Medieval Money Supply (perpetual loans)

[Stevenius]

Hi all,

I'm a long time player but a first time poster.
I've been thinking about this for a while and as an economist I really hate the infinite loan cycles that the game generates and in a period where money is pegged to base mental (silver) the ability to borrow indefinitely like it's a fiat money and go into perpetual debt like the USA is just not possible with finite supply of silver. Of course that's why we have debasement in game to simulate striking extra coins out of same weight of silver.

I get this might just be myself and I play with minimal debts and fiscal balance whenever I can and 'pro' players love loans to hire merc stacks so they can live their Byzantine glory. Still, loans as provided by medieval banks can't be infinite to live on a debt paying debt cycle.

Below are my suggestions and I've read some of the other posts here and the criticisms of having a complicated finance system, so I hope my suggestions will hit a right balance between real economics and simplicity for gaming.

First -
Change to bank loans is to make it scaled interest rate rather than flat. Say the base loan start at 3%, every subsequent loan goes up by 0.5%, as it makes no sense lenders will lend at fix rate of 4% still when your total debt has skyrocketed. So at 25 loans the 25th loan's interest rate is 15% and the overall average interest rate is a manageable 9%. But players and AI and no longer able to borrow at the same rate to pay for older loans as every new loan is more costly.

Second -
Loans are not individually repayable, they can expire at end of their term on their own, but to pay it back early one has to repay all outstanding loans together. This will making taking loans a calculated choice rather than just stack it up because I have a war with the Ottoman's coming and I know I can get cash from the Ottos later. If you take too many loans then even winning the war means a choice between taking all your cores back or having to get enough cash to pay for the crippling debts.

Third -
To make things bit easier for players, every batch of 5 loans paid down (on its own) can give players an option to restructure. So say I have 10 loans, the first 5 expired and paid. My next set of loans is at 5.5% to 7.5%, i can restructure my loans and "negotiate" with the bankers to restructure the loans at the rate of the 5 just expired, so effectively lowering the interests payable so now I am paying the 5 loans at rates between 3% and 5%.

Fourth -
International lending. Nations can lend to each other at fixed 4% interest rate so it's more expensive than taking a couple normal loans but viable if you need money but don't want more interests. There's a catch to international loans however, all international loans will need to be backed with a collateral. The collateral in questions is of course real estate (provinces). The loan amount could be linked to the value of the province ie. 3 dev province for 300 ducats and so on. The failure of repayment will give the lender a threaten war option to the collateral province and refusal to handover will result in a repossession war CB (upgrade to cancelled loan CB). This will give merchant republics a peaceful way of expansion, funding wars in neighbouring countries and take possession of provinces in indebted nations (Venice in real life 'acquired' Dalmatia), AI will never sell provinces anyway, so this could just be the way to expand peacefully. Additionally, this will give great power actions like take on foreign debt a bit more meaningful than just a relationship boost. Emperor Austria taking on the debt of Count of Cilli to Venice would nullify Venice's CB to expand. On the flip side, lenders without means to enforce debts can sell the collateral on to other nations that may look to expand but lack CBs,

Sorry for the long read.

 

[Vetgirig]

There is a limit on how many loans you may take as a nation. After that you may not take any loans and will go into default if you no longer has any money.

There is not a unlimited supply of money/loans.

 

[Stevenius]

There is a limit on how many loans you may take as a nation. After that you may not take any loans and will go into default if you no longer has any money.

There is not a unlimited supply of money/loans.

But expired loans that cannot be repaid can be retaken at the same rate, that's what I meant by infinite, you are paying down old loan with new loan at the same interest rate, there's no downside risk as you know you are not approaching default since the interest rate is the same. My suggestion aims to stop and that make default more likely as a result and so players will have to choose between funding a war by ducats and mercs or sell provinces (borrow on collateral) to rich nations for funding.

 

[PyroMegaManZ]

From the sense of reflecting true economical nature, these changes all seem positive, but from the perspective of making a game that isn't frustrating these changes probably aren't ideal. Small nations as an example would forever be stuck, unable to ever collect enough money together to field a capable army, or build buildings to eventually increase their income (i.e. Ulm would need to take out twenty loans to build two buildings, which would leave them paying monthly interest of 1.5 ducats, but the two buildings would probably only increase their income by 0.6).

 

[Lightwell]

Can't say I understand how giving someone a loan to get a CB on them is any more peaceful than just declaring the war and taking the province.

 

[Stevenius]

From the sense of reflecting true economical nature, these changes all seem positive, but from the perspective of making a game that isn't frustrating these changes probably aren't ideal. Small nations as an example would forever be stuck, unable to ever collect enough money together to field a capable army, or build buildings to eventually increase their income (i.e. Ulm would need to take out twenty loans to build two buildings, which would leave them paying monthly interest of 1.5 ducats, but the two buildings would probably only increase their income by 0.6).

The way this game stands if you are Ulm and if the building pays 0.6 p/m it will take over 100 years to pay back so there's really never ever any reason to take loans to build anything.

So for Ulm to expand you can collateralise Ulm itself to Venecian bankers say and hopefully you win that first war and you can repay the loan, otherwise it's a pound of flesh for a pound of gold. But really, you are in the HRE, and Venice isn't, so if they lent you the money then they'd have to ask the emperor's permission (ala war against member of HRE) to enforce the repossession.

 

[Stevenius]

Can't say I understand how giving someone a loan to get a CB on them is any more peaceful than just declaring the war and taking the province.

Sorry maybe my language wasn't clear, you get a diplomatic option first like threaten war. If your target is in a war already or in bad shape and don't want another front they will acquiesce. If not you get a CB and can sell that CB to another nation for reduced payment (how debt collection companies operate today).

 

[Canute VII]

Imho, the amount and number of possible national loans should be much more tied to estates. Without estates (high absolutism) you should need to turn to the international loan market.

 

[Lightwell]

Sorry maybe my language wasn't clear, you get a diplomatic option first like threaten war. If your target is in a war already or in bad shape and don't want another front they will acquiesce. If not you get a CB and can sell that CB to another nation for reduced payment (how debt collection companies operate today).

So, giving a massive loans to Ottos, then threatening war for Constantinople?

 

[Stevenius]

Imho, the amount and number of possible national loans should be much more tied to estates. Without estates (high absolutism) you should need to turn to the international loan market.

well, if we want to really emulate the medieval financing activities, then yeah, estates and debasing coinage would be where most of cash would come from with merchant republics or an off map 'bank' acting as the lender offering interest rates of 40% to 60%. But that would be too much for game play.

 

[Stevenius]

So, giving a massive loans to Ottos, then threatening war for Constantinople?

Well, the AI would actually need the money and is willing, but why not, between cash for survival and losing 1 province, it's worth it? As I said, the loan size would link to dev so 30 dev Constantinople would be 3000 ducats, a very large sum in early game.

 

[Lightwell]

Well, the AI would actually need the money and is willing, but why not, between cash for survival and losing 1 province, it's worth it? As I said, the loan size would link to dev so 30 dev Constantinople would be 3000 ducats, a very large sum in early game.

Worth. Trade Wars, here I come.