Today I’d like to talk about one of the central elements of Lords of Infinity‘s plot: the Budget Crisis.

As the war with Antar ends and the Unified Kingdom of Tierra becomes reacquainted with a peace it hasn’t seen in more than a decade, the crown finds itself in an exceedingly precarious financial situation. Historically, the Rendower monarchs (with the exception of Edmund II) have been very thrifty rulers and their governments have followed suit, maintaining a carefully hoarded surplus to ensure that there is always cash on hand in the case of an emergency. This was the case in 601, when the League of Antar declared war. Unfortunately, three factors meant that this accumulated reserve quickly disappeared.

First of all, there was the fact that Tierra has trouble feeding itself, even at the best of times. This meant that traditionally, Tierra imported grain from Antar. Since this was no longer an option, grain had to be imported from Kian and Takaran merchants, who took advantage by raising their prices. To keep the population fed, the crown issued grain subsidies to keep the cost of bread affordable, which rapidly became a major expense.

Secondly, there was the simple fact that the war was ruinously expensive (as wars tend to be). Weapons, uniforms, supplies, and those needed to make, transport, and fight with them were all paid for at the expense of the crown. Every battle meant enormous sums of money had to be spent to replace lost equipment and fighting men. While individual soldiers of the King’s army could get rich off plundering Southern Antar, the King’s government got nothing.

Lastly, there was the matter of the debt that Tierra began to accumulate when its currency reserves ran out. To keep the war going, Tierra needed to borrow. A lot of this money came from Tierran banks, but a vast portion of it came from overseas. Only Kian and Takaran banks could lend the amount of money the crown needed, and neither the Kian nor the Takarans had any confidence that Tierra would survive a war with its larger, more populous neighbour. That meant the interest rates these overseas banking houses offered were far higher than normal, under the expectation that Unified Kingdom might not even exist to pay them before long. While this prediction was proven wrong, the debt, and the need to service it, remains.

With the war over, one of those expenses is gone: the King’s army has been reduced to its peacetime strength, with officers placed on half-pay and houseguard regiments being released from royal service. However, the crown still has to bear the cost of servicing the war debt and the grain subsidies (Antar isn’t going to be exporting much grain to Tierra any time soon), something which it can only really do with the help of war taxes which are only growing more and more unpopular by the day, especially now that the war they were purportedly paying for is over.

The upshot of this is that the Crown is in between a rock and a hard place. To service the debt and keep the people fed, the Exchequer needs to keep enough money coming in by maintaining war taxes. However, maintaining these taxes will invariably increase discontent, drive more Tierrans into poverty or personal bankruptcy, and possibly damage the Unified Kingdom’s economy in the long run. Alternatively, if the Crown scraps the war taxes, Tierra will be forced to declare state bankruptcy, not only destabilising the Tierran economy, but also giving the Kian and Takarans very good reasons to intervene diplomatically, economically, or militarily.

Next month, I’ll be talking about the political factions currently dominating the Cortes, and what (if anything) they plan to do to dig Tierra out of the hole it’s gotten itself into.

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