Littlefinger Bankrupt the Kingdom

[princeimrahil]

It's a lot easier than you think. George IV managed to personally get into debt to the tune of about 630,000 pounds (that's about 50 million pounds in today's money). And when I say personal, I mean just him spending money on himself - it had nothing to do with expenditures for the realm. A more direct parallel is probably Henry VIII, who manged to overextend the treasury despite inheriting a very nice balance sheet from his father.

I think we tend to assume a lot of things about medieval-era finances incorrectly because we look at it through a modern lens. In general, there's much less trade, and FAR fewer taxes. Historically, nobles have also been notoriously difficult to raise taxes on (indeed, many power struggles in the medieval period were a result of financial wrangling between the crown and its vassals). There's also a much less sophisticated administrative system, meaning that the taxes that do exist are going to be collected with much less efficiency - there's no professional bureacracy to handle these matters. And naturally, the rate of corruption is going to be much higher. In fact, I believe it was assumed that tax collectors would skim a bit off the top to supplement their income (which is why they were considered such juicy appointments).

So Littlefinger probably was dipping into the treasury, but I don't think he would have been the primary factor in bankrupting the crown necessarily - these kinds of debts accrued in the real world, after all.

[Petyr Baller]

Indeed. I've been drinking a lot, so I don't care to check the exact numbers right now, but the Hand's Tourney cost something like 80,000, while the Crown was in debt something like 3 million total. Assuming these numbers are correct, which they probably aren't, Ned's inaguration was ~2.6% of the total debt of the realm.

Assuming the debt burden of the Iron Throne at the start of aGoT is similar to the USA's today, the Hand's tourney alone cost 430 billion dollars. Of course, this number seems absolutely absurd, but the point is that it's pretty easy to waste money when you're sitting on the Iron Throne.

[Ragnorak]

We're given a couple hints about financial schemes. When Stannis talks to Slynt he mentions that Slynt sold offices in the Gold Cloaks for a percentage of the salary and that he was certain LF saw that the realm profited from the corruption too. Jaime discovers that they are paying for for more goalers and turnkeys in the dungeons than actually exist. Someone is receiving those paychecks. The Antler Men all owed money to the crown which might be a hint that LF was using the crown's money to bribe them or possibly taking legitimate expenses to these businessmen and falsely recording them as loans so that he could account for corruption income.

Tyrion mentions things like buying grain when the price was low to resell it later when the grain market improved. LF makes the joke about investing in pots when Joffrey is shooting rabbits with his crossbow. While not a scheme it does indicate something about his mindset. He sees the famine coming and his reaction is to think of ways to exploit it to make money. We can reasonably assume LF has been doing something akin to this.

The most telling part is that the crown's revenues and expenses increased ten fold from under Aerys. That just can't be Robert. Let's assume Robert wasted the equivalent of the entirety of yearly income to the crown under Aerys every single year which seems overly excessive. The normal expenses under Aerys plus an equal amount in Robert's waste would only account for 20% of the total expenses of a ten fold increase. Robert could waste 4 times as much money as was spent under Aerys each year, still pay the normal expenses that existed under Aerys, and that only accounts for half of the money spent.

Robert didn't build castles, repave the Kingsroad, remodel the Sept of Baelor or engage in any fruitless money pit endeavors. Harren the Black built Harrenhal with the revenues of one of the Seven Kingdoms without bankrupting that Kingdom and Robert didn't have a remotely similar money drain. A ten fold increase in revenue and expenses means LF created 90% of the current revenues and expenses, so we can reasonably assume he's responsible for 90% of the financial mess.

[princeimrahil]

And then there's the "usury" (i.e. interest) on all of those loans, too - I'm sure things quickly reached a point where they snowballed out of control because the crown was not aggressively paying down its debt and trying to control its expenses.

[David Selig]

Indeed. I've been drinking a lot, so I don't care to check the exact numbers right now, but the Hand's Tourney cost something like 80,000, while the Crown was in debt something like 3 million total. Assuming these numbers are correct, which they probably aren't, Ned's inaguration was ~2.6% of the total debt of the realm.

It was 90,000 in prize money and quite a bit more for the feast and all other expenses. LF planned to borrow 100,00 to cover it all.

[butterbumps!]

It's very, very easy to waste money when nobody can say "No" to you. And Westeros not a modern large economy with a budget of trillions. So I don't get the "Robert couldn't have wasted so much money" argument. Of course he could. 5 tourneys per year with the absurd prize money he put up at the Hand's Tourney would do the trick alone.

That's assuming that there was no money coming in, which we know there was. If the ledgers can be trusted at all, then revenue had increased 10 fold. A tenfold increase in revenue minus the tourney expenses shouldn't have bankrupted the kingdom.

[SerBearroll]

I am not sure how wealthy the Iron Throne was when Robert became King. There was a Rebellion before Robert`s inauguration, and wars always cost. Also, Robert had some sort of Henry VIII lifestyle, enjoy as much as you can, worry not. I am sure he was buying horses, armors, swords and orginizing tourneys more than regular. He lived, and istead of that, he should have ruled. So, I am not buying the theory in which LF is to blame for financial ruin.

Oddly enough the crown was quite wealthy when Robert took over, if we believe what Ned says. Aerys didn't spend as much money as Robert, no tournaments or feasts, and he seems to have had a more competent small council. We have to remember that for most of Aerys' reign Tywin was Hand of the King and this means if you tried to steal from the hand/king your head would end on a spike.

Things changed when Robert became King and Jon Arryn the hand. Robert spend money on expensive feasts, giant ships or weapons and Jon seems to have given LF full control over the finances.

[TNine]

That's assuming that there was no money coming in, which we know there was. If the ledgers can be trusted at all, then revenue had increased 10 fold. A tenfold increase in revenue minus the tourney expenses shouldn't have bankrupted the kingdom.

That's just the thing. The ledgers couldn't be trusted whatsoever, with Littlefinger in charge cooking the books so much they were probably burnt black.

[butterbumps!]

That's just the thing. The ledgers couldn't be trusted whatsoever, with Littlefinger in charge cooking the books so much they were probably burnt black.

Ok, but hang on a second. We know that LF actually was able to generate incomes, and further, the crown gets income from taxes and customs. It's debatable whether the revenues increased "tenfold," but we do know that LF was able to generate revenue, and we know pretty much how he did it (investment in commodities). The point is that Robert could not have possibly drained the treasury singlehandedly given that considerable money was in fact being made by LF's investment banking.

[Mladen]

Oddly enough the crown was quite wealthy when Robert took over, if we believe what Ned says. Aerys didn't spend as much money as Robert, no tournaments or feasts, and he seems to have had a more competent small council. We have to remember that for most of Aerys' reign Tywin was Hand of the King and this means if you tried to steal from the hand/king your head would end on a spike.

Things changed when Robert became King and Jon Arryn the hand. Robert spend money on expensive feasts, giant ships or weapons and Jon seems to have given LF full control over the finances.

I am not saying that Crown was in debt, but Rebellion certainly took its toil. Also, we have Tyrion`s report of how good LF was in doing his job. I believe that Iron Throne would be in financial ruin if Arryn didn`t give LF control over finances

[princeimrahil]

We're given a couple hints about financial schemes. When Stannis talks to Slynt he mentions that Slynt sold offices in the Gold Cloaks for a percentage of the salary and that he was certain LF saw that the realm profited from the corruption too. Jaime discovers that they are paying for for more goalers and turnkeys in the dungeons than actually exist. Someone is receiving those paychecks. The Antler Men all owed money to the crown which might be a hint that LF was using the crown's money to bribe them or possibly taking legitimate expenses to these businessmen and falsely recording them as loans so that he could account for corruption income. Tyrion mentions things like buying grain when the price was low to resell it later when the grain market improved. LF makes the joke about investing in pots when Joffrey is shooting rabbits with his crossbow. While not a scheme it does indicate something about his mindset. He sees the famine coming and his reaction is to think of ways to exploit it to make money. We can reasonably assume LF has been doing something akin to this.

Good attention to detail there. Still, I get the impression that Baelish's financial manipulation was more akin to him using the treasury as his own personal pool of capital for investment. When the investment pays off, he takes a nice juicy little bite out of the profit, but when the investment goes bad, the realm soaks up the entire loss.

The most telling part is that the crown's revenues and expenses increased ten fold from under Aerys.

Can we get an exact quote here? Not doubting the accuracy, I'd just like a little more specificity on it, as the details can really affect how we interpret this.

That just can't be Robert. Let's assume Robert wasted the equivalent of the entirety of yearly income to the crown under Aerys every single year which seems overly excessive. The normal expenses under Aerys plus an equal amount in Robert's waste would only account for 20% of the total expenses of a ten fold increase. Robert could waste 4 times as much money as was spent under Aerys each year, still pay the normal expenses that existed under Aerys, and that only accounts for half of the money spent.

Robert didn't build castles, repave the Kingsroad, remodel the Sept of Baelor or engage in any fruitless money pit endeavors. Harren the Black built Harrenhal with the revenues of one of the Seven Kingdoms without bankrupting that Kingdom and Robert didn't have a remotely similar money drain. A ten fold increase in revenue and expenses means LF created 90% of the current revenues and expenses, so we can reasonably assume he's responsible for 90% of the financial mess.

I think your math might be a little too rough. Let's assume that, under Aerys, the realm took in 100 "mega-dragons" every year, and spent 70 "mega-dragons" as well. Let's say that Robert starts spending even less lavishly than you suggest - i.e., he's only wasting a significant part of the incomes, not the whole pot. So, say, Robert spends 130md while only taking in 100. Now, the first year, he's in the hole for 30md, BUT - and here's the kicker - the crown never seems to pay down the debt. So each year that expenses exceed revenues, not only are they adding that debt, they are also adding recurring payments on the interest (which, from my admittedly limited reading of medieval finance, could range as high as 45-60%). 15 years of those kinds of finances can get out of control pretty quickly - in fact, that's almost exactly the same amount of time it took for Henry VIII to burn through the cash-stuffed treasury he inherited from his father (and Henry had the mechanism of Parliament to allow him to raise additional funds when necessary - Westeros lacks this process, and their lords are quite prickly about their tax rates).

So just to sketch out some rough figures (lots of rounding here) based upon what I outlined above, and assuming a conservative interest rate of 20%:

Year 1

Income: 100 Expense: 130 Deficit: 30 Total debt: 30

Year 2

Income: 100 Expense: 130+6 (usury) Deficit: 36 Total debt: 66

Year 3

Income: 100 Expense: 130+13 (usury) Deficit: 43 Total debt: 109

Year 4

Income: 100 Expense: 130+21 (usury) Deficit: 53 Total debt: 162

Year 5

Income: 100 Expense: 130+32 (usury) Deficit: 62 Total debt: 224

Year 6

Income: 100 Expense: 130+45 (usury) Deficit: 75 Total debt: 299

Year 7

Income: 100 Expense: 130+60 (usury) Deficit: 90 Total debt: 389

Year 8

Income: 100 Expense 130+78 (usury) Deficit: 108 Total debt: 497

Year 9

Income: 100 Expense 130+100 (usury) Deficit: 130 Total debt: 627

Year 10

Income: 100 Expense: 130+ 121 (usury) Deficit: 151 Total debt: 778

So we can see that after only ten years, the crown's interest payments could well exceed its entire annual revenues, and at this point, the only possible way to begin digging out of the hole is to stop spending at a deficit (which Robert never does, because nobody ever says no to him). Now, Littlefinger might have blithely accepted - perhaps even encouraged - Robert's spending, but the simple fact is that not even Jon Arryn or Ned could convince Robert that he was spending too much money. If those two couldn't manage it, no one could.

So I don't think we can say that Littlefinger is the primary culprit here. He probably added a little bit here and there, but it's more likely that he took advantage of the situation to enhance his own wealth - so much coin was being thrown around that it became easy for him to cook the books.

[princeimrahil]

Allow me clarify an important point - indeed, perhaps my main point, that I should have made explicit/emphasized:

Assuming that the crown is spending at a deficit every year, and that each year it does not make any significant effort to pay down the principal (instead of merely making payments on the interest) then it is extremely easy for Robert to have gotten himself into that financial mess without any help from Littlefinger.

[David Selig]

Can we get an exact quote here? Not doubting the accuracy, I'd just like a little more specificity on it, as the details can really affect how we interpret this.

"Littlefinger’s rise had been arrow-swift. Within three years of his coming to court, he was master of coin and a member of the small council, and today the crown’s revenues were ten times what they had been under his beleaguered predecessor . . . though the crown’s debts had grown vast as well. A master juggler was Petyr Baelish."

[princeimrahil]

"Littlefinger’s rise had been arrow-swift. Within three years of his coming to court, he was master of coin and a member of the small council, and today the crown’s revenues were ten times what they had been under his beleaguered predecessor . . . though the crown’s debts had grown vast as well. A master juggler was Petyr Baelish."

Ah, thanks. So it looks like the crown's revenues are specifically pegged at a tenfold increase, but the debt/deficit numbers are indeterminate - possibly even greater than a factor of ten.

[TNine]

Ok, but hang on a second. We know that LF actually was able to generate incomes, and further, the crown gets income from taxes and customs. It's debatable whether the revenues increased "tenfold," but we do know that LF was able to generate revenue, and we know pretty much how he did it (investment in commodities). The point is that Robert could not have possibly drained the treasury singlehandedly given that considerable money was in fact being made by LF's investment banking.

I think LF was certainly increasing the Kingdom's revenue, but i think he was taking quite a bit off the top. It's not that LF was unable to increase income, but you have to take everything he says with a grain of salt, if not the whole shaker.

[C'mon George!]

Coffers overflowing at the end of rebellion, crown incomes go up ten fold yet some how debt exceeds 6 million.

Either embezzlement by Little Finger or rubbish writing by GRRM.

[SFDanny]

Anyone who pays attention to Martin's clues realizes that the major reason for the bankruptcy of the realm is Littlefinger and his myriad schemes of kickbacks, ghost payrolls, phony investments, and outright theft. Robert is an idiot, but Baelish is the main source of the problem

[WiDMNDBAMMD]

Ok, but hang on a second. We know that LF actually was able to generate incomes, and further, the crown gets income from taxes and customs. It's debatable whether the revenues increased "tenfold," but we do know that LF was able to generate revenue, and we know pretty much how he did it (investment in commodities). The point is that Robert could not have possibly drained the treasury singlehandedly given that considerable money was in fact being made by LF's investment banking.

Think about all the name day celebrations that Cersei had for her children(30?), think about all the harvest feasts, balls, tournaments to celebrate everything that Robert could possibly imagine.

Now keep in mind that the Iron Throne doesn't just have gold to pay for those things. Everything that costs them gold ends up costing them more than what they pay out.

For instance they spend 100K on the Hand's tourney but they're going to pay back Tywin Lannister with interest.

Littlefinger is paying the City Watch aka gold cloaks actual money to defend the city.

If Littlefinger was "cooking the books" he wasn't that concerned that anyone would be able to figure it out.

I will admit though he was trying leaving the Iron Throne in a pretty bad position.

Just look at some of the people they owe debts to: Tywin Lannister(50%), The Faith(15%) Iron Bank ( a large sum).

What does he do when the war starts? He leaves KL to go foster the Tyrell alliance, then he leaves to wed Lysa. In starts buying up debt in the Vale to gain alliances.

He might be able to keep the machine going for a bit, but he knows that the war will tear it apart.

[princeimrahil]

Just did a little more thinking that lead me to a little more number crunching:

The price tag for the Hand's Tourney was about 100k, yes? That's the only real approximation of the cost of a tourney that we have as far as I know, and certainly it's probably one of the more expensive ones. However, we also know that tourneys are held in honor of the namedays of Prince Joffrey - and we can reasonably infer that the other royal children receive their own annual tourneys to commemorate their births. Even if we assume that Robert only spends half as much on each child as he does on Ned (unlikely, given the way Cersei treats them, but let's accept it as a conservative figure), that amounts to 150,000 every year for 7 years (Tommen's 7 at the beginning of the series, and is the youngest), 100,000 for the one year between Myrcella's and Tommen's birth, and 50,000 a year for the 5 years that Joffrey is an only child. Tally all of that up and we get a cool 1.4 million, I think.

In short, using a conservative estimate, 1/4 of the crown's total debt is taken up just by birthday parties for the royal children. We can probably assume there are similar festivities for the King and the Queen, as well as some annual commemoration of Robert's victory in the war/ascent to the throne. Then you throw in holidays and festivals... it's easy to see how Robert could rack up that much debt.

[butterbumps!]

Ok, so maybe I should explain why I think it's so significant that the money wasn't likely simply embezzled by LF. First, I don't know if there really is a "debt" yet. LF investment banked, which means he moved money and tied them up in securities. The money indeed was not left in the treasury, which makes it look like there's no money, but I think the money is simply floating around in securities. I think that if LF "cashed in" so to speak, I suspect he played this so that he'd end up with a huge profit margin. The text does tell us he's playing the market, so this is the logical extension of the practices that he's already been confirmed to do.

What makes this so interesting now is the macroeconomics of this issue. LF invests in many commodities. With Dany's slavery abolition, the economy of Essos just bottomed out. This means that LF might actually have lost a great deal of the money he'd invested because the market essentially just crashed. Just one more "butterfly effect" of the story, and another potential vulnerability for LF.

He might be able to keep the machine going for a bit, but he knows that the war will tear it apart.

It seems unreasonable to me that mere conspicuous consumption by the crown is what did this. We have a lot of clues about the way LF did the banking, and it points to commodity investment. Which means that money wasn't laying around to access, and also that he's the only one who actually knows how to retrieve it. LF wants people to think Robert bankrupted the crown, but I think the money is just hiding.

War might not necessarily tear apart his system, especially if he's trading commodities in the Free Cities, which is what I suspect. As per above, I think the issue he didn't foresee that might come to haunt him is the issue of the slavery abolition on the Essosi economy.