The Consol.Consols are a combination of bond and equity -
a perpetual obligation to pay a fixed sum per year.
The timing to introduce consols now is very auspicious. The Town is short on current funds due to the obligation to pay 13.5 bil to the King on the new boroughs (9 bil still unpaid). The boroughs do not immediately recoup the investment especially because of the 700 m/sqm/year extra tax in B.9, which causes the land values there to be lower than elsewhere.
The cash flows from this borough, when fully sold (and fully sold it will: the dutch auction is going to zero m, making it a risk-free purchase for anyone, because land can be surrendered to the Town to avoid paying the tax at any time), will amount to 94.5 mil per year. In addition to the existing ~12 mil fixed cash flows from 1-SE, this enables the issuance of 1,000 consols that pay a fixed 0.1 mil per year perpetually.
This fulfills the principle of hedging. I strongly advise (IRL) against entering to
any obligations to deliver something that you don't always have, nor cannot reasonably produce. For instance a common loan is an obligation to pay back in currency units whose value is wholly decided by somebody else (central bankers), and that you don't have as a hedge (why would you need a loan if you did), nor have the right to issue. Obligations to sell something you have, or regularly trade with, or produce, are safe, because you are hedged so that the change in the valuation of the asset does not change your financial position (or more strictly: any amount of change cannot cause you financial ruin because you are not net short / naked short).
Therefore, the first consols may be issued as payment to the King for the new boroughs. The current pricing in the Long Bond auction suggests 1.1% APR, which translates to the consol price 0.1 mil / 1.1% = 9 mil/unit, which *1,000 = 9 bil, handily the same amount that the Town owes to the King.
So the net result of the financial trickery is that the Town gets the 2 boroughs
for free, and offsets the (perpetual) positive cash flow from the extra land tax with the (perpetual) negative cash flow of having to pay the consols. The only risk to the Town is if the land is surrendered by the characters in the future to avoid the tax, which might happen in very high XMR valuations. Though in the event of very high XMR valuations, the Town can probably handle it
(The tax is only 0.3 XMR/q/real-
month so does not become an issue for the owner any time soon - for comparison, the Expert-Master level salary from the Town is 9.1 XMR/real-month).
King is left feeling a bit puzzled. The deal seems straight, but somehow it feels that the Town is getting the sweeter half... The deal of this size will anyway be decided in the Town Council, and this is the preliminary announcement for it.
After the King gets the consols, he will naturally use them to make liquid bond markets, for the first time in the game. Until now, the market cap of even the largest bond issue has been ~1 bil, not allowing aftermarket. Now we get to the ~10 bil size. The CKG market is now at 765 bil and has suffered a little from the fragmentation due to the itemization.
