“Whatever is the matter, sister? You look positively distraught.”

“There is a standing offer for psychiatric counselling for you, Luna.”

“Oh.”

“For centuries.”

“The incomprehensible part.”

Celestia’s brow furrowed, and she hesitated with her coffee.

“I... think I may be able to explain this one.”

“Though I will also need to schedule a call with the Prime Minister about this.”

“Oh, well... that too? But... how about I just explain, that should clear things up.”

“What you witnessed may have been the early warning signs of a financial crash. Or perhaps a company is about to implode, or maybe there’s a securities fraud case about to blow wide open.”

“Okay. Let me try again. Your unhappy man has probably realised that he is about to lose more money than most ponies ever see in their whole lives.”

“That’s the thing, it’s not... robbery, as such. Have you been reading much into how financial markets work?”

“Unfortunately it just jumped up the priority list.”

“How far did you get?”

Celestia looked at her coffee, then refilled the cup. “Okay. So we’re going back to... the 17^th, 18^th centuries. It’s a bit of a hike from here to what I need to talk to the Prime Minister about, so...”

“Equestria’s new order is settling in with new ways of doing things, where the power of the merchants is ascendant. Now that the aristocracy isn’t standing in their way, their enterprises are growing, and with larger enterprises there’s a need for greater investment – more than one pony can contribute at once. Which is how you get shares.”

“It’s that era, yes. Now, from time to time it becomes necessary to exchange these shares – when the previous holder doesn’t want it anymore. So ponies began to buy and sell them. And then a funny thing happened. The value of the shares began to diverge from the value of the dividend.”

“Think about it. If you hold a share in a company that you expect to become highly profitable in the future, you can sell it for more than you bought it.”

Celestia chuckled. “It’s not fraud, Luna. It’s speculation. It’s only fraud if the value is based on false information. If I sell you ten eggs and only five of them hatch, I haven’t defrauded you, it was just unlucky. If I sold you ten rocks and said they were eggs, then that would be fraud.”

“How is it that you can’t get your head around the language of modern finance but it takes you less than a minute to figure out how to commit basic securities fraud?”

“... We’ll get there. But yes, the speculative nature of the stock market does expose it to the occasional enterprising thief. This is why we have laws and regulations around companies that issue publicly traded shares – the company’s board are legally obliged to act in the interests of the shareholders. If they are found to be acting against the interests of their investors, they can be prosecuted for fraud. Though usually they get pushed out by the shareholders themselves before that can happen.”

Celestia paused for a moment. “Okay, we’ll talk about the Tenebria Company real quick.”

“During the height of the South Seas Company’s wealth and power, investors were looking for the next big opportunity. Trading enterprises in Kirea and Viridia, for example. Nothing ever approached the South Seas Company in value or longevity, but in terms of notoriety, the Tenebria Company comes close. Tenebria – if you’ve been brushing up on your geography – is the continent at the bottom of the world.”

“But there is that spindly projection northwards. As best we can tell, nobody has ever lived in Tenebria, aside from a few okapi villages whose remains were discovered by archaeologists, but the land was considered a candidate for mineral prospecting, and the arcane storms there were ripe for study. So a company was set up to fund the exploration and colonisation of this newly discovered land.”

“Well... the proprietors never delivered. They just kept raising money by selling shares. They created a bubble, a cloud of excitement around the company that was wildly disproportionate to any possible returns they could make. It turns out that Tenebria is a significantly more hostile land than they anticipated. Even today a mining operation there would be very difficult to make profitable, due to the distance and danger involved. But because it was the far side of the world, and they were practically the only people going there, they could keep this information from getting back to Equestria, and the rollercoaster could keep going up.”

Celestia chuckled bashfully. “I was sceptical of the whole enterprise from the start because I was kept well abreast of the latest exploration news, and them being able to turn a profit on Tenebria seemed like an unrealistic promise, but... I must concede that I did buy one. Just in case. That may even have been one of the things that precipitated the crumble of the operation, because now they were defrauding the sovereign personally.”

“Slowly, and then all at once. They kept it going for a long time by paying dividends to early shareholders with the money raised from newer ones – which is its own financial crime, known as a pyramid scheme. But sooner or later, they ran out of new investors, and the jig was up. Dividends dried up, so ponies started selling, and as more ponies started looking to sell, the price they could get for those shares dropped as the market became flooded. Almost overnight, the Tenebria Company was worthless, and the proprietors were apprehended trying to flee to Grifreich with the money.”

“Kind of. The physical bills of exchange they were carrying were recovered, but they left a trail of chaos in their wake. The only winners out of the whole situation were the lucky few that sold at the peak, right before it all came crashing down. Countless small investors and even ordinary people who had never bought a share before in their lives lost everything they put in because their investments went to pay the dividends of existing shareholders. Riots followed, as did a hit for the whole stock market. It was a body blow to the South Seas Company that definitely contributed to its dissolution.”

“It was! But it wasn’t the only thing. The end of the South Seas Company, the Tenebria bubble, and the Great Everfree War all happen inside the same 25 years or so, and they’re all causally related in complex ways that would extend this tangent even further.”

Celestia winced, thought about it for a moment, then nodded sagely. “Close enough. So anyway, this was unfortunately not the last stock market malfunction that Equestria has had to deal with. The rules were in place, but the impulse to greed remained. The darkest corners of the soul are hard to expunge. The nation suffered some minor crises through the 19^th century in response to shocks such as the unrest after the Rapport, the Kwadube revolution, the Great Northern War, and so on.”

“Oh, you missed that?”

“It’s... a misadventure. The Dragon Lord Agniskar II escalated a dispute with Kirea over Crane Island, Equestria and Grifreich got involved in a three-way alliance against the dragons, lots of nasty fighting over remote northern islands that may have had mineral wealth on them. Tremendous waste of blood and treasure. The only real winner was Grifreich because it consolidated their unity.”

“The knock-on effects in Kirean history are fascinating, because it led pretty directly to the colonisation of the Summer Islands, and the spiral of events that precipitated their transition from a sort-of feudal state to a modern democracy, but it’s complicated because their feudal system had republican elements, it’s a whole other thing we don’t have time to get into.”

"As you may remember from how Sylvanian independence started a chain of events that led to the Grail administration, economic problems have increasingly not respected national borders. This vulnerability has only increased since then as global markets have become more interconnected. An equipment failure in a silicon mine in Yakyakistan causes Kirean electronics plants to fall behind which causes a shortage of hire cars in Manehattan. Which is why even though financial regulations have mounted over the years, it remains just as much of a problem as ever, because the stakes have gotten higher.”

“Now, your unfortunate dreamer... This is something I’ve been keeping one eye on for a while. We may be about to run into a property crisis.”

“As in, a collapse in the value of property.”

“No, not- okay. Housing, offices. Land.”

“Housing has been steadily rising in value for a long time, and we fear part of that value may be speculative.”

Celestia paused.

“How do I break this to you... I regret to inform you that Equestria has not had any common land for over 200 years.”

“There was a process of land enclosure that began... sort of in tandem with the development of share markets. Piecemeal, unclaimed land was claimed by anyone who could assert that claim. It actually contributed greatly to food production, because farms could be consolidated and made more efficient. The crown even got in on the act to preserve the character of the land in some places, because usually private claims were about expanding agriculture.”

“Well... that’s what a mortgage is for. There’s a whole class of loans specifically for houses, designed to be paid off over the course of twenty years or so.”

“It’s hardly perfect, but the only alternatives would be letting millions go unhoused, have the majority of people rent for their whole lives, or confiscate vast amounts of private land. And this is the 21^st century, we cannot just run roughshod over the law. At least with mortgages ponies have a stable investment to pass on to their children.”

“Now you’re just picking on my choice of words.”

Celestia made a noise like a creaky door.

“What’s so worrying about a housing crash is that it’s still likely to concentrate wealth, not distribute it.”

“This is unfortunately not the first housing bubble, we had one in the 1970s, so we know what happens. First is that a lot of ordinary people, especially those who bought houses in the few years before the bubble bursts, get stuck with negative equity. Their house is worth less than when they bought it, which means their mortgage is more expensive than it should be. This increases the likelihood that they’ll have to default, which accelerates wider market consequences. It also means that if they sell their house, it won’t cover the whole value of the mortgage, so they’ll still have that debt. Second, the people who are in a position to buy houses during a market crash tend not to be ordinary people, they’re...”

“Correct. Large renting companies, or just... more speculators.”

“Well... I could suggest that to the Prime Minister, and it would be popular with the left of the party, but I doubt it would get a majority in parliament. A lot of ministers are landlords themselves, even in the Labour party, so it would be undermining their own investments.”

“You’re obviously free to deploy your own stipend to whatever end you see fit, but the sheer scale of the national housing market is such that your efforts are unlikely to change the tide.”

Celestia blinked. “Yes? Not all landlords are greedy parasites. Sometimes you just own more than one house and allow someone to live in the one you’re not living in.”

“Not necessarily, there are many reasons to hold a particular party allegiance.”

“A stock trader having a nightmare isn’t quite substantial enough to base policy on, but I can recommend an inquiry into the state of the housing market. Then the government can make preparations to soften the blow.”

Celestia frowned. “Bail out failing banks, likely. Before you object, this is a necessary medicine. If a major financial institution is allowed to go out of business, it creates an even larger wave of chaos – people and businesses lose access to savings and banking services, which will inevitably cause jobs to be lost, businesses to close, and debts to be bought up by collectors. If we set the government buying houses ourselves, we might get a few thousand people on the property ladder. If we stop the banks from collapsing, we mitigate an economic fire that affects millions – including outside Equestria.”

“It sounds crazy when you put it like that, but...”

“Actually, sort of?”

“You know, that’s reasonable, I wouldn’t want to discuss monetary policy when I’m tired either.”