A brief thread on medieval sovereign debt, inspired by unanswered questions after the finale of #GameOfThrones. Quotations are cited from James Macdonald’s history of sovereign debt, “A Free Nation Deep in Debt,” unless otherwise specified. 1/

2/ Medieval monarchs did indeed borrow money, extensively, as accurately depicted in #GameOfThrones (and the books it was based on). “In the later Middle Ages, the kings of Europe were rarely out of debt."

3/ Unlike today, when national debts are more-or-less stable, medieval kings were constantly trying to get out of debt, only to be inevitably forced to borrow money again, in an endless cycle.

4/ These royal lenders were primarily rich merchant houses, for whom lending money was a sideline. The money was made not on interest (often illegal), but on concessions the king would give in exchange for financing.

5/ Medieval England, for example, was a huge producer of wool, highly valued by Italian merchant houses. These Italian merchants would loan the kings of England money in exchange for special access to the lucrative English wool trade.

6/ That’s not to say merchants weren’t paid directly for their financial services. Sometimes they’d be granted revenues from special taxes, but often they’d insist on being given control over customs duties in ports — less lucrative, but safer.

7/ GoT depicted the Iron Bank making loans to various sides in the Westerosi civil war, trying to back a winner who would promise to repay the kingdom’s existing debt. That happened IRL, too!

8/ King Henry VI of England had accumulated £372,000 in debts by 1450 on fruitless wars and extravagant building projects. “The inevitability of his default only encouraged merchants to support his rival, Edward of York.” Thus began the Wars of the Roses (inspiration for GoT).

9/ Medieval kings would often default on their debts, an experience that was bad for both the banks and the kings. For one thing, a royal bankruptcy often meant arresting the bank’s local representatives on trumped up charges, often treason, with usually fatal results.

10/ A fig leaf of justification provided by the treason charges, kings then got to what they really wanted: unilaterally canceling their debts, and also confiscating the bank’s local assets for good measure.

11/ Unsurprisingly, once a king had executed his bankers, seized their money and cancelled their debt, other merchants were less willing to loan them money in the future. But not UN-willing. Sovereign lending could be really lucrative, at least for a while.

12/ “The financiers accumulated ever greater profits until their inevitable day of reckoning arrived; then they usually lost not only their wealth… but their lives.”

13/ But banks suffered from grievously from defaults even when they were safely based overseas (usually Italy) with armies and navies to protect them. They had just lost a huge amount of money, obviously!

14/ When Edward III of England started the Hundred Years War in 1337, he financed it with a huge loan from the Bardi and Peruzzi houses of Italy. Three years later, his initial campaign was a disaster, and he was now £300K in debt with nothing to show for it.

15/ £300,000 was 10 times Edward’s normal revenues, massive for the time. “Inevitably, he defaulted, and his bankruptcy heralded the end of [his bankers] the Bardi and the Peruzzi. News of Edwards bankruptcy traveled rapidly to Florence and started a run on their banks.”

16/ Eventually, after banker after banker had been ruined and possibly killed in this cycle of bankruptcy, banks stopped lending to the bankrupt king altogether. “The English crown ended the Middle Ages virtually without credit.”

17/ This matters because it was basically impossible to finance medieval wars without borrowing money. They were just too expensive.

18/ Henry VII of England was a famous miser who devoted his reign to accumulating “the greatest royal fortune in Europe since the fall of Rome.” His son Henry VIII spent it all in about 10 years of warfare. Wars just could not be financed with normal revenues.

19/ Over the course of #GameOfThrones, we hear a lot about the sovereign debt of Westeros — to the Lannisters, to the Faith of the Seven, and most of all to the Iron Bank of Braavos.

20/ The Iron Bank, like medieval merchant houses, played multiple sides in the Westerosi civil war, trying to ensure that whoever won would pay back the crown’s massive debts (and avoid the threat of ruining the bank).

21/ King Bran I would have inherited massive debts, as well as greatly reduced royal revenues due to the ravages of war and the secession of part of his kingdom.

22/ King Bran and his Small Council would doubtlessly have been tempted to repudiate their inherited debts — THEY weren’t the ones who borrowed the money, after all. It was their enemies! Or kings long dead.

23/ If Westeros repudiated Cersei’s massive debt to the Iron Bank, it might very well set off a worldwide sovereign debt crisis, crippling trade around the entire Narrow Sea. Not a great start when you’ve got a kingdom to rebuild!

24/ But PAYING the debt also will cripple the finances of the crown, under the uncertain guidance of the Master of Coin, Lord Bronn. And is it really just to repay money Cersei borrowed to kill her enemies?

25/ Sadly the show (probably unlike @GRRMspeaking) has little interest in resolving these issues, even though sovereign debt was actually an issue it spent a fair amount of time on!

26/26 If King Bran were like medieval monarchs, he would almost certainly declare bankruptcy. But perhaps Bran (and Tyrion) are wise enough to see a better path?

27/26 In conclusion, read James Macdonald’s book, “A Free Nation Deep In Debt: The Financial Roots of Democracy.” For a work about financial history it’s full of all sorts of fascinating information, like what I’ve shared in this thread (all from a single chapter).

28/26: I don’t have a Soundcloud, but I do have a history podcast! Check out @TheSiecle for a deep dive into France’s overlooked hundred years in between Napoleon and World War I!