I would suggest avoiding different currencies and conversion, since it would be complicated and, in my opinion at least, not much fun. Have everyone use copper, silver, and gold coins, the value of which changes according to supply and demand.

It would probably be simplest to just have something like 1 silver coin = 100 copper coins, and 1 gold coin = 100 silver coins built into the system. You could make the comparative values of the three types change based on the availability of the metals or something like that, but it would be difficult and would probably require a government set value. Other values do not have to be government set and it's probably best if they're not. Prices for items will fluctuate based on supply and demand, and if stores only sell items that players sold to them and do not, as they often do, just have an infinite supply of stuff, they can be programmed to change their prices based on how much is in stock and how frequently someone sells them something and how often someone buys it.

Quote:Original post by Riviera Kid
I dont see how this system wouldnt work. We have this system in real life and it seams to be working.

If this could be made to work it would perhaps be realistic but not very fun. Do you see the difference between those two? Because your post has realism-equals-fun-mentality written all over it.

I don't think players will be entertained by the fact that every action they take might break the economy and thereby the game. In real life we have scores of economists working full time in order to prevent the national and international economies from breaking. This game would need some similar function. Will these people be employed staff or players? If the latter then the target audience of the game would be a small group of wannabe economists who's spare time interests involve moderating and stimulating complex markets and preventing them from crashing.

Quote:Original post by Riviera Kid
yes i understand now, see my previous post.

Right, so you understand that if gold is 3*copper, then gold_coin must be 3*copper_coin (if freewheeling conversion between resource and coin exists), and thus it's completely pointless to include them?

I think this is a great idea, quite realistic as well. I think a short explanation of what money is would be of help, though.

Why money? Of course, currency has not always existed. Initially items were bartered, but this had several disadvantages. First, there was a granularity problem: what would you barter a high-valued object for? Carpenters, gold diggers or jewel makers always had great difficulty exchanging their services for something useful (a kettle is useful, a gold nugget worth of kettles is not). The first advantage of currency is to allow lowered granularity: you can transform the value of a gold nugget into the values of a kettle, some grain, some meat, some cloth etc.

Then, there was the conservability problem: most items were at the time intended for consumption (they were not durable). Bartering a worn cloth, an used pot or half-eaten food was difficult, and when it was possible it only happened at a fraction of what a new item could be traded for. This had the consequence of preventing any form of saving (except for jewels and high-valued objects like weapons). On the contrary, currency in its first forms was something of infinite durability, since coins were indistinguishable from one another. Once could actually save money.

Finally, there was the quality problem. An important problem on most markets is asymmetry of information: what a party knows that the other doesn't. This always lowers the average quality of bartered goods (it's a simple game theory conclusion) when quality matters. Quality does not matter for currency since all coins are the same (in a simple world where no fakes circulate). Therefore, the person offering the goods has all the information necessary to trust the buyer and sell higher quality goods.

How did metallic currency work? The first incarnation of money was in the form of metallic coins. A coin has two values: a real value, which is equal to the value of the materials used, and a market value, which is equal to the value of the materials that can be bought with that coin. Again, asymmetry of information strikes and makes the two values different. With a random circular bit of gold, you cannot buy an equal amount of gold, since nobody would trust that object to be actually made of gold. Hence the market value of a coin is, intrinsically, lower than its real value (and in almost all cases, zero).

The market value of a coin is equivalent to the government endorsement. The government states that these coins have a known composition, people who create fake coins are punished by death. This statement creates trust in the coin, which in turn gives the coin a market value: the emblem on the coin gives the required information about the contents of the coin (100% gold or 25% gold + 75% silver etc). So, in effect, a coin is only worth the value put on it by the state that creates it.

But why metal (instead of paper banknotes) ? It's quite possible that non-metallic currencies existed in antiquity, but since the value of currency depends on the stability of its originating government or institution, it's always a good idea to keep money that, given enough effort, can be converted back to its real value. Gold coins could be melted, then sold to experts at their full value (sometimes, nations would buy metal in exchange for the coins made with the metal), while the same is obviously not true for paper money. However, as we'll see, when the stability of nations and institutions increased, paper money began to appear because of its advantages when large sums are involved. Another advantage of metallic currency (especially monometallic currency) is that the conversion rates are obvious (their value is proportional to their weight), and this is very useful when a large amount of coin types are available: in ancient greece, each city-state has its own coins, and sometimes more than one!

How did metallic-referrent currency work? With the Renaissance (or the late Middle Ages) appeared a new type of currency. While metallic currency was endorsed by the state to give it a market value equal to its real value, several new coins, as well as all banknotes, were endorsed to have a market value greater than their real value. The first example was the venetian lettera di cambio, which was a bit of paper signed by the owner of a venetian bank and could be returned to the bank for a complete refund. This was very effective, since merchants could now deposit large amounts of money in the bank in the Netherlands and cash the check in Venice to buy spice and other exotic goods they would sell back in the Netherlands. First, there was no more lugging around heaps of gold coins on bandit-infested roads, since checks can be hidden or transported by couriers. Second, this means that the burden of change conversion was upon the bank (you'd deposit Florins, and get an equal weight of Pistoles, for instance).

If the bank failed to deliver, or became bankrupt, the note was obviously rendered worthless, which is why the power of such checks was inherently dependent on the renown and (assumed) stability of the bank. The best example of this is probably the bank of Amsterdam. The bank only accepted deposits, and delivered on demand certificates of ownership over part of an account, which could be transferred to other people as payment. No credit means no risk of bankruptcy. Finally, the burden of checking that no fakes were paid was upon the bank. This made Bank of Amsterdam Banknotes the safest means of payment (for medium-to-large sums) available throughout Europe for half a century.

In the late Renaissance, nations started creating currency with a market value higher than their real value, using the same mechanism independent institutions had used a few centuries earlier. Coins were no longer made of gold, but rather were equivalent to a fixed amount of gold that would be given by the state when the coin was returned. This had the obvious advantage of preventing certain types of theft where thieves would scrap a bit of gold off of each coin. Now, coins were made of less valuable metals, so this was no longer possible. The disadvantage was that it was not possible to determine the value of a coin by weighting it. This is one of the two reasons why it took so long to appear: nations had to become large enough to be stable (so real value was more or less stable as well), and few enough to keep the number of different coins low.

An interesting experience is that of bimetallic currency, such as that of France in the late Renaissance. Bimetallic does not mean that the coin was made of an alloy, but rather that it was defined in terms of two metals. A coin had the same value as X grams of gold and Y grams of silver. The same could be achieved by keeping both gold coins and silver coins, with a fixed conversion rate between the two. In games, when you hear that one gold piece equals ten silver pieces, you actually hear about bimetallic currency. In real-life, islamic currencies have been bimetallic for a very, very long time (almost since the beginning of islam, in fact). The problem with bimetallic currency is that it creates an artificial lock between the values of gold and silver (this is the most used bimetallic system, although others exist).

If the universal price ratio of gold and silver is different from the national one, one can use the nation's "refund your coins" program to buy and sell at better prices, and the universal price ratio will shift to equal the national one. This has the effect of allowing a nation to select the universal ratio! Of course, should two countries choose different ratios, the richest one would win. Because nobody is foolish enough to engage in a bimetallic battle, bimetallic systems are naturally very stable currency systems.

How does the current system work? Of course, the previous system came to an end in the western world. Mainly because of national debt and inflation. Countries generally created more coins than could be refunded given the country's stockpile of gold. Quite recently, a similar situation was still in effect in Argentina, where the local currency was equivalent not to gold weights, but rather to US Dollars. In the end, the currency-gold parity was abolished, during the last century. It first happened for the USD, and most of Europe followed. The world returned, conceptually, to a barter system. However, instead of bartering bread loaves and kettles, people bartered currency. The respective demand for each currency determined its value relative to others, and demand reflected, in turn, each country's commercial balance (since a country pays with its own currency). Abandoning the gold pariy was made possible by the continued geographical growth of nations: since prices must constantly be reevaluated in all used currencies, this would have been impossible at a time when each city-state and fiefdom used the currencies of its neightbours. Now, each country used only one currency, and currency changes only had to be handled by a handful of people, not every merchant on the street corner.

In most places in the western world, nobody could envision losing all his or her money because of a government change, as could happen in the antiquity. Because of this, money has become safe (though less safe than gold, oil or bonds, as far as canonical bear investments go). This allows continued usage of paper banknotes and non-noble-metal coins. This has a very annoying consequence: inflation. While inflation was first constrained by the amount of gold available, it was now uncontrollable since any country could cheaply start creating more money to compensate for a disastrous commercial balance or to invest in new deals. This happened in the 1930s. The price of basic household items such as pencils jumped from two Mark to two billion Mark in Germany over the course of a few months. In the end, the one-cent coins were worth less than their weight in junk metal, and were melted, as backnotes with additional zeroes appeared. So much for the safety of money.

Nations finally decided that money printing was best left alone if inflation was to be avoided, and willingly gave up their money printing powers. Yes, that's right. Most western nations cannot print money anymore. That role went to the FED or the CEB, independent money-printing banks which have the mission to keep inflation low (one could debate over whether this is a bad thing, since deflation is a very nasty thing too: look at what happened in Argentina, people just don't spend anymore, since money is gaining value over time).

There, that should answer most questions you have about real-world currencies.

let's just stick to some interesting system which would (hopefully) create some roleplaying as an additional effect: let's keep bartering!!!

No more currencies, no more money... Let's just stick to the old "I'll give you those two chickens, and that nearly new shirt for your old pants and the boiler, plus the wooden plates." "No way!! The plates alone are worth at least three chickens! Look at the finely carved figures!" "Ok. BUt I will also do your chores" "You're on. let's shake it."

Quote:Original post by Fournicolas
Let's just stick to the old "I'll give you those two chickens, and that nearly new shirt for your old pants and the boiler, plus the wooden plates." "No way!! The plates alone are worth at least three chickens! Look at the finely carved figures!" "Ok. BUt I will also do your chores" "You're on. let's shake it."

<Meenx the Wizard> Hey, Smasharr, buddy, didn't you say something about buying yourself the Sword of Worldslaying, the Arrow-Proof Enchanted Cape of Invisibility, the Unholy Full Plate Armor of Indestructible Elderdragonbone, the Potion of Dracolich Blood and Pus, the Unique and Highly Prized Wand of Animate Nightstand (And Lesser Gay Bars) and the Power Level One Bazillion Epic Mount with Defy Gravity and Climactic Cavalcade racial traits?

<Smasharr the Barbarian> Me only have sacred fist-sized diamond of ineffable value. Me cannot split sacred fist-sized diamond of ineffable value. Me cannot pay weapon-man, cloth-lady, armor-midget, potion-hag, wand-gender-indifferent-person and horse-mommy. Me not happy.

* Smasharr the Barbarian has clipped your head off with a cracked, shoulder-length fingernail.