Holy Roman Empire

Chapter 255: Chapter 4, Trouble Brewing
Vienna Palace

Franz’s wedding had already been put on the agenda, and it was not up to him to decide anymore. More than fifty million people of the New Holy Roman Empire were eagerly anticipating it.

An auspicious day had to be chosen, for if the weather were gloomy with overcast skies and incessant rain, wouldn’t it tell everyone that God did not favor the new couple?

In an ordinary household, encountering such weather would also be considered bad luck, and the fervently religious might even cancel the wedding. For the royal family, needless to say, it would be a huge political scandal.

Though the influence of theocracy had greatly diminished, feudal superstitions still prevailed in the conservative regions of Austria.

After much deliberation by a group of theologians doubling as amateur meteorologists, the auspicious day was set for March 12th, 1855.

The preparations had begun, and Franz found himself having to inquire about them occasionally, to demonstrate the importance he attached to the marriage alliance.

Marriage is a joyous occasion, especially to someone one likes. Alright, Franz admitted that his feelings for Princess Helen were average at best, but for an emperor, being able to marry someone he did not dislike was considered fortunate.

Franz’s good mood did not last long before troubling matters arose.

“Your Majesty, our plan to purchase gold has failed. The international market price of gold has surged by twenty percent. If we continue buying now, it would be too costly.”

“Our investigation has revealed that this hike in the international gold price was orchestrated by the British, with the intent of obstructing our gold purchases,” the Finance Minister said, looking exhausted.

It was evident that he had not had a good night’s sleep for some days.

At a critical moment in currency reform, the British drove up the price of gold, hindering Austria’s ability to buy gold—obviously, this was done with ill intent. With such an event, one could imagine the pressure faced by the Finance Minister leading the currency reform.

Franz’s brow furrowed, as under normal circumstances the British had no reason to obstruct the currency reform of the New Holy Roman Empire. Increasing the members of the gold standard system was advantageous for them as well.

“Have you ascertained why the British are doing this?”

Franz asked, for he did not believe that the British would act this way merely for profit. A gradual price hike would suffice if their only goal was to benefit from the gold price increase.

If the price increase was not too abrupt, the Vienna Government might have accepted it to increase their gold reserves?

A twenty percent spike all at once—only a fool would continue to buy under such a disparity.

Forcibly driving up the price of gold wasn’t without cost. Whether the capitalists speculating on gold prices could profit was debatable, but as gold appreciated, the British Pounds linked to gold also increased in value.

This was tantamount to a twenty percent appreciation of the British Pound overnight. With such a significant surge, the cost of British industrial and commercial products naturally skyrocketed, making it difficult for them to maintain their competitiveness in international trade.

What, had the British capitalists grown weary of living, preparing to play themselves to death?

Throughout, Franz never considered that this was a scheme by the London Government. Such actions were tantamount to harming the enemy a thousand and self-harming eight hundred—an act detrimental to oneself. Who would do such a thing?

Carl answered with a troubled face, “It is said to prevent us from acquiring gold and ensure we cannot gather enough reserves.”

Even he did not believe this explanation. Austria was also an established empire with deep-rooted traditions. If the government were willing to pay the price, they could gather the gold reserves needed for the gold standard within the country itself.

As long as the government had high credibility and market recognition, even if the gold reserves were slightly insufficient, the gold standard reform could still be completed.

In the end, issuing paper currency depended on government credibility. The Russians were a negative example—they weren’t worried about insufficient reserves, but their previously issued Paper Ruble was not well received.

The British couldn’t possibly directly undermine the market’s confidence in the New Holy Roman Empire, right? If they had that capability, they would have used it to threaten the Vienna Government during the Near East crisis.

Franz said with a cold laugh, “Keep investigating, but it’s okay if we can’t buy gold. We made early preparations anyway, and the gold for the currency reform is barely sufficient.

The remaining gap is not significant. At worst, we can exchange with countries that use gold and silver; the British may have the power to drive up the price in the European gold trade market, but I do not believe they have the ability to elevate the price of gold worldwide.

However, maintain the appearance that we continue to buy gold, letting the British keep their high gold prices. Let’s see how long they can sustain it!”

Lack of information flow is the greatest malady of this era. In areas where news doesn’t travel fast, the gold to silver price ratio still remains unchanged.

To elevate the global price of gold, the British would have to maintain high gold prices for several years. Otherwise, many regions outside of Europe would not be able to react promptly.

If the British really went through with this, Franz would just laugh. Postponing the gold standard reform for a few years was not urgent—it wouldn’t be fatal whether it was a year early or late.

What he wondered was whether British industry and commerce could withstand the consequences. The cost increase caused by the currency appreciation would inevitably slash the international competitiveness of British goods significantly.

Of course, the profits from overseas trade in this era are quite considerable. Franz believes that capitalists, braving such great risks to engage in oceanic trade, can still achieve profits of around twenty percent.

Maintaining competitive pricing without raising costs is still achievable. However, the profits from trade on the European Continent may not be as substantial.

Even though the British are the world’s leading industrial power, it doesn’t mean they have an advantage in every sector, and these industries may not survive such a blow.

Franz even briefly entertained the idea of inflating the British Pounds to strike at British industry and commerce, but he quickly dismissed the thought.

With Austria’s modest capital, if they truly went head-to-head with British capital in the financial markets, the likelihood of losing was almost ninety-nine percent.

London

The Granville Cabinet was flabbergasted; raising gold prices was their doing, but they had not prepared for such a steep increase!

According to the original plan, they were only to raise the price by a few points, enough for the Vienna Government to back down and accept their terms, but they had not anticipated gold prices skyrocketing this much.

Unfortunately, they overlooked a group in this world— speculators.

The abundance of domestic capital in the United Kingdom is nothing new, and now, the rapid economic growth in the United States and Austria is inseparable from the help of British capital.

This time, the government’s action raised the price of gold, and it gained everyone’s favor, leading to a rapid spike. The gold-to-silver price ratio surged, then spiraled out of control.

The London Government only had two choices before it: either to immediately sell off a batch of gold to quell the storm in the capital markets or to devalue silver. If the price of silver fell, then the high exchange ratio would normalize.

One reason gold is so sought after right now is the gold standard reform of the New Holy Roman Empire.

Once the Vienna Government completes the currency reform, the New Holy Roman Empire will certainly not hold so much silver, and its influx into the market will inevitably lead to a collapse in silver prices.

The speculators are sharp-sighted; they deduced from the most basic data on hand that silver prices would fall in the future and thus began to act.

In some ways, even if the London Government did nothing, this situation would still have occurred; the rise in the gold-to-silver exchange ratio is an inevitable trend.

This decision was tough to make, as pulling one hair would affect the whole body.

If they sold the gold to calm the storm and stabilize the value of the British Pounds, then their plan to prevent the Vienna Government from buying gold would fail, and the future effort to pull the New Holy Roman Empire into their British Pounds-gold system would require a higher price.

Of course, that’s not without its rewards; the London Government would profit from this operation, which could soothe their wounded pride.

Should they devalue silver, they must consider the consequences. The most direct effect would be the devaluation of the currencies of silver standard countries, making their exported goods more competitive economically.

With such consumption and growth, it would affect the export of British industrial and commercial products and subsequently impact the British economy.

Anxiously, Prime Minister Granville asked, “Does the Treasury have any plan to calm this storm?”

Without any hesitation, Finance Minister George-Grey had an answer, “Prime Minister, the best course of action right now is to sell off the gold we’ve purchased to normalize the market.

This has the least impact on domestic economics, and since we bought it at a low price, we can even make a profit by selling it now.

And we must act swiftly. The Vienna Government still hasn’t given up their plan to buy gold, which is practically stimulating the nerves of the speculators.

They may have discovered our plan already and are now deliberately putting on an act of determination to mock us.

If we delay any longer and more speculators join in, it will become difficult to calm the storm later on.”

The gold purchased by the government and the reserve gold for currency issuance are completely different concepts, even managed by two distinct systems.

In the gold standard era, governments couldn’t arbitrarily decide to decrease or increase reserve gold; these actions had to be based on actual demand.

The London Government had already experienced the consequences of rash actions. A wrong signal could lead to swarms of speculators, culminating in disastrous outcomes.

Since gold is considered hard currency in many people’s eyes and is thought to never significantly depreciate, even if one ended up holding onto it, one wouldn’t suffer much loss.

After much deliberation, Prime Minister Granville made a decision, “No matter what, we must first quell the gold price turmoil and stabilize the value of the British Pounds.

The Treasury must immediately start selling gold and communicate with domestic financial consortia; we need their help!”

Even though he knew it would come at a considerable cost, Prime Minister Granville still chose to seek aid from the financial consortia, as without their help, it would be very difficult for the London Government alone to calm the storm quickly.