A Song of Ice and Economics

The Citadel
A Game of Thrones, The Citadel Library, ©HBO

The Grand Maester’s Conspiracy is that the Maesters have conspired over the centuries to destroy magic and manipulate historical records in Westeros for centuries. However, politics and economics go hand-in-hand. The Maesters have more control than anyone gives them credit, and it is all due to the white ravens sent out by the Citadel to announce the changing of the season.

Let’s take a step back from Planetos and consider Earth. Though our physical seasons are of fixed length and can be tracked accurately on a modern calendar; even before modern calendars the length of the seasons was well known and regular religious holidays were constructed to fit with the changing of the seasons. However, that which matches up to the seasons of Planetos on Earth are the economic seasons! The upturns and downturns of an economy, while obvious once a recession or recovery has begun, are still beyond our capabilities to predict when changes in economic climate will occur and how long they will last.

While this may seem a simple analogy to connect the citizens of Planetos to those of Earth, the business cycle *is* what occurs in Westeros when Winter arrives. Those Sweet Summer Children only know economic prosperity. Winter is coupled with famine and death from exposure. In fact, in an agrarian medieval society, the weather would be intimately connected with the economic welfare of the nation. Prosperity is coupled with good growing weather while economic downturns are, indeed, during winter.

While in the United States of America, for instance, we have the Federal Reserve which is tasked with regulating the economy, the Seven Kingdoms has no analog. The Master of Coin keeps the Iron Throne’s fiscal house in order and controls the minting of new Gold Dragons, but ultimately is not tasked with controlling unemployment. It would indeed be a conspiracy if anyone could control even a bit of the business cycle in Westeros due to its intimate connection with the weather. But, that is what the Maesters have been able to accomplish on a limited scale.

The Maesters, in their studies at the Citadel with their detailed histories of Westeros, would surely notice the deep connection that the state of people have with the weather. The first, obvious direction, that bad weather leads to a distraught populace is clear. However, the connection goes the other direction as well. Bold statements need bold evidence. Let’s consider 3 notable winters:

  1. A winter began during the the middle of the Dance of Dragons in 130AC, which was a particularly hard winter with the winter fever during this period as well.
  2. Another harsh winter lasted from 230-236AC, and during this period the 4th Blackfyre Rebellion occurred.
  3. Finally, the Year of the False Spring (281AC) occurred at the exact time of the Great Tournament at Harrenhal when when Rhaegar Targaryen “kidnapped” Lyanna Stark, which directly precipitated Robert’s Rebellion. Though the Maester’s hadn’t determined winter was over yet, everyone seemingly believed that was the case. Given that the “Year of the False Spring” needs no other descriptor, expresses how uncommon such an event is in Westeros.

The Maesters, who send distinct white ravens throughout the Seven Kingdoms to announce the change of seasons, could therefore control the business cycle by merely announcing that the season is changing. Just as choice words from the Chairperson of the Federal Reserve can precipitate economic changes, the sending of white ravens can cause people to despair (announcement of fall or winter) or become exuberant (announcement of spring or summer). But these have a secondary, pernicious effect, on the citizens of Westeros. At the coming of Winter, a negative supply shock will hit the agricultural markets as everyone hoards foodstuffs to survive or to profit off of inflated prices during the peaks of winter (as a result of everyone else’s actions). This latter effect can either deepen the economic/seasonal downturn or, in fact, precipitate it.

The Maesters certainly do not start all season changes. The current winter, with its linkage with the white walkers, is clearly beyond their control. But the power to control, even minimally, the seasons beyond the knowledge of the Iron Throne and Great Houses is a great power indeed. Such control can easily be used for accumulating and maintaining power. Were providing counsel to lords not sufficient to keep all houses following the desired order, a seasonal change could be called in with those symbolic white ravens that the common people would notice. During hardship is when counsel is needed most. If that counsel is to ignore best practices during a supply-side recession thus creating a stagflation period and undue hardship, who else has studied for years to argue the Maesters are wrong. The people, after all, won’t blame the Maesters. Truly knowledge is power. And enough knowledge is control.

Advice for the Lannisters: Break up the banks

The Titan of Braavos
The Titan of Braavos — the center of the Iron Bank. Photo from Game of Thrones.

Behind the stories of dragons, white walkers, and warfare, there is a story of risky investments in HBO’s hit series Game of Thrones. And the economics of these investments tell much of the story of what has occurred in King’s Landing. This policy proposal is for Cersei Lannister to strengthen the Seven Kingdoms, but also strengthen the position of the Lannister family. We propose a three pronged strategy:

  • create a bond market for the debt of the Iron Throne — to the best of our knowledge the first in Westeros or Essos;
  • institute financial regulation of “too big to fail” banks operating in the Seven Kingdoms, e.g., the Iron Bank of Braavos; and
  • begin a propaganda campaign to get money out of politics.


The War of the Five Kings has ravaged much of Westeros. The people of the Seven Kingdoms, desiring safety, have been streaming into King’s Landing — as starving refugees (cf. Season 2 Episode 6). The Tyrells curry favor with the populace by providing protection and, more importantly, food (cf. Season 3 Episode 1). Cersei Lannister already recognizes the risk involved with this to her position (cf. Season 3 Episode 1) and as an extension her family’s position — her children are officially recognized as Baratheons and not Lannisters.

Additionally, though the Lannister family has seemingly inexhaustible gold reserves (cf. Season 1 Episode 5), as with any resource — even in Westeros — there is a finite supply. Tywin Lannister said as much (Season 4 Episode 5): “Our last working mine dried up three years ago.” On top of this the Lannisters have lent large sums of gold to the Iron Throne (cf. Season 1 Episode 3). As the Lannisters are not able to pay off the loans called in by the the Iron Bank of Braavos (Season 5 Episode 4), we can rightfully assume that the loans the Lannisters have made to the Iron Throne constitute a large fraction of their wealth — an estimated $1.8 Billion in 2013.

Recognizing that repaying the loans due to the Iron Bank is not tenable and thus a threat to the safety of Cersei Lannister and her house, she dispatched Mace Tyrell to renegotiate (Season 5 Episode 4). On top of that, she received forgiveness of the debt the Iron Throne has with the Faith of the Seven, and in exchange she grants the Faith the right to create its own military once more — the Faith Militant.


Given the financial situation of the Lannister family and the Iron Throne, we propose a three part strategy that helps King Tommen and the entire Lannister family. First, the creation of a bond market for governmental debt. Second, the proposal to institute stricter financial regulation within Westeros. And third, the beginning of a propaganda campaign against money in politics.

A bond market would serve a threefold purpose.

  • First, by creating a market for buying and selling debt in the Iron Throne it would allow for more transparent accounting. As such Eddard “Ned” Stark would not have been surprised by the financial situation at the time of his appointment to be Hand of the King (Season 1 Episode 3). This would also keep the Master of Coin, e.g. Petyr “Littlefinger” Baelish, honest. It has been speculated that Littlefinger was debasing the currency by “coin clipping.” The mere threat that this might be true could cause even more chaos to the Seven Kingdoms and harm the Iron Throne.
  • Second, as discussed, the Lannisters have a significant portion of their family wealth invested in loans to the Iron Throne. In the terminology of modern banking, this is a single, undiversified and illiquid, portfolio. Such an investment would be considered unwise by financial analysts. It is undiversified because Tywin has placed all eggs in one basket. It is illiquid because the Iron Throne is not capable of paying the funds back in the near future. In order to diversify their investment, the Lannisters need to be able to exchange their future debt obligations (loan repayments) for Gold Dragons.
  • Third, as the Iron Bank of Braavos lent millions of Gold Dragons to the Iron Throne and it is said, “the Iron Bank will have its due.” Tywin Lannister acknowledged as much and more (Season 4 Episode 5): “If you owe [the Iron Bank] money, and you don’t want to crumble yourself, you pay it back.” In financial parlance, this is counterparty risk: the risk that the other participant in a contract (the Iron Throne) may not fulfill their obligations (because they must pay the Iron Bank of Braavos first). Following this logic the Iron Bank owns the senior tranche of debt (i.e., paid back first) and the Lannisters (and any other lender) owns a junior tranche. Owning the junior tranche means the Lannisters have a riskier investment than even they might suspect. (This is reminiscent of the Collateralized Debt Obligations [CDOs] that partially drove the 2008 financial crisis. Before 2008 investors were buying the junior tranches of mortgage backed securities, but not calculating their risk properly.) The creation of a bond market would allow for legal structure to be put in place so that various tranches could be bought — without unspoken prioritization of obligations.

As the Iron Bank of Braavos would not want to renegotiate their contracts, nor receive lower interest rates than they were previously winning, we propose a new policy of financial regulation. Since the Iron Bank is able to single-handedly finance a coup or war in order to change the rulers of a city or kingdom, its failure would surely be a cataclysmic event within Westeros and Essos. We would thus classify the Iron Bank as a systemically important financial institution [SIFI]. King Tommen should be advised of the risks that a failure at the Iron Bank would cause, and use his position of power to communicate this this throughout the Seven Kingdoms. Thus for them to continue to operate within Westeros they must begin paying taxes that could be used for a bailout in the case of financial panic or a bank run (i.e., everyone wishes to withdraw their money at once, which would push the Iron Bank into bankruptcy). Additional requirements could be enacted as well. As the Iron Bank of Braavos is much larger than other institutions that exist within the Seven Kingdoms, e.g., lending by the Faith of the Seven, the rules could be written as to be specific to the Iron Bank alone. Of course if the Faith of the Seven becomes too powerful they can be classified as a SIFI as well. Though having the debts of the crown to the Faith greatly reduces the size of the Faith as a financial institution.

Finally, the Iron Bank would surely turn against the Lannister family and King Tommen for implementing new financial regulation. This is where the third policy becomes important: winning the hearts and minds of the people. The smallfolk generally do not follow the going-ons at court, nor do they care who their king is (Season 1 Episode 4). However, the common people seemingly enjoy seeing the nobles brought to “justice” (cf. Season 5 Episode 10). And with the religious reawakening of the Sparrows along with a revived Faith Militant, surely rooting out usurers would be in the list of sins. Thus the Iron Bank of Braavos would be demonized for attempting to overthrow the King Tommen, and any noble fighting to take the Iron Throne would be seen as corrupted by money and unfit to rule by the High Septon and Sparrow. The smallfolk would follow as their suffering could be blamed on the financiers.

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