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[thijser]

While more conection with the outside worlds would be nice it's also important to remember that the average city only had little connections with the outside world futher away than the farms providing it's food. So they were largly closed systems.

What I think we really need is a system that makes dwarfs demand more money if they have more wealth. "I'm not going to work for 1 dwarfbuck a month if I can enjoy my legendary meal in my legendary dinning room after which I can go to my legendary bedroom!"

Combining this with some way by which the amout of money a fort has (money is really only worth something because we all know it's standing for something more then a little piece of paper or coin). Perhaps saying that the value of a dwarfbuck is relative to the total value of the fort/the amout of dwarfbucks in excistance. Ofcourse we would need a way to stop players from making a single dwarfbuck and buying out an entire caravan with it. Then the next year making 2 dwarfsbucks and buying the caravan again. As this would be a huge exploid. Perhaps making the caravans not accept coins or having them trade with individual dwarfs and not with your fort itself.

[Vercingetorix]

Of course, it's also true that bigger cities had much more connection with the outside world; while that's definitely true of a newly-founded outpost, a fully-developed Mountainhome would be a huge nexus of trade attracting far more than the four caravans per year we currently get (of course, we'll also need more goods in order to make more caravans useful). 

That being said, ultimately money will only work if it actually plays a role in production.  Shortages of currency should slow production (due to a switch to barter or alternative methods of payment) whereas having too many coins will drive inflation, forcing up the prices of goods and services and affecting wages, and in turn purchasing power.  This is going to add a twist to trade; no longer would you be able to dump large quantities of goods for trade or offerings without making up for it through minting coins or withdrawing them from circulation to balance the money supply. 

It would be complex to implement, but could be made much easier by simply having the tax collector or whomever estimate the number of coins that need to be minted or withdrawn from circulation and report it through the status screen.

[jester]

I currently have 80 gold bars and 30 platinum, plus my gem horde, I think this would play merry hell with any sort of economics you throw at it

[Heavenfall]

Why? Because you can mint coins?

[jester]

Indeed, if I knock out 3 batches of gold coins and then 40 2 years later inflation may be an issue  .

[Heavenfall]

Only if gold coins are the only currency. Basically, it would tilt the market in favor of those who have savings that aren't in gold coins, and in favor of those who have borrowed gold coins earlier.

But in an island economy, a limited inflation isn't by default a bad thing. It redistributes the wealth, if you want it to (give to those you choose). Or it doesn't, if you don't want it to (give to those who already had gold coins, or keep all the coins for yourself).

Currency adds another level of difficulty when it comes to creating an economy. Who creates the currency? How is it maintained? Is it secure? Is it unstable?
The way I see it, all these are non-issues until you become the MountainHome. Logically, you wouldn't have to deal with currencies at all, or if you did, it would be a local currency that could be substituted for "real" worth. Again, minting new coins would only serve to alter the value of the coin itself, not necessarily all the goods related to it.

[breadbocks]

Your dollar bills are worth what you can buy for them. They're only worthless if you can't buy anything. The central bank now works to guarantee a steady price (low inflation) instead of guaranteeing gold.

Actually, dollar bills or euro bills aren't worth anything other than the paper they're on. Fact is, we think they have value, and everyone else thinks they have value, so they are used as if they have value.

[Heavenfall]

Wasn't that what I said? 

[AngleWyrm]

For any type of money to work, the minter has to have a product/service that they will buy back the money with. Then the money is a stand-in for that product/service. He who would print and sell money in exchange for something must be willing also to trade something in exchange for his coin. So that the coin represents a voucher from the mint for something the people want.

Maybe the player's minted coin counts as the Leader's coin for his services -- which ain't much. He listens to people bi*ch all day long, and maybe charges for it. "I'll listen to your complaints for a fee." Then he could say one minted coin has a value of one therapy session. People could accept and trade that, but the problem is that it's not a high volume need for the people. So it wouldn't work very well as a substitute commodity.

Another approach might be to assign who is the minter of coin, and what they promise in return for their coin. Maybe the brewer mints coin in exchange for beers. Or the Carpenter mints coin in exchange for barrels. It should be a common high-demand commodity to make the currency useable by everyone.

Or maybe the governing authority (leader) declares ownership of a base commodity, such as crops. He then pays the farmers in coin, representing one crop each. The farmers can buy crops for their own consumption, or sell the coin to others who might want crops.

Government ownership would let the player mint any amount of coin, but could be in trouble if the dwarves decided to come collect and there wasn't enough crop to cover the coin. Upset dwarves begin a tantrum spiral from inadequately capitalized coin Maybe they start trading the coin at a lesser value (3 coins/ 2 crops or some such) because that's all the total currency is worth, compared to the total crop available. And voila, we have modelled inflation due to a greedy leader printing up too much currency.

[Heavenfall]

The way I see DF running currently, the government owns everything and controls everything. Dwarves are effectively labour-machines, who are only paid when they labour. Everything they produce, the government owns. If dwarves want to own anything, they need to labour for salary, and then purchase items from the government. These items include food and clothing. Rooms are only rented.

Shops are merely retailers.

[Urist McKing]

For any type of money to work, the minter has to have a product/service that they will buy back the money with. Then the money is a stand-in for that product/service. He who would print and sell money in exchange for something must be willing also to trade something in exchange for his coin. So that the coin represents a voucher from the mint for something the people want.

Maybe the player's minted coin counts as the Leader's coin for his services -- which ain't much. He listens to people bi*ch all day long, and maybe charges for it. "I'll listen to your complaints for a fee." Then he could say one minted coin has a value of one therapy session. People could accept and trade that, but the problem is that it's not a high volume need for the people. So it wouldn't work very well as a substitute commodity.

Another approach might be to assign who is the minter of coin, and what they promise in return for their coin. Maybe the brewer mints coin in exchange for beers. Or the Carpenter mints coin in exchange for barrels. It should be a common high-demand commodity to make the currency useable by everyone.

Or maybe the governing authority (leader) declares ownership of a base commodity, such as crops. He then pays the farmers in coin, representing one crop each. The farmers can buy crops for their own consumption, or sell the coin to others who might want crops.

Government ownership would let the player mint any amount of coin, but could be in trouble if the dwarves decided to come collect and there wasn't enough crop to cover the coin. Upset dwarves begin a tantrum spiral from inadequately capitalized coin Maybe they start trading the coin at a lesser value (3 coins/ 2 crops or some such) because that's all the total currency is worth, compared to the total crop available. And voila, we have modelled inflation due to a greedy leader printing up too much currency.

Actualy, for gold coins they back themselves. The only time you need backing for currency is when the stuff the currency itself is made of has little value, IE paper. A gold coin that weighs 1 ounce is worth one ounce of gold, same goes for platinum coins, silver coins, bronze coins. It was the system used durinng the middle ages. Now, inflation occurs in that system because if alot of coins are made of a certain material, that material becomes more readily accesible and therefore demand drops. Realy, you don't need a huge horde of gold to back the coins, you just need a huge horde of gold to make more currrency when the need arrises.

[AngleWyrm]

In theory a precious metal coin is also the product. But when people started melting the US pennies down to use them for their copper, the government responded by stripping the copper out of the pennies.

The US Dollar was originally defined in the 1792 Coinage Act of US Congress as being 371.25 grains of silver.

[thijser]

Perhaps we should move this to another forum part.
Anyway perhaps we should start by choosing what a good dwarven economy needs to be able to do.

1 Simulate money for all your dwarfs.
2 Doesn't make a fort that's able to support legendary for all have to go back to rooms as cheap as passble.
3 Is able to trade with caravans.
4 Doesn't make your dwarfs spent more time hauling their money then working.
5 Has "depth/complexity" like the rest of the fort.
6 Shows dwarven greed it's what they are known for!

[Vercingetorix]

Technically, though, gold coins and fiat currency are the same in the sense that their inherent value is the item itself; gold is only valuable because it's limited in supply, and if we increased the supply of gold we'd also increase inflation.  This is exactly what happened to Spain during the 15th and 16th centuries; so much gold and silver flowed in to the country from their colonies that it triggered massive inflation.

I'm not sure how it would work in DF but it would add a strategic side to mining; rather than simply dig out veins of gold/silver/copper, it may be more productive not to do so in order to keep the economy balanced.

[thijser]

Inflation of precious metals would be quite low because they would be wanted by all civs so that inflation only really kicks in if either there are very little intelgent creatures left or if you mine enormous amouts.