In the Seven Kingdoms of Westeros, the staple food is bread, as in all the other nations in the region. Bread is widely traded across national boundaries, as is silver. In all these nations, bread can be purchased, using raw (uncoined) silver, at a rate of 27 loaves per (Troy) ounce. This price is determined by international market forces, and it is not influenced by the monetary actions of any individual nation in the Known World. Historically, the people of the Seven Kingdoms have used coins containing silver as money. Before its government got involved in the country’s monetary system, the Seven Kingdoms had coins that were produced by private mints. Often, these mints were owned by prominent nobles. One of them was owned by Tywin Lannister, the head of House Lannister, an extremely wealthy house that dominated the western part of the Seven Kingdoms. The coins produced by this mint provided most of the currency in the westlands, and they were very commonly used elsewhere in the Seven Kingdoms. Following traditional practice in the Seven Kingdoms, the Lannister mint used monetary units known as “stars.” Its most popular coin was a silver “dragon” whose denomination was seven stars. (Seven was an important number in Westeros: in addition to the seven kingdoms, the principal religion in Westeros featured a god with seven aspects.) These coins had a picture of a dragon engraved on one side. The mint named and marked the coins in this way to honor House Targaryen, the house of the Lord of the Seven Kingdoms, who governed them from the Iron Throne in the city of King’s Landing. The symbol of House Targaryen was a dragon. For many years, the Lannister mint bought silver and produced dragons (dragon coins) at a mint price of 9 stars per ounce of pure (fine) silver. But the mint equivalent was 10 stars per ounce of silver. Since a dragon coin weighed 4/5 ounce, these coins were not pure silver. Initially, the price of bread in coins depended largely on their silver contents. However, because of the superior convenience of coins in exchange, silver in coins was worth more than uncoined (raw) silver. For example, a person could buy 210 loaves of bread with ten dragon coins.

 1. 

a. How much silver did a star represent?

b. How much silver did a dragon coin contain? 

2. What was the fineness of the silver in a dragon coin? (That is, what was the percentage silver purity of a dragon coin?)

3. What was the price of a loaf of bread (in monetary units: stars)?

4. a. How much did 27 loaves of bread cost, in silver in monetary form (silver contained in coins)? How much did one loaf cost? b. How much less, as a percentage, did 27 loaves of bread cost in monetary silver, compared to their price in raw silver?

5. How much purchasing power, in bread, would a person who brought an ounce of raw silver to the mint have gained or lost by doing so?

6. a. How many dragons did the mint produce when a person brought in 7 Troy pounds of silver?

b. How many stars did it earn, as its gross (before minting costs) revenue from minting these dragons? How many dragons?

7. If this revenue just covered the mint’s costs and gave it a profit of 14 stars, what were the mint’s costs, as a percentage of the total number of stars it minted?

At some point, the Lannister mint secretly started debasing the coins it produced, increasing its actual mint equivalent to 12 stars per ounce. It left the mint price at 9 stars per ounce, and it continued to claim that its mint equivalent was 10 stars per ounce. It also reduced the weight of the debased dragon coins very slightly, to 7/9 ounce.

8. What was the debasement rate? Hint: The debasement rate is the percentage by which the silver contents of a new, debased dragon coin have decreased, relative to the silver contents of an original dragon coin.

9. What was the fineness of the debased dragons?

10. a. How many dragons did the mint now produce from 7 Troy pounds of silver? b. How much was the mint’s revenue gross (before-costs) revenue, in debased stars, if a person brought in seven Troy pounds of silver?

11. a. Assuming that the percentage minting cost, per star minted, remains the same as in Question 7, what was the mint’s net (fraudulent) revenue, in debased stars, from minting seven Troy pounds of silver? Note: Use the cost fraction from Question 7 to calculate the minting cost. Then subtract the cost from the total revenue to calculate the profits.

b. By what multiplicative factor did the profits increase, relative to their value from before the debasement?

12. a. What was the price of bread, in (debased) stars, after people discovered the debasement?

Note: You should assume that the price of bread in monetary silver remained unchanged. b. Calculate the annual inflation rate for bread: the percentage increase in its price, relative to its price in the preceding year (before the debasement).

13. a. How much purchasing power, in bread, would a merchant have lost if he brought seven Troy ounces of raw silver to the mint, received debased coins, and spent them after the debasement had been discovered? b. What was the percentage decrease in the purchasing power of this silver?