Chapter 203: Letters Of Credit
The explanation had to begin at the foundation, and Batu knew it, so he started there.
"Normally, a merchant moving silver from Sarai to Urgench carries that silver on the road."
He explained. "The road has bandits, delays, and unpredictable weather. There is always the risk the silver arrives late, arrives short, or doesn’t arrive at all."
He let the context sit before continuing. "What can travel safely is paper, easy to store and worthless to bandits. So the silver stays in Sarai and a document representing it travels instead."
Saran looked at him with attention. She had not encountered the concept before, her body leaning forward on the search for its meaning.
"Mahmud’s office is responsible to issue the document."
Batu continued to explain. "It’s stamped with two seals, the wolf’s track and Mahmud’s counter-seal, both required for validity. The document names the specific merchant and states a standardized denomination, be it ten silver, fifty silver, or one hundred. The merchant deposits that amount into the civil account, receives the document, and travels without the silver."
He paused to let them both catch up with the idea, "At the destination, the merchant presents the document to the yam station operator. The operator checks the seals and honors the document from the station’s reserve, and the merchant has its silver without the risk of loss."
Khulgen had both hands flat on the table, very stiffly, which was how he sat when he was pondering something unfamiliar.
Saran then finally inquired, "If I’m the station operator, the silver I pay out is real, but the document in my hand is paper. What makes me certain that the silver in Sarai the paper claims to represent is actually there?"
"Through the civil records."
Batu thought over first before starting to explain, "When the document is issued, that denomination is committed in the records and cannot be issued again until the original is honored and the serial number closed."
He confirmed Saran was following his reasoning, "The civil account keeps the silver in reserve against every outstanding document. In this case, legitimacy is through the wolf’s track seal that has the khanate’s authority and Mahmud’s counter-seal that has his personal record-keeping integrity."
Khulgen then joined the discussion, "How does the station operator tell a genuine document from one that’s been fabricated?"
"There will be two methods."
Batu replied immediately. "The first is the seal tools, meaning both the wolf’s track and Mahmud’s counter-seal are held physically at the accounts office. Fabricating both convincingly is possible but expensive, and a document whose seals don’t match exactly with those in the station is rejected on inspection."
He continued without hurry. "The second method is the serial number. Every document issued will have a unique serial number. The accounts office distributes a list of valid serial numbers to every station through the civilian relay every season, and the operator checks the number on the document against the list. If the number appears as valid and uncanceled, the document is genuine."
Saran tilted her head, "And on the case someone presents a genuine document to multiple stations?"
Batu replied simply. "The serial number has a one-time use. When a station honors a document, it reports the serial number back to Mahmud’s office through civilian correspondence. That number is removed from the valid list and the update is distributed to every station, meaning any subsequent presentation of a document with that number is rejected as already honored."
She shifted her notes slightly, clearing the mind of one problem before moving to the next in a mental list. "What if the station’s silver reserve is depleted before all merchants presenting documents for that period have been honored?"
Batu nodded in approval of the questioning, "Each station holds a minimum reserve sized against the expected document volume on its route. Mahmud’s office projects the volume from the accounts outstanding committed amounts, route by route. When a station’s reserve approaches the minimum threshold, the civilian network sends a replenishment notification to Sarai and the accounts office moves silver to the station before the next distribution cycle."
"And if a document is lost on the road?" Saran took notes and moved on to the next topic.
Batu continued to answer calmly, "The merchant reports the loss to Mahmud’s office with the serial number. The number goes on the canceled list and distributed to all stations on the next relay cycle. From that point, no station honors a document carrying that number, whether it was lost or stolen."
Saran looked at the table for a moment, then looked at Batu with flat inquiry. "It can work, but it won’t be perfect. If a group of bandits or dishonorable merchants acts fast enough, they can fraud the system before the accounts offices and stations update their serial numbers."
"I believe the same, but the revenue it will bring should offset the losses." Khulgen intervened.
He had his document case open and had been writing while the exchanges ran. "With a fee for every exchange, silver deposited and document issued and proper surveillance, any fraud problems should not aggregate enough to justify not implementing the system."
He closed the case with the motion whose next task was clear.
"These... letters of credit can be drafted before the end of the week."
Saran shrugged with a sigh, "That covers it."
Khulgen gathered his materials and went out with the next item in his head before the current one had finished.
The administrative building was left behind, the daily work done.
Batu and Saran walked out into the street together, the Khar Kheshig around them.
The afternoon was past its peak heat, the light flat and long across the road between the administrative quarter and the market district.
The foot traffic was what it was at this hour, people moving with purpose, the ordinary density of a city that had been running its day for hours and had not finished yet.
They walked through it without ceremony, and the road made room for them, some due respect, others due necessity, a few due fear.
At the corner where the market road met a side street that stretched toward the workshop district, two men were deep in a conversation that had clearly been happening for some time.
One wore a merchant’s coat and had a wrapped bundle balanced under his arm.
The other had the burned forearms and dark-stained hands of a metalworker, and he was gesturing east toward the workshop district, saying something about a piece of bronze he was having cast.
The merchant was asking about the price. He sounded interested by what he was hearing.
Neither of them looked at the two people passing them because there were plenty of other people on this road, and a few more made no particular difference.
The city moved around them, going about the business it had learned to go about on its own.
