Holy Roman Empire-Chapter 988 - 2, Promoting the Divine Shield

Chapter 988 -2, Promoting the Divine Shield

Everyone knows about the benefits of currency hegemony, but only a few countries are qualified to enter the fray. To qualify as an international trade settlement currency, the following basic conditions must be met:

1. The economy of the currency-issuing country must be significantly large;

2. The volume of imports and exports of the currency-issuing country must be substantial;

3. The currency itself must have a stable exchange rate;

4. The currency-issuing country must have the ability to guarantee the conversion of its currency;

5. Ideally, the currency-issuing country is also the world’s policeman.

In modern times, the British were the first to meet these requirements, which is why the British Pound became the earliest international currency.

However, limited by communication and the low degree of economic globalization, the British Pound’s proliferation was not smooth, and gold and silver remained more popular for international settlements.

As international trade volumes continued to rise, a settlement system based solely on gold and silver became antiquated, and the British Pound took center stage in history, becoming the first international currency.

Unfortunately, by this time, Britannia’s dominant economic status was no longer stable; during the currency hegemony establishment, it faced challenges from the Franc and the Divine Shield.

Once an opportunity is lost, it’s gone forever. As time went by, Britannia gradually lost its industrial and economic advantages, and so the dream of currency hegemony for the British Pounds also came to an end.

Especially after the end of the Continental Wars, the Holy Roman Empire was unified once again, and the Divine Shield’s strong position on the European Continent was established, making it the most favorable contender for currency hegemony.

Advantage is one thing, but before the dust settles, no one can guarantee there won’t be any surprises. Franz was well aware that the Chosen Country was now quietly cultivating its internal strength.

There was no help for it; the natural conditions of the United States were just too superior. It could be self-sufficient in almost all resources and still have the potential to become a top power even if split into three parts.

The United States and the Alliance, both exceed England, France, and Spain in terms of development potential, especially the United States, whose potential even surpasses that of Russia.

Now, the deficiency is merely in population, a dual shortage in both quality and quantity, becoming a crucial factor restricting the economic development of the two countries.

Although Franz had made preparations in advance and sent an unexploded bomb over to the Americans before they could react, whether or not this thing would explode, and when, remained an unknown.

Franz did not wish to pin his hopes on the unknown; instead of waiting for a challenger to develop, he preferred to use the existing advantages to secure the larger situation ahead of time.

Once currency hegemony is established, overturning it is not so simple. Later generations in the United States made decisions that caused many countries to suffer, yet the dominance of the US Dollar remained unshaken.

The reason is simple; it’s the vacuum effect. Currency hegemony aggregates capital from all around the world, and with money, the speed of technological development increases, solidifying military dominance as well.

One step ahead means staying ahead at every turn. Once the position of overlord is established, it presses down on latecomers like a leading company in the internet industry.

Once the Divine Shield’s position in currency hegemony is established, “the only entity that can bring down the Holy Roman Empire will be the Holy Roman Empire itself.”

Economy Minister Reinhardt analyzed, “Your Majesty, to make the Divine Shield the international settlement currency, our economic model must also change.

The biggest issue facing the Divine Shield in becoming an international settlement currency is its export. With the continuous increase in international trade volume, merely providing international loans is no longer sufficient to meet the demand.

To minimize capital outflow in the past, we adopted a trade balance model. For most of the past forty years, we’ve maintained a trade surplus.

Not that this kind of surplus is bad; in fact, over these years, our empire has built its wealth little by little from trade surpluses, which was what enabled our development.

But to overthrow the British Pounds and make the Divine Shield the mainstream currency in international settlements, this approach is no longer appropriate.

In terms of currency exports, the British are the best role model. Currently, the method the British Pounds uses is reliant on the British trade deficit model.

To transition to a trade deficit model, we must make sacrifices, either by reducing the volume of exports or by increasing imports.

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The Economic Department believes that we can relinquish certain non-critical low-technology industries to other countries while we focus on developing high-tech industries.”

The Divine Shield’s export issue has been discussed many times by the Vienna Government. To better promote the Divine Shield, as early as twenty years ago, the Vienna Government began issuing international loans to countries around the world.

Without the major backdrop of exporting the Divine Shield, not even political necessity could justify such subpar clients as the Tsarist Government borrowing so much money from the Empire.

Unfortunately, as fast as loans were given out, capital returned just as quickly. As the world’s leading industrial nation, every industrial and commercial product could be found here. Most debtors, even before the money had time to cool, spent it right away.

There’s no denying that under these conditions, even if the Vienna Government aimed for trade balance, the final result would still end up in trade surplus.

The consequence of a surplus is a massive influx of capital, which, while promoting the economic development of the Empire, also hinders the development of international trade.

Simply put, massive outflows of gold and silver impoverish trade partners, who then lack the funds to purchase more goods.

Knowing this is one thing; changing the economic model is not an easy task. One wrong move could lead to massive losses.

Now Franz somewhat understood why the Americans in later history played the game of deindustrialization. Industries that are highly reliant on labor and polluted, with low technological content, weren’t they the ones to abandon?

Once enough industries had been abandoned, it was only then the enlightened ones suddenly realized—the nation had hollowed out. However, by this time, it was already too late.

Competitors relying on cheap labor force had developed, and to restore industrialization, the only option was to accelerate artificial intelligence research and compete with cheap labor by relying on robots.

As for what the ultimate result was, Franz did not know; at least before his time travel, artificial intelligence had not yet replaced human labor.

“Economy Minister, which industries is the department preparing to abandon?”

Abandoning certain industries was inevitable, Franz was no idealist. Wishing to enjoy the dividends of currency hegemony while not wanting to bear the aftermath, how was that possible?

However, specifically which industries to abandon required further study.

Economy Minister Reinhardt said, “The industries that the department is preparing to abandon mainly focus on low-end manufacturing and the mining of non-renewable resources.

Primarily they include: mining of rare resources, the textile industry, printing and dyeing, production of low-end clothing, shoes and socks…

Considering the needs of domestic economic development and employment, it is clearly unrealistic to directly shut down these industries. In the short term, our approach is to strictly scrutinize the approval of new mines and registrations of low-end industrial enterprises.

At the same time, we will reduce the import tariffs on relevant field products, and through time and market competition, we will gradually phase out these outdated capacities.

If the plans go smoothly, in about five years, we should step into an era of trade deficit.”

The industries prepared to be abandoned did not include core industries, and Franz breathed a sigh of relief. It seems the Economy Ministry was still qualified, knowing what the foundations of the nation were.

If someone in the government’s upper echelon really proposed to abandon core industries, then Franz would have considered whether to overturn the table and change the way to contend for currency hegemony.

After all, the current generation of leaders was handpicked by him; if they were so short-sighted, there was even less hope for future successors.

The Americans in later history deindustrialized, all because they saw rapid developments in artificial intelligence and dared to play such a game, thinking that at some point in the future they could take it all back.

Due to a misjudgment, the anticipated technological breakthrough had not occurred, and they all regretted it.

If they played this game in the 19th century, they could refer to the French of the original timeline, who did not manage to secure currency hegemony and turned from an industrial empire into a usury empire.

With this lesson in mind, Franz naturally did not dare to take it lightly.

Also contending for currency hegemony, the Vienna Government was presented with two choices. The most lucrative was naturally to enter the fray personally; alternatively, Franz could also suggest pushing the Continental Alliance to snatch the currency hegemony.

In some sense, the latter had a greater chance of success. With the power of the Continental Alliance combined, not to say the British, but even the whole world added together would not be enough to compete.

The only problem was that the Holy Roman Empire, which invested the most, would not get a high rate of return, likely only a little more than what it was getting now.

After pondering for a moment, Franz shook his head: “The risks of economic model transformation are very high, we’re not like the British, it’s okay to learn from them, but there’s no need to emulate them directly.

For the sake of prudence, what we can do in the short term is to reduce the mining of mineral resources, leave mines that have been developed as they are, and strictly review those that have not yet been developed.

Which minerals must be developed, which can be reduced, and which can temporarily not be developed, the government should have clear ideas. We can’t act blindly and affect domestic economic development.

It would be best to come up with a natural resources law, to ban the export of mineral raw materials in legal form. This includes coal and oil, which can also temporarily be put on the resource control list, with strict reviews on exports.

For low-end manufacturing, strict scrutiny is enough to reduce capital inflow. Let the market make its choice; there’s no need to specifically reduce tariffs too deliberately, it might seem too contrived and thus unattractive.

In the short term, the government’s focus can be on pollution control, particularly in core domestic areas, heavily polluted businesses located upstream of lakes or rivers must be relocated or shut down.”

Comprehensive pollution management was unrealistic; not only was there a lack of technology, but the Vienna Government also did not have that much money.

However, implementing some degree of fine-tuning, relocating or closing some heavily polluting enterprises, Franz was still confident.

In any case, in order to promote Divine Shield, the Holy Roman Empire had to gradually enter an era of trade deficit, and it was an excellent opportunity to weed out some heavily polluting industries.

To promote Divine Shield, Franz was all in. Even for his own oil industry, he was prepared to include it in the resource control list.

Of course, this was also due to the limitation of the era; the international market’s demand for oil was not high, and the “Oil–Divine Shield System” was even less of an issue.

Moreover, limiting oil exports wasn’t without its benefits. On the surface, it looked like making less money, but in reality, it was a blow to competitors.

As an important oil-exporting country, once the Holy Roman Empire reduced crude oil exports, the international oil prices would necessarily rise significantly.

This would impact the promotion and usage of internal combustion engines. It’s a critical period for the second industrial revolution, and once missed, catching up again would be difficult.

For a move that killed two birds with one stone, Franz didn’t mind sacrificing a bit of money temporarily. After all, the oil was buried underground and wasn’t going anywhere.