I’ve combined my two passions: economics and Game of Thrones to come up with an economic
analysis of Westeros. I scoured the pages of the first 5 books to find clues about
the financial situation in the seven kingdoms. Here's what I found...
First of all: The Iron Throne really needs to get its finances in order. The crown has
been spending and accumulating debt. Unfortunately, none of this spending has been invested in
long-term growth. The throne spends on lavish parties and jousting competitions. And has
ongoing expenses due to the war of the 5 kings. In book one Ned Stark says the mad king left
the treasury flowing with gold. And Littlefinger has managed to increase revenue tenfold during
his time as Master of Coin… YET SOMEHOW the crown is over 6 million golden dragons
in debt. It owes 3 million dragons to the Lannister house, 2 million to the Iron Bank
of Braavos--the most powerful bank in the known world, and another million to the church
of the seven. The crown’s sizeable income barely covers the interest on its debt. And
Cersei has already suspended payments to the bank and the church. It seems to me the Lannister's
are going to need a new motto... Based on the unsustainable debt dynamics of
the Iron Throne it seems the probability default is high… which means the Iron Bank is no
doubt getting restless. But if Tommen wants to stay on the throne
(or rather if Cersei plans to keep him there) he going to have to keep fighting for it,
which will cost money. As more debt isn’t an option, the throne has increased taxes.
The crown has imposed a tax on the tens of thousands fleeing to King’s Landing. Tywin
even levied a tax on the brothels. The other option is printing money. Which
is difficult with a commodity-based currency. But there is some speculation, based on a
few pointed lines in books 2 and 3, that Littlefinger was printing more coins by diluting the amount
of gold in each. Though these statements could be attributed to Little Finger's incredible
business acumen. BUT THERE ARE TWO SIDES TO EVERY GOLDEN DRAGON
COIN… Debt isn't so bad if the economy is growing… But there isn't any good news here.
Government spending can sometimes lead to growth... If the gold is spent on infrastructure,
capital investment and public goods. That was not the case. The iron throne went into
massive debt throwing parties and fighting a civil war.
The Westeros economy is based on agriculture. And has little by way of international trade.
The people of Westeros reap what they sow, which has been less and less lately. And ever
since “The Mountain” ravaged the riverlands - Farmers have fled, fields have burned, and
equipment has been destroyed. And the fertile lands of The Reach has been cut off from King’s
Landing. NOT TO MENTION WINTER IS COMING… And though
most of us are too young to remember the last winter, I think it’s safe to say that it
will make farming EXTREMELY difficult. So all signs point to financial instability
and negative economic growth. We’ve already seen food prices increase
in King’s Landing. With winter ahead and expectations of even less supply, food prices
will continue to rise. However, expect the price of services to fall.
Unemployment is high. I suspect that the supply of prostitutes is on the rise…And discretionary
spending has evaporated for most of the kingdom. Which means that the price of some companionship
will go down. There's only one positive that I can see coming
out of this mess. The Lannisters will likely lose much of their wealth and power.
The Iron Bank of Braavos is known for getting its due. They aren’t going to simply write
off the debt of the Iron Throne. They will step in and support someone else to take over
the throne provided the usurper promises to honor the outstanding debt to the Bank. This
is doubly bad for the Lannisters. Not only would they lose control of the Iron Throne.
BUT the throne owes the Lannisters millions of golden dragons--a debt which is unlikely
to be honored if someone else takes the throne by force.
So at least something good will come out of the impending crisis of Westeros: House Lannister
will be hit harder than anyone which will make winter a little bit warmer for the rest
of us.