Maraguan bank

[Jonas]

I want to develop the Maraguan economy a bit. And we need a bank to do so.
The best chose would be a central bank with Shireroth (like we are planning to do with the Commonwealth). Is their a possibility that this can be tried?

[Andreas the Wise]

Do you want to be hosted on the same bank with similiar currency, or merely use the same software?

[Jonas]

Something as 1 Maraguan Frank (maybe the name will change) = 1 Erb
And the possibility ro have transactions between both nations.

[Andreas the Wise]

So you mean I need to start thinking about how to handle currency exchange again?

[Jess]

Yes.

[Erik Mortis]

I could in theory, as I've said.. host 2 currencies on the one bank. with no intermixing..

[Andreas the Wise]

Well, for now, I don't see any reason why Jonas can't buy this service for Batavie. But for the moment, leave exchange rates for further thought ...

[Jonas]

Buying my services for Batavia? But we are talking about Maraguo...
I think an exchange rate isn't needed, except if you (Andreas and Erik) think it is.

[Malliki]

1 = 1 should be easy enough for an exchange rate.

[Andreas the Wise]

It would be, if it weren't for the fact that that requires creation of Erb every time there's a transfer (for example, if Batavians spent up big in Shireroth, they might inject 10 000 extra erb into the economy = significant inflation)

[Malliki]

How would that be? If we stipulate that the Imperial government handles exchanges between currencies, that would mean that the Batavian would have to give 10 000 Whatevers to the Imperial government for 10 000 Erbs. That is, the Imperial government would then hold 10 000 Whatevers instead of 10 000 Erbs, but with an exchange rate of 1 to 1, those 10 000 Whatevers are worth 10 000 Erbs.

[Andreas the Wise]

That's one of the solutions I'm considering (when trading currencies was proposed months ago by Ocia I said that was the best solution for closed economies). However, while in actuality no erbs are being created, it still in effect has the same ... well, effect for inflation - more money is in circulation.

Thanks for the suggestion, that sort of clarification is helpful But in my mind there's a huge difference between "Lets have a 1:1 exchange rate" and "Let's swap some currency and then have a 1:1 exchange rate" ...

(actually, wait ... doesn't that mean Erb is being owned by non-citizens?)

[Malliki]

Erbs cannot be transferred out of the country nor owned by non-citizens under the current rules.

If private companies were to handle the currency exchange, no money would enter circulation, or, alternatively, the Imperial government could tax the citizens the equal amount of Erbs that are exchanged, thereby maintaining the same amount of money in circulation.

[Andreas the Wise]

I still prefer the private citizens handling exchange thing, as Bayen and I proposed last time this came up. That also means we don't have to set exchange rates ...

[Malliki]

I think that the exchange rates will naturally start at or around 1 anyway.

[Andreas the Wise]

They're welcome to, but we shouldn't make it official ...

[Malliki]

Or a bidding process could be used. The point is that given that we don't know how much a foreign currency is worth, 1 to 1 is the natural choice. I also think that any currency exchange companies should be licensed by the Treasury.