Kirib: Difference between revisions

As Morstaybishlia traded with nations far and wide, traders would buy vessels and undertake long trips to bring goods to and from Morstaybishlia. Around the reign of King [[Lambertus I]], Merchants formed guilds which were institutions that were designed to protect their interests and offer mutual support. They used kirib and albon coins to trade not only within Morstaybishlia but with foreign lands. They used these coins to buy things from other traders and they, in turn, accepted them as payment for goods and services that they rendered. They found that the banks which existed were extremely tedious and inconvenient especially for long-distance trade and travel. Thus, these merchant guilds established their own banks, starting during the reign of King [[Lambertus II]], and stored their gold and silver coins in their own vaults. These banks were called merchant banks. They issued their own certificates denominated in kiribs and albons as previous banks had done. The difference was that these merchant banks issued certificates and tokens that were recognised by increasingly wider networks of traders. Because the merchant banks had offices in multiple cities and were reliable, people, including those outside the merchant guilds accepted the certificates and coins as legitimate payment for goods and services as they trusted that they could eventually withdraw kirib and albon coins at face value.

Merchant banks realised that people would hold on to these certificates for a very long time, so they started issuing more certificates and tokens than there was gold and silver in their vaults. Moreover, they would lend out the gold and silver to other traders and then everyday people would repay them in interest, so they were comfortable in the knowledge that they would make enough money to repay their depositors and even make profits for themselves which they could lend out to others. Unfortunately, people started exploiting this system and creating their own notes and coins. The merchant banks could not keep up with the situation and they asked the Crown to step in. TheUnder the reign of King [[Slev II]], the Crown made it a criminal offence to counterfeit bank certificates and all certificates, tokens and gold were recorded in the ledgers of the Treasury to keep track of legal currency. This worked well, however, the merchant banks issued too many certificates and tokens. Thus, when there were tough times such as a war or drought people would want to withdraw their gold and silver coins in return for the certificates. Unfortunately, this led to some banks going bankrupt or making losses as they struggled to pay back their obligations to their depositors. This would lead to inflation, where the value of gold and silver was insufficient to pay to for the available supply of goods and services. The Crown realised that this would lead to social and political instability and would bring economic hardship upon the nation. To disassociate themselves from merchant guilds, most banks dropped the term merchant from their name unless they exclusively conducted services for merchant guilds.

TheUnder King [[Gustav I]], Treasury of Morstaybishlia decided to regulate the banks. It ordered all existing banks to keep a set amount of gold and silver in their vaults compared to the total number of certificates and tokens that they had issued, formally establishing the notion of fractional reserve banking. Moreover, banks could only be established with the approval of the Treasury according to the criteria that it set out. In 1422, under the reign of King Gustav I the[[Sigmund GreatII]], the Crown decided to formally establish the kirib as the currency of Kingdom of Morstaybishlia and all of its territories and it divided 1 kirib into 128 albons. This made the value of kiribs and albons independent of gold. This meant that kiribs and albons no longer measured the weight of pure gold and silver, but different amounts of kiribs and albons could be exchanged for a set weight of gold and silver as determined by the Treasury of Morstaybishlia. This also began the gold standard (formally called the precious metal reserve standard). The certificates and tokens of the new Kirib currency were now banknotes and coins, currency in their own right. As the duty of administering this system and handling the financial requirements of the government of Morstaybishlia became more complex and as the Treasury became so powerful that the Lord High Steward who governed it rivalled the King in power, who at the time was King [[Frederick I]], the Crown separated currency management from the Treasury and gave those duties to the newly established Bank of Staynes, formally ending the Treasury period.

TheDuring the reign of Queen [[Rosamund I|Rosamund the Great]], the Bank of Staynes demanded that all that banks use kirib notes and coins under a new regime that it controlled, practically forbidding any mints or printers other than the Staynish Banknote Company and the Royal Staynish Mint from producing currency. The banks would request permission from the Bank of Staynes to issue a set number of banknotes and coins based on the total gold and silver in their vaults. The Bank of Staynes would write them a cheque that they could redeem at the Staynish Banknote Company and Royal Staynish Mint for a fixed number of coins and notes. Each bank would request its own unique designs. These notes and coins could be redeemed at any bank for gold and silver based on the exchange rate declared by the Bank of Staynes. By thisthe reign of King [[Redmund timeV]], the use of gold and silver in everyday transactions had practically faded. Most workers, landlords and traders accepted currency as payment and only used silver and gold for major payments such as buying a house. Thus, the Bank of Staynes was content that the economy could survive the movement of gold and silver in its economy. Moreover, Morstaybishlia's empire allowed it to create a massive internal market that reduced the total gold and silver that was used to pay for imports from outside the empire. The stability of this system became incredibly attractive to many countries that were struggling to pay for Morstaybishlian imports with gold and silver.

Some countries that traded with the powerful Kingdom of Great Morstaybishlia were struggling to pay for imports. They had to take out massive loans from Morstaybishlian merchant guilds and other bodies to afford the cost of imports. They often lacked the gold and silver to pay them back. Moreover, they realised that life would be easier if they could pay them back in more abundant and easily accessible kirib coins and notes instead of physical gold and silver. Thus, they decided to approach the Crown directly and develop a system that would allow them access credit for imports. TheUnder Queen [[Florence II]], the Crown signed bilateral treaties with these nations whereby they could use the kirib as their currency if they adhered to strict requirements. In general, their banks were required to adhere to the fractional reserve standards that Morstaybishlian banks were required to follow. Moreover, they were required to strictly limit public spending and lending. To ensnare them and entrench their economies in the Morstaybishlian sphere, the Bank of Staynes created exceptions for payments made in kiribs, incentivising them to adopt the kirib. In return, they could keep their gold and silver in their own country. Thus, the nations that participated in this scheme were called the Kirib Monetary Union.

During thisthe reign of King [[Frederick timeIII]], the telegram was invented. It allowed communication over incredibly long distances and reduced the need for people to physically be in a place in order to do business. The Bank of Staynes decided that all future loans to large banks and governments would longer be in notes and coins, but they would keep the loans as balances on their respective balance sheets. This eliminated the need for physical notes and coins. Commercial banks extended similar services to their commercial clients, allowing the wealthy to keep their wealth as entries in the ledgers of banks rather than carry around notes and coins. They could simply write a document called a cheque that would allow the bearer to go to the bank where issuer of the cheque had kept their funds and request a fixed amount of currency either in the form of gold and silver or in the form of kirib notes and coins. This service became so sophisticated that bank could simply adjust their ledger entries to represent that value had shifted between their clients. Thus, large scale payments could be settled in this manner instead of piles of coins or buckets of physical money. Moreover, the Bank of Staynes favoured this method as it prevented the need to issue large-denomination banknotes. To make the process of transacting easier, the kirib was decimalised in 1893 under the reign of Queen [[Rosamund II]], meaning that 1 kirib was now worth 100 albons. 128 old albons were set to the value of 100 new albons.

TheIn the reign of King [[Thadeus I]], the [[Great War]] began which was incredibly expensive and it required the Treasury of Morstaybishlia to borrow incredible amounts of gold and silver from the Bank of Staynes to pay for the war effort. People became increasingly worried that the kirib would become virtually worthless and started queueing at banks demanding that their kirib notes and coins be redeemed for gold and silver. The Crown immediately banned the use of gold and silver in everyday transactions. This had the effect of making the kirib a representative currency. Thus, people were forced to hold on to their kirib denominated assets, preventing a massive run on the banks that would have crippled the economy. People were free to pay their taxes in kiribs instead of precious metals and banks expected kiribs instead of precious metals and payments for loans. Furthermore, the government could channel these resources to fighting the war and supporting its allies in the Imperial Powers. This did not mark the end of the gold standard but withered the everyday applications of this standard except on a macroeconomic and national level. It catalysed further modernisation and reforms under the reign of King [[Thadeus II]].

ElectronicDuring the reign of King [[Galfridus]], electronic lectronic systems emerged that made it easier for people to communicate and usurped the telegram. They had the effect of making banking vastly easier and reducing the dependence on physical currency for large transactions. The [[Auroran Imperial War]] was incredibly costly for the Bank of Staynes. Now, it was not individuals and business that would demand gold and silver, but entire governments. The Bank of Staynes dreaded the probability that the Kirib Monetary Union would effectively collapse. Moreover, the member states of the Kirib Monetary Union were on opposing sides of the war. Thus, the Bank of Staynes declared monetary neutrality, protecting the hard currency balances of participating states even if they were not allies of Great Morstaybishlia. This drew a lot of public criticism against the bank both from within Great Morstaybishlia who felt that the Bank of Staynes betrayed them and by foreigners who felt that the Bank of Staynes could be manipulated by the Morstaybishlian government to their detriment. When the war ended, all of Morstaybishlia's enemies were defeated. But it wanted to prevent the collapse that would lead to instability in the KMU. Thus, it was decided that the value of kiribs would no longer be fixed to gold at all - effectively ending the gold standard. Instead, the demand and supply forces on commercial markets would dictate how much it was worth. Moreover, gold and silver as means for transactions were totally banned, relegating them to assets as any other.