World capital market or Centres of Finance

[unmerged(2695)]

The world economy of the 19th Century was in essence a free-market economy. This was praticularly the case of the capital markets.

For that reason I think that having states, the players, extend loans as a general rule is a bad idea. It will also lead to possble loan-shark explots that will lead to the international financial market being patched away for playability.

There are two ways of getting around this:

One suggestion is that nations borrow money as in EU, but in the World Capital Market. The size of this market can be computed by adding the total income for all nations/provinces - or alternatively just the value of all the CoTs. This sum will be total amount of money that can be borrowed at any time. Interst rates should be determined by supply and demnad in this market and by the behaviour of the borrower. A nation that has repaid its debts will be charged lower interest rates on future loans.

Nations receive income from the WCM in proportion to their share in it.

The model is very crude, but I think it important to abstract the WCM as much as possible because a straight EU mechanism is simply unhistorical.

Alternatively rich countries (determiend by the aggregate size of the economy: trade+production) could be given Centres of Finance (or their CoTs could function as such), in which case a player could decide to float a loan in London or Paris or Frankfurt or Vienna and borrow from that specific country. This however would require a special merchant function. Of course, by assigninjg rich countries CoFs the basic imbalance that existed in the world in 1835 would be simulated.

In such a case the total amount of money available as well as the interst rate would depend on the size of the CoF and defaulting on a loan would lead to that CoF being closed and the owning country getting a CB.

A country with a CoF might perhaps be able to offer loans in MP situations, but such state credits were rare in this age of global liberalism.

 

[unmerged(5588)]

These ideas are interesting, however, I would like to see some kind of economic interaction between private entrepeneurship and private interests, especially considering your other thread regarding gunboat diplomacy. Governments certainly acted politically based on economic interests their private citizens had in other countries. To completely randomize this would be a simplification. There needs to be some feature representing this, though it could be implemented in a variety of ways.

 

[unmerged(2695)]

Randomizing it is the opnly way to prevent player "exploits" that will make Paradox weaken the mechanism through patches because it unbalances multiplayer.

The WCM model of course is ahistorical by letting all countries have a piece inb the financial cake. I would assume it would be easier to program.

The CoF model is best as that would give only the creditor a CB.

 

[supergamelin]

The CoF system sounds good. I would represent the importance of the major financial places. Governements needing money would borrow on those market. There should also be private borrowing taken into account.

The confederates are an interesting exemple. The raised capital on foreign markets including France. At the same time they passed a law so that private debts to US creditors would be cancelled and replaced by debts to the Confederate government. This measure met with little success, as confederate planters did not want to damage their business relations with Yankee bankers. Even the most exalted fire eater secessionists knew the limits.......

There were a lot of financial innovations at that time. The US government also emitted the first federal banknotes.

The major sources of income for the Governments were:
1)Taxes
2)Custom revenues
3)Loans
4)Printing notes

The player should have some control over those issues to fund his policy and manage influence his economy. Each having its advantages and disadvantages.

Printing Banknotes is easy. You can print Billions of dollars of new Banknotes, like the confederates did, and face raging inflation. You just need the paper and the ink....

Loans have to be taken on a CoF depending on offer and demand. Not paying what you owe gives a CB on you.

A government could also decide to cancel the private debts of its citizens toward foreign creditors like the confederates tried to do or the Russians did after Revolution. This should also give a CB on you.

Customs were a major source of revenue but also impact your trade. Most countries raised custom barriers to protect their own industry from foreign competition until they were strong enough to go into the competition and claim Free Trade is the only way...


Taxes are not popular and will slow your economy, but you need to get that money somewhere.

Gold mines boosted the economy but they were not state controlled and were not government revenues.....

 

[peo]

I like the CoF idea.
However i think all nations should have one.
Altough their size would be very varying.
For example the amount of available money in the Swedish one would be very very small.

 

[unmerged(2695)]

I think a CoF should be tied to the size of a nation's economy. Norway should never get a CoF because it's too small, Sweden did acccumulate capital suffieciunt to industrialize on its own. But London and Paris were the major European centres of finance with Switzerland, Hamburg and Vienna emerging as secondary. The CoF should of course come in the richest province of a country, not neccessarily in the capital - in Barcelona or Bilbao, not in Madrid.

 

[unmerged(5588)]

Perhaps a country could loan money not directly from another government, but still have to choose a nationality from where the money comes from. Loan size would be dependent on the size of the lending country's economy, so that large loans (or loans at all) might only be viable from one of the great powers. This would abstract the CoFs, but still allow for the same functionality.

 

[unmerged(2238)]

Seems like if you're going to have that extensive a market (which would cool) there HAS to be a reason to have it. That is, it can't be a cardinal sin anymore to get into debt. Nations of the time were in debt ALL THE TIME and I think it should be common to have to get a loan for something (I thought this in EU). But in EU, you didn't have to, as you could normally get along just fine while living within your means, which just doesn't seem to be very accurate in terms of history.

 

[peo]

Originally posted by Hardu
I think a CoF should be tied to the size of a nation's economy. Norway should never get a CoF because it's too small, Sweden did acccumulate capital suffieciunt to industrialize on its own. But London and Paris were the major European centres of finance with Switzerland, Hamburg and Vienna emerging as secondary. The CoF should of course come in the richest province of a country, not neccessarily in the capital - in Barcelona or Bilbao, not in Madrid.

Since Norway was more or less a part of Sweden during the time well you get what i'm pointing at.

But i dom think that the smaller nations should get a CoF.
Maybe via an event.
Or from the begining but that it is worth next to nothing since the nation it is in wasn't rich enough.
But i don't think that the game should force me as Sweden to invade a nation to get one which was the only way to get one in EU. If i reform my economy to be a financial market economy based on a lot of banking then that should give me a CoF or if i have one increase it in value.

 

[AllonEU]

So how about a list of possible COF's. US should start off with one in New York. and maybe if the CSA gets independence it gets one in Atlanta in the 1880s where if it doesnt Chicago gets one in the 1880s.

 

[unmerged(9563)]

Personally, I think there should be a 'major' (IE : Richest) one, which was London and then switched to New York later. Maybe something could be tied into it, like extra trading power or something...

 

[unmerged(2238)]

Yes, I think the number should be very, very limited maybe low single digits (much, much fewer than COTs in EU) and it should certainly give a huge advantage to whoever has them.