77 Banking in Rex Imperia (1/2)
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,”