Holy Roman Empire

Chapter 1007: Chapter 21, Seal, Seal, Seal
 

“Money, money, money,” had become the curse of the governments across the European Continent. “Twelve billion” was not “twelve pieces,” because the previous wars had emptied the national treasuries, and even the Vienna Government could not gather such a sum in a short time.

There was no choice, assets and cash were two different concepts. To extract twelve billion Divine Shield without affecting the economy’s normal operations was nothing short of mythic.

Whether borrowing from banks or issuing bonds, it was reducing the liquidity in the market. Once it surpassed the market’s tolerance, it would impact the normal functioning of the economy and exacerbate the crisis once more.

One of the essences of an economic crisis was the uneven distribution of social wealth, excessively concentrated in the hands of a few, with the pockets of ordinary people cleaner than their faces, devoid of purchasing power, naturally leading to economic cycle issues.

The most ideal state, of course, was for the wealthy to spend money and stimulate the economic market. As long as money started flowing, the economic crisis would cease to exist.

Clearly, this was impossible. Even a hundred years later, problems that remained unsolved—Franz did not believe he could solve them.

In a sense, supporting the nobility in building overseas domains was the greatest policy stimulus. The only regret was that the emerging military nobility, having amassed wealth for too short a time, were not generally so affluent.

Apart from the Aristocratic Group, another holder of immense wealth was the capitalists. Their wallets were even harder to pry open; each one was cunning, waiting to buy in after the crisis passed.

Unless one resorted to forceful measures, these profit-maximizing individuals would never willingly part with their money.

There was nothing to blame; seeking gain and avoiding loss was human nature. True selflessness belonged to saints.

Nobody was more noble than anyone else—placed in the same position, most people would make the same choice, including Franz himself. What he could not achieve, of course, he would not expect of others.

“How is the funding to be solved?”

Franz did not care about the specific rescue plan. A plan accepted by all the governments certainly balanced and was the result of a gambit involving all interests. As for whether it was the optimal solution, that was a question for God.

By contrast, the funding gap was the key issue. Franz knew all too well the extent of Shinra’s resources, being able to resolve half the funds was already the result of everyone’s cooperation.

The remaining gap had to be addressed through the financial markets of the European nations. If it had been a year ago, it would not have been difficult; regretfully, it was now during an economic crisis, precisely when the market was most short on money.

Taking Franz himself as an example, not counting land and other immovable properties, at his peak, his fortune reached a staggering 146 billion, wealth enough to rival nations. After the economic crisis broke out, it directly shrank by fifty-four percent.

There was no way around it; the stock market was such a miraculous place. Even this was with insider information, having retreated early; those who were slower could take the tech stocks plunge as a reference.

In the end, they were all tears—bubbles that Franz had crafted, and the bitter fruit had naturally to be swallowed by… No, wrong, by the chives.

This was the price of technological progress; had it not been for a bunch of enterprises constantly raising funds and burning through cash in public offerings, Shinra’s technology would not have been able to take the lead in the second Industrial Revolution.

On average, over the past thirty years, the Shinra Empire had invested up to eighty million Divine Shield annually into science and technology research and development; if this timeframe was narrowed to the most recent five years, this figure had reached a staggering 210 million Divine Shield.@@novelbin@@

Apart from raising capital from the capital markets for all investors to share the burden, no organization or individual could support such an expense.

The input and return were proportional. After more than two billion in funds were invested, airplanes, tanks, and battleships were all produced, and countless civilian facilities followed. Humanity had also entered the age of electricity and internal combustion engines ahead of schedule.

The tragedy, like many stockholders, was that Franz had become poor. Of the thousands of technology companies he held, fewer than fifty were profitable. Besides the more than two hundred already undergoing asset restructuring, the rest were still in money-burning mode.

Even though he had cut corporate operating costs and slowed the burning rate, the total loss still reached as high as tens of millions of Divine Shield each month.

When the market environment was good, there was no shortage of capital willing to burn money together, but now that the market conditions had worsened, the “leek-harvesting” companies previously supported by everyone had to be propped up by Franz alone.

He had to keep going or else, if the companies collapsed, it would be difficult to re-establish a reputation in the future. After all, no matter how appealing the story, it was a project that had failed before, and investors would certainly not be so eager to put in money.

But if he persevered, as soon as he weathered this storm, there would be plenty of capital entering the market. And if there was a technological breakthrough in the meantime, it would be a windfall.

With so many burdens to bear, even if Franz still had some money, he had to save it first. After all, the projects in his hands were high quality, although perhaps too advanced, they were the future of the world.

If Franz had a hard time, it was even worse for others. Anyone engaged in the real economy and striving to achieve something was now saving grain for the winter, and no one dared to use their precious capital rashly.

Those who really had a lot of idle funds were the ones playing with finance. Sometimes Franz even thought about draining the pond to catch the fish, taking over the banks for the state, and just chopping these characters off.

Of course, that was just a thought. If Shinra’s financial capital strength could catch up with Britannia, Franz might just lose patience and flip the table.

But Shinra’s financial capital strength was limited to begin with, and it had fallen into the technological pit dug by Franz, almost completely buried when the stock disaster struck.

Of course, such good fortune would only come this once. Once bitten, twice shy. When the next cycle begins, it’s estimated that the main players in technology will be individual investors, given the woefully low success rate.

If everyone was out of money, where did the money go?

The answer is simple: it was war’s fault. The wars on the European continent caused a massive outflow of Shinra’s wealth, and more than twenty years of surplus could not withstand the consumption of a war.

The post-war market boom relied more on virtual credit than on real currency.

This was also the main reason why Franz strived to dominate currency hegemony: only by making Divine Shield the international settlement currency could he avoid the embarrassment of a war depleting the country’s coffers.

Prime Minister Carl said, “Your Majesty, the current financial market is not suitable for financing. The only way to resolve the financial difficulties is to raise the lever and issue more currency.

Our reserves are relatively abundant, and Divine Shield’s leverage ratio has always been low. The Ministry of Finance has calculated that simply raising the issuance leverage ratio of Divine Shield to the level of British Pounds would allow us to issue 830 million currency.

If endorsed jointly by European countries, even a one-time issuance of twelve billion would be accommodated by the market.”

As a rising force, Divine Shield needed to have its own advantages to defeat the British Pound and become the international currency.

Before the war in Europe ended, Shinra was far from unified, let alone being the world hegemon, trailing far behind Britannia in international status. Divine Shield could only gain market recognition through its “low leverage ratio” and stability.

Since Shinra also happened to be the leading gold-producing country in the world, outproducing the second through eighth combined, it provided ample collateral for the government’s currency issuance.

Knowing it was one thing, but Franz was astonished by the government’s solution. Printing money when short on funds seemed unproblematic, yet the real issue was tremendously significant.

It might have been the 19th century, yet suddenly the aesthetics shifted to the 21st, seeming rather abnormal. However, for the moment, “printing money” did appear to be an excellent way to solve the crisis.

Printing more currency, inflation was inevitable. However, with the endorsement of European countries, it was different; it was as if the whole of Europe helped digest the inflation together.

Printing an additional twelve billion, spread across the European world per capita, wouldn’t amount to more than a month’s wages. Even if inflation did occur when this money circulated in the market, it wouldn’t be too severe.

As long as the Vienna Government’s gold reserves were sufficient and the conversion ratio of Divine Shield remained firm, the internal inflation would gradually be absorbed over time.

Most importantly, while resolving the funding issue, it also promoted the step of Divine Shield becoming a world currency. Once the crisis was over, the market’s confidence in Divine Shield would reach new heights.

The more Franz thought about it, the more feasible it seemed. There was a saying that went, “As long as the speed of printing money is fast enough, debt will never catch up with me.”

After hesitating for a moment, Franz asked, “How do we get other countries to recognize it? What if they make the same demands?”

It wasn’t that Franz was paranoid; if Shinra could solve its funding problems by printing money, other European countries could also print more money to alleviate their financial crises.

Other governments weren’t fools either; if the Vienna Government could ask them to endorse the value of Divine Shield, those governments could likewise demand that the Vienna Government endorse their currencies.

If everyone started “printing, printing, printing,” Franz could hardly imagine the scene. If Pandora’s box was opened, the gold standard might as well say goodbye, as gold production couldn’t keep up with everyone’s speed of currency printing.

Perhaps, the French were the ones who most wished this to happen. Only with everyone printing more and more money could they hope to repay their debts. Ideally, as with the former France, everyone would be a billionaire, and debts could be settled in minutes.

Prime Minister Carl confidently replied, “We can use interest-free loans and material support to exchange for recognition from other governments.

Now, they have no choice, printing more money might be simple, but not everyone is qualified to do that. All European countries have their flaws; it is simply impossible for them to issue more currency at this time.

There is no need to mention the ten bankrupt nations; printing more money for them is like hastening their own demise. Montenegro and Armenia don’t have the capability to print currency; they rely on our printing houses for the service.

The Netherlands, Nordic Federation, and Spain have limited economic scales; printing more currency would immediately trigger hyperinflation. The Russian Empire’s economy might be sufficient, but considering the reputation of the Tsarist Government, printing more money would mean the ruble would become the second franc.

The risk-bearing ability of these countries is extremely limited, not just domestically, but they also wouldn’t be recognized internationally. Printing more currency would inevitably cause a run on the banks unless they were willing to abandon the gold standard; otherwise, they simply couldn’t survive.

Against this backdrop, if they wished to solve their financial difficulties, their only option would be to incur foreign debt. Currently, only we and the British can resolve their funding issues.

If anyone betrays the European Continent and leans toward the British at this time, our swords are not just for show; we can “kill the chicken to scare the monkey.”

Indeed, under the sun, there is nothing new. In the original timeline, after World War I, all countries abandoned the gold standard, and now, how remarkably similar the situation is.

“Abandoning the gold standard,” seems impossible now, but once pushed to the edge, not wanting to abandon it won’t be an option.

Seeing one leaf fall, one knows autumn is coming. If not for Shinra’s alternative plan, I guess the final outcome of this economic crisis would be the forced abandonment of the gold standard by each country.

More precisely, some countries have already given up the direct gold standard. History is astonishingly similar, and France is the leader in this respect.

The French government had no choice; after the wars on the European Continent, the nation’s gold had been pillaged. Without gold reserves to issue currency, how could they maintain the gold standard?

International loans are all in paper currency, not gold. Despite the French government’s exhaustive searches, they still couldn’t gather enough reserve gold.

At last, King Carlos, driven into a corner, made a bold move and borrowed a sum of Divine Shield as reserve gold, starting an indirect gold standard system.

The indirect gold standard could barely be considered a gold standard, but it’s better than switching directly to a credit standard. If they really had to deal with credit currency, French citizens would probably have to continue down the road of everyone becoming “billionaires.”

Many things become easier once someone takes the lead, including currency standard systems. France was only the beginning; several newly independent Italian countries followed suit, adopting the “indirect gold standard” path.

Regrettably, Belgium continued the gold standard system.

There was no helping it. Even though Belgium suffered tremendous losses in the wars on the European Continent, the desperate resistance of the Belgian Army bought time for the government’s evacuation, and the gold reserves snatched were taken by Leopold II to Shinra.

As a moral and cultured monarch, Franz naturally would not do something so low as to loot a burning house. Belgium, possessing sufficient gold reserves, naturally continued a more autonomous gold standard system.

Although it was a pity, Franz did not regret it. Replacing gold with Divine Shield isn’t something that happens overnight; moving too quickly could lead to trouble.

There needs to be a transition period first, to give everyone time to accept the change. Such as initially establishing a “Gold—Divine Shield” co-standard system.

Achieving this wasn’t hard; as long as Shinra reduced its gold exports, with economic development, countries would sooner or later suffer from insufficient gold reserves. At that point, promoting a co-standard system would be a natural progression.

When enough time passes and everyone gets used to Divine Shield as the standard, that will be the time for Divine Shield to replace gold and establish currency dominance.

Plans are plans, and until they are complete, no one can guarantee success. There are many similar schemes, or alternative plans, and this is just one that seems relatively easier.

It must be acknowledged that the end of the wars on Europe have brought significant changes to the Vienna Government. In the past, Prime Minister Carl would, at most, deal with such matters by scheming later.

Now, things are clearly different. First by slapping the traitor label on those in Europe, and immediately following with a show of ‘killing the chicken to scare the monkey,’ a true sign of a hegemon’s style.

In fact, this is just standard practice for the 19th century. Treaties are made, and aligning with the British at this time is betrayal; traitors must die without negotiation.