Holy Roman Empire-Chapter 1017 - 31, Jiawu

Chapter 1017: Chapter 31, Jiawu

In the blink of an eye, 1894 drew to a close. The Vienna Government, long mired in a financial deficit, finally managed to shake off fiscal shortfalls this year.

Embarrassingly, the main reason the Vienna Government escaped the financial deficit was not due to an increase in tax revenue from economic growth, but rather the over-issuance of currency.

Backed by the joint endorsement of the Continental Alliance, the Vienna Government over-issued twelve billion Divine Shield, which are now slowly entering the market.

Despite the need to share this money with everyone, the biggest slice still went to the Vienna Government. Preliminary estimates show that after deducting printing costs and profit-sharing, the Coinage Tax revenue belonging to the Vienna Government still soared to 7.8 billion.

This sum surpassed the normal fiscal revenue of one year. If they still could not turn the deficit into a surplus, that would have been truly indefensible.

The Alliance’s endorsement merely stabilized the value of the Divine Shield, but the adverse effects of currency over-issuance still existed.

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According to statistics from the Vienna Government, the domestic inflation rate this year will reach 3 percentage points. This is still the result of not all the over-issued currency having flowed into the market; otherwise, inflation would be even more severe.

In the later era of credit-based currency, an inflation rate of 3 percentage points is nothing; inflation rates of seven or eight percentage points happen from time to time.

Inflation is happening all over the world, and it’s not news when there’s no inflation. There are even countries that experience double-digit inflation rates for years on end.

But the current times are different; during the gold standard era, inflation rates are negligible. Apart from a wave of inflation in the sixteenth and seventeenth centuries due to a large influx of gold and silver, there have seldom been significant bouts of inflation since entering the industrial era.

A 3 percentage point inflation rate has already caused great nervousness among the Vienna Government, fearing it might trigger a market collapse.

For the national economy, inflation raises the production costs of industry, clearly hindering the export of industrial products.

It’s only because the Vienna Government lent out a massive sum of Divine Shield and restricted the amount to be spent in Shinra that the export industries have not been backfired upon.

Every risk carries with it a potential gain.

Leveraging this extra income, the Vienna Government not only remedied the fiscal deficit but also initiated the Ring Railway Project and concurrently repaid a portion of government debt.

Most importantly, it quelled the wave of revolutions, contained the expansion of the economic crisis, stabilized the situation in Europe, and solidified its position as the dominant power of the continent.

One need only look at this year’s report to see this. At the beginning of the year, a severe economic downturn unfolded, marking the biggest decline since Franz ascended to the throne.

In the first quarter, the curtain was raised on the economic crisis, with GDP falling by 8.7% compared to the same period last year;

In the second quarter, the economic situation worsened further, with GDP sliding by 12.8% compared to the same period last year;

In the third quarter, measures taken by the government began to make a difference, and the economy showed some improvement. However, GDP still dropped by 10.8% compared to the same period last year;

In the fourth quarter, countries across Europe reached a consensus and jointly launched an “injection of funds” bailout plan, but GDP still declined by 5.1% compared to the same period last year.

On a cumulative annual basis, Shinra’s economy contracted by 8.93% in 1894. Thankfully, it didn’t break through the 10 percentage point barrier, keeping the reduction to a single digit.

Regrettably, the actual situation is more severe. The above data includes the localized territories in Africa, which diluted the rate of decline.

Without the aristocratic lords in the Region of Africa desperately engaging in construction and maintaining high-speed economic growth, which boosted the economic data, Shinra’s economic performance for 1894 would have been utterly lamentable.

For the European native territories alone, the GDP growth rate is definitely double digits—negative, that is. The specific figure is a startling -13.7%.

There’s no denying it; this is the aftermath of war. Had the government not promptly taken countermeasures, this figure could have potentially doubled.

If the grand Shinra Empire is in such dire straits, other countries naturally are not fairing any better.

Defeated France, for example, is still suffering from the aftershocks of the war. Compared to before the war, its economy has been halved and then halved again, followed by an additional twenty percent cut.

Forget about repaying debts; it’s decent enough if they can even cover the government’s daily expenses. That’s why, ever since Carlos came to power, he has been relentlessly fighting corruption.

According to estimates from the Vienna Government, Armenia fared the best amidst the 1894 economic crisis, maintaining economic growth even though the growth rate of agricultural nations is comparable to a snail’s pace.

Even Montenegro, another agricultural country, couldn’t escape unscathed. Although it didn’t experience an economic crisis like the others, its own economy, heavily influenced by Shinra, was also affected.

The downturn in Shinra’s economy has heavily affected Montenegro’s import and export trade. Since exports do not constitute a significant proportion, the economy has experienced only a slight decline, with a preliminary estimate of less than a 1 percentage point drop.

After that comes the Nordic Federation and the Netherlands, both of which profited from the war and had substantial reserves, so the economic crisis didn’t hit them as hard as other nations.

However, both countries are too closely tied to Europe’s economy. If Europe is hit by a severe economic crisis, they too can only join in the crisis.

Affected by the economic crisis, even if their GDP doesn’t slide by 10 points, a decrease of eight or nine points is inevitable. Their adjusted figures look quite similar to Shinra’s polished data.

Then comes the Russian Empire. Unquestionably, the Russians were dragged down by Shinra.

The economic ties between the two were so tight that when Shinra was struck by the economic crisis, the Russians saw their industrial raw materials also suffer from sluggish sales. Stock crashes, layoffs, bankruptcies—none were avoided.

If it was only this, it could be considered just a storm in the economic teacup. Unfortunately for them, revolutions erupted in both Poland and Bulgaria, and guerrillas in Central Asia also joined the chaos.

Had the Tsarist Government taken timely and appropriate economic measures, perhaps the situation wouldn’t have been so dire, but unfortunately, they did nothing.

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All these factors combined, and in the end, the Russians presented an economic performance slightly better than Shinra’s domestic results, with a downturn of seven or eight points being unavoidable.

Of course, these are just estimates by the Vienna Government. Even the Tsarist Government itself did not keep statistics, making it even more difficult for outsiders to figure out.

Apart from those that suffered less damage, the rest have experienced negative double-digit economic declines.

Even the mighty United Kingdom, a financial empire, couldn’t escape unscathed. Banking and the financial sector play a significant role in the national economy.

The crisis was artificially delayed, causing the market bubble to further inflate. The stock market, being the most swollen, meant that upon the outbreak of the economic crisis, Shinra and Britain became like two peas in a pod.

One suffered a post-war industrial imbalance plus a stock market bubble that triggered a nationwide economic crisis; the other, a colossal stock market bubble, dragged the financial sector down with it, eventually leading to an economic crisis.

Franz could not be certain of the exact scale of losses, but they had to be double digits at least. Otherwise, it wouldn’t live up to the title of “the greatest economic crisis in human history.”

Compared to the devastating economic crisis, a little inflation hardly seemed to matter. However, as economic conditions began to improve, this inflation became somewhat troubling.

While it may seem that all European countries and Shinra are sharing the losses for now, with little short-term impact, Shinra continues to run a trade surplus.

With ongoing overseas trade, loans disbursed will keep flowing back to the Shinra Empire. Without policy measures, Shinra will be plagued by inflation in the coming years.

Against this backdrop, once the economic crisis ends, the Vienna Government will have only two paths to choose from: either lend out the money again or adopt a tight monetary policy.

After personally weathering the storm, Franz suddenly understood why Americans were so keen on throwing money around the world after both World Wars.

When capital is in severe surplus, if you don’t scatter it, inflation will occur domestically.

It seems like the British have been troubled by similar problems for many years. Franz just didn’t expect it to be his turn so soon.

In a sense, Franz’s ability to reunite the Shinra Empire also benefited from the British capital surplus.

Without the British having excess wealth with nowhere to spend it, Austria couldn’t have industrialized in such a short time. British capital also contributed significantly to infrastructure construction.

Of course, British capital wasn’t at a loss either. Except for the few times Franz schemed and they inadvertently fell into a pit, they made a substantial profit.

The only one who probably lost out was the British Government. Capitalists, pursuing profits, invested and loaned extensively overseas, inadvertently creating a competitor.

History seems to have come full circle. The rapid development of the original timeline’s United States also benefited from British capital.

It wasn’t just that. Even the rise of Prussia was heavily aided by British capital. Without these financiers, how could the impoverished Berlin Government have had the funds to stir trouble?

If looked at from this perspective, the bankers of London were the grave-diggers of the Great Britain Empire.

Without their help, the development of their competitors would not have been so rapid. Britain might have lost its supremacy anyway, but it surely would not have declined so swiftly.

“Those who do not remember the past are condemned to repeat it.”; with such a tragic example in mind, Franz had no choice but to be cautious.

…

Just as one wave flattened, another rose.

While Franz was considering the future, the Japanese, having recently hit a wall in the Philippine Islands and forced to withdraw, were at it again.

Taking advantage of their neighbor’s unpreparedness, they daringly launched a surprise attack, crippling the Beiyang Navy. Immediately after, the Japanese Army followed up with a lightning-speed landing operation.

No matter whether the Far Eastern Empire had snapped out of its daze or not, the enemy was at the door. Although the Japanese Army was still on the Korean Peninsula, war had already erupted.

That wasn’t all. As the Far East plunged into war, America also descended into turmoil.

The backup plans set in motion by the British finally began to take effect, igniting an independence movement in Cuba.

Spain, having just concluded the Philippine War and not yet had the chance to catch its breath, was now dragged into a new conflict.

It was just a fraction away from simultaneous unrest. It’s uncertain whether the Japanese Government, having given up the Philippine Islands, was now regretting not holding on just a little bit longer.

Of course, what the Japanese Government thinks is no longer important. A new war awaits them, and even if they wanted to turn back, the international situation wouldn’t permit it!

With the Continental Alliance pressing together, the scene was simply too terrifying. The Japanese Government definitely would not want to go through that again.

Whether the Japanese Government regretted it Franz knew, but the Spanish Government definitely wanted to cry. The independence movement in Cuba, breaking out at this time, hit them right in the soft underbelly.

Having just ended the Philippine War, this was when the Spanish Government was at its poorest. They hadn’t even finished gathering the funds to rebuild the colonial government, and another financial stronghold was in trouble.

The once never-setting sun of the Empire had already declined. The Philippines and Cuba might not be Spain’s only colonies, but they were the richest.

Losing either of them was a heavy blow to Spain, not just economically but also politically fatal.

Having just been humiliated by the Japanese in Southeast Asia, nationalist zeal was at its peak domestically.

Were it not for the support of the Continental Alliance in successfully reclaiming the Philippine Islands and appeasing the domestic populace with victory, Spain would have lost its days of peace.

Now, the Kingdom of Spain could not withstand any more failures. Any defeat would knock down their already teetering position as a great power, or even trigger revolutions.