Chapter Seventy Four

Fifth day, Tenth Moon, 258 AC (+107 days)

"The sheer number of rules is, at first glance, daunting, but at a closer look it seems to make a nice sort of sense," I said. "How you valuate large assets is certainly interesting. As is the stability of the system; there haven't been any changes in decades?"

"Centuries since the last major change, I believe," replied Irrys, my newest goodson. Contrary to my expectations, the distance between him and Evelyn did little to cool things down, and I soon received a letter from Irrys' father, offering a substantial bride price. It took a few moons to come to a deal, mainly because of the distances involved in sending the letters, but eventually, their family arrived in Redbridge, and just two weeks ago we celebrated Evelyn and Irrys' marriage.

Irrys' family left last week, and he and Evelyn had a little honeymoon for the past two weeks, but it was time to get to work.

"The Sealord," continued Irrys, "and the magisters prefer a stable environment for greater and more sustained profits. Changing systems frequently do little but erode that, especially when the existing system works."

"I can understand that, but I'm not sure if I agree with all of the policies. For instance, only large ships can claim depreciation? I think that is a bit short-sighted."

Irrys tilted his head in confusion. "It doesn't make much sense to expand it to smaller ships – smaller ships see a more frequent overhaul and replacement, as well as the fact that many owners of smaller ships run small businesses and don't use this style of accounting."

"Huh, I never thought about that last part. So, it is only the larger trading companies that use this accounting?"

"For the depreciation aspect, as well as a smattering of other rules, but the base system is required of any medium-sized company or larger, as well as any business that the Iron Bank lends to – for the most part."

"Interesting… I still don't like keeping depreciation solely for large ships, as there is plenty of other things it ought to apply to – things like equipment and buildings."

"But the ship is crucial to earning income – unlike a building. Equipment I could see perhaps, but most of that is small and quickly replaced anyway. Why bother accounting for a hammer?"

"I don't disagree about small tools, but I was thinking larger equipment like the farming machines. And buildings can be instrumental in earning income – for example, look at the warehouses by the dock."

"Hmm, I can see what you mean. But when would you replace a building? Such things can last many years – decades, even in the right conditions."

"It would be a low rate, maybe 5 percent or less? Maybe less? Assume something like twenty or thirty years between replacements?"

Irrys nodded. "I can come up with something if you'd like."

"Aye, that'd be appreciated. Once you can come up with a more encompassing system, I can get Simon to start writing out a few copies so that we can begin teaching it."

Irrys put his quill down after making a quick note and took a sip of wine. "Evelyn was saying that something was being made to make writing books easier or some such?"

I shook my head. "Hopefully, but it keeps getting pushed back; Violet is working on it, but with the direwolves taking more of her time, especially with Lord Stark stating his interest in the project, her other projects are getting pushed back. Soon, I hope, but it feels like I keep repeating that word."

"That and the fact that she just gave birth, I'm sure."

I chuckled. "That too."

Violet had recently given birth to her second child, Sigmar, four days before and was still recuperating. A healthy addition to our ever-growing family.

"Though," I added, "she does have a new avenue of research for the project and has handed that off to someone else – she wants to see if a different type of ink will be our answer."

Irrys nodded politely, but clearly had no idea what I was talking about and I wasn't overly keen on explaining. He may have been family now, but he still had a way to go before I trusted him with everything.

"About the bank itself," said Irrys, "You want it to be focused more on smaller loans?"

"Aye, nothing large like loans to other lords or anything like that – other than what we've previously discussed. I want every loan backed by assets, at least for now, but the focus is going to be on smaller loans to the farming co-ops for the farming machines. Possibly loans for ships as well, but I don't really know enough about that to comment or direct you. The goal of this is to help the people of the area while pulling in a tidy profit. Perhaps in a few years, once the bank is established, we can look at offering small loans unbacked by assets to established clients – for a higher rate of course."

"I understand. No sense in bleeding the place dry – there would be no profit in the long-term."

"Additionally, I would eventually like it to be a place similar to the Iron Bank, where people can store their money."

"That should be simple enough; have plans for the building been drawn up?"

"Not yet, Tylan was waiting on your final input before finalizing it, but Evelyn has already drawn a general design for the bank."

"Very well, I shall discuss it with Tylan – I need to make sure that there will be enough room below excavated to hold vaults. And what of security?"

"I will be posting some of my men-at-arms to help you, and we were planning on building the bank close to the castle as well."

"Excellent! Now, my father told me of your discussions with him as well – regarding the insurance schemes. That should be no trouble in getting implemented – though it might run at a loss until the predictability and odds are more reliably determined."

"Fire and shipping, both?" I asked.

"Aye, but I still don't think that the fire insurance will be worth it – especially in a town of this size. I have no doubt this will change as the town grows, but I am dubious of its current worth."

"I'm sure some of the businesses like tanners or blacksmiths will be interested, but you are probably right for the rest of the residents."

"The shipping is looking promising. Still no signs of any raids or other types of visits from the Ironborn?" he asked.

"None – I'm pleased with how effectively Lord Greyjoy is controlling his people; whatever he is doing works."

"Hopefully, that means that ships start to come individually and not only as part of the trade fleet."

"One can hope," I said wryly. "The other pillar of this bank," I continued, "will be an exchange of sorts."

"An exchange? What do you mean?"

"For the most part, would you agree grain is grain? As in, indistinguishable from one piece to the next?"

Irrys looked confused at the tangent. "Provided there was no rot, and they were of the same type of crop, yes?" he said uncertainly.

"Tell me, how familiar are you with the grain trade?"

"Passingly; I've never been directly involved, but I know of people who are."

"The grain trade is an interesting thing since, for many regions, such as the North which has only subsistence farming, it is exclusively an import culture. But in other regions, like the Disputed Lands or the Reach, they export their surplus grain – of which, there is plenty. For the most part, grain is moved around one of two ways, local fairs or by grain collectors. The grain collectors are the important aspect."

"I can imagine, the local fairs would only move small amounts of goods – and, as the name implies, only locally."

I chuckled. "Exactly. These grain collectors travel around buying grain from farmers, or their lords depending on the situation, and bring it to port cities where they then sell it to ships that are looking to buy. Sometimes, depending on distance, the collectors may sell to other collectors who will then bring it to a city. The ships' captains will then have to find and purchase from a large number of collectors, agree upon individual deals, and inspect every single lot to ensure there is nothing wrong with it. A time consuming and inefficient process."

"And you propose to fix this?"

"Yes, I want to create an institution, through our new bank, to allow people to buy and sell commodities – goods that are common and indistinguishable from each other – in larger quantities with an assurance that the goods are of the quality specified."

"So, the bank would act as the grain collectors? How is that any better?"

"Not quite. The grain collectors would still exist – sort of, but that is a topic for another time – what this exchange would do is allow the grain collectors and farmers to sell easier, and the merchants to buy easier. Let's say in maybe two-ton increments? We would need to expand storage in the town to allow for trade, but I think it will work well. It would allow merchants to buy grain at a future date for a specific price in addition to buying existing stock. The exchange would, of course, charge a small price for this service, but by cutting down on middlemen and making things easier, it will lower the price as well."

"To clarify, there would be two services of this exchange: a future market and a current market?"

"Correct. The futures market would allow for more flexibility on the part of the farmers with the certainty of payment while the current market would allow them to sell off their goods as quickly as possible."

"Would both farmers and merchants be able to post a sale?"

"Aye, merchants could post a 'Looking For' contract, while the farmer could post a 'Selling' contract. We could call them Call contracts and Put contracts, respectively, as they are calling out to buy and putting things up for sale."

"And what sort of 'certainty of payment' are you referring to?"

"We want people to trust in this system, and in order to do that we must have rules in place that guarantee that transactions will occur. It a merchant posts a Call contract, they need to put the money down first – it can be held at the bank. Perhaps we can create an exception for local, established merchants, but that is something that can be worked out later."

"And what would we need the farmers to do, to ensure trust?"

"That's a bit tougher," I said, frowning. "Since the farmers would be local, I'm not too worried, but there ought to be something to help merchants trust our system. The farmers obviously wouldn't receive payment until delivery, so that reduces any sort of financial incentive from trying to scam the system. I suppose there could be a danger that the farmer tries to pass off subpar goods? We might need a penalty system for that."

"Hmm, I could try and figure that out."

"Excellent," I replied.

"And what of merchants who wish to sell on the exchange instead of just buy? There is less control over them as they have no farms that you could control as a penalty. There is a higher likelihood that they would skip town."

"You mean if they want to fulfill a call contract?" At Irrys' nod, I continued, "That'd be a bit trickier, as you say. We would need to have them prove that they could provide the goods at a future date."

"Yes, just as a farmer can point to his farm and say, 'Here is how I can guarantee I will have goods to sell.' Or at least, barring crop failures or some other disaster. Established, local merchants won't be an issue, but the non-local ones will be an issue."

I nodded. "Let's table that for now and think on it for a while. Perhaps you'll think of something as you put everything together."

He grinned. "I look forward to the challenge! I won't disappoint you, goodfather!"

I chuckled. "I believe you."