Holy Roman Empire

Chapter 273: Chapter 22: Capital Has No Borders
In July 1856, the Vienna Government officially began implementing the “Trap Plan,” increasing infrastructure investment and publicly soliciting tenders.

At the same time, the railway network also began to be re-planned, with almost every city being included in the planned railway lines, followed by the tendering process.

This time, not only domestic railway companies could participate, but overseas railway companies could also join the competitive bidding without any investment restrictions.

It was still the old rule that only one railway company was authorized for each railway line, preventing resource wastage through duplicated constructions, satisfying everyone’s desire to monopolize operations.

It looked very promising, provided that the railway companies had to start work on time and finish on time; otherwise, get ready to cry!

According to the new plan, once the railway network was completed, the total mileage of the railways in the New Holy Roman Empire would reach an astonishing 97,000 kilometers.

And the country’s current total railway mileage was just 15,800 kilometers, with only 32,100 kilometers of railway projects under construction, it was almost a doubling.

Considering some of the newly planned railway routes were too remote to be profitable, to attract investors, the Vienna Government even promised to exempt remote sections from taxes forever.

Good news may fool the average investor, but the savvy ones knew it was merely a tantalizing pie in the sky. Yet, in an era of market frenzy, who cared so much?

The savvy ones knew that whether the projects succeeded or failed, as long as they didn’t end up being the last holder, they could make money from it.

Although none of the Austrian railway companies had ever made a profit, railway stocks were steadily rising and were highly favored by the capital markets.

The currently operating railways were all making a profit, which created an illusion for many that railway companies were a sure-win business, especially since Austrian Railway could monopolize operations.

In the tender projects, the Vienna Government was also exaggerating its assets, such as the rapid economic development of the New Holy Roman Empire, the demand for railway transportation, and the high population growth rate—all considered positive news.

After such packaging, many speculators were hooked. Theoretically, all these railway lines would be profitable, even the Railways in Bosnia and Herzegovina in the most remote areas were expected to be profitable in the future.

These data were not deceptive; it was just a matter of time before the railways would be profitable. In this era, there were no cars, no planes, and on land, no other means of transportation could compete with railways.

The territory of the New Holy Roman Empire was not large, there were no extremely remote areas, no uninhabited frontiers, and the future held potential discoveries.

Franz estimated that if the Vienna Government did not regulate railway transportation prices, then after ten years, over seventy percent of routes would be profitable; after twenty years, over ninety percent of routes would be profitable; and thirty years later, all routes would be profitable.

This profitability was based on not considering construction costs, merely that operating revenues would exceed operating costs, with no idea when the investments would be recouped.

Before the railway construction costs had been recovered, major repairs were needed. No matter how well maintained, after several decades, most of the rails and sleepers would need to be replaced.

Since it was about painting a bright future, Franz didn’t mind making it look even more attractive. For instance, the Vienna Government promised to subsidize seriously loss-making routes to ensure normal railway operation.

This promise was practically the same as having no promise at all. Railway lines that couldn’t even recover operating costs would surely be abandoned by the railway companies!

As for the Vienna Government, who would be the one left holding the bag, whether or not they provided subsidies, they would still have to ensure normal railway operations. Ensuring smooth basic transportation infrastructure was the government’s responsibility and obligation—a cost that could not be avoided.

Moreover, there was no need to wait that long; an economic crisis would break out, railway companies’ financial chains would break, and government shareholding would become inevitable. After a few economic downturns, the Vienna Government would become the largest shareholder.

Why break the rules to gain control of the railway shares when it can be done within the framework of the rules?

Obtaining controlling interest in the railways through economic means was much more intelligent than flipping the table and brutally declaring nationalization.

Furthermore, the management system of a joint-stock cooperative company was much less costly than direct government appointment of bureaucrats.

 

London

Barclays Bank was now beginning to form the embryo of the Barclays Bank Group. Although it had not publically announced the establishment of the consortium, the capitalists around the bank already possessed the strength of a consortium.

Barclays Bank itself had funds exceeding 50 million pounds, and through the financial market, it could mobilize over 300 million pounds, influencing industries worth over 500 million pounds. It ranked among the top few consortiums in the United Kingdom.

President Genos distributed a stack of documents to everyone and then stated, “Gentlemen, just a short time ago, the Vienna Government suddenly announced it would heavily invest in infrastructure.

It includes: railways, ports, city water projects, municipal works renovations, and even some water conservancy projects—all within the scope of tenders.

The total investment is estimated at a staggering 480 million Divine Shields, which is 240 million British Pounds, with an adjacent industry market exceeding 500 million pounds. This is a capital feast, but it also comes with very serious challenges.

How to secure the largest slice of the cake while keeping risks at its lowest is what we’re here to discuss today.

The information has been distributed to everyone, and it’s generally consistent with what we knew previously, just that now it’s more detailed and involves specific projects.”

The big capitalist Simon challenged, “Mr. Genos, as far as I know, the Vienna Government’s total revenue last year was only 121 million Divine Shields, and it will not exceed 128 million Divine Shields this year. Can they afford such massive investment?”

Genos calmly responded, “In recent years, Austria’s economy has grown rapidly. Taking advantage of the Near East War, the Vienna Government successfully escaped financial difficulties.

Especially since the annexation of several German Confederation Sub-States, the population of the newly-formed New Holy Roman Empire has exceeded fifty million. Their total economic output has surpassed France’s and is second only to ours.

Currently, their total government debt is less than 80 million Divine Shields, a very low debt ratio. If they seek foreign financing, I’m sure none of us would refuse, would we?”

Refuse, how could we refuse? Who would want to turn away from money? The British, with a serious excess of capital, are looking everywhere for investment opportunities. Facing a high-quality client, how could we possibly refuse indiscriminately?

Being able to influence the New Holy Roman Empire’s financial market through loans, the potential benefits are even greater.

Simon unhesitatingly replied, “Of course, as a worthy client, the Vienna Government only needs to join the British Pound – Gold System, and providing them with loans is not an issue at all.

“But they won’t join—Austrians still want to pursue the Divine Shield—Gold System, and won’t easily compromise with the London Government.”

“In this case, should we still go through with this deal?”

Capitalist Bernett countered, “If it’s a profitable deal, why not do it?

Control their financial markets through loans, then use financial influence to sway Vienna Government decisions, accepting the British Pounds—Gold System. This is a long-term endeavor.

“Our approach is in line with that of the government; it just needs a little more time. The New Holy Roman Empire is also a major power; compromising them isn’t an overnight affair—it’s safer to take it slowly.”

Apart from the first sentence, the rest was pure nonsense. Controlling financial markets through loans is indeed possible, in theory.

Austrian capitalists are no fools and will resist capital invasion to protect their interests. It’s very clear which side the Vienna Government will stand on.

There has never been a case where a country’s finance was controlled just by a loan.

Unless they can cause financial problems for the Vienna Government and make it rely on overseas loans long-term, they will inevitably fall under their influence.

But by doing so, a high-quality client becomes a poor-quality client, and there’s no need to proceed with the business.”

Genos spoke sternly, “Let the London Government carry out their plans; we can support them as long as it doesn’t harm our interests.

“Don’t forget, the bait thrown by the Vienna Government is poisoned; they request investors to provide construction funds upfront and also pay a deposit.

“If something goes awry mid-way, and the project’s funding chain breaks, not only is the initial investment wasted, but the deposit is also confiscated—investors bear all the risks.

“Such projects that squeeze out a large amount of funds seem to be tailor-made for us, which is far too abnormal.

“Given the current economic situation, this cycle of economic growth seems to be reaching its limit. The fruit is ripe; the harvest day is not far off.

“At a time when an economic crisis is looming, the Vienna Government launches this grand plan. I’m highly suspicious they’re just out to swindle deposits.”

Bernett didn’t hesitate to say, “Even if they’re cheating for deposits, that’s based on the premise that the project fails. As long as it’s completed successfully, they have to pay up, and I don’t believe the Vienna Government would default.

“Compared to the deposit, I think their likelier goal is to drag others down. Once we have invested in these unprofitable infrastructure projects, even if an economic crisis breaks out, there’s no way to withdraw funds from Austria.

“To avoid their initial investments being in vain, investors would have to keep investing even more. As long as these projects are under construction, the impact of the economic crisis on Austria is minimized.”

“However, I seriously doubt whether Austria will experience an economic crisis, will it?

“Despite the expansion of capitalist economics to now, the conservative Austria should not be greatly affected.

“They have never even felt what a true economic crisis is like. Do they really need to make such a big fuss?”

Simon scoffed, “Bernett, your thinking is still stuck a few years back! Since 1850, the Austrian market has become the hottest spot for British capital.

“As of now, British capital’s total investment in the New Holy Roman Region should exceed 180 million pounds, with French capital not investing less than 50 million pounds there.

“Barclays Bank alone has invested over 15 million pounds; if we all withdraw our funds, Austria’s economic crisis will erupt immediately.”

They had the right to be proud: it was the era when Britain’s capital had its greatest advantage, even the nearby French couldn’t compare.

Genos glanced over everyone and said, “Whatever the Austrians are plotting, as long as it does not hinder our profit-making, we can continue our cooperation.

“Based solely on the information we have now, guessing their plans is unreliable. No matter what schemes the Vienna Government has, the projects they’ve put forward indeed contain many high-quality assets.

“We just need to filter out the high-quality assets and figure out a way to acquire them. Let someone else take over the leftover junk; whoever wants it, let them take it.

“If possible, we could even make an effort to toss some seemingly nice but junk projects to our competitors.”

“In my opinion, the urban safe drinking water network project is quite good and can be digested. Once this project is complete, you can imagine the profits from monopolizing a city’s water supply.”

Simon cooperated fully, “Genos, you’re still so impressive, pinpointing the project with the most effective value right away.

“Our own water companies have always been the most stable source of funds, hardly affected by market fluctuations.

“However, I believe as long as the Austrians offer a high enough price, it’s also okay to undertake some of the municipal projects, and by the way, we could also help them issue construction bonds to solve the project’s funding needs.”

Clearly, what he was interested in was not municipal construction projects, but the issuance of bonds—that was the business guaranteed to profit from rain or shine.

These bonds were not for them to digest themselves, but to sell on behalf of the Vienna Government in the London Financial Market. Whether they could eventually be cashed or not didn’t concern them; they would first make their money from fees and foreign exchange.

Bernett added, “Our railway company can’t be idle either. Domestic business growth has almost halted, and there’s not much potential left.

“We must take this opportunity to secure a few railway lines, boost the stock price a bit more, and then find someone else to take over.”

Obviously, everyone knew there was a crisis in play, but that didn’t stop them from making money. As long as there was a large enough profit, who cared what the Vienna Government really wanted?

The differing opinions actually represented the different interest demands of each. Within the same consortium, it was impossible for everyone to have the same direction of development.

Everyone had their own goals, and only when interests did not conflict could they cooperate closely.

If this was not possible, then it was still necessary to split. Simply put, a consortium is a coalition of interest groups; once conflicts of interest become too great, it’s natural for things to fall apart.