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Lytse Pier

Trading, banking and the European markets; an 18th century look at it.

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Trading, banking and the European markets; an 18th century look at it.

 

I’ve seen quite some discussion on these forums about how the current trading systems can be used to scam, how inflation of the current economy drives pricing of labour hours through the roof, that producing goods for markets are somewhat meaningless if demand and supply cannot be used to trade and that European traders magically have stock to start selling at certain economic thresholds, etc.

 

Currently the only way to trade in the game is to sail in between the local markets of the caribbean and there is some interaction with European Traders in a basic fashion using certain thresholds in prices whilst buying goods. Trade can also be done through personal trading by players that are in the same port and exchange money and goods through a trading window. These are all good basics, however do not reflect the fleshed out situation we should like to see.

 

However, let’s forget how things are now for a bit. Let’s imagine the world in the 18th century where our ships sail the oceans, where banks and stock markets under strong influence of the financial success of the Dutch with their East India trade in the 17th century start to dominate the capital and (government supported) companies start to take over the power of the guilds of the ancien régime. A time where financial systems start to appear between nations, instead of State regulated mercantilism and markets are fueled by a growing hunger in the European continent for products from across the globe, thus creating global commodity markets. A shift that fueled more trade on a global scale and the growing motivation why we sail our ships in this beautiful budding sandbox created by Game Labs.

 

These backgrounds are the base of my suggestions to the developers to give our sandbox a good trading system where banking, commodity markets and European influences should be felt throughout our caribbean theatre.

 

Questions arise:

How do I trade with Europe?

How can I trade with other Companies and players without being physically in the same port?

How will I corner a market?

How do I move my fast amounts of goods, my ship alone of those of my friends are not big enough?!

How will I get paid?

Etc.

 

This is where my proposal of ideas of the commodity markets, banks, trading systems, warehousing and transportation come in.

 

Commodity markets (production and consumption)

Commodity markets were places where an abstraction of trade was created regardless of the actual whereabouts or physical location of the goods. Looking at the Amsterdam Stock Exchange (founded in 1602) its origins were a commodity exchange (Amsterdam Bourse) where a lot of complicated contract structures were already used, like short sales, forwarding contracts, futures, etc. Stuff we still find even now in our own time. A lot of the trade was done using a future contract (futures) where the goods were sold by the producer at a certain price today with payment and delivery in the future. This opened the opportunity to trade goods using these futures making sure that local coin influences and other market influences could be reduced or even speculated upon. A model that now has taken our modern economies not even for goods, but also for financial products to a rather impacting level to our regional economies, but that might be a story for another time.

 

How will a commodity market work ingame?

 

Trading through the Commodity markets and (Amsterdam) Stock Exchange. (trading)

Selling goods at the Amsterdam Stock exchange are not real deposit of goods, but a "future" is created upon an agreed price when your goods sell and deliver in the future. In game I see it happen in the following way. Your goods are blocked in your warehouses and should be present (assuming we do not implement short selling). Futures are tradable between players and can be freely traded on the Stock exchange or underhanded, but have a date when they will be rendered effective and goods will either be returned to the producer when the future is not sold to anyone (or could be traded to European traders to free up warehousing), the goods will be sold to the buyer of the future or in some circumstances the goods will be offered to a European trader (see also warehousing and transportation). As a producer you will be getting the price stated as soon as the future is used to claim the goods by a player.

 

By actually activating a future or waiting until its term expires, it will seal the deal and the possibility that goods will have to be transferred from one players warehouses to the other players warehouses and need to move across the Caribbean.

 

This entire process will involve a bank, deposits and possibly AI fleets to move stuff, but more on that later.

 

Note to the developers: As shipbuilding is an integral part of the game (but most was actually done in Europe and not the Caribbean), I foresee that our caribbean captains will actively participate in trading futures at the markets to acquire their own supplies also. This is not a problem and actually gives a player participation and not only a European Trader influence on the markets which can make a fun game in cornering markets, cashing in cheap futures and creating new higher prices ones.

 

Warehousing (logistics)

To keep goods stocked your need space in your warehouses. If you don’t have enough warehouses, you cannot hold the goods that you want to trade. Holding a lot futures but having no warehousing poses a serious threat that the futures goods will be offered towards European Trading companies that take the stock that cannot be stored at a considerable “Dutch” pricing, leaving the player that holds the future filling the financial gap between seller (the producer) and buyer (European trader). So players that cannot maintain their stocks have a problem. Warehousing also keeps the producers in check, as they still have to maintain the goods of their futures in their own warehouses, as the goods are not sold yet.

 

Warehousing is the cap that keeps players from actually dominating markets (without huge investments in warehousing).

 

Transportation (logistics)

Goods have a physical location in the game and is stored in warehouses in your ports or outposts. When goods exchange hands towards other players or even to Europe, they have to move. This is where player fleets or even AI fleets come in. Trade lanes will start to appear and could be awesome hunting grounds for pirates to hurt those care-bearing nationalists! On the other hand those vigilant captains of our nation will have a purpose to protect their companies trading routes and their own goods in transfer, escorting those AI trading ships moving real goods they bought. Goods under transportation should be moved from the sellers warehouse to the harbours warehouses but have a limited time to be shipped by the buyer.

 

As warehousing is, the logistical system of transportation (and the means to pay for AI fleets) will also pose a challenge to maintain the size of your trading empire.

 

Banking (financial system)

The trading process is pretty straight forward. Using futures to trade commodities, use warehousing to store commodities and set up transportation for the goods to move stuff by AI or players. The interplayer trading is arranged by this system but a system needs also be in place to also arrange the actual financial transactions.

 

Welcome the the Bank of (Amsterdam)!

 

A banking system like the the Dutch used with the Bank of Amsterdam and their stock- and commodity exchange was very advanced for its time, but remarkably straightforward nevertheless. Bullion (unminted gold) or other valuables was deposited by the merchant(companies) at the bank and financial contracts (like futures) were traded in arranging the financial transactions between the deposits of the buyers and the sellers.

 

You deposit your gold to the bank and pay a periodical fee to maintain a banking presence as the bank has to maintain and protect your unminted gold deposits/bullion. With this stored wealth you can acquire goods that are traded and present in the warehouses of other players that have been sold using the futures system of the commodities market.

 

Of course one should still be able to keep his own right to maintain his wealth and use the trading system as it is now in the game. Paying a bank a periodical fee to maintain the protection and maintenance of your bullion is like a real money sink; however, no bullion at the bank means no access to the trading through the commodity markets and you are on your own to get scammed!

 

Money sink possibilities, financial control,  and fun stuff to think about.

  • Setting up a future will cost money. Setting up a buy/sell contract is also charged ingame.

  • Maintaining a deposit at the Bank of (Amsterdam) costs money, they need to protect your bullion (e.g. unminted gold) and wealth and move it around to other deposits when trade happens.

  • Trading with Europe and dealing with pesky non personal buyers using their “Dutch” pricing will pull goods from the Caribbean and maintain a healthy market.

  • Warehousing could be expansive but also expensive to maintain.

  • The ridiculous height of the transaction tax was a popular discussion subject in those Sunday afternoon pub visits after the morning's protestant church services in Amsterdam.

  • Making (AI) trading fleets to transport your bought goods is expensive, not to speak of those insurances and protection!

  • Developers could create a pretty European Traders AI for buying up futures of players to simulate scarcity situations in Europe.

 

Parting thoughts

A system like this should be pretty easy to implement for the developers and could be made as complicated or as simple as you’d want. It helps to give the developers more control over the markets and financial ingame state. For the players it will create an involved and rich sandbox feeling where the influence of the powers of Europe, the storing, trading and moving of actual goods with value and the huge financial interests of the colonial endeavours are a real “thing” to play with as a player.

 

The system could be player based, but making warehouses for your the clan/company you are in, having clan/company deposits at the bank, trading goods through clan/company futures could be an awesome way to play with your friends and fellows.

 

I hope the direction of thinking will inspire the developers to make something really fun and meaningful content to the sandbox and represent the ruthless trading and economical interests that were part of the Caribbean in the age of sail!

 

Please feel free to add or comment.

Edited by Lytse Pier
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Some great ideas here. I would like to know how far developers willing go with Economy expansion. Will we ever see banks or sophisticated stock market that could get impacted when ports are under attack. Right now we simply capture ports to get more resources, but it would be nice to see an impact on global market, something that would force players to think twice before attacking a country that has a major influence on combined server market.   

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Some great ideas here. I would like to know how far developers willing go with Economy expansion. Will we ever see banks or sophisticated stock market that could get impacted when ports are under attack. Right now we simply capture ports to get more resources, but it would be nice to see an impact on global market, something that would force players to think twice before attacking a country that has a major influence on combined server market.   

 

Interesting post and the ideas that can be drawn from this. This could also lead to blockades of goods and open up smuggling for players who don't mind doing some dirty deals on the side :)

 

Taxation was the main reason for smuggling in this time and I imagine that the Traders you encounter on the OW that has contraband is supposed to simulate that. Would be awesome if they actually carried goods that reflected that.

 

It also is part of a suggestion I wrote earlier for when/if diplomacy is implemented and you are allowed to enter allied/neutral ports for trading purposes

 

You should be forced to pay a larger tax/levy for your goods sold and bought on those foreign markets. You could ofc meet in a freeport and do a deal with a member of another nation and thus avoid that extra levy/taxation. Etc There are so many ideas that can come from a more advanced trading system even if we keep it simplified.

Edited by Niagara
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Adding blockaded and smuggling would be great indeed! I think if you implement the basic ideas of

 

- Commodity Market with futures

- Banking with bullion

- Logistics with warehousing and transportation

 

your trading system is set and could be extended upon.

 

I'll see if I can make a flowchart (or two) to get from a large textual idea to a more concrete version and think about how blockades and smuggling would fit in.

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An implementation question from a non-economist:

 

Do your envision transaction/futures dates and recurring banking fees pause or halt whenever you log off the game?  If not, what happens to the player who goes on a business trip for 5 or 6 days, then returns to the game to find he's lost much or all of his investment?  Particularly so if he is a clan member and has authority to provide the transactions on behalf of the clan?  Much of what you offer entails continual game-play.  Could there be a pause after 2 or 3 days of game inactivity for example?  I like all of what you presented above, but it seems implementation would be tough or impossible for the part time player, at least in order for him to call himself a trader.

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Very good point Jean, let me think about that, as at first glance there a more than one way that could solve it, but I don't like any of them yet.

Edited by Lytse Pier

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Hi Ribault, I've thought about it.

 

The only major obstacle is when a buyer of a future is not being online and the sellers warehouse keeps being occupied because not handling the future. However, the price is set, the only thing that needs to happen is that the bank takes the goods from the warehouse of the supplier and place them in an inbetween holding until the buying player gets online to handle his transaction of buying the stuff and arrange transportaion for it, or decide that the goods can be sold to the European traders and he takes his financial loss.

 

A second part that might poses a problem you describe is when a producers future is not sold on the commodity market and he wants to sell it to the European traders when he cannot be online for a longer period. However the goods are just in the players warehouse, so nothing is lost and the European trader just have to be a bit more patient when he gets his goods and have the bank transfer the money to the producer. Also an option could be set to handle a transaction like that automatically.

 

The running costs periodically could also be replaced by soley transactioncosts.

Edited by Lytse Pier
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...

Also an option could be set to handle a transaction like that automatically.

...

 

 

Maybe establishing stop limits or stop losses should be a requirement?  That way it is automatic, and the perhaps the sell stop could be artificially mimicked for that player after say 7 days, or other arbitrary limit.

 

As for banking fees, probably the fees could be extracted on a periodic basis until zero is reached upon which a repossession of goods occurs.  Could be all, or equal market value plus a fine.

 

I don't know if any of these things can be accomplished while a player is logged off the game though.

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Yes, that certainly would be vialble in my eyes also. Thanks for thinking along and adding to it Jean Ribault!

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Along the lines of blockading, it would be nice to see any commodities that are in a port's marketplace have to actually arrive via trader.  That way, an effective blockade that nabs all player and NPC traders could strangle the port of anything they don't produce (grow, mine, etc.).  This might also increase the cargo volumes of current NPC traders; I recently captured a Grosse Venture and could put the entire cargo into my Surprise with room to spare.  In reality, the cargo vessel should be fairly full of some sort of product, or at least ballast!

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Along the lines of blockading, it would be nice to see any commodities that are in a port's marketplace have to actually arrive via trader.  That way, an effective blockade that nabs all player and NPC traders could strangle the port of anything they don't produce (grow, mine, etc.).  This might also increase the cargo volumes of current NPC traders; I recently captured a Grosse Venture and could put the entire cargo into my Surprise with room to spare.  In reality, the cargo vessel should be fairly full of some sort of product, or at least ballast!

 

Yes, there've been a few threads suggesting nice ideas like these.  There are innumerable ways the trade system could be enhanced depending on how far the devs want to take it.  I think the main benefit of implementing some of the more sophisticated ideas is that it would tend to create a whole new type of player via new avenues of gameplay in NA.  Trading interaction would be both PVE and PVP by nature.  It'll be exciting to see what they ultimately have in mind or are willing to put into further development. :)

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Along the lines of blockading, it would be nice to see any commodities that are in a port's marketplace have to actually arrive via trader.  That way, an effective blockade that nabs all player and NPC traders could strangle the port of anything they don't produce (grow, mine, etc.).  This might also increase the cargo volumes of current NPC traders; I recently captured a Grosse Venture and could put the entire cargo into my Surprise with room to spare.  In reality, the cargo vessel should be fairly full of some sort of product, or at least ballast!

 

Blockades which can lead to shortages for that town and them lowering the ports loyalty to their current protectors, but also give opportunity for smugglers getting stuff in to a good market. This economic system of commodity markets and banking could  be a afactor in ports changing hands, instead of just a simple port battle.

 

http://forum.game-labs.net/index.php?/topic/12535-town-morale-conquest-mechanic-suggestion/?p=236505

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Lytse, excellent post and thoughts. Have you also thought about the implementation of negotiable instruments, documents that represent the deposit of goods or bullion, plus the promise to pay on presentation at any branch of the issuer? These could be issued by private or national banks or private dealers.

Those instruments could then be sent by fast packet and presented in a distant port to be used like currency. National bank basic functions could be automated.

From there, it would not be far to bills of leading and documentary letters of credit.

Again, great work!

~ H. Knox ~

Edited by HardyKnox

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Hey i had some similar ideas about the economy on a post here.  http://forum.game-labs.net/index.php?/topic/13796-resource-distribution-the-economy-and-giving-players-a-reason-to-sail/

 

I also redrew the map to redistribute the resources, regional capitals, and free towns.

 

I would appreciate it if you popped over and downloaded the map and read the post to see if you think this sort of thing would help make the economy more alive.

 

any feedback appreciated.

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