Money in Middle-earth

[Witch-king of Angmar]

Gordis

He-he, great post again, Alcuin. I like Offa's penny. What a nose he has got !!!

You are right that by our time (TA 1346), most likely all the three kingdoms had their own money, probably called the same, but differing in value. Rhudaur currency must have been pretty low!

Angmar on the contrary, being prosperous, might have had its own coins, more expensive than the Arnorean ones.

"If the Witch-king were really financially savvy, he’d counterfeit Arthedain and Cardolan coinage by substituting base metals in order to debase it. The easiest means of doing for him this would be to take 1000 real coins, add a base metal (bronze, copper, tin, pewter, etc.) and turn out 1200 or 1500 counterfeit coins. That would cause real chaos in the Dúnedain kingdoms, with people accusing one another of thievery, and folks trying to determine some means of verifying the authenticity and grade (fineness) of the coins they received. "

I am not sure if this method of causing inflation in another Kingdom was already known in the Middle ages. I know for sure that Napoleon did that to his enemies (and he was hardly the first to invent it). But middle-Ages... Hmm...

Anyway, we can assume the Witch-King was a financial genius, so he invented it in ME. How about that?

[Witch-king of Angmar]

Valandil

I like the idea of a silver penny being a standard coin - hopefully of the same weight from each kingdom, at least initially. I think it should be a respectable amount of money - as suggested, one or two of them being a day's wages. And... if Rhudaur had already experienced much turmoil, there may have been varying coinage standards used - perhaps even attempts by one king to get "more bang for his buck" by mixing base metals - and the economy of Rhudaur may already be in shambles.

It should be no surprise if what remained of Arnorian coinage by the time of Frodo's visit to Bree was severely changed. The years had brought much war and many other acts of violence. Most of what had been coined in years past lay by then in the lairs of trolls - or buried in the rubble of ruins, long ago burned down on them in their destruction. Besides - the noble and royal classes who would have hoarded most of these coins - they are no more (or at least appear not to be). Perhaps 80%, 90%, 95% ... or even 99% - of the former coinage was lost. There's less population to share around what remains, but still - the money would have a higher value, which could explain what seems to be a severly depressed economy. Getting a silver penny for a week of work could have been cause for great joy. An innkeeper could expect to do much better than a laborer though - but still, the pennies Barliman lost would be a hard thing.

I also like the idea of copper pennies for more common use (returning to 1346). So - if the value of copper to silver is 1:12, and of silver to gold 1:20 - that gives us a good starting point. Gold might even be minted only in larger coins - so that at twice the weight (Alcuin - do you have a good term?) - a gold coin is worth 40 silver pennies.

Gordis - why do you think Angmar would be prosperous?

I envision Angmar as a fledgling kingdom - just starting up - and only able to take on the divided realms of Arnor one at a time - starting with the weakest - then moving up the line, as Angmar slowly grew stronger and the other two (Cardolan and Arthedain) slowly weakened further. Otherwise, it would not have taken Angmar another 600 years to strike the final blow.

So - I don't think Angmar is prosperous at all yet - still very much a "start-up"

That inflationary idea - is it not only done at great expense? It would take a very wealthy nation to cause turmoil like that with money made from precious metals. If, for instance, Angmar would take 1000 of its gold coins, add in a base metal and make 1500 counterfeit Arthedainian coins - they have destabilized Arthedain's economy by 500 gold coins - but they have still lost 1000 gold coins of their own! I don't see how this could be done by one small kingdom to a larger, more established one - to any great effect.

[Witch-king of Angmar]

Alcuin

You should get inflation in the Arnorian daughter kingdoms during the wars with Angmar. Depending upon the progression of the wars, inflation in Angmar would rise and fall with its results.

The reason is that you’re dealing with what’s called a specie currency, sometimes called a “hard” currency: your money is actually minted metal. (We have fiat currencies in modern days: the dollar, the pound, the euro all depend upon swapping debt claims from one another: the paper money we use might be considered warrants on those claims.)

You may have heard of “Gresham’s Law.” It is an oft-misused phrase, but its origins are in the advice by Elizabeth I’s advisor, Lord Gresham. When she was informed that her enemies were debasing their coinage in order to build more ships and hire more troops, she inquired of Gresham what she should do. After several days of contemplation, Gresham replied that should she debase English coinage, “the bad money would drive out the good”: in other words, people would horde the finer coins and use the debased ones to pay their debts, resulting in inflation, which was in fact the fate of Spanish currency. The same thing might happen to Arthedain and Cardolan, but especially to Rhudaur, which would as client state probably transfer a good deal its wealth to Angmar, its suzerain.

Angmar, as the aggressor, would naturally debase its coinage before an attack, and then refine it again following victories, when it would use gold and silver taken from its adversaries to restore the content of its coinage. This is a pattern of not only medieval warfare, but ancient warfare as well, at least in Persia, Greece, Rome, and (I believe) Carthage: it has quite the pedigree as a means of finance. (We do the same thing with fiat currency when we make war: we inflate when we arm to prepare for war and wage it, and then we deflate afterwards: if we win. The “if we win” is important, and it’s why the US suffered such crushing inflation in the 1970s, after it lost the Vietnam War.)

After the end of the wars and the collapse of both Arnor and Angmar, deflation would set in: the economy was ruined, trade was gone, and most of the people were dead or fled away. Prices would fall over the long run, folks involved in trade would naturally have demanded payment in unadulterated coin, and the debased coinage melted down to retrieve the precious metal from it.

By the way, Elizabeth I did something remarkable. She did not debase her currency. That is often credited with beginning the underlying growth in the British economy that lasted until World War I.

[Witch-king of Angmar]

Gordis

QUOTE (Valandil @ Aug 6 2006, 04:23 PM)
That inflationary idea - is it not only done at great expense? It would take a very wealthy nation to cause turmoil like that with money made from precious metals. If, for instance, Angmar would take 1000 of its gold coins, add in a base metal and make 1500 counterfeit Arthedainian coins - they have destabilized Arthedain's economy by 500 gold coins - but they have still lost 1000 gold coins of their own! I don't see how this could be done by one small kingdom to a larger, more established one - to any great effect.


I don't think Angmar would use its own gold coins to make counterfeit Arnor coins. Angmar would take 1000 Arnor coins, melt them, add some good Angmarian iron that it has in such an abundance, and make 1500 Arnor coins that look exactly the same as the old ones.

I have recently read about the French King Phillippe Le Bel's methods of filling his treasure. That was his chief method - adding base metals to gold coins. But that caused inflation in his own kingdom. It you do the same with coins from an enemy kingdom, you only gain and destabilize the situation there.

[Witch-king of Angmar]

Gordis

QUOTE
Valandil:
Gordis - why do you think Angmar would be prosperous?

I envision Angmar as a fledgling kingdom - just starting up - and only able to take on the divided realms of Arnor one at a time - starting with the weakest - then moving up the line, as Angmar slowly grew stronger and the other two (Cardolan and Arthedain) slowly weakened further. Otherwise, it would not have taken Angmar another 600 years to strike the final blow.

So - I don't think Angmar is prosperous at all yet - still very much a "start-up"



First of all, I wouldn't be surprised if the Witch King brought with him a good amount of gold and treasures when he set up his shop in the North.

Then, the rate of Angmar's growth seems outstanding. In 1300 there is almost nothing to mention in the North, by 1409, Angmar has swallowed Rhudaur and was strong enough to conquer Cardolan, defeat Arthedain and besiege Imladris. Only the intervention of the Elves of Lindon and Lorien saved Arnor at this time.

The rate of growth of Angmar makes me think of similar phenomena in Mordor after the return of Sauron (2951-3019), industrialization and uruk-breeding programs in Orthanc at the same time period and even (at a lesser scale) of Saruman's rule of the Shire, where in one single year the rustic hobbits come to know machinery, new mills, wooden houses and "organized" labor.

It seems that unlike Arnorians, Angmar relied more on high-tech and industrialization- things scorned by "Good guys".

I am not trying to say that Angmar's swift rise to strength and prosperity meant much happiness for its inhabitants (I think they were almost as astonished and reluctant as hobbits were under Sharky), but the overall economic effect must have been grand.

Also, it was surely a very good idea to stop hunting orcs and trolls as wild beasts, as all the Arnorians did, but start to use them instead, both in the mines and in the army.

The third thing that made Angmar strong was the wide use of mercenaries from all over the ME. (It is written that "there were gathered many evil men, and Orcs, and other fell creatures." App.A). But the term "evil men" might be even more specific and mean the presence of Black Numenoreans - Morgoth-worshippers probably from Umbar and Harad.

So, I would say, by 1346, Angmar has already grown very strong and was becoming more so daily, only its enemies couldn't realize it yet.

Then in 1409 Angmar was defeated and took many centuries to recover. Why? Probably lots of the Black Numernoreans who came there initially were killed, treasures lost, population depleted. Only after the plague of 1636, when Arnor suffered and Angmar didn't, Angmar started to challenge Arthedain again.

[Witch-king of Angmar]

Valandil

(both Alcuin & Gordis) OK - hang on, a little light bulb just went on someplace. Whether you start with Angmarian gold, or Arthedainian gold - if it's going from your possession outward, it doesn't matter.

What I didn't get at first though - for some reason, I just thought of "slipping in" the fake stuff - but obviously, the intent would be to BUY something with it. So then you're theoretically buying 1500 gold marks (hey - is "Mark" a good term for the basic gold coin? Equal to 40 silver pennies?) worth of stuff for only 1000 marks.

But... it's probably hard to come up with too many things worth that much gold that are even on the market. May have to start the inflationary thing at a smaller scale - with those silver pennies.

Gordis - I still don't think Angmar was that powerful yet. It took a very weakened Rhudaur mostly by subversion - not by overwhelming force. Looking ahead to other principal events within the next few decades, here's how I see them:

1356 - Rhudaur and Angmar defeat a force (was it just Arthedain, or were components of the force from Cardolan?) in the open field. My guess is that this was a big shock and major demoralizer to the "good guys". Perhaps Argeleb went forth with all his might, expecting to sweep those "weaker" armies aside - much as the W-K would do years later (1975), when he went out against the forces of Lindon and Gondor. I think what made the difference in 1356 was the W-K himself. He may have even personally slain Argeleb - but in any case, I think it was a battle Arthedain expected to win: quickly and utterly - and they were probably greatly dismayed to lose it. (and this loss may have spurned the creation of those marvelous blades found in the Barrow Downs - for some may have guessed at the W-K's identity - if only in a very general way)

1409 - Angmar and Rhudaur had more time to build up forces, but it was probably once more a great shock to the Northern Dunedain to lose their great fortress of Amon Sul.

I guess I've strayed far from just the money talk - but all these things come together, don't they?

[Witch-king of Angmar]

Alcuin

Gordis, that is exactly what should happen. It would reduce the ability of the kings of Arthedain and Cardolan to prepare for war against Angmar, and it would both damage the economies of those kingdoms and reduce community trust and neighborliness: in other words, it would damage them in terms of economic and morale.

Alcuin

That was me. Sorry. Forgot to sign in.

-|-

There is one thing here that you need to be aware of. I thought of it after I posted this afternoon. It’s the differences between inflation, deflation, and changes in supply-demand. It sounds a little confusing, but if you take it step by step, it makes sense.

“Inflation” is a “term of art,” it has a very specific economic meaning. Since Milton Friedman and Anna Schwartz published A Monetary History of the United States, the understanding is that, “Inflation is everywhere and always a monetary phenomenon.” So if you debase the currency, it takes more of the currency, but the same about of gold, to buy the same goods or services. Sometimes it’s described as “more money chasing the same amount of goods,” but in this case, it’s less gold or silver per coin, and since the price is in gold or silver, it takes more coins to buy it. People are not stupid: they realize you’ve cheapened (“debased”: taken off the base) the money.

In the Black Death of AD 1348–49, millions of people died: in some towns, everyone in the town died. There was no war, no destruction: crops grew and needed to be harvested, and the next spring, a new crop needed to be planted. As a result of the Plague, there was a tremendous labor shortage, but demand had not slackened: prices for labor rose. This is not the same as inflation: you haven’t changed the money supply, but the balance of supply and demand. It’s as if workers controlled more of the economic see-saw than before. That could have happened in Arthedain/Arnor after the Great Plague of III 1636: Cardolan in particular was hit hard, and most of the people there died.

But once the kingdom was annihilated in III 1974–5, there was no aggregate demand: there were just not enough people left, and the towns and cities had been systematically destroyed over the centuries with few remaining (Bree, Hobbiton, Michael Delving, Tharbad) unable to support a national economy. In that case, you trade and barter to reach self-sufficiency, and then that trade and barter becomes the basis of the economy. It’s not money that matters, it’s the stuff that you need that matters: you might not be able to swap the money for something else useful because there’re just not enough people around to trade with. Of course, when you do trade for money, you demand the highest quality coinage obtainable: otherwise, it isn’t worth it to do the trade. That creates a deflation: there’s no trade, and there’s credit available, so you if really need some thing that does require a transfer of money, it isn’t likely that people will let you go into debt.

Is that sufficiently confusing?

Suffice it to say that if you’re looking at the period III 1330-III 1360 in Arthedain or Cardolan, you should be facing inflation. I think Arthedain is going to have more intensive military preperations because of its proximity to Angmar, and because of its long eastern border with Rhudaur (political problems or natural disasters might prevent these preperations, but that should be the natural reaction): at some point, the rulers and military commanders of Arthedain should begin to see Angmar and Rhudaur not as two separate opponents, but as one opponent with two centers of gravity. One of its military and political objectives should then become to destroy the center of gravity in Rhudaur: destroy its cities, its towns, and its manufacture and agriculture. Arthedain is also landlocked, and its frontiers, except for Lindon, are all subject to interdiction by potentially hostile states, including Cardolan. Until there is rapprochement between Arthedain and Cardolan, Arthedain should suffer higher inflation that Cardolan; but Rhudaur’s inflation should be even higher because it should be paying heavy tribute to Angmar: its only ability to improve its currency is to pillage its neighbors, and it doesn’t seem to be winning any wars for itself.

[Witch-king of Angmar]

Alcuin

BTW, I don’t do RPG, but I did DM for many years playing D&D about 20–25 years ago. I don’t recommend that you include inflation in your game unless you intend to keep up with it. In that case, I can help you set inflation rates if you can tell me what you want going on; but I don’t want to track them for you. My years as DM also lead me to suggest that you immediately establish a section in the RPG that is essentially the same as Tolkien’s Tale of Years. We used to call it “Dungeon Time.” You need to consistently track who’s where and doing what, pretty much all the time.

[Witch-king of Angmar]

Gordis

QUOTE (Alcuin @ Aug 7 2006, 07:15 AM)
My years as DM also lead me to suggest that you immediately establish a section in the RPG that is essentially the same as Tolkien’s Tale of Years. We used to call it “Dungeon Time.” You need to consistently track who’s where and doing what, pretty much all the time.


Now that is an excellent idea, Alcuin. Thank you. I shall try to do it.


QUOTE
BTW, I don’t do RPG, but I did DM for many years playing D&D about 20–25 years ago. I don’t recommend that you include inflation in your game unless you intend to keep up with it. In that case, I can help you set inflation rates if you can tell me what you want going on; but I don’t want to track them for you.



No, I don't think we will include inflation as a constant "feature", as it is not a game but a common storuy. But it is nice to know thast the Rhudaurian silver penny must cost less than a Cardolani or Arthedain one.

[Witch-king of Angmar]

Alcuin

If you’re going to set up a Dungeon Time, you should do it in Microsoft Access or Borland Paradox, or you will not be able to keep a good track of who’s where. If you do that, you can also build a currency calculator into the system fairly easily, as well as base prices, distances, travel time, weather, illness, NPC activities, etc. It depends upon how complicated you want to be; fortunately, you do not have to add all their pieces at once, and you can bolt new pieces and concepts on as you go along, dropping what doesn’t work and expanding what does. The Game Master can also keep parts of it private so that the players cannot see everything.

Gordis

Oi! I am out of my depth here! "Microsoft Access or Borland Paradox?"
I can only do it in the old MS Word...