Chapter 254: Exporting Pounds
Before proposing the gold standard reform, Franz had already considered the issue of gold reserves. The optimal choice, of course, involved securing access to gold-producing regions and organizing efforts to extract gold.
Unfortunately, most of the world’s primary gold-producing regions had no connection to the New Holy Roman Empire. The majority of these areas were under British control.
In this era, easily accessible gold mines were mainly distributed in regions such as South Africa, Russia, Canada, Australia, the United States, Zimbabwe, Ghana, Brazil, Colombia, the Philippines, Papua New Guinea, and others.
Under these circumstances, there were no substantial gold mines on the entire European continent. Even where there were some, they had mostly been developed, and the remaining gold deposits were buried underground. Open-pit gold mines were no longer available.
Franz wasn’t an encyclopedia, and it was impossible for him to remember the location of every gold mine. Of course, he naturally couldn’t locate all the gold mines in his own country.
In comparison to the small production of gold, Austria’s production of silver was much larger. Under the bimetallic system, silver supported the value of the Austrian currency.
After a challenging negotiation, the New Holy Roman Empire barely passed the gold standard reform. This was the result of Franz not intervening, as there were also people within the Austrian government who voted against it.
Regardless, gold standard reform was inevitable, and initiating it earlier allowed for the preemptive purchase of some gold. If everyone started rushing for gold at the same time, the cost would be much higher.
While large gold mines were beyond their control, there were smaller gold mines, both domestically and in the Austrian colonies of Guinea and the Congo. Ignoring underground gold mines for the time being, there was hope in the exploitation of open-pit gold mines formed by alluvial deposits in riverbeds.
Franz’s expectations were not overly optimistic, aiming only for a few tons of annual production to offset the domestic gold deficit.
As for other gold-producing regions, it seemed prudent to wait until the British were occupied with suppressing the Indian Rebellion before making any moves. For now, maintaining a low profile is essential to avoid becoming a target.
By that time, Austria’s ironclad warships will also come out and occupy the first-mover advantage. Deploying multiple ironclads to the colonies and establishing regional naval superiority would change the dynamics of colonial influence.
Despite the British Navy’s global dominance, it had numerous colonies to defend. Scattered around the world, apart from dominance in important waters, the remaining areas depend on the commitment of various countries.
The value of these regions before and after the discovery of gold mines are two completely different concepts. At the time, it was not worth the intense competition between nations.
Following Austria’s operational model, investing heavily in local operations for over a decade and sending tens of thousands of immigrants made it less vulnerable to competition.
War also cost money, and unless it was a colossal mine like those in South Africa, gold mines with only a few hundred to a few thousand tons of reserves were insufficient to cover the costs of a localized war between two great powers.
Even though South Africa accounted for half of the world’s gold, the British Empire’s most important colony was still India, for a simple reason: gold mining was expensive.
Even at its peak, the profits the British made in South Africa were only one-fifth of those in India, making them incomparable.
Franz, of course, couldn’t prioritize the pursuit of gold at all costs. Gold is only one manifestation of wealth; other industrial raw materials are equally valuable.
The most important aspect is still the development of domestic industry. Germany, with limited gold reserves in history, still managed to develop.
In the industrial age, the speed at which humanity creates wealth far exceeds what a few gold mines can achieve. Development is the most important aspect.
After the two world wars, the British still held on to regions such as India, South Africa, Australia, and Canada. Eventually, they willingly relinquished global dominance, confirming that domestic development is the most important thing.
With the decision on the gold standard reform settled, Franz left the remaining tasks to the cabinet.
……
Franz still underestimated the impact of the gold standard reform. Not to mention the heated domestic discussion, it also caused a sensation on the European continent.
London
The sudden initiation of the gold standard reform by the New Holy Roman Empire immediately caught the attention of the British government. From the perspective of developing a capitalist market economy, the gold standard system would be more favorable for international trade.
For the British, the New Holy Roman Empire’s entry into the gold standard system undoubtedly marked another significant step forward in their monetary hegemony.
During this period, the British had the largest gold reserves in the world, and London was the global financial center. Once various countries adopted the gold standard system, the settlement system they established for the pound sterling against gold would become the world’s standard.
Countries without gold reserves would have to buy sterling as a reserve currency to stabilize their currency values. Of course, the use of sterling in international settlements would become inevitable.
Once the pound sterling became the world’s currency, the benefits would be substantial, laying the foundation for British world domination.
Knowing it for what it was, even if he was aware of the British plan, Franz had no choice but to acknowledge it, albeit reluctantly.
You can’t just neglect domestic economic development to prevent the British from establishing dominance, can you? The fluctuation of the gold-silver exchange rate is obviously detrimental to industrial and commercial development.
10 Downing Street, influenced by the recent failure in the Near East War, has changed hands once again. In the power struggles within the country, the George Cabinet has been ousted and is now replaced by the Grenville Cabinet of the Whig Party.
The former Prime Minister Palmerston, whose career had unfortunately been ruined in the last political turmoil, and with the failure of the Near East War, of which he had been one of the initiators, naturally could not make a comeback.
As a political party representing financial and business interests, the Whig Party is also an ardent supporter of the gold standard system. In the future, the shadows of their influence will be seen as European countries embark on gold standard reforms.
Prime Minister Grenville expressed some surprise: “The Austrians, who have always been conservative, have unexpectedly taken the lead this time in initiating gold standard reform.
I don’t deny that Austria’s adoption of the gold standard system is beneficial to Great Britain. However, this abrupt change is somewhat difficult to accept. Do you think the Austrian government’s reform can succeed?
Foreign Secretary John Russell replied, “Prime Minister, the Austrian government’s gold standard reform is more about power struggles this time. The central government wants more control over the state governments.
The New Holy Roman Empire essentially inherits the legal traditions of the Holy Roman Empire and is necessarily constrained by them. The autonomy of the various state governments is significant.
So far, the Austrian government has won only unified diplomatic authority and military command in times of war. Now they want to regain coinage rights, hence the initiation of the gold standard reform.
Although the timing is a bit hasty, Austria received a substantial war indemnity during the Near East War. At this point, the Austrian government should have sufficient funds for the currency reform.
Barring unforeseen circumstances, the New Holy Roman Empire’s entry into the gold standard system should pose no significant problems.”
After a moment’s reflection, Prime Minister Grenville spoke: “The gold standard reform requires not only funds but a considerable amount of gold reserves. I assume that the Austrian government is in the process of purchasing gold on the international market.
However, the international market is unpredictable and gold is a scarce resource. It seems likely that Austria will have difficulty acquiring sufficient gold reserves, especially in light of the current rising prices.
Given the relationship between Britain and Austria, how about we make a loan to the Austrian government to help them reform the gold standard?”
No doubt Prime Minister Grenville was preparing for something. As a major player in the international gold market, controlling the price of gold exchanged for silver, the British had considerable leverage.
By manipulating gold prices, the British could make it difficult for Austria to acquire enough gold.
If Austria couldn’t secure enough gold, the Austrian government would have no choice but to accept a loan from the British and establish a “sterling-gold system” as the basis for its currency.
This would greatly enhance the international status of the pound and lay the groundwork for international trade to be conducted in pounds.
The Anglo-Austrian friendship was nothing more than a joke. It was a deep friendship when it coincided with British interests. But when interests clashed, no matter how deep the friendship, it could turn into enmity.
Historically, Britain and Austria maintained a quasi-alliance, supporting Austria against Russia for nearly a century. However, in the early 20th century, to contain Germany, the British made a compromise with the Russians, abandoning this longtime ally.
After a brief silence, Chancellor of the Exchequer George Grey replied, “The Prime Minister’s proposal is a good one. If the New Holy Roman Empire joins our monetary system, the rest will be easy.”
Whether Austria accepts the loan is, of course, of secondary importance. The crucial aspect is to get the Austrian government to recognize the “sterling-gold system” and join the British-dominated pound as the international currency settlement system.
To reap the immense benefits of the pound becoming an international currency, the British embarked on an export frenzy in the mid to late 19th century. They used various means to force governments around the world to recognize the hegemony of the pound.
Historically, the global dominance of the British Empire was essentially built on the monetary hegemony of the pound sterling. The British accumulated enormous profits through the subtle means of the pound.
In the years that followed, as the British Empire’s colonial dominance crumbled, monetary hegemony was the first to go. In pursuit of monetary hegemony, the Americans also adopted the strategy of exporting the dollar.
From investments in Europe after World War I, to financial aid for Germany’s recovery, to the European Recovery Plan after World War II, these efforts were all part of the competition for monetary hegemony.
The British have vast colonies that even the Americans have given up on, but the monetary hegemony is firmly gripped in their hands. The benefits involved are obvious.
Concerned, Prime Minister Grenville asked, “Sir Russell, what do you think are the chances of the Austrian government accepting our goodwill?”
After a moment of thought, John Russell replied with a smile, “That depends on how high our offer is!
Although the New Holy Roman Empire has a large economy, it is at a disadvantage in terms of gold reserves. They are not qualified to compete in the quest for international monetary hegemony.
Currently, apart from the possibility of the French posing a threat in this regard, no European country has the strength for such competition. Of course, if the Russians complete their internal reforms, they could also become a threat.”
After a moment’s hesitation, Prime Minister Grenville made a decision: “Then we must speed up. We must act quickly, draw in more countries before our competitors realize it.”
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