Chapter 59

After a nap and confirming with Yoren that he wouldn’t be leaving for the Wall anytime soon, Aegor set out with Tyrion. Riding through the streets on horseback, they began discussing the details of their plan.

“All fundraising efforts start as building castles in the air,” Aegor began, “but the difference between legitimate finance and a financial scam lies in this: in real finance, raising funds is just a means to an end, not the end itself. What we’re doing—at least what we hope we’re doing—is the former. If that’s the case, we need to establish a formal, functional system—not just something that looks legitimate but something that actually works.”

“That means setting up a host of rules to govern everyone involved—not just you and me,” Aegor continued. “So, let’s start ironing out the specifics, just as you requested.”

“Good. I’m listening, and I’ll offer suggestions when needed,” Tyrion replied.

Aegor nodded. His thoughts were already well-organized, having rehearsed them in his room countless times. “A mature financial system has to account for many factors: stability, order, development... But we’re just starting out, so for now, stability is all that matters. By stability, I mean the stability of our cash flow. Since our main source of funds is borrowing, stability depends on one thing: creditors not demanding repayment at random.”

Faced with the influx of new terms and concepts, Tyrion found himself unable to interject and could only nod, focusing on absorbing the information. “You’ve mentioned this before—interest.”

“Exactly. Interest, or returns,” Aegor said. “I initially suggested a 1% monthly return off the top of my head, but upon reflection, it’s a fairly reasonable number. The lower the promised returns, the less likely the system is to collapse. It’s moderate, perhaps even conservative. To complement this, we’ll need additional rules. The simplest is to set fixed repayment terms: creditors can earn interest beyond the agreed-upon period, but they’ll face penalties for withdrawing early.”

“Penalties?” Tyrion frowned. “Borrowing money is already about asking for favors. Won’t this discourage people from lending entirely?”

“Not if we set a key baseline: the creditors’ principal will never shrink. The penalties will only affect the interest,” Aegor reassured him. “Remember, what we’re doing may be a scam, but only we know that. On the surface, we’re raising funds on behalf of the Night’s Watch, with the Hand of the King as our guarantor, to purchase supplies and defend the realm from wildlings. This is a serious and noble cause. While in reality, most of the money will be used elsewhere, the debts legally belong to the Night’s Watch, not me.”

He paused for emphasis. “This is critical. I represent the Night’s Watch—a legitimate organization. While the Watch is in decline and looked down upon by the southern lords, it’s still legally equal in status to the great houses of Westeros. That’s all we need. This is an official loan, not a personal favor. As the representative, I’ll conduct myself with utmost formality, making it impossible for anyone to accuse me of misusing authority. And with the creditors’ principal guaranteed, we can impose strict, even seemingly domineering, rules that also work in our favor. For example, we’ll refuse early redemptions of our bonds under any circumstances.”

“That’s logical,” Tyrion admitted. “But most people in Westeros aren’t logical. I don’t know how things worked in your homeland, but here, such rigidity won’t just fail—it could spark panic.”

“You’re not wrong. Rules are dead; people are alive,” Aegor conceded. “If a creditor genuinely needs their money back, we won’t stick rigidly to the rules. But penalties will still apply. If someone withdraws early after keeping their money with us for over two months, they’ll forfeit one month’s interest as a fee. For periods under a month, where the interest wouldn’t cover the fee, we won’t charge it. But there will still be consequences—such as barring them from buying our bonds in the future.”

“Barring them from buying bonds?” Tyrion chuckled but quickly realized Aegor wasn’t joking. “Surely you can’t be serious. Who would beg to lend you money?”

“It sounds arrogant, doesn’t it? Let’s rephrase: they’ll lose the eligibility to purchase Night’s Watch bonds,” Aegor said with confidence, buoyed by Tyrion’s participation. “Unless they pay the penalty for breaching their prior agreement. It may sound absurd, but sometimes reality is stranger than fiction.”

“I’d like to believe you,” Tyrion said cautiously, “but I’m not convinced.”

“That’s fair. A 1% monthly return isn’t magical enough to achieve this on its own,” Aegor admitted. “That’s why penalties must be paired with incentives. First, no fees for redemptions after three months. Second, progressive interest rates. For example, the interest for the third month could be 1.5%, the sixth month 2%, the ninth month 2.5%, and the twelfth month 3%. Every three months, the rate increases by 0.5%.”

“That’s excessive.”

“It’s incremental, not cumulative. It’s not as much as it seems,” Aegor corrected. “With this system, a creditor lending for three months earns a total interest of 3.5%, six months 7.5%, nine months 12%, and twelve months 17%. This creates a compelling impression: the longer your money stays with me, the higher your returns. If you had 100 gold dragons sitting idle, which would you choose? Leave them untouched for a year and have the same 100 dragons, or lend them out and get back 117?”

...

A 17% annual return might sound fantastical, but in the context of Westeros, it wasn’t entirely unreasonable. Societies with lower productivity and less developed economies naturally had higher borrowing rates. Take the current state of Westeros: borrowing a young animal at the start of the year required repaying double by year’s end, and borrowing seeds in spring meant repaying 1.5 times the amount in autumn. Annual interest rates often approached or exceeded 100%.

This was because loans weren’t typically "idle money" but crucial resources—livestock, seed stock, or even a family’s last savings—lent out at great risk. With no established credit systems and a high chance of default, high interest rates were necessary to balance the risks.

Aegor’s official borrowing position offered an alternative. The debts were backed by taxation (even if the Watch collected little) and the land under the Wall. With the assurance that "the Night’s Watch might run, but the Wall won’t," the interest rates didn’t need to match the exorbitant rates of private loans. Still, without offering double-digit returns, no one would part with their gold.

...

“Seventeen percent... barely enticing enough,” Tyrion admitted. Though proficient in arithmetic, he found himself struggling to keep up with Aegor’s rapid calculations and projections. Still, he had to acknowledge the logic. “Not only that, but creditors will form a habit of leaving their money untouched, knowing the longer they wait, the greater the return—unless they’re desperate.”

“Exactly. Think further: imagine you’re a creditor who lent 100 gold dragons to the Night’s Watch for 11 and a half months. Suddenly, you’re in dire need of money. If you redeem early, you’d only receive 114 dragons. But if you wait two more weeks, you’d get 117. What would you do?”

“Hm…” Tyrion considered. “I’d sell the bond to someone else for 115 or 116 dragons. That way, I’d resolve my immediate crisis while the buyer earns a quick profit.”

“Exactly. And what does that mean?”

Tyrion’s expression darkened as he followed the logic. “It means your bonds could become as good as coin. They’d effectively function as a form of currency.”

“Precisely,” Aegor said with a grin. “Though that requires widespread trust in the bonds’ reliability—a long road ahead. Perhaps, in time, the crown might even step in, issuing state bonds that outcompete ours.”

“True finance is far more intricate than this. But we’re just starting. No need to look too far ahead,” Aegor said, snapping back to reality. “Now, which way at this intersection?”