Monetary Theory and Interstellar Markets
We have discussed many topics of interest to Free Traders and have moved onto one of the most important ones.
Money
Specifically, what it is, who uses it, and why?
Since the first formal markets were invented in pre-history humanity has been exchanging something for something else. Typically, this revolved around some kind of standard that could be set to a commodity, ancient civilizations used grain and more advanced ones used precious metals. This caused no end of trouble and wars. These types of commodities backed currencies still exist on many underdeveloped planets within the Inner Sphere. It wasn’t until the 20th Century that monetary theory, global trade, and international services really took off and consumed humanity’s attention.
Throughout humanity’s early days of spaceflight and planetary governments this trend continued starting with the Terran Alliance, humanity’s first planetary government. With the Outer Reaches Rebellion, subsequent coup by James McKenna and foundation of the Terran Hegemony, then subsequent Star League, many of the foundations for the Inner Sphere’s modern economies were formalized.
The modern interstellar standard exchange truly crystallized with the first Hyperpulse Generator signal in 2630. Finally, there was a low cost, high throughput manner of transmitting information between inhabited planets. The Great Houses rejoiced because they had been reliant on courier ships jumping between far flung worlds within their empires for almost 300 years. A process that took a very long time and made interstellar trade difficult. Interstellar trade is still difficult but for different reasons now.
First Lord of the Star League, Nicholas Cameron, thus created the first C(ameron)-Bill which would be used for accessing this HPG technology and upon which all other currencies within the Star League could be exchanged. As the HPG system began to develop and more systems were deployed throughout the Inner Sphere ground rules and its rate were established by the Ministry of Communication.
It’s successor COMSTAR retained most of these and added a few of their own. Phi Branch refusing to wire any money but the C(OMSTAR)-bill through their network was the most contentious. This meant that interstellar trade was easiest to conduct in C-bills as House Bills required a fee to be turned into and returned as House Bills.
However, Imperial Authorities would only accept their taxes in House Bills thus they had to pay COMSTAR to get access to their own taxes in their own bills. The only other option was transferring physical bills or commodities across the stars. That however still would have earned COMSTAR money as they owned the largest interstellar shipping fleet in the Inner Sphere and were the financier for almost every jumpship in existence. As a supposed infringement on Imperial Sovereignty this earned COMSTAR the ire of the Great Houses, but what else could they do but accept it?
Having a standard exchange to all currencies and ample physical currency/commodities on hand COMSTAR’s C-bill was an incredibly soft power advantage for the Order. While they could manipulate markets that would damage their trustworthiness and neutrality making them less desirable partners. Thus, the Order mostly preferred arbitrage, buying low and selling high. By doing this COMSTAR provided a massive buffering effect on interstellar trade while helping stabilize planetary markets. With local information on planetary conditions and close relationships with leaders the Precentors could leverage the futures markets of a thousand worlds and redistribute commodities where they were needed most, at a profit. Holding onto warehouses of goods also kept their (or friendly) freighter holds as full as possible plus the fact that they could do so without being taxed on their property and capital gains helped as well.
Although the C-Bill [now (Clan) Council] is the gold standard of exchange there are numerous other types of money in circulation throughout the Inner Sphere. House Bills are commonly used for interplanetary or internal trade within an empire with many people never even seeing a ‘blueback’ as the C-bill is known. For this they serve perfectly well as regional (in the several planet sense) or planetary banks can operate where COMSTAR choses not to, at a consumer level as their fees are high and terms onerous.
Keeping a world in even Imperial currency is sometimes difficult though unless you have regular interstellar trade coming to your world. Planetary governments will issue their own currency (P-bills) for internal trade if they have a shortage of off-world currency coming in or would prefer to incentivize (or trap) local spending. COMSTAR does not normally accept P-bills beyond what it can use locally so these worlds must sell commodities to them or acquire House bills to transmit their taxes or pay for imports that are priced in C-bill equivalents. P-bills can only be used on that world or for things from it while having a typically unfavorable exchange rate set by agreement between Treasuries. These are rated from D to AAA based on how well the planetary economy is doing and whether they are paying their debts to off-world bankers.
Major corporations do the same in the places they have authority, circulating something known as ‘scrip’ which can only be used internally within that company to purchase goods or services they provide. Scrip is normally distributed in company towns and is a sort of non-voting stock coupon/credit. Some of the larger interstellar corporate scrip such as Irian, LAW, or Nashan can even draw a favorable exchange rate on par with AAA P-bills.
The Clans utilize the Purchase of Goods and Services (POGS) voucher which also acted as a type of scrip. Commonly known as ‘Work Credits’ this standardized, time-dependent, and codex linked, credit entitled the individual access to a certain value of goods produced by the centrally planned economy and available from a central exchange.
However, the value of these goods was never truly fixed and often subject to wild fluctuations within the Enclave or over time. Meanwhile an individual’s ‘work credit’ remained consistent and non-transferable outside the issuing Clan Enclave and subject to review for any reason. Thus, commodity and inter-Clan trading was conducted ‘awkwardly’ by an abstract ‘K’ (for Kerensky) value agreed upon by both parties.
While it was not discovered until the Wars of Reaving the Merchant Caste of several Homeworld Clans had been engaged in market manipulation and ‘cooking the books.’ Slight imbalances put supply and demand out of balance to maximize an enclave’s economic output while concealing this fact from Warrior oversight through arcane accounting practices. This unfortunately left most Clanners short of some less ‘profitable’ goods such as food or clothing, while more ‘profitable’ ones such as refined metals or complex manufactured goods were incentivized.
Any created beyond the centrally planned (and often very manipulated) allotment or which ‘failed’ quality control remained with the Merchants. These were in turn exchanged through Dark Caste or Society contacts with Deep Periphery groups such as the Hanseatic League and Jarnfolk or with the Second SLDF’s Huntress garrison for luxury goods or other contraband. Lootera quickly became a major smuggler’s port as Great House and other well-heeled enterprises were willing to pay big money for Clan manufactured goods even if they had to wait a long time for shipment. Some of the product was also used to pay Dark Caste to silence opposition from the Scientists and Technicians who could bring this manipulation to their Warrior superiors while rewarding those that cooperated.
When this was discovered, there was a massive purge in the Homeworlds that exacerbated the already fragile post-Reaving economy. To this day almost ten years after those events they have still not recovered while the Sphere Clans are thriving despite suffering massive damage during the Jihad after abandoning the ‘old ways’ in favor of greater integration with the Second Star League and Inner Sphere.
