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Right now, I am in the beginning of the season 4. I haven't read the books themselves, but I understand that the series is pretty close to the original content.

What makes me curious is the financial system of the Seven Kingdoms. Here and there some unclear bankers are mentioned, those who actually support with gold all the rulers of the Seven Kingdoms. Do the books ever explain any of this in detail? When did this bank system came to reality, who made it legal, and why do the kingdoms tend to loan money from them?

It's actually not some natural institution. For example, in many real medieval kingdoms usury and interest were against the law. Was it true for the Seven Kingdoms in the past? If so, when did this change? It seems to me that the bankers actually are the main financiers of the war, since it brings them huge profits. But do bankers make any actual appearance in the books?

Since I was asked to be more specific about my questions:

  • Who produces the currency of the Seven Kingdoms? It's definitely not the Master of Coin, considering what I saw.
  • Is the currency centralized at all in Seven Kingdoms, or does each kingdom have its own currency?
  • Why do the kings prefer to borrow money from some bankers (i.e. to borrow from each other, since the bankers don't have any money of their own from the start) instead of getting rid of the bankers once and for all and issue their own coins?

Bronn in season 2 put it out perfectly in his dialog with the Imp:

Why don't we just get rid of the bankers instead of paying them?

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You seem to be asking a lot of questions could you by the least edit the text to show your questions more clearly i.e via bullet points. –  Simon Apr 24 at 8:24
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Related question I asked about currency denominations. Also, there are many examples from real history of a King or country disrespecting the rules of banking and triggering an economic collapse. It's not hard to imagine a world stuck in the middle ages for thousands of years to have learned that one the hard way as well. –  Dacio Apr 24 at 14:39
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Your parallel to medieval Europe is irrelevant. Usury was forbidden because of Christianity, which does not exist in ASOIAF. –  Superbest Apr 24 at 16:37
    
@Superbest, The parallel is not irrelevant at all, since most religions have made statements against usury and both Islamic and Christian religions have, at some point or other, banned it. Interest rates are regulated in most societies these days, which is why loan sharking is illegal in most places, which makes the parallel excellent. –  PatrickT Apr 25 at 7:44
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4 Answers 4

up vote 24 down vote accepted

Bankers do make an appearance in the book. The main bank in ASoIaF is the Iron Bank of Braavos All of the free cities have their own banks, but the Iron Bank is by far the most powerful. It is considered highly foolish to trifle with the Iron Bank, where it is often said, "The Iron Bank will have its due." If necessary, the Iron Bank will use its vast wealth to hire sell swords to get its money back, and has the power to support new Kings, thus changing the shape of the lands.

Spoilered appearances for each book.

A Game of Thrones

We first hear of the Iron Bank in the first book, Game of Thrones when Ned Stark learns from the small council that Westeros is in a lot of debt, much of it to the Iron Bank.

A Feast for Crows

Considering it is foolish to trifle with them, it may not surprise you that in Feast for Crows Cersei opts to delay payments to the Iron Bank (against the objection of Pycelle). An envoy, Noho Dimittis, is sent to King's Landing, but he is initially given the run around from Cersei, who sends him to speak with Lord Gyles a few times, before finally being sent away and told that the Iron Bank would get its payments when the rebellion had been quashed.

A Dance with Dragons

Another envvoy, Tycho Nestoris, arrives at the Wall to meet with Stannis. The Iron bank intends to support Stannis, on the promise that he will pay the debts that the Iron Throne owes the bank. The Iron Bank will have its due.

We also hear that

Ser Harys Swyft, the Master of Coin under Lord Regent Kevan Lannister, has written to the banks of both Pentos and Myr, to try and raise enough money to pay back the loans of the Iron bank. This clearly suggests that the Iron Bank is so powerful that it's worth taking another loan in order to placate them.

Clearly banking is a very important part of the Known World. However we only hear of banks from the Free Cities of Essos. We do hear of other sources of loans. We learn that the Iron Throne is in a large debt to Tywin Lannister. It does not make clear the terms of the loan, but it is unlikely that Tywin will lend money without the potential for gain, whether through interest paid or promise of power.

Update based on the revised question

Who produces the currency of the 7 kingdoms? It's definitely not the Master of Coin, considering what I saw.

I don't believe there's any mention of this, I'll continue looking.

Is the currency centralized at all in Seven Kingdoms, or does each kingdom have its own currency?

There is a single unified currency throughout the seven Kingdoms. This consists of three coins: the Gold Dragon, The Silver Stag, and the Copper Star (7-pointed, representing the Gods). This was established after the unification of the Seven Kingdoms, following the War of Conquest.

There is some slight exception to this, regarding the Iron Islands. The Iron Born (particularly the men) tend not to use money as much (“the Gold price”) and prefer only to trade the things which they took by force (“the Iron price”).

Why do the kings prefer to borrow money from some bankers (i.e. to borrow from each other, since the bankers don't have any money of their own from the start) instead of getting rid of the bankers once and for all and issue their own coins?

This is a very complicated question, and you could ask the same of our world. If you start to dismantle the financial institutions, then you start to create many enemies. Banks have their money and power stored in many ways, and once you try taking apart one piece, the others will find retribution. It is mentioned that the Iron Bank of Braavos will be willing to incur losses, and hire sell swords to get their money back. It's all about reputation. If you believe that a bank will come back with swift retribution, then you might prefer to pay them.

There's also an issue with revolt. Once you start dismantling your own laws, regulations and institutions, this leads to anarchy. For a real world comparison, consider the revolts and rebellions surrounding Charles II reign and his actions of dissolving parliament.

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Another loan we know of, from A Feast for Crows, is from the Faith of the Seven. –  ssell Apr 24 at 13:28
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There are also gold coins from Highgarden that are different from the Golden Dragons, I think they were brought up in AFFC. –  Rob Apr 24 at 14:24
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@RichardTingle There's definitely some logic in that. However you would have to argue that Gold/Silver actually have an intrinsic value. Electronics don't exist in ASoIaF so I don't think they have any value other than "it looks pretty". Therefore, as a lot of the use of gold will be used in trade and bartering, I would argue that the value is just as abstract. But then we're getting into the realms of material worth of currency confidence, which is a bit too off topic for me. Good point though. –  Moogle Apr 24 at 16:04
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Since they use precious metals in Westeros, the government cannot simply "print more money". They can mine gold, which they already do, but there are obviously limits to that. You can "issue your own coins", but provided that you can prove the gold is actually gold, they would probably be worth their weight (just like actual dragons). For gold coins, the branding doesn't determine denomination (that is determined by the amount of gold), it's just a handy seal of quality showing that the coin is probably real. So it is meaningless to ask about centralization. –  Superbest Apr 24 at 16:44
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There is no centralized mint in Westeros. Since the currency itself is the source of the value, all the mints do is make sure they are standardized in size and stamp pretty pictures on them. Like it was mentioned before the Reach has different coinage, and the Manderlys were offering to rebuild the Old Mint to stamp King Robb coins. –  System Down Apr 24 at 17:05
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Who produces the currency of the 7 kingdoms? It's definitely not the master of coins, considering what I saw.

Actually yes, it is the master of coins. But those coins are commodity money - the crown first has to buy the gold or silver they are made from, they cannot be produced in arbitrary numbers.

Is the currency centralized at all in 7 Kingdoms, or does each kingdom has it's own currency?

They all use the same currency (golden Dragons, silver Stags, copper Stars) which was established after the War of Conquest. The coins typically show the likeness of the king who was on the throne when the coin was made.

Why do the kings prefer to borrow money from some bankers (i.e. to borrow from each other, since the bankers don't have any money of their own from the start) instead of getting rid of the bankers once and for all and issue their own coins?

In the case of the Lannisters, the "bankers" are basically former kings - an the current queen is of course one of them. You cannot simply "get rid" of them. The same is true for other creditors of the crown, even down to common merchants: you could of course simply stop paying those, but then what happens next time you need money? And they'll probably also stop selling you other stuff that you need.

Ultimately, this question is about macroeconomics, where many "common sense" views stop being true and the important thing to remember is that money is a fiction: what counts is not who has how much money, but who controls what resources (people, land, infrastructure, etc.) - and the king is only king and allowed nominal control of everything because a lot of people with more immediate control of resources support him.

Answer to the Original question::

who made it legal,

Typically, things are legal unless there is a law that says they aren't.

why do the kingdoms tend to load money from them?

Because they need it?

It's actually not some natural institution.

I submit that, quite to the contrary, it is natural for people who have money and others who need it to come up with arrangements.

For example, in many real medieval kingdoms the usury and the interest money were against the law.

This ban was specifically imposed by the Christian church. Westeros is not Christian. Usury bans were also widely circumvented, especially when kings got involved.

Ultimately, the reason why Westeros has close involvement between finance and politics is that the period of real history it is based on had such involvements in spades. Read about the Medici and Fugger families, who controlled much of Europe by funding kings.

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Actually not just the Christian church. But also Islamic countries use this ban. –  SPIRiT_1984 Apr 24 at 9:22
    
@SPIRiT_1984: correct, but the question mentioned "medieval kingdoms", and islamic countries (at least back then) didn't have kings. –  Michael Borgwardt Apr 24 at 9:26
    
I disagree. For example, the city of Buchara was founded by the king Siavash. Of course, they held different names, but we can treat them as medieval kingdoms too –  SPIRiT_1984 Apr 24 at 9:29
    
Additionally I think the word "kingdoms" was used as a more general term in place of "domains" or other such term. I don't think we need to be so pedantic as to take it literally as a monarchy ruled by a king/queen. –  Moogle Apr 24 at 9:35
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@SPIRiT_1984: not a good example - that was before Islam existed. But yes, of course this is pointless hair-splitting. I already said that you're correct and was just giving my reason for mentioning Christianity specifically. –  Michael Borgwardt Apr 24 at 9:38
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Master of coins acquire gold and silver to keep the ship afloat. As Littlefinger explains it in season one when Eddard is informed that they are six million gold dragons in debt: "The master of coin finds the money, the king, hence the hand, spend it." He is responsible to fill the treasury, keep books and advice in financial matters.

Bank systems, up until recent times, usually had a gold standard or the like. In GOT they primarily use gold, silver and copper. As in real times the money has its value of its own. A gold dragon is worth it weight in gold so to speak. In other words they can't simply "print money". That also goes by that if a person has a banknote saying he owns one million gold dragons, the bank is required to have one million gold dragons at hand.

The Seven Kingdoms uses the same "currency": that is the kingship regulates it, but one can also use private minted or coins from foreign banks. As such it is likely the master of coins has, at least a finger, in the minting process, but that gives no income in itself.

In short: the king borrows money because it is needed to fulfill duties (and amusements).

"Not to pay the bankers" would mean to alienate oneself from the source that they rely on. Usually a shortsighted solution.

In real history Philip IV of France is perhaps one of the more infamous debt evaders.

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Yes, Philip IV is infamous for that. By the way, in another question posted by me it was admitted that Martin is in fact a big fan of Accursed kings - and Philip IV is the main hero of the first book. –  SPIRiT_1984 Apr 24 at 15:49
    
@SPIRiT_1984: Cool. Wasn't aware of that. Guess I have some books to read ... :) –  user13500 Apr 24 at 19:31
    
Also Philip II of Spain was famous for defaulting on the national debt - four times: in 1557, 1560, 1575, and 1596. –  RobertF Apr 24 at 21:17
    
user13500: actually I had asked a question about this book - scifi.stackexchange.com/questions/49624/… - appears to be George Martin was inspired by that. –  SPIRiT_1984 Apr 25 at 9:04
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I have neither read nor watched A Game of Thrones (yet), but your description reminds me of the Knights Templar. Could it be the bankers of Westeros are part of a similar shadowy organisation, allowing rich people to deposit gold in one place and allow them to withdraw money or gold against it from some other Knight?

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