NOVEL NEXT Chapter 59: Chapter 59
After a short nap and confirming with Yoren that they wouldn't be leaving for the Wall in the next few days, Aegor and Tyrion set out together, discussing details as they rode.
"Any form of fundraising is a scam at the beginning," Aegor began. "The difference between legitimate finance and outright fraud is this: in the former, 'cheating' people out of their money is just the initial step, not the ultimate goal. What we're doing or at least what we hope to be doing falls into the first category. To achieve that, we need to establish a formal and complete system that not only appears legitimate but actually functions as such." He glanced at Tyrion. "This requires a whole set of rules and regulations to govern everyone involved not just you and me. And since you've asked for details, let's start there."
"Very well, go ahead," Tyrion replied, gesturing for him to continue. "I'll listen and offer suggestions where I can."
"Alright." Aegor had thought everything through meticulously in his room and now laid it out with clarity. "A mature financial system has to account for many factors stability, order, growth but since we're just getting started, we only need to focus on one thing: stability. Specifically, stability of the capital chain. Since our main source of funds is borrowing, ensuring stability means making sure our creditors don't suddenly demand repayment en masse."
Tyrion nodded, though he was struggling to keep up with the flood of unfamiliar terms and concepts. "You mentioned interest?"
"Yes, interest—or rather, the return on investment," Aegor explained. "I casually set the rate at 1% per month earlier, but after thinking it through, that figure is quite reasonable. The lower the return rate, the lower the risk of the entire operation collapsing. It's a moderate figure, low enough to be sustainable. However, we'll need to implement additional rules to support it. The method is simple: when borrowing money, we'll agree on a repayment period. If repayment is delayed, interest will continue to accrue. If repayment is made early, there will be penalties."
"Penalties?" Tyrion asked, raising an eyebrow. "Borrowing money is already a request for help. Who would dare to pay up if you start talking about penalties?"
"Calm down. The penalties won't affect the principal," Aegor assured him. "The principal will always remain secure, no matter what. The 'penalty' will only apply to the interest, the profit portion. And remember, we're operating under the guise of raising funds for the Night's Watch, with the Lord Hand of the King's endorsement. Officially, the money is for purchasing food and equipment to defend the Wall against wildlings and White Walkers. This is a noble cause, one that few would object to. While it's true that everything is being managed by just the two of us, and only part of the funds will go where we claim, the debtor isn't me—it's the Night's Watch."
Aegor paused to let the point sink in before continuing. "This distinction is critical. I represent the Night's Watch. Even though the organization is in decline and southerners look down on it, it's still legally independent and on par with the great houses of Westeros. As such, it must act impartially and responsibly. To maintain that facade, we need strict principles that seem overbearing but ultimately work in our favor. The most important of these is that our bonds will not be redeemable before the agreed-upon time."
"You make a valid point," Tyrion admitted, "but you're underestimating how unreasonable people can be. I don't know how things work in Tsena or wherever you claim to be from, but here in Westeros, those rules could backfire and cause widespread panic."
"You're not wrong. Rules are dead, but people are alive. If creditors are truly desperate for repayment, we won't strictly enforce the rules. However, there must still be consequences," Aegor said. "For instance, if a creditor redeems their bonds early—after more than two months—a 1% handling fee will apply. That means they lose one month's worth of interest. If they redeem within one month and the interest doesn't cover the handling fee, we'll waive it, but they'll face other penalties. For example, I might refuse to lend to that person again."
"Refuse to lend to them again?" Tyrion laughed, then paused when he saw Aegor's serious expression. "You can't be serious. Who would beg for the privilege of lending you money?"
"It does sound a bit arrogant, doesn't it?" Aegor admitted. "Let's put it another way: such individuals will be disqualified from purchasing Night's Watch bonds in the future—unless, of course, they pay the handling fee for their defaulted bonds first. It might sound ridiculous, but reality often defies logic."
Tyrion's skepticism remained. "I'll believe it when I see it."
"Fair enough," Aegor conceded. "A 1% monthly return isn't enticing enough on its own. That's why we need incentives as well as penalties. Incentive one: after three months, no handling fee will apply to redemptions. Incentive two: interest increases over time. For example, the interest for the third month might rise to 1.5%, the sixth month to 2%, the ninth month to 2.5%, and the twelfth month to 3%. Every three months, the rate increases by 0.5%."
"That's still too much," Tyrion said, shaking his head.
"Not at all, it applies only to the current month, not cumulatively. It's perfectly manageable," Aegor clarified. "Think about it: after three months, the creditor earns 3.5%; after six months, 7.5%; after nine months, 12%; and after a full year, 17%. This structure makes the return rate attractive enough. Creditors will naturally conclude that the longer their money stays with me, the higher the return. Imagine you had 100 gold dragons. If you left it untouched at home for a year, it would still be 100. But if you lent it to me, it would grow to 117 by year's end. What would you choose?"
"Indeed, it's attractive enough." Arithmetic had always been one of Tyrion's strong suits, but compared to Aegor, who seemed to possess a methodical, almost clinical understanding of numbers, he felt like a rank amateur. Since meeting Aegor, Tyrion found himself being persuaded more often than he had in the past twenty years combined. "I get it now. Not only that, but the people who lend you money will eventually form a habitual mindset: the longer they leave the money with you, the more they'll earn. Unless they're in a true emergency, they'll avoid redeeming it."
"Exactly. Now, think a bit deeper," Aegor said, his tone steady and deliberate. "Imagine you're a creditor who's lent me—no, lent the Night's Watch—100 gold dragons. Let's say it's been eleven months or eleven and a half months. Suddenly, your family encounters an emergency, and you urgently need the money. If you redeem the bond now, the return will be calculated for eleven months, meaning you'll receive 100 gold dragons plus eleven months' interest—114 gold dragons. But if you wait just another half a month, that 114 becomes 117. However, because of the urgency, you can't wait. What would you do?"
Tyrion furrowed his brow, considering the scenario. After a moment, his expression brightened as he found the answer. "I'd sell the bond to someone else for 115 or 116 gold dragons. That way, I can solve my problem, and the person buying the bond still gets to earn one or two gold dragons in just a matter of days."
"Exactly. And what does that imply?"
Tyrion mulled it over again, his mind racing. After a few seconds, a realization dawned on him—a realization both thrilling and unsettling. "In that case, the Night's Watch bonds you've issued can effectively serve as 115 or 116 gold dragons! In other words, those bonds function almost like… what you called 'banknotes' earlier!"
"Precisely," Aegor confirmed, nodding with a faint smile. "But for that to happen, society at large would need to recognize the reliability and value of the Night's Watch bonds. That's a long road ahead. If we're fortunate, we might see it in our lifetime. More likely, however, the king will recognize the potential of finance, issue his own royal bonds, and squeeze us out of the market entirely." He chuckled softly. "True finance is a thousand times more complex than this, but we're only taking the first steps. No need to overthink the distant future… Now, which way should we turn at this intersection?"
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