Holy Roman Empire

Chapter 261: Chapter 10, Coinage Tax

After a series of setbacks, on May 12, 1855, the first currency of the New Holy Roman Empire — the New Holy Roman Empire Rhine Shield  was officially issued.

The Vienna Government successfully obtained the right to coin currency, and the reserve gold from the governments of various sub-states was also uniformly absorbed into the Imperial Central Bank’s reserves but was temporarily held within the individual sub-states.

It wasn’t that Franz didn’t want to consolidate everything in one step; he primarily considered the risk of backlash from the sub-state governments after having just carved a chunk of meat from their bowls.

Since everyone wanted to keep it in their hands, it was left as is, as long as the Central Government dispatched officials to supervise, prohibiting anyone from using these reserves.

Without a doubt, once the Central Government obtained the coining rights, they could legally collect the Coinage Tax from various sub-states. The Coinage Tax, by definition, refers to the profit made from issuing currency after deducting costs.

Of course, it’s the era of the gold standard; reserve gold is still needed, and the profits from issuing currency couldn’t be as significant as those made in later credit-based eras.

Even so, the Coinage Tax remained an essential part of fiscal revenue, and when compared, things like tobacco or liquor taxes are utterly inferior and not even worth mentioning in the same breath.

The British aimed to establish the “British Pound — Gold” system, essentially wanting to collect the world’s coinage tax. This, of course, required the recognition of countries worldwide; they must be willing to settle international trades in British Pounds.

There are only two ways to achieve this: either by overpowering other nations with formidable strength or through the exchange of interests, convincing them to accept the British Pound as the international settlement currency.

Up to the present moment, the British’s plan had yet to succeed. The Vienna Government might have adopted the gold standard, but the unfortunate fact was that the New Holy Roman Empire only recognized gold in international settlements.

What’s the British Pound, and is it edible?

On this matter, the London Government and the Vienna Government had communicated multiple times but to no avail in the end.

The British wanted to collect the Coinage Tax, and so did Franz! While collecting the world’s coinage tax was beyond Austria’s qualification, it was still attainable within the Holy Roman Economic Alliance.

Otherwise, why would the Vienna Government run the risk to reform to a gold standard? Keep in mind that currency reform comes with its costs and risks.

Based on current circumstances, once the currency value reform was complete, the coinage tax revenue of the Vienna Government would account for approximately 0.5 to 2 percentage points of GDP.

The wide gap in the data mainly depends on the domestic economic development; the more prosperous the economy, the more currency demanded in the market, and consequently, greater the coinage tax revenue.

Of course, that’s domestically; internationally, there is no way it could be that much. Franz also couldn’t demand other countries to stop issuing their currencies and only use the “Divine Shield.” At most, he could only encourage the use of “Divine Shield” in trade settlements with the New Holy Roman Empire.

It’s a long-term task; in the short term, everyone would still settle using gold and silver, with the Divine Shield being accepted only within the New Holy Roman Empire.

Persuading everyone to join the “Divine Shield Gold” system is equally challenging. Without tangible benefits, why should they pay this coinage tax?

Once the status of an international currency is established, then the demand for gold reserves could be reduced, as nations could support the value of their currency on the credit of their governments.

Currently, gold and silver are still the mainstream currencies in use; these solid currencies are the most widely accepted, while others like the British Pounds, francs, and Divine Shields are just ordinary currencies.

The British have already started promoting the British Pound, with the push for gold standard reforms being a crucial part of this agenda. Only when everyone’s base is the same can the British Pound — Gold system be established.

Finance Minister Karl spoke with buoyant enthusiasm, “Your Majesty, the issuance of the Divine Shield is going very smoothly—our reserves of gold and silver are ample and more than sufficient to cope with any fluctuations.”

Thanks to the international gold and silver standard of the era, the Austrian Government could use silver for international settlements, and everyone was happy to accept it.

If we waited until various countries abandoned the bimetallism system, it would be difficult to obtain gold from the market, and even purchasing all the gold in circulation wouldn’t be enough.

Historically, because there was not enough gold in the market, governments trying to reform to the gold standard had no choice but to compromise with the British and accept the British Pound-gold system.

Some countries, with a vast shortfall in gold, directly linked their currency to the British Pound, borrowing the British’s credibility to underwrite their new currency’s value.

This is why it is generally believed that the British’s zenith was after the Anglo-Ebura war. By acquiring South African gold, most of the world’s gold fell under British control, solidifying the pound’s status as the world’s dominant currency.

Franz nodded and said, “Let’s not take this lightly, continue to strengthen the financial market surveillance. If there is any sign of substantial capital outflow, immediately trigger the contingency plans.”

Although he didn’t believe anyone would cause trouble at this time, the recent actions of the British had sounded an alarm for Franz; to establish the hegemony of the pound, who knew if the British would stir things up again.

Minister Karl replied gravely, “Your Majesty, rest assured. We have personnel monitoring the foreign financial syndicates that enter the country. As soon as they start withdrawing capital, we will take action.

We’ve collected all their dirty laundry, and when it’s released, that’ll be enough to temporarily seize their capital. In severe cases, we can even send them to the gallows.”

In this age, which capitalist doesn’t have a dark history? Even after entering Austria, these foreigners might have tempered their behavior a bit, but they couldn’t entirely shed the bloodiness inherent in capitalism.

In tranquil times, to develop the domestic economy, civilians wouldn’t report, and officials wouldn’t investigate—the issues were shelved, and everyone pretended not to see them.

Now, at a critical moment, these overlooked dark histories, once exposed, would be enough to land them in insurmountable trouble.

With a criminal record, the capital becomes the proceeds of crime, and according to Austrian law, it can be decided whether to seize or confiscate them in the end.

As long as there is evidence in hand, no matter how influential they are, the Vienna Government fears nothing.

Franz instructed, “Keep an eye on them. If they plan to leave at this time, try to work on their thoughts first. If that fails, then resort to extreme measures.

Make sure our evidence is compelling enough. Even if we have to take action, we can only ‘kill the chicken to scare the monkey’—target a few with severe charges.

We can’t afford to fall out with all international capital. Even when we act, we must be mindful of the methods. The government cannot go into battle bare-chested.”

Unless necessary, Franz still didn’t want to fall out with international capital. Such actions would be killing the goose that lays the golden eggs; after doing it once, there would be no second chance.

In the future, whether it’s issuing bonds on the international market or attracting foreign investment, it would no longer be possible. Even Austria’s normal commercial trade with outsiders would suffer retaliatory blows from them.

Austria’s industrialization process still needed foreign capital to add bricks to the edifice—these people were all of value.

If they were choked off all at once, even if the government gained a substantial amount of cash, it wouldn’t achieve the same results.

“Yes, Your Majesty!” Karl replied solemnly.