Lit Economics in SW?

in TCW, the banking clan is dissolved and control of the bank goes to Palpatine/the Republic. so this means that after the republic becomes the Empire, the Empire controls the banks.


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I thought the IGBC was the only megacorporation shown in the prequels that was NOT dissolved/nationalized?

 

No, but it would be silly to pretend the modern FTSE or Hang Seng or NASDAQ relate in any way to the London stock exchange of old.

Stocks generally form the main component in any capital raising venture (selling off ownership of the company in fractional amounts in exchange for capital to expand and invest) by a company when sold on the primary market (i.e. through an IPO or 'float'); and then act as a barometer for market faith in the performance of a company when traded on the secondary market.

Derivatives, exchange traded commodities and funds, bonds etc form most of the tradable securities today.

Therefore, it's better to look at someone like John Castaing and Jonathan's Coffee House (https://en.wikipedia.org/wiki/Jonathan's_Coffee-House) if you want an inspiration for a Star Wars exchange and/or broker type.

 

That's what I thought as well.

Related to that is that the IGBC financed both sides of the Clone Wars, unlike the other big commerce guilds present at the Geonosis conference who were pretty much in the tank for the Seppies.

 

That was Legends, not TCW which may as well be a part of Disney canon. And even in Legends it was still pretty much directly brought into Imperial control. Muunilinst was even one of the planets that stuck with the Imperial Remnant out of loyalty to it.

 

But TCW was made when it was still in Legends. Where in TCW does it say the IGBC was dissolved or nationalized?

 

season 6, Crisis at the Heart.


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This thread brings back some good memories of the economic debates around the Trade Federation that raged for da…years in the Episode One thread.

The novelization didn't exactly clarify things.

 

It doesn't matter, if the IGBC is on a fiat currency or the minerals and metals of the planets it controls. What matters is, if they as the ones who decide on the value of a currency are seen as independent from the larger galactic government or not. The moment they aren't faith in the value of money gets lost and people try to conserve their wealth in the form of other things.

When the Galactic Republic takes over the Banking-Clan in TCW the institution has already lost credibility with the Council of Five arrested for corruption and fraud. The fact, that prior to that both Galactic Republic and CIS sent envoys to resolve the situation shows how dire the situation is (most likely the outstanding loans and fiat currencies can no longer be backed/covered by the resources of the Banking-Clan-worlds. Just consider how much values were lost because of the war). In other words at that point in time it matters little, if the IGCB remains independant or not, since it has already lost the most valuable commodity in the monetary sector: trust.

 

No they wouldn't. The republic would only have to continue to levy taxes payable with republic credits, which would generate more than enough demand for Republic credits to maintain its value. With a territory almost the size of a whole galaxy, there would be a lot of republic taxes: almost all businesses would have no choice but to accept credits in order to pay their taxes.

I could imagine a hard currency controlled by a private organization making sense in peace time; especially if it's been the practice for a thousand years or more. But as soon as the war starts, cutting out the IGBC would be the first thing the republic does

I'm sure there would be lots of inflation as the Republic builds more and more of its kilometer long warships, but I don't think the credit's value would fall through the floor.

I could imagine the republic issuing tons of war-bonds. The Empire would probably resort to directly coercing the banks to take imperial war-loans, so as to avoid the embarrassment of a bad bond sale (which could be seen as a referendum on the empire itself). But neither would be necessary to directly fund govt expenditures, only to suppress civilian demand for the duration of the war.

 

I don't think you guys get the point of a hard currency. It isn't based on trust, its based on an actual resource. This is why Watto wanted 'something more real', he wanted something with actual value; ie some sort of resource crystals. The IGBC based the Republic Credit on said resources, Nova Crystals, various other resources from their spires on Muunilinst and Mygeeto. Fiat currency is based on how much trust you have in the creditor for its value. I assume by the Prequel era, the Republic credits were fiat, hence not trusted by the Outer Rim as the Republic doesn't exist there. This might've been different before and after that, since after Sheev directly acquired the IGBC and could've had a functional hard currency for the late Republic and Galactic Empire.

 

But we know from TPM that the Galactic Republic does NOT control the entire galaxy and at the time of the Clone-Wars the galaxy is divided between Republic, CIS and Neutrals. And we also don't know how the taxation on every level works. For all we know every planet has its own currency and while Republic credits have to be accepted (depending on the power of the Republic itself), the natives still deal in their own currency. If they want to do business offplanet or for some reason have to pay republic taxes, they have to make a currency-exchange or take the money they made from their offworld-deal. This is a more likely scenario for the ordinary citizen of the Galactic Republic than one single, monetary system since a single unified monetary policy for a whole galaxy with worlds as diverse as Coruscant, Kuat, Naboo and Tatooine wouldn't work. A prime rate, that would work on Kuat would probalby ruin the economy of Tatooine.

Now lets look at the fiat-currencies: A fiat-currency is accepted as long its value (= buying power) is guarrented by the government or an independant institution. As long as people have faith in the government or the independant institution they will also have faith in the fiat currency. Now if this government is in a war for its very survival and in danger of being toppled, what do you think how much faith the people have in their goverment and currency?

Now how does the Banking-clan fit into this: It is said to back (among others) the Republic credit with the "hard" resources it controls. One could interpret this in the way, that the Republic credit is a hard currency.

This is unlikely for two reasons:

If the Republic credit were a truly hard currency, hundreds of planets wouldn't have seen the need to establish their own currencies (Legends), because they would have still been able to do business with their money. It would have also been money, where the value would have been independant from the state of the Galactic Republic and its government as long as the Banking-Clan backed it.

The second reason is, that it is doubtfull, that even the resource-rich worlds of the Banking-Clan could have shouldered the covering of the entire galaxy's money. Meaning that not even the Banking-Clan could have exchanged every currency-piece in circulation (and stored electronically on accounts, liquidated loans and debts) with nova-crystals and metals of corresponding value. I find it a much more possible scenario, where the the galactic economy runs on fiat-currencies and only a part of those is actually covered by the resources of the Banking-Clan.

How does this work? Lets assume the galactic economy covers 1 Million worlds. Lets also for the sake of simplicity assume, that they are all more or less equal in economic terms. Each world decides on the monetary policy that suits it best. Its currency is backed by the IGBC. That would mean each of the one million world's currencies is backed the IGB. The natural riches of the IGBC can however only cover ten percent of those. That means as long as "only" hundred thousand of those one million worlds go down the drain and their citizens want to exchange their fiat-currency into the hard cash the Banking-Clan promised them, the system works. If only one world more collapses, the Banking-Clan and the rest of the galaxy is f..ked. Of course the system would probably collapse a lot sooner, since the other worlds wouldn't sit still, while the BC bails out one ruined system after the other, but on the other side ... under what circumstances would hundred thousand worlds go down the drain? Certainly not in a Republic that has known peace for a thousand years.

I think it is something like this what happened in TCW, Season 6 "Crisis of the Heart". Due to the destruction of assets during the Clone-Wars to many of the BC's loans had become worthless and they also couldn't cover the currencies anymore. The Council of Five tried to cover up, that the IGBC was basically bankrupt and tried to get as much cash with all means necessary to stay in control and keep the system running. Only their machinations were discovered and the IGBC found itself with a new management. A government fighting for its very survival at least as far as the ordinary layman knew, while the ones behind the war knew of course better.

 

I eagerly await your An Inquiry Into the Nature and Causes of the Wealth of Galaxies. I'm sure it will be a page turner.

As was stated above by GAJello, the less detail the better when it comes to these things. To go further either alienates people or confuses them, hence the economics of the prequels.

 

That was a lot I think if the reason why people didn't like or understand the prequels-the worldbuilding, the more complicated politics and economics-which contrary to a previous poster Darth Plagueis did an excellent job of explaining and elucidating, and yet your right this sort of stuff puts people off-either they get upset at things being "wrong" don't know what their talking about, think other people don't know what their talking about and basically it just makes everything unfun for everybody.

I think subjects like this have a place certainly in the SW fandom and IU as well-they provide lots of room for discussion, for worldbuilding, RPGs, alternate interpretations and so on. However it must be understood that these sort of subjects are not the heart of Star Wars and hence simply will never be discussed in a consistent or in depth way for their own merits. So inevitably their will be contradictions, scanty details, and so on.

Anyway that's my take on it.

 

That's not my point. The republic still controls enough of the galaxy.

We do know that the senate levies taxes. It was stated in the infamously dreary opening crawl of the Phantom Menace. Presumably the senate imposes RC denominated tax liabilities.

This is certainly possible: but not inconsistent with my argument. Larger national currencies and local currencies, both fiat or otherwise, can co-exist in harmony. In fact, for a gigantic state like the Republic, it*s probably absolutely necessary.

It's more complicated than that.

Fiat currency has nothing to do with "trust". Fiat currency is based on tax liabilities, meaning that when the businesses and the people of a country have to pay their taxes in their state's currency, it generates demand for that currency. The currency has a captive user base who can't suddenly say "oh I don't trust this money anymore". It's a different story for people outside the country; so the exports and imports situation can deteriorate if trust is lost.

The currency of a war-fighting nation can definitely swing wildly. The American Confederate dollar saw all kinds of ups and downs, but mostly declined along with that government's prospects.

However, the galactic republic was never as weak (comparatively) and it controlled vast regions of the galaxy. I think the republic always had the necessary to means to uphold the value of their currency without third party involvement.

Of course there is a reason to have your own currency. The local governments would probably want to have their own printing presses and finance government expenditures without always having to tax people.

In economic downturns, many governments feel the need to expand their money supply, so there's that.

In fact, a hard republic currency would probably be rather scarce, which is all the more reason to have your own currencies. It helps with local businesses.

There is no reason why this demand would suddenly stop at the Republic's frontiers. Watto has every reason to accept republic credits, since he can use them to purchase goods from the vast economy of the republic. The republic's businesses will certainly welcome his business. Also, Watto could probably do this through local merchants in Tatooine, who do business in the republic, if Watto himself doesn't have any direct need for anything from the republic. We know there is plenty of interstellar trade going on; including the lucrative illicit substance trade, which could certainly use the credits. At the very worst, Qui Gon would have to endure an unfavorable exchange rate between the local currency and his republic credits, but I don't see why that would be the case either.

 

It is interesting that there is an alternative form of currency on Tatooine in the form of Truggats(whatever those are but they are clearly some kind of currency). The republic's financial system doesn't seem to have the same sway/legitimacy in the outer rim.

But again, this is all a bunch of textbook like stuff. I'm not sure I go to a SW film to get an economic treatise. You ned up raising more questions than answers. That's great for a history book or essay or debate but for a SW film….ehh.

 

bellatroll is right, honestly. It didn't make much sense for Watto to NOT accept the credits and just go and buy himself something in Republic space. They didn't even need to have a big explanation for it either. Just say that Watto over-inflated his prices because this is Tatooine and merchants swindling you is common, so those Republic credits Qui-Gon has are simply not enough for a new hyperdrive, but the prize from the upcoming Boonta Eve is. Could've also had a note that they -tried- selling the Queen's wardrobe much to her distaste but didn't find any buyers because people on Tatooine want guns, speeders and ships. A bunch of expensive silks wouldn't seem to be worth much to Tatooine's citizens for them to pay anything big for them.

 

It certainly doesn't control Hutt-space and it didn't/couldn't control, what happened on Naboo. You seem to have forgotten the entire point of the Prequels in political terms: the Republic is in decline, close to finished, f...ed,... take your pick.

We know the Republic recently started levying taxes on trade-routes in the Outer Rim. How business on individual planets is taxed, we don't know.

That we agree on.

And which can be circumvent by black markets and illicit work. I'm sure the citizens of countries of the EasternBlock were obligated to pay their taxes in the national currency. Doesn't mean the Dollar wasn't wanted and couldn't be used there.

The CIS used to be part of the Republic and we know the megacorporations, that backed the CIS made up a substantial part of the galactic economy. If otherwise, the Clone-Wars wouldn't have been such a huge affair. Also, if people thought the Republic was never as weak, why do you think they gave all those emergency-powers to Palpatine, if they didn't percieve the situation as desperate.

But the timing is suspicious, since obviously for close to thousand years those planetary governments saw no need to have their own currencies. Thousand years with no economic downturn ... . Earth-economists would probably cream their pants at that thought.

According to Shmi Skywalker "the Republic doesn't exist out here". In other words even if Republic credits had some value, Watto wouldn't be able to use them. I wouldn't be surprised, if the Hutts had established tight controls on the economy of their fiefdoms including the monetary systems.

 

The outer rim as you say is outside of the republic's jurisdiction though I imagine in a de facto sense rather de jure-IYRC the Sith defeated the republic in a major battle in the new Sith wars(Legends timeline) roughly a thousand years previous, rendering republic laws(slavery) customs, and currency outside of relevance.

 

It happens in the real world too. For a historical example, in the "Wild West," you could say the US government didn't exist out there (even though it was technically the United States). There's plenty of similar examples too.

 

Or Mexican Texas prior to 1835

Yeah just because a state claims territory on a map doesn't mean it actually administers and has legitimacy in said territory

 

If I was a trillionaire in the galaxy and I wanted to buy a planet or even a star; how would I go about doing it and how much would it cost?

I remember in The Courtship of Princess Leia Legends novel; Han won Dathomir in a sabacc game for a pot of 8 million credits but that was back in the 90’s. (when the book was published)

 

Come to think of it, shouldn't Han have done some research on this planet to see what it's worth before playing for it? What if it's some dead blown-up planet like Peragus II?