Chapter 297: Economic Crisis Breaks Out
Chapter 287 – Economic Crisis Breaks Out
The four-way negotiation was still in progress, and a crisis had already crept in. The overcapacity of the capitalist world has fed back into the market, and in order to de-stock, the British capitalists have increased their dumping on countries around the world.
The first to suffer is the Americans, even if Franz’s butterfly effect, Austria diverted part of the international capital, but this can not solve the crisis in the United States.
From 1848 to 1858, the Americans built 25,000 kilometers of railroads, 8,000 kilometers less than in history, and the railroad bubble was finally not as serious as in history.
Unfortunately in the case of the high speed development of the American railroad business, the surrounding industries were not driven up. The metallurgical industry also shrank under the competition from British goods, and the cotton industry was slow to develop.
Railroad tracks, pig iron, locomotives, cotton cloth, hardware, machinery …… were all filled with British products, and the native industries were squeezed and struggling.
Now that the British have increased their dumping efforts, these industries can’t take it. The cotton textile industry, which was the first to be hit, kicked off a wave of bankruptcies.
Soon it spread to the stock market, the price of the stock is unmanageable, more companies were implicated in it.
A large number of factories went bankrupt, banks and financial companies naturally could not survive, a large number of bad debts appeared, a run on the crisis broke out, the bank went bankrupt.
The economic crisis in the United States soon spread to the United Kingdom, the contraction of the market, the British industrial and commercial exports were also hit, a large number of enterprises went bankrupt, as investors in the British capitalists also suffered heavy losses.
The reaction of the capitalists was sharp, in order to stop losses and cope with the possible outbreak of economic crisis at home, the British capitalists have withdrawn their funds from the American market.
Against this background, in the fall of 1857 there was a shortage of money in the American financial market, the whole banking system was paralyzed, 62 out of 63 banks in New York stopped making payments, and the discount rate exceeded 60%.
The economic crisis broke out in full force in the U.S. The unprotected U.S. market was vulnerable, and this economic crisis directly induced the American Civil War.
Northern capitalists needed cheaper labor to increase profits and tariff barriers to protect their interests, while Southern planters needed the opposite, lower tariffs to export cotton and buy cheap industrial and commercial goods.
Fueled by the economic crisis, Northern industrialists decided to turn the table and began to advocate the benefits of abolition and trade barriers in an effort to strangle Southern plantation owners at the source.
Obviously this was not acceptable to the Southern plantation owners. Abolition of slavery was tolerable, and the system of bonded labor was not much worse than slavery, but tariffs were non-negotiable.
Northern industrial and commercial products were of poor quality, inefficient, and expensive, so why should we use them?
Besides, if the tariff is increased, the export of grain, cotton and tobacco will be dealt a fatal blow, and for every dollar increase in taxes, they will have to reduce their profits by a dollar, which is totally robbing them of their money.
The conflict of interest between the two sides was so serious that it was impossible to negotiate, and in the end the southern plantation owners, who were on the downside, started to become independent.
The outbreak of the economic crisis in the United States and Austria does not have much to do with the trade volume between the two countries is very small, everyone is an agricultural exporter, the competition between the two sides is greater than the cooperation.
However, when the economic crisis spread to Britain, it was difficult for all European countries to survive, and Austria was no exception.
Vienna Palace
Prime Minister Felix said seriously, “Your Majesty, the economic outbreak in the United States has already affected Britain, and it won’t be long before it affects us.
Once the British pull their funds out and leave, many businesses in the country will be short of funds, which will in turn lead to an economic crisis.”
Franz replied as if nothing had happened, “This is an inevitable outcome, at least we have prepared for it, there will not be a money shortage in the country, as long as we ensure normal exchange in the banking sector, the crisis will be within control.”
The crowd nodded their heads, in order to deal with the economic crisis, the Vienna government had made a lot of preparations, firstly, it had hedged a part of the capital so that they couldn’t flow out, and then it had issued huge bonds to accumulate funds.
Now even if there is part of the British and French capital retreat, the Vienna government also holds a large number of pounds and francs in the hands of the government, can be directly cashed, will not cause the outflow of gold and silver.
Finance Minister Karl proposed: “Your Majesty, the crisis is still within control, then the approval system for the flow of huge sums of money, is it possible to suspend the implementation.
After all, doing so will damage our reputation, until the last resort, there is no need to do so.”
In this era, capital was free to circulate between countries without any restrictive conditions. As the first Lord to eat crabs, there was a possibility that he would become a hero, and a greater possibility that he would still become a martyr.
Once it was resented by the capitalists, it would be very unfavorable to Austria in future international trade.
Franz thought for a moment and said: ”Approval still needs to be there, can issue a circular, more than 100,000 Shendian of the flow of funds, must be declared 1 to 3 months in advance to declare.
We guarantee that all legitimate financial flows are unrestricted, and funds of undetermined origin must be explained clearly and confirmed not to be illegally obtained before leaving the country.
The government can find more excuses, such as: certain underworld groups, transfer of funds; or certain corrupt officials, in the transfer of financial ……
Implemented before the economic crisis broke out in Austria, lest people think that we are restricting the free flow of economy.”
Checking over the legitimacy of the funds will add a lot of work to the government, but a little bit of added cost is acceptable to fight crime.
As for restricting the flow of funds, this was not worth mentioning at all, it could be declared in advance. At most, it will add a layer of protection to the financial market, so that the government has time to prepare in advance.
Otherwise, the currency crisis in the United States is a lesson from the past. Suddenly, a large number of foreign capital to leave, the government simply do not have the time to react, can only swallow the bitter fruit.
“Yes, Your Majesty!”
……
Apart from adding a financial firewall, the Vienna government did nothing more, it was still the era of capitalist free market economy, too much government intervention in the economy would cause a lot of resentment.
Besides, Franz didn’t know how to intervene. In any case, overcapacity is an indisputable fact, and the problem is simply unsolvable.
In 1857, Austria’s industrial capacity was more than four times that of 1847, far exceeding the world average, and the aftermath was naturally overcapacity.
This is the inevitable result of industrialization, the efficiency of mechanical production is much higher than manual production, the growth of the market obviously can not catch up with the growth of industrial capacity.
Therefore, after the first industrial revolution, every once in a while, an economic crisis would break out in the capitalist world.
Finding new markets was actually very much a crap shoot at this time. Against the backdrop of economic crises in countries all over the world, where is there any market.
This is not the latter days, where there are people there is a market. Now the productivity is limited, the creation of social wealth is also limited, the vast majority of people simply do not have the purchasing power.
Take the Russian Empire as an example, more than 70 million people ranked first in Europe, on the surface it seems to be a big market.
In fact, in addition to the more than 10 million nobles and free people, the rest are serfs, who do not have personal freedom, talk about what purchasing power?
This limited market, has long been divided up, want to continue to increase exports, wait for the tsarist government to complete the serfdom reform!
Relying on the colonial market was also bullshit, except for a few colonies such as India, Cuba, the Philippines, and the South Seas, most of the other overseas colonies were in a state of undevelopment.
The number of immigrants was small and the locals had no purchasing power, so if they wanted to export industrial products, they could not find buyers.
Under such circumstances, once overcapacity emerges, an economic crisis is inevitable. The best option is not to keep a lid on it, but to let the crisis erupt.
The strong survive and the weak are doomed by the survival of the fittest. This is also the driving force behind the advancement of science and technology. Enterprises that do not want to stay put and be squeezed to death by their competitors must replace their equipment in a timely manner and eliminate backward production capacity.
Even if it is a cottage enterprise, it must fight, or not react fast enough, not strong enough imitation ability, not low enough cost, it will die.
Time rushed by, and by the end of 1857 the economic crisis spread from England to France. By the beginning of 1858, the economic crisis continued to expand to Belgium, Austria, the German region ……
The entire European continent, except for the Russian Empire, which had not yet completed its reforms, no one was left alone. Under the blow of the economic crisis, all countries suffered heavy losses.
(End of chapter)