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I was wondering whether a particular system of currency that I designed for a kingdom in my world would be feasible. The government is a heavily bureaucratic monarchy, and all of the government has access to powerful enough magic to make keeping millions of years worth of detailed daily records possible, and the perfect memory and mental arithmetic to handle detailed record-keeping.

The theoretical currency of this kingdom is gold coins, which are used for most customer-merchant or client-provider transactions.

However, the majority of transactions are conducted on paper by the record-keepers and calculators of the Ministry of Finance and the Royal Treasury, which maintains ledgers for every government ministry and bureau, all registered and licensed merchants, and particularly wealthy citizens. All transactions, including payroll, taxes, business transactions, loans, payment of interest, and so forth, between two parties with ledgers maintained by the Ministry are conducted arithmetically, the balance subtracted from the paying party's ledger and added to the paid party's ledger, and each addition or subtraction notated with the time and detailed nature of the transaction. Upon request, anyone can exchange mathematical currency for hard gold or liquid paper money-slips, which operate on the same principle as paper currency but are not printed in fixed denominations, and are printed only upon request. These money-slips are exchanged for mathematical value on ledgers, or directly exchanged for gold by any party in possession of them.

Is this viable as an economic system, and what are any implications or consequences of such a system, given that it was continuously in use for tens of millions of years (or more) and that the material/computational/physical limitations are effectively null due to widespread high-level magic?

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    $\begingroup$ This sounds an awful lot like a modern day wire transfer communicated through magical means, although I'm not sure it's really distinct from just the general concept of credit. $\endgroup$ – Thriggle May 25 '17 at 22:18
  • $\begingroup$ You might be interested in learning about bonds $\endgroup$ – dot_Sp0T May 25 '17 at 22:19
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    $\begingroup$ The cost of the bureaucracy must be low enough that the economy can support it through normal taxation. Older kingdoms didn't have a separate State Treasury (since there wasn't a State yet) - it was the King's personal Treasury. Your story must justify why the King will pay for a big bureaucracy instead of Army Regiments and Navy Ships to grow the Kingdom, internal spies to keep the Nobility and Commoners in line, more ostentatious palaces and fashions, etc. Lots of priority demands on the King's limited purse. $\endgroup$ – user535733 May 25 '17 at 23:33
  • $\begingroup$ You are describing the real world as it was during the Bretton Woods system (from 1945 to 1971). Currencies were theoretically backed by gold, yet there was no gold in circulation, because in principle it was all held in the USA. $\endgroup$ – AlexP May 26 '17 at 13:50
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    $\begingroup$ You need to solve the problem with communication. Even if the bookkeeping is perfect, system can only be as good as the reports that go into the books. Suppose, a transaction has happened in a remote village. How soon that transaction can be recorded in capital? How can royal bookkeepers trust the report of that transaction? $\endgroup$ – Alexander May 26 '17 at 21:40
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Yes, modern financial system works almost exactly the same way

The modern world already works on system of ledgers. Getting a paycheck involves your employer telling a bank to move so many units of currency from their payroll account to your bank account (assuming you have direct. Bank transfers between banks and between governments are done exactly the same way. Cashing out this virtual currency is as easy as using an ATM.

Cryptocurrencies such as Bitcoin take this idea a bit further by instituting methods for preventing double transfers and keeping up with all the bookkeeping.

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    $\begingroup$ Blast! Beat me to it! It'd be even easier for them too, since all of the difficult parts got handwaved away with magic. $\endgroup$ – Cort Ammon May 25 '17 at 22:19
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    $\begingroup$ @CortAmmon Especially since magic bookkeeping doesn't require custom ASICS and tons of electricity for Bitcoin mining to keep the accounts up to date. $\endgroup$ – Green May 25 '17 at 22:20
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How is this different from any country on a gold standard like the US was up until the Great Depression? Most transactions are done on ledgers etc but the government backs its money by promising to redeem paper with gold on demand.

Even after the US went off the gold standard, one could still redeem some paper money for silver. Those silver certificates were printed through the 1960s. enter image description here enter image description here

And all this happened without the power... of Magic!

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