NOVPUBThis world will forever have its victors and its vanquished.
The biggest losers of the London Peace Conference, without a doubt, were the Ottoman Empire and the Kingdom of Poland. The former lost cities and territories and was exhausted to the point of near collapse, while the latter even sacrificed its sovereignty.
Setting aside the details, from an overall strategic viewpoint, England, France, Russia, Austria, and Prussia were all winners, each achieving their strategic objectives.
The performance of the Russians was particularly notable, profiting from both sides as if the once unrivaled Russian Empire had returned.
However, Alexander II, who was considered the biggest winner, could now hardly feel joyful. The recovery of lost territories greatly boosted military morale, which should have been a cause for celebration.
Unfortunately, the Tsarist Government could hardly bear the fruits of this victory, all due to one thing—poverty. Once the war ended, rewards for merits and pensions for the wounded were unavoidable. Who would risk their lives next time without them?
The destructive power of war is immense; the territories recovered by the Tsarist Government also needed funds for the restoration of civil life, and there was no short-term return in sight.
All of this required money, seemingly trivial but in actuality, hundreds of millions of rubles were indeed needed.
Alexander II had long given up hope of securing loans. International financial institutions were scared off by their behavior; anyone who lent to them would be a fool.
St. Petersburg, Winter Palace
Alexander II asked uncertainly, "Gold standard reform, can it really help us through the financial crisis?"
Among the current powers, only the Anglo-Austrian two countries had completed the gold standard reform. Everyone knows that the gold standard is conducive to stabilizing the value of currency and increasing its international competitiveness, but still, they waited and watched.
It’s not that they didn’t want to follow suit, but what to do if gold reserves weren’t sufficient? The Anglo-Austrian countries monopolizing over 75% of the world’s gold left other nations in despair.
The Russian Empire was in a relatively good position since the market’s purchasing power was low and Russians didn’t demand much in the way of foreign industrial goods. The foreign exchange generated by agricultural exports balanced the expenses, leaving the country with a trade surplus.
But these good times only lasted until the outbreak of the Prusso-Russian War. The war caused the deterioration of the Tsarist Government’s finances, accumulating a significant amount of foreign debt, and for the sake of repayment, gold and silver began to flow out massively. 𝚗o𝚟pub.𝚌𝚘𝚖
The outflow of gold and silver caused domestic currency contraction, further worsening the government’s finances. To avoid intensifying the crisis, the Tsarist Government was forced to declare bankruptcy outright.
After resting and recuperating for several years, the Russian Empire finally caught its breath. Through diplomatic means, most of the debt was written off, and an agreement was reached with the British to use grain to offset the repayments, gradually normalizing the Russian economy.
However, the financial issues remained the Tsarist Government’s most significant challenge. To change the fiscal predicament, in 1871, with Austria’s help, the Tsarist Government issued paper rubles.
This was just testing the waters, the first issue was only 50 million rubles, implementing a bimetallic standard system. The Tsarist Government had enough reserves and the currency was quickly absorbed by the market.
As relationships with Austria worsened, the financial sector of the Tsarist Government tended to cooperate with the British, and things took a sharp turn for the worse.
Without Austrian endorsement, the second batch of paper rubles was too large and received a cold reception in the capital market. To protect the exchange rate, the Tsarist Government had no choice but to stop printing.
There was an agreement between Britain and Russia; the ruble would join the British pound-gold system, and subsequently, the Tsarist Government had to undertake gold standard reform.
Being one of the world’s major gold and silver producers and with a small domestic economy, the Russian Empire generally had a balanced trade, theoretically making gold standard reform a non-issue for the Tsarist Government.
That was in theory, but when combined with the Tsarist Government’s creditability, the situation changed. International capital simply did not accept it unless it was linked with international currency. Independent of international monetary hookups, the Tsarist Government alone could not accomplish the reform.
This involved a currency settlement issue. Whether linked with British pounds or the Divine Shield, they were very welcome to do so, under the condition that they could only settle using another’s currency.
No matter whom they aligned with, the Russian Empire would inevitably be fleeced. Alexander II didn’t mind being fleeced; his greater concern was, after currency reform, how much benefit it could bring, and whether it could free them from the financial crisis.
Finance Minister Kristanval said, "Your Majesty, theoretically, after the currency reform, we could gain an annual coinage tax of 52 to 55 million Gold Rubles.
This amount will continue to grow with the economy. It will be of great help in improving our financial situation."
(Note: 1 New Ruble = 0.774 grams of gold)
Over fifty million Gold Rubles is not a small number, exceeding one-tenth of the Tsarist Government’s fiscal revenue.
To ensure continuous growth in coinage tax, in addition to economic growth, it is essential to guarantee a plentiful supply of gold.
Kristanval wasn’t worried about reserve issues—the Russian Empire’s annual production of gold was sufficient. Otherwise, he wouldn’t have dared implement gold standard reform.
After all, following the currency reform, the new issue of Gold Rubles had to be pegged to the British pound, with exchange rates that are subject to fluctuation. Without sufficient reserves, the currency value could not be stabilized.
After hesitating for a moment, Alexander II made a decision, "Let’s begin then! However, we must be vigilant when cooperating with the British not to get tricked by them."
Taking this step meant that Russia and Austria would start to financially diverge and also signaled the imminent end of the Russian-Austrian Alliance.
There was no alternative; it was all due to interests. The Tsarist Government was put off by Austria’s low valuation; Franz felt the Russians were too greedy, with investments too high to recoup the costs.
Previously in a different timeline, the French were duped to tears. When the Tsarist Government collapsed, all the enormous debts were written off, and the French finance group suffered heavy losses.
With this precedent, Franz naturally chose caution. Investing in the Russians was riskier for Austria than for the French, as with the Russian way, nobody could guarantee that, when the debt grew too much, the Russians wouldn’t start a war between the two nations just to default on their debts.
Of course, the absence of financial tycoons in Austria comparable to those in the United Kingdom is also a significant factor. After all, Austria itself has a great need for funds and lacks the capacity to throw money into the pit for the Russians.
If the Tsarist Government cannot quickly emerge from the financial crisis, once the currency reform is complete and the Ruble is tied to the British Pounds, whether the British are still willing to lend money is an unknown.
The debt between Russia and Austria has reached a dangerous level, and Franz does not dare to risk hundreds of millions of Divine Shield with the Russians. Should there be a loss, Austria’s economy too would sustain heavy damage.
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It is not just the Russians who want to undertake a gold standard reform; the French are even more eager.
In recent years, the production of silver has been continuously increasing and the gold-to-silver exchange ratio has been constantly changing, posing a big problem for the settlement of bimetallic currencies.
Affected by the gold-to-silver exchange ratio, the value of the Franc often fluctuates, to the despair of those engaged in international trade.
The instability of the Franc’s value undeniably weakens the overseas competitiveness of French goods. With the booming development of international trade, this problem has become increasingly severe.
Before 1854, France’s total foreign export trade volume was more than one and a half times that of Austria. By 1870, the trade volumes of the two countries were nearly the same, and now, Austria has directly overtaken France.
Of course, natural resource advantages play a part, such as the development of Austria’s agriculture and food processing industries, increasing the value-added of products and driving export growth, as well as the benefits brought by spearheading the second industrial revolution.
The instability of the Franc’s value is also an important factor. To avoid the uncertainties caused by currency fluctuations, many capitalists would prefer Anglo-Austrian products under equal conditions.
In the last five years, the annual average growth rate of exports for both the Anglo-Austrian countries has been no less than 3%, while sad France has only 0.8%, and this number is still in decline.
Are French industrial and commercial products inferior in quality? The answer is no. Except for individual industries, there is no generational gap in industrial technology among England, France, and Austria.
The market competition has not reached a white-hot stage; everyone is maintaining relatively high profits, otherwise, they wouldn’t all be growing together.
However, the gradual fall behind of France is an undeniable fact; French goods are occupying an increasingly smaller market share on the international stage.
Of course, compared to the original timeline, France’s current situation is much better, with its domestic economy not having been heavily impacted.
In order to increase the competitiveness of export goods, Franc currency reform has also gradually been put on the agenda, and it is Napoleon IV who is leading this gold standard reform of the Franc.
This can also be seen as the political legacy left to him by Napoleon III. As long as the Franc gold standard reform is accomplished and the international competitiveness of French goods is increased, he can win the support of the capitalists.
As early as 1870, the French government began preparing for the gold standard reform, continuously purchasing gold from the international market. There was no other way, given France’s insufficient gold production.
This time, God did not favor France. Apart from a shortage of coal, gold production in the French colonies was also very low.
If one doesn’t have it, then one must buy it. Compared to the impoverished Tsarist Government, the French government can definitely be considered wealthy and powerful.
After years of preparation, the French have amassed a total of eight hundred tons of gold, and Napoleon IV still deems it insufficient.
For most countries, this amount is already significant, but it still falls far short compared to the Anglo-Austrian countries.
Moreover, given the economic scale of the Greater French Empire, eight hundred tons of gold as reserve funds is indeed not much. Napoleon IV’s bottom line is a thousand tons; if the reserves are low, it would be troublesome if someone speculates on the Franc exchange rate.
Paris, Palace of Versailles
Napoleon IV asked in disbelief, "What, the market actually can’t get any gold?"
This, if leaked, would definitely be big news; at the very least, gold prices would soar.
Finance Minister Allen explained bitterly, "Your Majesty, in recent years, there have been quite a few countries undergoing gold standard reform, all scrambling for gold on the market.
At present, the main gold-producing regions of the world are in the hands of the Anglo-Austrian countries, and they have intentionally controlled the outflow of gold, resulting in a severe shortage of gold circulating in the market.
In recent years, affected by the shortage of gold circulation, the price of gold has been continuously rising, and the gold-to-silver exchange ratio has increased from last year’s 1:18.6 to the current 1:23.5.
Even at this price, it’s very difficult for us to purchase enough gold. The amount of gold that flows out on the international market each year is only two to three hundred tons, which is simply not enough for everyone to share."
There was no other way, as there really have been many countries undergoing gold standard reform recently.
In 1873, the Nordic Federation began its gold standard reform, followed by the German Federation Empire and the Kingdom of Prussia also announcing gold standard reforms, and now Russia has been added to the list.
Leaving the Russian Empire aside, its domestic gold circulation can basically meet the needs of its currency reform, but the rest of the countries are not main gold producers.
The gold production may be insufficient, but the reserve gold for issuing currency must be adequate, so they are forced to buy on the international market.
During Europe’s critical moment for gold standard reform, it coincided with the Anglo-Austrian capital jointly speculating on gold and making huge profits.
It should not be said to be a coincidence; this was the inevitable outcome. Capital seeks profit; profit that presents itself on a platter is too good to pass up.
Under such circumstances, it’s not only the French who are in short supply of gold but other countries undergoing gold standard reform are facing the same dilemma.
