it isn't. I don't see a benefit to the government, and it seems as if it opens the gov. to problems it'd rather not have.

A closed economy is the proper assumption, I believe.

A so like ancient China it produces all the goods it needs?

And if the government doesn't set an exchange rate, then you will find that there will a lack of a merchant class because where is the motive? No matter how many shells you gather you will never be "wealthy" as I understand it. That will subsequently prevent the country from creating more advanced forms of a monetary system. Unless of course the wealthy take it upon themselves to be merchants, but again, where is the motive? They don't need anymore wealth to live a life of luxury.

 

[Hygro]

A so like ancient China it produces all the goods it needs?

And if the government doesn't set an exchange rate, then you will find that there will a lack of a merchant class because where is the motive? No matter how many shells you gather you will never be "wealthy" as I understand it. That will subsequently prevent the country from creating more advanced forms of a monetary system. Unless of course the wealthy take it upon themselves to be merchants, but again, where is the motive? They don't need anymore wealth to live a life of luxury.

From your line of thinking silver would be like land in the Roman empire, and shells would be like their money. Merchants were motivated to amass large fortunates to become subsistence farmers, really wealthy ones with slaves etc, buying land with large sums etc. But that's because the land earns interest, whereas silver in Tarquelne's world might, or might not.

There would be merchants, but their aspirations would be to become something beyond merchantist. Their goal would be to facilitate more wealth for the existing gentry (shells for slaves, slaves for silver, etc) that the gentry need to show off to one another, in exchange for a spot amongst them.


It really comes down to how capitalist or not this world is. Where does status actually come from? Is it accumulated money or something else?

 

[jackelgull]

From your line of thinking silver would be like land in the Roman empire, and shells would be like their money. Merchants were motivated to amass large fortunates to become subsistence farmers, really wealthy ones with slaves etc, buying land with large sums etc. But that's because the land earns interest, whereas silver in Tarquelne's world might, or might not.

There would be merchants, but their aspirations would be to become something beyond merchantist. Their goal would be to facilitate more wealth for the existing gentry (shells for slaves, slaves for silver, etc) that the gentry need to show off to one another, in exchange for a spot amongst them.


It really comes down to how capitalist or not this world is. Where does status actually come from? Is it accumulated money or something else?

Actually, some of my points of confusion came from distribution and source in economy. If we are to assume that the government wants to keep silver out of plebeian hands then it must be severely regulated one way or another. So how is it distributed to the elite and how are the elite decided? I am going to theorize a world in which the government mines silver and not it can mine silver. Then it distributes silver to its elite, whom I will assume because in low tech empires, they are generally the elite, are the wealthy land owners in exchange for support and an army. The land owners then use silver to buy slaves and land. That seems like a plausible set up for the silver currency in the empire. Now in exchange for this empire not to collapse from inflation shells need to be regulated. The original poster has mentioned how shells aren't everywhere so scarcity works as a regulator, and they are injected in the economy each year by being washed up and found by those who live nearby.

Then we get into the problem of lending and credit which I am not sure how to solve. If we assume that land and slaves two profit reaping commodities belonging to the rich and powerful can only be traded for silver, than what use is taxation to the government? They own all taxable wealth. And who owns the slaves to sell? If this is a closed system, then how is labor bought? Are we to assume that the wealthy enslave the landless poor who were unlucky enough to not be born with any land. And how would cities form? Like, I know not all the land would be claimed by wealthy land owners, but good city sites would. How would those without homes gather in one spot when the land belongs to someone else? There might be taxes dealing with that, but shells would not be necessary for the rich when they have silver. But then cities make manufactured goods and those can be collected as taxes. God, I am rambling and confusing myself more and more as well as making less sense. I should stop now.

 

[Hygro]

Hmmm... in dark ages Europe a surprisingly significant portion of the suffering was caused by centuries of tight money policies--princes would hoard old Roman treasure troves. These coins were kept away from the masses, not by decree but by practice. They were used almost exclusively to claim Roman-backed authority, but mostly to pay ransoms to one another.

 

[Tarquelne]

Still digesting ... and I see there's more to digest.

Say there's no fixed exchange between shells and silver, and it's determined by the market. Are they both money?

I think metals would be a "medium of exchange," and the shells would be money.
For taxes the government would want metal, labor, or goods.

Are both legal tender for settling all debts?

No, since shells are either impractical or perhaps not allowed with some usages.

Are there banks? Can they issue loans in both, or just one?

Few or no formal banks, but there are people and organizations interested in loaning money. Unregulated, so they'd do whatever they wanted. I'm hoping they'd be uninterested in working with shells.

Overall, I'm shooting for as little regulation as I can get away with without having the system bend itself to a different state.

A so like ancient China it produces all the goods it needs?

Needs, yes. There's foreign trade, but focused on luxuries and tightly controlled. (ATM all sea-going trade, for example, is conducted via gov-owned boats. Merchants bid for shares/cargo space.)

The land borders are porous, but there's not anything traded markedly different from interior products.

My guess is that shells wouldn't be at all popular outside the country ... though the tech is low enough that people, as they did historically, might give them significant intrinsic value as ornaments. But still ... not much. So barter would be common.

So I do see silver (or other metals) leaving the country one way or the other.

OTOH, what if silver and gold tended to come into the country via foreign trade? Finished goods or commodities for gold and silver. Or "Take this vase, give us that gold, and we won't kill you."

But I suppose the gov. just seizing and running a lucrative mine is the most likely scenario, foreign or domestic. At least if it's reasonably close.

I'd prefer the gov. introduce precious metals into the system "organically". ie, somebody doesn't say, "I think we need to loosen the money supply." Rather, it "just happens." How that'd be, I don't know. Just paying for things? I suppose this is the "source" issue you mentioned?

I guess that would fit well with there not being much metal in circulation, since there isn't all that much the government would want to pay metal for. They'd employ a lot of labor, but want to give them shells.

What would they offer metal for? Wages for high officials, military officers, and tithes to temples.
Payments for skilled artisans for their labor.
Payments for slaves and other relatively expensive goods. (Quite a bit of the military equipment ... horses.)

Metal might be offered for foreign goods, then come back into the country when foreigners buy things.

And if the government doesn't set an exchange rate, then you will find that there will a lack of a merchant class because where is the motive? No matter how many shells you gather you will never be "wealthy" as I understand it.

My thought is the lower-order of merchants who aren't allowed metal could still become much more wealthy than the average person, even if the wealth is only in shells. Such merchants *could* boot-strap their way toward metal-using merchant via accumulating the shells to get something that can be traded for metal. Or bribing the right people.

That will subsequently prevent the country from creating more advanced forms of a monetary system.

That'd be super. Exactly what's wanted.

There would be merchants, but their aspirations would be to become something beyond merchantist. Their goal would be to facilitate more wealth for the existing gentry (shells for slaves, slaves for silver, etc) that the gentry need to show off to one another, in exchange for a spot amongst them.

Generally in an informal manner? (Not "I'm a local lord and these are the merchants I sponsor.", but rather, "I'm a local lord and these are the merchants who operate in my area, and whom I buy from. I'm glad I don't have to go fleece all the peasants one by one!")

It really comes down to how capitalist or not this world is. Where does status actually come from? Is it accumulated money or something else?

I'm thinking not very capitalist, in that the government owns a great deal, various religious organizations own a great deal, and aristos own most of the rest. Wealth tends to accumulate in the form of land or slaves or goods. There's little social mobility, and innovation is actively discouraged. (At least where it doesn't mean a great deal of additional wealth for someone already wealthy.)

Edit: "Crony Capitalism" might fit well. There's often a presumption of a need for government permission. "You're allowed to go here and trade silver for cattle ... you're not."

I don't think "state capitalism" fits. The central state is very powerful, but it has to share a lot of power and wealth with religious organizations and, to a lesser extent nobles (I think "nobles" are generally just families of great wealth.)

 

[Tarquelne]

Coming to realize the depths of my ignorance, I started looking for books and papers.

The good news I found a paper addressing some of my questions.
The bad news ...

Frankly I am puzzled about the relation between local copper coinage and silver and gold issues. It seems the value of the former was determined by the state, whereas gold and silver was
subject to the market, since from time immemorial people distrusted the debasement of those metals in coins of the realm.

is that the author is puzzled.

He also notes that nomadic people seemed to have strongly tended to prefer silver, while "settled" peoples preferred gold. He has no explanation for that, either.

 

[Valka D'Ur]

Silver is lighter, and more useful for making everyday objects?

 

[gay_Aleks]

Perhaps you could insert an explanation that by the use of silver, they're worshipping an ancient God/defend themselves from curses/greed/they realised gold is brittle and overrated and that silver is best?

And that city-dwellers use gold because they're not some heathen primitives who believe in cults and are rightful followers of the One True Religion.

 

[Cutlass]

Gold has always been far rarer than silver. So you need a lot of wealth before gold as currency makes much sense. And while the debasement of gold is detectable, it takes expertise to do so.

 

[Tarquelne]

Silver is lighter, and more useful for making everyday objects?

Gold has always been far rarer than silver. So you need a lot of wealth before gold as currency makes much sense. And while the debasement of gold is detectable, it takes expertise to do so.

Good points. (He was talking pre-currency, but I think the rarity point still holds. Not everyone can place a huge value on something they've never seen.)

I was thinking there might be something with hardness or workability, but there doesn't seem to be enough of a difference.

 

[Cutlass]

If you are going to have commodity money, gold has a lot to recommend it. But the fact that there never has been all that much of it around has always been a downside. It's been estimated that all of the gold ever to be mined by humans since the dawn of time to the present would make a cube only 68 feet on a side.

 

[warpus]

Why make priests upper class?

 

[Flying Pig]

Perhaps out in the boonies price controls are unworkable and largely unenforced, but apply in the cities? IIRC the Roman government wanted to keep the price of grain down, which is something I'm interested in, too. But that was more about controlling the supply, I believe, than simply setting prices.

In the Republican period it was both - the state bought grain and sold it at a price determined by statute to those sufficiently poor. Later in the Republic it was given out freely to such people, although the state continued to ensure supply.

 

[Tarquelne]

Why make priests upper class?

I'm cynical.

 

[Tarquelne]

How about making the shells represent X amount of grain? (Since the government gets to determine X, shells would be a grain-backed "currency"?) The government (or cronies) would hold - or and perhaps own outright - most of the grain harvested. The shells would double as a ration tokens.

I've read that in ancient times while perishables were often bartered for perishables, grain was often exchanged for basic manufactured goods. Pegging the shells to grain strikes me as significantly more plausible than my previous attempts. But then, I'm still discovering how much I don't know about all this ...

 

[Hygro]

Feudal Japan tied their money to rice. Why not?

 

[Flying Pig]

Doesn't work so well with a banking economy - the minute there's a good harvest, the whole country will rush to pay off their debts, and savings plummet.