Technomancer: Genesis Chapter 77: Banking in Rex Imperia

Aerwyna and Ezra entered Reitz's study, the guards and knights that were escorting Ezra were left outside. Reitz wore a frown as he sat behind his desk, he didn't answer Ezra before because he didn't want the public to know the actual state of the treasury. Aerwyna couldn't help but giggle.

"Hey, that's unfair, it's not funny you know? You basically blackmailed me, Ezra," Reitz sighed. At this remark, Aerwyna burst out shrill laughter.

"Haha, our son outsmarted you. You know you should curb that impulsiveness of yours, haha," Aerywna chuckled merrily.

"What's this about? Are you just trying to get me to fund your projects again?" Reitz looked at his son grimacing.

"Of course not dad, this will really make Castle Blackfyre a lot of money. I promise. " Ezra replied, although he could not hide his sly smile.

"Then why does it sound like you are scamming me? I gave you my word in front of all those people, they would not look kindly at me if I took it back, my authority would not hold any weight if I did," Reitz explained while still frowning. "You know this and used it to your advantage." He groaned.

Then as the thought passed he spoke again. "At least I know you can handle yourself in court," Reitz frown disappeared and chuckled a bit.

Reitz clapped on to his knee again, "Well, let's hear this great business plan of yours. I led you here partially because I wanted to hear your proposal without other people. Word could spread and they would copy your idea."

Ezra nodded in agreement.

"Father I'm going to establish a business, it's actually not very easy to copy. It requires that one would have the power of at least an Earl to execute so don't worry about imitators any time soon."

Reitz's ears perked up. He wanted to hear it out, if Ezra said was true then, the monopoly alone would make it very profitable.

"Father, the business is what I call a bank. There will be three important things that this institution will be doing. First and foremost is lending money to merchants and charging them for that service in the future," Ezra said. While he wanted to extend the services to common people, he knew that it was too early to do this in the inception of the idea. He wanted to help the lower classes, not rob them blind.

Besides if done incorrectly a sudden tilt in the economics of Rex Imperia would spiral everyone into poverty so he had to be really careful when implementing the banking system. He remembered a passage on earth: "Give a man a gun and he can rob a bank, give a man a bank and he can rob the world." Yes, banking services were like tools if used for the right purpose it would help the users, if not then it would hurt them instead.

Reitz's eyebrow raised. "Continue."

"I have made a few different models so that we can make a profit out of this. First is to write a contract where they borrow a principal amount and pay us for an exact percentage. So it would be a fixed time and a fixed value. For example, we lend a merchant, 100 gold imperials, after half a year he would pay us a total of 110 gold imperials."

Reitz face lit up, it was ingenious, and it was literally making money out of money. There were no messy trades and there was no travelling. It was a brilliant concept. "But what if the merchant can't pay on time?"

"Well, we can choose from many options depending on the merchant. One, we could simply confiscate his goods or property and sell it. Two he could re-apply for another loan, called a rollover, and we charge a percentage on top of that but we have to screen it if his business is really practical and it can actually pay us by that time we could also charge a fine for delayed payment on top of the percentage of the money we are charging. Three, we could opt for the debtor for slavery but I don't want precedence in the matter, eventually, we will be copied by others."

Reitz nodded.

"We can also let merchants loan a principal amount and let them pay a fixed amount per month plus a fee that way, at least the money would not be stagnant and would keep on flowing back to us"

"Yes, I think I like that set up more,"

"Finally we can have them opt for a small percentage that compounds over time, this last one is the most lucrative trust me. In the future, these merchants would not want to use their own money as start-up capital and would look to us for money."

Wow you have thought this through haven't you Ez? Hmm, what is the second way we can make money?"

"The second way we make money is by providing a safe haven for their money,"

"What do you mean?"

"Around Fulmen we will establish other banks, especially in city centres. Merchants will let our bank handle their money and give it to us willingly."

"What? I don't follow?" Reitz was confused.

Ezra smiled. "Dad they will give us the money and then they will receive what I'll call a certificate of deposit. This paper will hold information on how much they have deposited. Then they can exchange this paper with actual gold in other cities or towns if we have branches there. "

Ezra then was walking to and fro like a university professor explaining a subject to his students. He continued. "We will charge a two percent fee when they get withdraw their money. With this set up they won't need to actually bring their money along with them while travelling making the journey safer. The risk of getting pillaged by their own hired hands will go down significantly and also bandits are less likely to attack a caravan without money too. So a lot of merchants will definitely use the service."

"What only two percent? That's too low isn't it?" Aerwyna interjected and she was frowning.

"Mother you didn't let me finish. The certificate of deposit is also a contract in itself. It will state there that we can use their money for our own purposes and investments but they can get the full sum whenever they want. The key is letting them keep on depositing their own money with our bank. Since they know it is safe with us they won't easily withdraw the money." Ezra explained and smiled.

On earth, he would have been heralded as the most diabolical banker of all time. Instead of paying the depositor interest for letting them use their money, the depositors were actually going to pay money to Ezra's bank instead, money that he could use for lending, money he could use for making even more money.

In the future he planned to convert it so that depositors will get an interest if they transact with him, but for the meantime he did not want to implement it, it wouldn't make sense that a business would be giving away money, this would be treated with suspicion as banking was not even in its infancy in this world. This would cause a lot of problems.

This very first bank he was establishing would be the blueprint of all banks and he would make it into a central bank in the future to regulate banking interest, the discount rate, and inflation and the future money markets as a whole. This alone was a tremendous power to wield. In the future, his bank would be able to make and break kingdoms and level the lords into submission but that would also require sufficient firepower to back this.

Aerwyna was still frowning. "Ezra that's too lax, after all the staff and the soldiers we hire to implement this will be counted as expenses."

"Just trust me mother, with the money we are going to get from this, I think we would rival the wealth of the whole empire itself. With just two per cent, any traveller can safely deposit his money without fear of being robbed. But we have to make certain that the people who have deposited are the actual people who are withdrawing."

Aerwyna didn't like the answer but she still nodded in agreement. "Okay Ezra, I trust your judgement."

"The third way we can make money is to sell the goods we have confiscated, with our network we can easily find buyers who want the confiscated goods and we could even profit more from defaulting merchants. Yes, and there is even a fourth way."

"Really now? How?"

"We can set up places where their certificate of deposit can be used as currency and trade supplies and goods for it."

"Damn, it's really well thought of." Reitz looked at him." I thought at first that you were moping and wanted to take revenge on me, haha." Reitz laughed." This is truly a huge undertaking. You are a monster you know, how do you come up with these ideas of yours? Hahaha, I think you get your intellect from the Blackfyre linage,"

"Don't bet on it," Aerwyna retorted.

"As for the things I need father I need manpower, I need a few scribes and treasurers. I need people to be able to crunch numbers. I need a list of known trade routes, I think we should set up shop on the main trade routes. Please help me with organizing the people, dad, I need you to understand how this bank works so that you and mother can give me input."

"Of course my son, I now see why you required the money," Reitz nodded. "Very well then, this is, not just Ezra's business anymore it is now a family undertaking!"

Ezra smiled again.

"Since you like it so much, we can use the whole of the treasury for this right?"

Reitz almost fainted on the spot flabbergasted as he fell off his chair.

Chapter end