Chapter 463: Bankrupt!
Chapter 452 – Bankruptcy
Having no money is always the most painful thing, especially when there is a large group of people who are counting on food, solving the financial crisis has become imminent.
St. Petersburg Winter Palace
The new finance minister Evgenkis reported with a crying face, “Your Majesty, this is the expenditure report of the last month, if we don’t take measures, we will go bankrupt in three months at most.”
Financial bankruptcy was not the first time it had happened to the Tsarist government. If it was normal times, bankruptcy was fine, the big deal was to declare reneging on the debt.
The problem now was that the just-organized campaign to open up the land could not be stopped, or else these tens of millions of people would go hungry. By then not only would the reforms be ruined, even the Tsarist Empire might collapse as a result.
After receiving the statement and scanning it, Alexander II threw it aside and got up to wander around the room.
Plans never change quickly, and the actual number of people participating in the opening of the land was far greater than the Tsarist government had anticipated. There was a great deal of power in numbers, and a great deal of expense.
After a long hesitation, Alexander II asked, “If we suspend international debt payments from now on, can we get through this crisis?”
Relying on the debt was not an option, but the problem was that the tsarist government was really out of money. Whether it was continuing international loans or issuing bonds, the Tsarist government had tried.
No one was willing to lend money to the poor, and even if the Russians were able to put up collateral, people were worried about not being able to honor their commitments.
Having lost some of the fertile land in Eastern Europe because of the war, the Czarist government’s coffers were also drastically shrinking.
If it hadn’t made a fortune in the copycat, the Tsarist government would have gone bankrupt. With the war consuming and the reforms equally devouring the gold beast, there was not much left for Alexander II to choose from.
After some thought, Finance Minister Evgenkis replied, “If some of the programs are suspended and all efforts are made to ensure the campaign to open up the land, there should not be much of a problem.”
The time for multiple choice questions had come, and after having suffered from a lack of transportation once, Alexander II formulated ambitious plans for a Russian railroad.
With a whopping 150,000 kilometers in all, once this plan was completed, Russian Eastern Europe was strung together and Prussia and Poland were almost declared finished.
Alexander II made a decisive decision, “Good, then!”
The question of development lagged for the moment, and it was important to solve the problem at hand. On the surface, it seemed a good thing that the Great Clearing had increased the amount of land and made it available to all the peasants.
In reality, there was a great deal of hidden danger. The biggest problem is that in the future there will inevitably be too much food production, and the truth that the low price of grain hurts the farmers is something that everyone understands.
Perhaps an increase in grain production is a good thing for a capitalist economy, reducing the cost of feeding workers.
Then, for the peasants and nobles, it was a disaster. Many nobles are pulling back, mainly because they fear that their interests will be jeopardized in the future.
The Russian Empire was already a major exporter of grain, and if it continued to increase its production capacity, it would certainly not be able to consume it internally, and exporting it would become the only option.
From the beginning, the tsarist government was ready to bring down the price of food in Europe. Countries can dump industrial products on them, and they can reverse the dumping of agricultural products.
It would be great if they could monopolize the food supply of the European continent. To do this, it was necessary first of all to make it possible to ship grain out of the Russian Empire.
Railroads are an essential part of this, and if the transportation problem cannot be solved, the plan will always remain on paper.
No one objected to Alexander II’s plan, it was more important to get through the immediate difficulties than the great plan.
As long as the output of the land could guarantee the basic life of the people after the first year, then the later would be better.
In this era, the Russian peasants were well-fed, and had just been transformed from serfs to freemen, so as long as they could fill their stomachs, they did not dare to ask for anything else.
As long as they could survive the worst crisis, the rest of the problems would be easier to solve.
On July 7, 1869, the Tsar’s government sent a note to the major debtors, declaring that the Russian Empire was financially bankrupt and unable to continue to honor its debts.
The European world was in an uproar; no European country had reneged on its debts in recent years, all giving the public the illusion that the temperance of governments had improved.
The Russians have now shattered everyone’s illusions, not reneging on their debts is that everyone’s financial situation is good, not to the time when they must renege on their debts.
If they really have no money, then they will have to renege on their debts. Anyway, if you want money, you don’t have it, if you want life, you don’t give it, and the rest is up to you!
In addition to the debtors, the European people have become a crowd of eaters, cast their eyes on Vienna, gloating expression overflowing.
Austria recently some development is very good, naturally also let a lot of people jealous. As the Russians’ biggest debtor, many people were now watching Austria’s jokes.
It should be known that the Russians were now paying 3,068,400,000 Shendian in principal and interest every month, which was 36,820,800,000 Shendian per year.
This astronomical figure is already enough to break the Russian-Austrian alliance. Even the best relationship can’t withstand the destruction of interests.
Franz was not as terrified as the outside world imagined, as early as when he refused to provide loans to the tsarist government, he was prepared for the Russians to renege on the debt.
No, I should say that at an earlier time, there was this mental preparation. After all, the financial situation of the tsarist government has not been very good, to be able to support until now is not easy.
Even more fully prepared, the aftermath of the work must also be done. Most of these loans, are the Vienna government to provide guarantees, otherwise there are not a few banks dare to take orders.
In addition to the problem, the Vienna government is also need to take responsibility. The good thing is that the vast majority of loans are secured, and now the work of the Vienna government is to urge the Russians to implement the collateral.
Prime Minister Felix frowned and reported, ”Your Majesty, the contract that was signed at all, we have made a preliminary estimate, even if the Russians fulfill the collateral, we will still have to bear the compensation of 38 million God’s Guilders within the scope of the guarantee.
This sum cannot be borne directly by us; the Russians must be made responsible for it. Now that there is no money in the treasury, let them defer repayment; the Tsarist government cannot remain bankrupt.”
Franz nodded, other people’s debts could be ignored, one’s own accounts always had to be collected. Even if there was no money, the tsarist government had to be made to recognize the debt first, otherwise it would be difficult for the government in Vienna to answer to the public.
“The Ministry of Foreign Affairs and the Russians to communicate, urge them to fulfill the contract. The inability to pay the debt can be deferred.”
The one who owes money is the master, and the present tsarist government is this master.
Collecting the debt by force is impossible, and this amount of money is simply not enough to cover military expenses. Unlike Mexico which is so easy to bully, the hairy bear still has power.
The tsarist government has no money, does not mean that the tsarist nobility also has no money, hundreds of years of accumulation, and then how to support a war.
The nobility and the tsarist government is a loss and a gain, when the foreign enemy invasion, they will soon be as close as a family.
The Russians had many creditors, and in the principle of bullying the weak, it was expected that the debts of the smaller countries would be repudiated, and the debts of the larger countries were generally deferred.
Deferred payment of debt is likewise divided into three, six and nine classes, guaranteed by the governments of various countries is certainly a priority for repayment, there is no government guarantee of private commercial loans, most likely to be able to renege on the renegade, renegade on the drag on.
After picking and choosing, this renegade activity, the Russians at least reduced the foreign debt of 400 million guilders. If the tsarist government is tough enough, there may be more.
Franz is pleased that the Near East War period of foreign debt, the Russians have already paid off seven or eight, not to mention interest earnings, at least the principal is back.
The debt from the Russo-Prussian War, without saying so naturally, had not been got back. The banks with the greatest business capacity have recovered at most thirty or forty percent of the cost.
The Austrian government is no loss, most of the loans are with conditions attached, through these years of trade between the two countries, driving economic development, increased tax revenue will be enough to make up for the loss.
Financial institutions are not the same, if there is the Vienna government provides a guarantee, then also good, even if the Russians reneged on the debt, there is the Vienna government is responsible for guaranteeing the safety of the principal.
Commercial loans that are not guaranteed are a big problem. This kind of loan, financial institutions are responsible for their own.
Philippot is such an unlucky man, he is not a banker, just a securities company owner.
Because of the greed of the Russians to give a high rebate, on behalf of the tsarist government to sell a number of bonds, and now the Russians declared financial insolvency, in accordance with the provisions of the Austrian law, his securities company will have to bear joint and several liability.
A middle-aged fat man hurriedly came and said, “Mr. Philibert, the news of the Russians’ declaration of bankruptcy must have spread, and now the people outside are asking us to pay the bonds in advance.”
In this era, Austria’s securities management system can be described as rough, the securities company issued bonds on behalf of the people, must be responsible for the people who bought the bonds.
Simply put, the right to audit the bonds was in the hands of the securities companies. This is not just a good thing, since they have got the right to audit, they also have to bear the corresponding responsibility.
For example: to ensure that the bonds can be dealt with properly, explain the risks to the people who buy the bonds in advance, and in the event of a bad debt, the securities company needs to bear a certain amount of responsibility to pay.
The standard of payment is jointly determined by the securities company and the government. The standard set by the government is not less than fifty percent of the principal amount, while securities companies often set a high standard in order to attract business.
There are not even two securities companies in Austria that claim to be capital preservation, and Philippot’s securities company happens to be one of them.
According to the promise, now the Russians reneged on the debt, inability to normal payment of bonds, Philipotent’s securities company will have to repay the principal on behalf of.
One gives out the promise, then it must be honored. Philippot now regretted, the Russians give a draw up to 15%, would have been abnormal, but unfortunately did not resist the temptation at first.
Philippot was concerned and asked, “Berger, how much money is left in our accounts?”
Running away was impossible, the police were already on him. If he ran away, he would probably be arrested before he could leave Austria.
Finding a way to make amends was the way to go, losing money was a must. Now these bonds are obviously impossible to sell at a flat price, but after a discount there may be people who dare to take over.
After all, this is the tsar’s government issued bonds, even if now bankrupt and unable to pay, in the future the Russians want to re-establish credibility, there is still the possibility of repurchase.
The general public can’t see that far ahead, or can’t wait that long.
Berg thought for a moment and said, “The total on the books is 3,894,600,000 Shendian, but after deducting the operating expenses of the securities company, only 3,560,000 Shendian can be utilized.
Mr. Philippot, there are a lot of people out there asking for early payment, and I’m afraid this amount is not enough to cover the payout.”
Philippot sighed and said, “I know, first send people out to pacify the people and tell them that we agree to pay out early according to the contract.
I remember that the original sales contract had an agreement that in the event of force majeure resulting in the bonds not being able to be dealt with properly, we are indeed responsible.
However, the time for this responsibility is after the bonds have expired. Now they ask for early payment, belongs to the default behavior, need to bear twenty percent of the default penalty, we only need to pay eighty percent of the principal on the line.
Put out the message that after three days we will start to cash the bonds early, open only one window, increase the number of review steps, and delay the time as much as possible.
I still have to poke around and see if things have turned around. With something this big happening, there’s no way the Vienna government won’t react.
Don’t worry, this matter can’t knock us down. The total number of Russian bonds issued by the company is just over 8 million, it’s not possible that all the people are demanding early payment!
You guys also make inquiries to see if there is anyone in the market to acquire Russian bonds, even if it’s at a discount, we may still accept it.”
The securities company had always been very profitable, and when he had founded it ten years ago, Philippot had invested just under three hundred thousand sacred guilders, and now the liquidity alone was more than ten times that figure.
The profit sharing he had siphoned off from the securities company over the years had also amounted to millions of God’s Guilders, and this crisis had brought him a great deal of losses, but as long as he responded appropriately, there was still hope of getting through this crisis.
Philippot had to be thankful that the Russians themselves had a poor reputation and their bonds were not popular in the market. Otherwise, if he had sold out tens of millions of divine guilders at once, he would have had to go and jump off a rooftop.
Of course, if he really was able to sell out tens of millions of divine guilders, he wouldn’t be able to do this business.
Austrian law was not child’s play, and the government would interfere with bond issues that exceeded their carrying capacity.
Otherwise, registering a purse securities company, issuing bonds in the market to enrich themselves, and then running away with the money after selling them and declaring bankruptcy, wouldn’t it be possible to get rich quickly?
Obviously, this way of getting rich overnight is clearly written in the legal provisions.
Unlike other companies, the pursuit of liability for the bankruptcy of a securities company is the strictest. Management and shareholders are subject to severe investigation, and unless all of them operate in strict accordance with the rules, basically no one can run away.
Strictly speaking, the bonds that Philibert had issued on behalf of the Russians were considered to have been scrubbed.
No problem if nothing happens, but if something happens, if he doesn’t do a good job soon, when the police intervene, he’ll most likely go to jail.
(End of chapter)