This feature began as a thought about an Event in Victoria; the French intervention in Mexico. Now, the event itself wasn’t all bad, it just had two intellectual problems: The French have the choice to intervene in Mexico in the 1860s to collect debts. We don’t let minor things like Mexico having no debts get in the way of this. Meanwhile, neighbouring Guatemala can go bankrupt as many times as it likes and the French are pretty cool about this. We also have the game play problem of conjuring money out of thin air, which felt a bit wrong. The final piece of the puzzle was the Victoria State bond system, where essentially the government got money for nothing because its people were rich. From all this we began to rethink the whole loan system.
Our goal is to try and capture two things; money should move around in a more sensible manner, and since countries did use the failure to pay debt as a pretext for war we want to have this in as well somehow. The concept of the national bank is born. Your country’s POPs deposit some of their cash reserves into a national bank that then lends money. If the national bank makes loans then the POPs will receive interest on the money.
So here is the basic system. When you need to borrow money you first go to your national bank and borrow money from your population, who will then receive interest on their debt based on how much money they have deposited in the bank. Essentially you can finance things like wars and industrial expansion by tapping your population for cash. This adds greater realism to the lending system; suddenly if you go bankrupt you don’t just lose money that magically appeared out of nowhere, you are going to impoverish your whole population. Secondly, borrowing money by the government removes money from the civilian economy, making for a balance between the two more important, because if a POP is short of money it will start to withdraw its cash reserves from the National Bank.
So far so good. However, what happens when your population just doesn’t have the money for you to borrow? Well, then you can start borrowing from other countries national banks. Essentially, there is an international debt market, where you can borrow money from richer countries who you then pay interest to. Hopefully they will then buy your goods to allow you to pay the debt, leaving the money flowing around the world.
The catch comes when you can’t pay all the interest on the loans; you then go into debt default. You start to not pay people based on the size of their fleet. The country with the smallest fleet is defaulted on first. (You will thus want a navy to protect your commercial interests.) If a country does not pay and has a coast you can send in the gun boats (unless you don’t have a fleet). This allows you to force a country to pay X amount of debt of every month of your loan. The amount is determined by your fleet size. As long as the country on the receiving end pays your demand you can do nothing to them. However, should they fail to respond to the persuasion that only your fleet can offer, then you get a justification for war. So, as Mexico, if you fail to keep your international creditors happy, 50,000 Frenchmen might pay you a visit.
The final question is what happens if you happen to be running your economy well, there is a sudden spike in expenses, leaving you needing to borrow and there is simply no money available for you to lend? Well, if your debt is high then bankruptcy beckons. Fortunately for those countries with low debts there is a shadowy cartel of international financiers with hidden goals who are always willing to lend a hand. Although we tried not to have money coming out of nowhere we felt that for the sake of good game play we needed to have this to keep things working.
In summery we are creating a debt market where credit is not unlimited and there are very direct game play consequences for not paying up.
Our goal is to try and capture two things; money should move around in a more sensible manner, and since countries did use the failure to pay debt as a pretext for war we want to have this in as well somehow. The concept of the national bank is born. Your country’s POPs deposit some of their cash reserves into a national bank that then lends money. If the national bank makes loans then the POPs will receive interest on the money.
So here is the basic system. When you need to borrow money you first go to your national bank and borrow money from your population, who will then receive interest on their debt based on how much money they have deposited in the bank. Essentially you can finance things like wars and industrial expansion by tapping your population for cash. This adds greater realism to the lending system; suddenly if you go bankrupt you don’t just lose money that magically appeared out of nowhere, you are going to impoverish your whole population. Secondly, borrowing money by the government removes money from the civilian economy, making for a balance between the two more important, because if a POP is short of money it will start to withdraw its cash reserves from the National Bank.
So far so good. However, what happens when your population just doesn’t have the money for you to borrow? Well, then you can start borrowing from other countries national banks. Essentially, there is an international debt market, where you can borrow money from richer countries who you then pay interest to. Hopefully they will then buy your goods to allow you to pay the debt, leaving the money flowing around the world.
The catch comes when you can’t pay all the interest on the loans; you then go into debt default. You start to not pay people based on the size of their fleet. The country with the smallest fleet is defaulted on first. (You will thus want a navy to protect your commercial interests.) If a country does not pay and has a coast you can send in the gun boats (unless you don’t have a fleet). This allows you to force a country to pay X amount of debt of every month of your loan. The amount is determined by your fleet size. As long as the country on the receiving end pays your demand you can do nothing to them. However, should they fail to respond to the persuasion that only your fleet can offer, then you get a justification for war. So, as Mexico, if you fail to keep your international creditors happy, 50,000 Frenchmen might pay you a visit.
The final question is what happens if you happen to be running your economy well, there is a sudden spike in expenses, leaving you needing to borrow and there is simply no money available for you to lend? Well, if your debt is high then bankruptcy beckons. Fortunately for those countries with low debts there is a shadowy cartel of international financiers with hidden goals who are always willing to lend a hand. Although we tried not to have money coming out of nowhere we felt that for the sake of good game play we needed to have this to keep things working.
In summery we are creating a debt market where credit is not unlimited and there are very direct game play consequences for not paying up.
