Logical Outline of Melistrad's Market

Beneath evening’s light, the city walls slouched. The wall was made of crumbly bricks. It seemed the moss extensive moss was what was keeping the walls together. The houses inside were little better. These were made of wood, but they were much newer and in better shape than the walls. Still, the houses suffered incredible structural damage over years of neglect and decay. A window broken by a wind-tossed branch, with shards of glass still poking at the bottom of the shoes and feet and of passerbys still three months after the incident.

Melistrad was the name of the town. A town, because it  lacked the quality of life often associated with the title of city. Though many might name it a city because of its great population and its great amount of land and possessions, Melistrad itself was dilapidated and home to a poor people.

How is this possible? If a city has such great possessions, there must be wealth. If there be wealth, someone must have it. Whether it is properly distributed or hoarded by a select few, there must be some hidden wealth. Well, there is wealth alright, but it is lost. There is almost a drain or leak that causes wealth to seep away into the unknown. But where does the wealth go? Someone must have it, right?

Ah, but this is part of the problem. Some people do have this wealth. But it is not the hoarding rich, or the distribution among the poor. It is the case of intercity trade. Merchants travel to Melistrad and leave wealthy. So the money leaves the system. Is that it? Yes, mostly. There is rampant crime in Melistrad, as one would expect from a place of such poverty. But no one ever seems to get any richer.

Goods are stolen. Food, clothes, sometimes money and wealth. But mostly food and clothes and necessities. This is a town of thievery. A town of economic decline. A town of depression. When people work, they can’t gain money because their goods are stolen. So they don’t have the goods to sell. Those who obtain money by some means cannot buy because of lack of supply. So they buy from traveling merchants.

Traveling merchants do not buy. They add no currency to the system. But goods and money should be interchangeable, so wealth should be transferred equally, right? Not really. Goods are not permanent. They degrade over time. Clothes rip and tear. Food is eaten and digested. Tools rust and bend. How can a town survive?

One idea would be to somehow sell to traveling merchants and never buy from them. Only buy amongst themselves. But We would need to remove the problem of crime. Thievery causes a loss of goods. Goods and services often require an expense to produce. But if these services and goods are stolen instead of sold, the producers do not have a profit and can no longer produce because they lack the funds.

A town must then be self-sufficient. How? Well, if it were isolated entirely, the value of money could simply change. As all prices drop, the cost of money would drop as well as the currency itself would be worth more. If a town has 1,000 coins, but then finds itself with only 100 coins, it should rearrange the value of the coin to be 10x greater, right?

Maybe, but such loss of currency is subtle and invisible. People don’t notice or know that people have physically less money. Wealth is all in products, and money is a representation of wealth. So if the town has access to all necessary resources to be self-sufficient, it should be fine.

Melistrad is in a swamp near a mountain, but it has enough resources despite the hard conditions. Mountains hold goats that can provide hide, meat and milk. Swamps hold trees, though they are soggy and laden with dangerous insects in the waters. This timber is good enough. Stone from the mountain, ore as well. But they live in a swamp, but there are hills above the swamp where fields are planted.

So what is the problem? The traveling merchants can’t be too much of a problem. They may remove currency, but the city can still re-establish monetary value to perform commerce with themselves? The problem is the other main thing I mentioned. Not the dilapidated structures, I mean the crime. The thievery. People can produce goods and sell them. Monetary value can change to reflect what is necessary. But if goods are stolen, then producers gain no monetary representation. They lose money in the process and can no longer produce.

So the problem is not the lack of coins. The problem would be the same no matter how many coins the town had. The problem is lack of producers due to thieves starving businesses of supply, and sometimes even consumers of coin. So how can Melistrad recover? The answer is simple. It must remove the crime. But how? The criminals need jobs in order to have the money to pay honestly. But jobs are shutting down because producers have lost the ability to produce due to crime. It seems like it is too late.

It’s never too late. Market works like this. Miners need money. As long as he has a pickaxe, he can perform his job. The ore is in the mountain, and there is plenty of ore there. The trouble is not with resources. The miner mines ore, so he has supply. He simply needs demand, right? So he sells to the smelter. Smelter pays, if he doesn’t have enough money due to drought of money in town, monetary value changes to allow smelters to pay for ore.

Smelter refines and molds ore into ingots of iron and steel. Smelter sells to blacksmith. Blacksmith heats and shapes metal into tools like a trowel or plow. Blacksmith sells trowels and plows to farmers. Farmer plows and digs, so he can plant and grow crops. Farmers grow crops. Farmers sell crops at market. The miner, smelter and blacksmith all buy crops for food.

This allows goods to transfer. The money is irrelevant. This should allow goods to transfer. Monetary value should fluctuate to allow such transactions to be possible.

But how can everybody in the transaction make a profit? Money would have to be constantly increasing in town for this work. That is the problem of a closed system. Barter would work perfectly. It explains why barter was used in small towns and villages. Barter is fine. Monetary representation takes shape and allows barter of representation to allow more precise transactions.

However, how can this work. If we follow that the more processes a resource or product goes through, the more valuable it is, how can this process work? If the ore a miner sells is valued less than the ingots the smelter sells, though they are the same amount of iron, how can the miner make a living. The miner only sells to the smelter or maybe even blacksmith. The smeter sells primarily to the blacksmith, but the blacksmith and farmer have it best. They sell to literally everybody.

Let’s say value increase is +$1 per process. Miner sells ore=$1 to Smelter. Smelter sells ingots=$2 to blacksmith. Blacksmith sells tools=$3 to everyone. This is a flawed argument. Perhaps the miner and smelter would be destitute if ore was literally the only resource. But their lumber, there are crops, there is twine, there is weaving of clothes, there are so many. I would need to account for how much blacksmith pays to the lumberjack and farmer to see how much… no. Let’s keep it simple.

Farmer sells crops=$4. This may be an inaccurate or flawed representation of the value of crops. Because crops are not made by the resources of ore. So they are actually sold crops=$1. This means, miner can afford crops because he sells $1 and buys $1. So even though it seems the miner would be at the bottom of the system, he would likely still make a miniscule profit. So, he may not have enough money for anything but food, but at least he has food.

So crime is the problem. If at any time ore is stolen, ingots are stolen, tools are stolen or crops are stolen. The process breaks.

(Unlikely scenario, why would a thief or poverty stricken person want ore? Unless they wanted to sell it, which would allow the cycle to continue.)Ore stolen from the miner. Smelter cannot sell ingots. Blacksmith cannot sell tools. Potentially even farmers cannot sell crops.

(Real scenario)

Crops stolen from farmers. Aside from everyone starving, because I doubt all the thieves would steal all the food in the town, so no food could be bought legitimately.

Crops stolen from farmers, so reduced money for farmers. Reduced money from farmers means less money to pay for tools from blacksmith. If reduction of profit continues. Farmers will not be able to pay Blacksmith.

Blacksmith loses a large customer, the farmer. Blacksmith now slowly loses profit, until he cannot pay smelter for ingots. Smelter cannot get money, so he cannot buy ore from miners. Miner now has no money. He has no reason to mine ore, as he can’t sell any of it.

This means all the town is without ore, without ingots, without tools, without food. So the crime needs to stop.