A question about the Crown's debts.

[hodorisfaclessman]

Overall I feel LF was actualy responsible for keeping the whole kingdom afloat financialy esp given he massively increased the crowns incomes by kicking out dull lesser lordlings and replacing them with competent guys in the tax collection posts.

Robert as we know liked throwing feasts and tourneys which seemingly are ruinious affairs plus you have the cost of the greyjoy rebellion ,LF seemed to have a system set up where he was using the crowns income smartly so it grew but due to roberts overspending it was enver enough.

[OldGimletEye]

There are some misconceptions in this thread. I might even make an entirely new thread about this, because I don't want my response to be too buried. The debt was most certainly not caused by Robert's spending alone. There's just no way. But a lot of people believe that GRRM doesn't know what he's talking about in terms of money, because in their heads the sheer amount of debt the crown is in could not be possible. I think it very well is, and you owe those numbers to Baelish. Petyr did a lot to fuck with the crown's financial stature, and it was mostly caused by Petyr handling the economy well.

LF focuses on stimulating the economy by investing, excessive spending and with an active fiscal policy. He ventured into deficit spending, but by all accounts the realm was financially stable - demand was high, spending was high and, with the plentiful harvest, supply was high. Deficit spending and accumulative debt is not necessarily a huge problem as long as it is matched by a growth in GDP, which is what Littlefinger seemed to be able to sustain.

What LF did was an extraordinarily viable economic model in the short run. As a long-term model, especially for an entire government, it fails. Which was the point. When LF left King's Landing, he did so at the perfect time. At the time of Petyr's departure, the Crown needs to recover from a huge and costly war, the Crown's debt payments are overdue, supply is dropping due to the inevitable Winter, and the Crown can no longer rely on LF's talents.

I am not too sure about “medieval Keynesianism”. Looking at your basic old school IS/LM diagram, it would seem to me that the LM curve would be quite steep because you wouldn't have lot of developed financial assets for people to by buy in a medieval type economy. I would think people's demand for real money balances (or real gold balances really) would remain quite high. And I don't see the boys and gals down at Casterly Rock doing an accommodating monetary policy.

One of the problems medieval monarchs had was borrowing at reasonable interest rates. Even in good times it would appear monarchs had to borrow around the 10%-15% range. I would have to wonder kind of rate of return LF was getting on his various projects.

In modern terms, the debt to GDP ratio in Westeros is probably quite low. If Westeros is anything like England at about the 14th or 15th century it would probably have a GDP per capita somewhere between 700 USD to 1000 USD. If you think that that Westeros has population say between 20 million to 40 million you'd get a total GDP somewhere between 14 billion USD to 40 billion USD. Assuming that 1 Dragon is about 1,000 USD (and this maybe very high) that would give you a debt/GDP ration anywhere from 42% on the high end to 15% on the low end.

The problem that medieval governments had though is that their tax bases were often small because of inadequate systems of public finance. Accordingly, it was often difficult for them to carry large public debt loads.

Overall, I'd agree with your assessment that LF probably had a lot to do with the Crown's debt. I would be doubtful though that LF's schemes were realistically good for the Westeros economy. Although, I am quite sure LF did very well.

[Jaak]

I was just pointing out the corruption of the City Watch. And yes, you're right...because the numbers are raised from 2,000 to 6,000 after Robert dies. What's your point concerning anything prior to that?

The Crown debt was quoted at 6 million dragons when Eddard arrived as Hand. The Watch was still 2000 men - it was not on the pay of Watch that Robert had borrowed the sum.

Huh? A corruption scheme about hiring too many people to work the dungeons that went on for centuries? Juicy. Who's behind that?

It's not about an increase in payroll, it's the increase of actual employees. Did you read what I wrote? A lot more people worked the dungeons than necessary....which leads to increased spending where it's not necessary. My point is that LF created a lot of waste in small areas, like the City Watch and the Red Keep's dungeon,

The waste at chaplain´s wages was not created by Petyr.

My point is that it was relatively difficult to ask the increase of employees, because of the danger that King or Hand asks questions and discover that even the existing employees are more than needed. What might be easier is to keep the payroll unchanged, hope that the King and Hand do not pay attention to a small cost that has always been there and the same... and not replace the unnecessary employees when they retire.

[Maid So Fair]

What seems very curious was that Aerys's government was actually in financial sound position by Ned's account. We know that Aerys was fond of conceiving of grand and costly schemes (even if he never ended up carrying them out), and that the first thing Tywin did as Hand was to repeal all Egg's reforms that took the power away from the nobles and gave it to the people (and the Crown?), which probably meant lower taxation for the nobility. Duskendale rebels because the taxes (of a major port) are seen as too high - they might have just been greedy, but maybe this was actually stifling the trade? And crucially, any taxation fo trade still seems to go through the coffers of the noble families that own the city/port, like the Lannisters, Hightowers, Darklyns, Manderlys etc - we have no actual royal charters, no cities paying taxes directly to the Crown. Where is the IT getting its income from?

[Guard of the Rainking]

So Littlefinger probably has the money, so where did he put it? Secret accounts on Ibben?

[OldGimletEye]

What seems very curious was that Aerys's government was actually in financial sound position by Ned's account. We know that Aerys was fond of conceiving of grand and costly schemes (even if he never ended up carrying them out), and that the first thing Tywin did as Hand was to repeal all Egg's reforms that took the power away from the nobles and gave it to the people (and the Crown?), which probably meant lower taxation for the nobility.

I'd be curious if this was part of Egg's policies. Historically, medieval monarch's had a helluva time raising taxes upon the nobility.

[Bright Blue Eyes]

What seems very curious was that Aerys's government was actually in financial sound position by Ned's account. We know that Aerys was fond of conceiving of grand and costly schemes (even if he never ended up carrying them out), and that the first thing Tywin did as Hand was to repeal all Egg's reforms that took the power away from the nobles and gave it to the people (and the Crown?), which probably meant lower taxation for the nobility. Duskendale rebels because the taxes (of a major port) are seen as too high - they might have just been greedy, but maybe this was actually stifling the trade? And crucially, any taxation fo trade still seems to go through the coffers of the noble families that own the city/port, like the Lannisters, Hightowers, Darklyns, Manderlys etc - we have no actual royal charters, no cities paying taxes directly to the Crown. Where is the IT getting its income from?

Tywin did something very nasty to Duskendale - cutting the royal tariffs for KL, Oldtown and Lannisport. That's redirecting trade there. For the crown it's neither a big gain nor a big loss, since their winnings are eaten up by the losses elsewhere. For Hightower and Lannister, it's a net gain. For Duskendale, it is ruinous. Hardly anybody will trade at Duskendale instead of KL now.

Furthermore, the taxes for Duskendale were most likely established when Duskendale was still a thriving port, before KL rose to prominence, making the matters worse.

Anyway, in a more general way, every port pays tariffs directly to the crown. Manderly is able to pay for a fleet with the additional funds he has after cutting the payments of White Harbour to KL.

Probably a bunch of other high value sources of income all over Westeros as well. Tolls and tariffs and fines and fees. Lots of money for just a bit of administration.

[jarl the climber]

What seems very curious was that Aerys's government was actually in financial sound position by Ned's account. We know that Aerys was fond of conceiving of grand and costly schemes (even if he never ended up carrying them out), and that the first thing Tywin did as Hand was to repeal all Egg's reforms that took the power away from the nobles and gave it to the people (and the Crown?), which probably meant lower taxation for the nobility. Duskendale rebels because the taxes (of a major port) are seen as too high - they might have just been greedy, but maybe this was actually stifling the trade? And crucially, any taxation fo trade still seems to go through the coffers of the noble families that own the city/port, like the Lannisters, Hightowers, Darklyns, Manderlys etc - we have no actual royal charters, no cities paying taxes directly to the Crown. Where is the IT getting its income from?

I thought that all the income generated in KL went directly to the Crown, plus they get a cut from all the feifdoms in the Crownlands like Duskendale, Dragonstone, etc. I think that the Crown imposes certain duties on specific goods in all the ports, like Wool, Dyes and Wine, that they have their own officials and that this in addition to any taxes the local Lord might impose. I remember that in ASOS, Redwyne was quite pleased with simply getting a reduction on the taxes imposed on Arbor wines. Under Littlefinger it seems like the Crown was engaged in commodity speculation as well as usury.

Another Littlefinger also seemed to do is to sell appointments. Being a custom official could be quite lucrative for instance. In other instances it seemed like some appointments were no show jobs like all the turnkeys and gaolers positions that the crown was paying for that did not really exist.

[Blackfish Tully]

So Littlefinger probably has the money, so where did he put it? Secret accounts on Ibben?

Littlefinger has some of the money more than likely but the rest is gone because of the damages during the war. The Iron Throne was heavily invested in commodities (see following quote) and the war would have destroyed a great deal of the products the Iron Throne was invested in. Also the Iron Throne had lent out a huge amount of money (the Antler Men for one but probably people all across the seven kingdoms) and the war has probably ruined or killed many of them so payment on those loans are probably nonexistent.

"he bought wagons, shops, ships, houses. He bought grain when it was plentiful and sold bread when it was scarce. He bought wool from the north and linen from the south and lace from Lys, stored it, moved it, dyed it, sold it. The golden dragons bred and multiplied, and Littlefinger lent them out and brought them home with hatchlings."

[Guard of the Rainking]

Littlefinger has some of the money more than likely but the rest is gone because of the damages during the war. The Iron Throne was heavily invested in commodities (see following quote) and the war would have destroyed a great deal of the products the Iron Throne was invested in. Also the Iron Throne had lent out a huge amount of money (the Antler Men for one but probably people all across the seven kingdoms) and the war has probably ruined or killed many of them so payment on those loans are probably nonexistent.

"he bought wagons, shops, ships, houses. He bought grain when it was plentiful and sold bread when it was scarce. He bought wool from the north and linen from the south and lace from Lys, stored it, moved it, dyed it, sold it. The golden dragons bred and multiplied, and Littlefinger lent them out and brought them home with hatchlings."

Yeah. That's what I meant by "the money". Probably should have phrased it better.

[F The King]

I am too not sure about “medieval Keynesianism”. Looking at your basic old school IS/LM diagram, it would seem to me that the LM curve would be quite steep because you wouldn't have lot of developed financial assets for people to by buy in a medieval type economy. I would think people's demand for real money balances (or real gold balances really) would remain quite high. And I don't see the boys and gals down at Casterly Rock doing an accommodating monetary policy.

One of the problems medieval monarchs had was borrowing at reasonable interest rates. Even in good times it would appear monarchs had to borrow around the 10%-15% range. I would have to wonder kind of rate of return LF was getting on his various projects.

In modern terms, the debt to GDP ratio in Westeros is probably quite low. If Westeros is anything like England at about the 14th or 15th century it would probably have a GDP per capita somewhere between 700 USD to 1000 USD. If you think that that Westeros has population say between 20 million to 40 million you'd get a total GDP somewhere between 14 billion USD to 40 billion USD. Assuming that 1 Dragon is about 1,000 USD (and this maybe very high) that would give you a debt/GDP ration anywhere from 42% on the high end to 15% on the low end.

The problem that medieval governments had though is that their tax bases were often small because of inadequate systems of public finance. Accordingly, it was often difficult for them to carry large public debt loads.

Overall, I'd agree with your assessment that LF probably had a lot to do with the Crown's debt. I would be doubtful though that LF's schemes were realistically good for the Westeros economy. Although, I am quite sure LF did very well.

I'd say your first point is true to an extent. There aren't many financial assets avalaible, but in Westerosi society the majority of people are poor smallfolk. Their demand for money may be high, but it doesn't matter what they want. They're peasants, so they're not going to get it. Although it's worth mentioning that, while I admit I know very little about medieval history, I would assume that the prices of certain commodities were very high compared to what they would be now, adjusted for inflation, because of the lack of technology. For example, food is pretty expensive due to the fact that there's no technology to mass produce anything. We see that in Brienne's AFFC chapters. That's an aspect of the economy that I hadn't been considering.

I'm uncomfortable making up an exchange rate between a Dragon and USD, because GRRM really doesn't give us much to work with in terms of figuring that out. I know that different monetary values are mentioned more frequently in the Dunk and Egg novellas (I didn't read them yet, I've found this via Google). At one point, sausage and ale was one copper. A full meal with four ales was one stag (but whoever paid for it got a "fistful of coppers" for change), and a tent costed one silver (and whoever paid for it got 22 pennies and 3 coppers as change). The Wiki tells me that one stag is equal to 56 pennies, and one Dragon is equal to 210 stags, or 11,760 pennies. And....I don't really know where I'm going with this, I can't find anything that would tell me the exchange rate to USD.

[Blackfish Tully]

So Littlefinger probably has the money, so where did he put it? Secret accounts on Ibben?

Littlefinger's money is probably right out in the open. He is probably the silent partner or secret owner of multiple business or enterprises. There is probably not any type of business taking place in Westeroes that Littlefinger does not have some kind of direct or indirect hand in. It's the way to make tons of money but also the way to collect tons of information which in some ways is more important then the money.

[jarl the climber]

Littlefinger has some of the money more than likely but the rest is gone because of the damages during the war. The Iron Throne was heavily invested in commodities (see following quote) and the war would have destroyed a great deal of the products the Iron Throne was invested in. Also the Iron Throne had lent out a huge amount of money (the Antler Men for one but probably people all across the seven kingdoms) and the war has probably ruined or killed many of them so payment on those loans are probably nonexistent.

"he bought wagons, shops, ships, houses. He bought grain when it was plentiful and sold bread when it was scarce. He bought wool from the north and linen from the south and lace from Lys, stored it, moved it, dyed it, sold it. The golden dragons bred and multiplied, and Littlefinger lent them out and brought them home with hatchlings."

If you consider the price of food in KL that Tyrion gave us, which he considered to be exorbirant, Littlefinger probably made a killing off the war.

[Maid So Fair]

I'd be curious if this was part of Egg's policies. Historically, medieval monarch's had a helluva time raising taxes upon the nobility.

Well, whatever he was doing I think its safe to assume it would require (possibly significant amounts of) capital. Raising taxes for the nobles solves that and also explains why he was so unpopular among the nobility.

[OldGimletEye]

I'd say your first point is true to an extent. There aren't many financial assets avalaible, but in Westerosi society the majority of people are poor smallfolk. Their demand for money may be high, but it doesn't matter what they want. They're peasants, so they're not going to get it. Although it's worth mentioning that, while I admit I know very little about medieval history, I would assume that the prices of certain commodities were very high compared to what they would be now, adjusted for inflation, because of the lack of technology. For example, food is pretty expensive due to the fact that there's no technology to mass produce anything. We see that in Brienne's AFFC chapters. That's an aspect of the economy that I hadn't been considering.

I'm uncomfortable making up an exchange rate between a Dragon and USD, because GRRM really doesn't give us much to work with in terms of figuring that out. I know that different monetary values are mentioned more frequently in the Dunk and Egg novellas (I didn't read them yet, I've found this via Google). At one point, sausage and ale was one copper. A full meal with four ales was one stag (but whoever paid for it got a "fistful of coppers" for change), and a tent costed one silver (and whoever paid for it got 22 pennies and 3 coppers as change). The Wiki tells me that one stag is equal to 56 pennies, and one Dragon is equal to 210 stags, or 11,760 pennies. And....I don't really know where I'm going with this, I can't find anything that would tell me the exchange rate to USD.

I did a very crude estimate of what a Dragon would be worth roughly in USD. I got about 630 USD or so. Although, I would admit there are some problems with that estimate like 1) the price of wheat was inflated in KL, 2) I didn't account for income and substitution effects, and 3) the conversion ratio between stags and Dragons is based only semi-cannon sources. Here is the link http://asoiaf.westeros.org/index.php/topic/115963-how-much-is-40000-gold-dragons-worth/?p=6151278

A more accurate estimate might be possible by looking at prices in medieval England or Europe or something. And if you had some method of accounting for substitution effects. Over time you'd expect the proportion of certain types goods to fall as society got richer. For instance, as technology improves the price of wheat should fall. You'd have two effects from this. One would be an income effect and the second would be substitution effect. Over time, I think you'd expect, the rate of substitution to fall until the proportion of wheat consumed would fall, although its general level of consumption would be higher.

[Blackfish Tully]

If you consider the price of food in KL that Tyrion gave us, which he considered to be exorbirant, Littlefinger probably made a killing off the war.

Littlefinger knew the war was coming (because he was the one that started it ) so he would have had his personal fortune set up to maximize profits for a war time economy but he would have had the Iron Thrones finances set up so that they would maximize their losses during a war time economy. As Master of Coin he could easily manipulate the Crown finances so that a war would be devastating to it's profits and make it seem like he had nothing to do with it.

[Bright Blue Eyes]

I'd say your first point is true to an extent. There aren't many financial assets avalaible, but in Westerosi society the majority of people are poor smallfolk. Their demand for money may be high, but it doesn't matter what they want. They're peasants, so they're not going to get it. Although it's worth mentioning that, while I admit I know very little about medieval history, I would assume that the prices of certain commodities were very high compared to what they would be now, adjusted for inflation, because of the lack of technology. For example, food is pretty expensive due to the fact that there's no technology to mass produce anything. We see that in Brienne's AFFC chapters. That's an aspect of the economy that I hadn't been considering.

Most of the people will be reasonably wealthy, but still have no coin. That applies to basically anywhere except in the cities. Taxes are paid in kind or in labor, barter is rife, there simply is no coin available.

[Jaak]

What seems very curious was that Aerys's government was actually in financial sound position by Ned's account. We know that Aerys was fond of conceiving of grand and costly schemes (even if he never ended up carrying them out),

Did he get to the point of raising revenues to pay for them, and then store up the money when he cancelled the scheme?

[Poodle Pup From Astapor]

I did a very crude estimate of what a Dragon would be worth roughly in USD. I got about 630 USD or so. Although, I would admit there are some problems with that estimate like 1) the price of wheat was inflated in KL, 2) I didn't account for income and substitution effects, and 3) the conversion ratio between stags and Dragons is based only semi-cannon sources. Here is the link http://asoiaf.westeros.org/index.php/topic/115963-how-much-is-40000-gold-dragons-worth/?p=6151278

A more accurate estimate might be possible by looking at prices in medieval England or Europe or something. And if you had some method of accounting for substitution effects. Over time you'd expect the proportion of certain types goods to fall as society got richer. For instance, as technology improves the price of wheat should fall. You'd have two effects from this. One would be an income effect and the second would be substitution effect. Over time, I think you'd expect, the rate of substitution to fall until the proportion of wheat consumed would fall, although its general level of consumption would be higher.

Medieval food and goods were relatively much more expensive (because there were no pesticides, no machinery). On the other hand, labor was cheap. A skilled medieval professional like a master mason or carpenter could buy 500-1000 bushels of corn for his annual salary, likely less since few would be employed full time. Today, a similarly above average american professional could afford 10-20 000 bushels of corn for his annual income after taxes.

And low rank servant would work mainly for food and a tiny annual salary that could buy him just a few bushels of corn.

So it's quite apples and oranges. A Westerosi spending a silver stag on a bushel of corn is not the same as a modern American spending $3 on that same amount of corn.

Also, those prices were from King's Landing when it was starving, those prices were exorbitant. Normally, a Westerosi person would likely be able to buy multiple bushels for a silver stag.

So I think your estimation could be increased by at least 10-20 times, possibly even 50-100 times.

But again, these eras don't compare well. Medieval labor is cheap, food is very expensive. People were eating most of the fruits of their labor without seeing any coin, and those who worked for money would spend vast majority of it on food. Buying power was low, and money weren't featured in the economy to the same degree as they are now.

[OldGimletEye]

Medieval food and goods were relatively much more expensive (because there were no pesticides, no machinery). On the other hand, labor was cheap. A skilled medieval professional like a master mason or carpenter could buy 500-1000 bushels of corn for his annual salary, likely less since few would be employed full time. Today, a similarly above average american professional could afford 10-20 000 bushels of corn for his annual income after taxes.

So it's quite apples and oranges. A Westerosi spending a silver stag on a bushel of corn is not the same as a modern American spending $3 on that same amount of corn.

Also, those prices were from King's Landing when it was starving, those prices were exorbitant. Normally, a Westerosi person would likely be able to buy multiple bushels for a silver stag.

So I think your estimation could be increased by at least 10-20 times, possibly even 50-100 times.

But again, these eras don't compare well. Medieval labor is cheap, food is very expensive. People were eating most of the fruits of their labor without seeing any coin, and those who worked for money would spend vast majority of it on food. Buying power was low, and money weren't featured in the economy to the same degree as they are now.

I am well aware of both income and substitution effects. I am wonder if there is any data about elasticities of substitution and of income.