Chapter 278: Retreat
Franz had been very busy lately. An economic crisis was coming, so he had to liquidate most of the industries in his hands. Any companies that could be publicly listed to raise funds were all put through the process.
All investments in stocks and bonds must be liquidated. How can you buy low without enough money?
Franz personally supervised everything that involved large sums of money. After all, it was his own money. If he left everything to subordinates without supervision, who could feel reassured?
Especially in the critical period before the outbreak of the economic crisis, any wrong decision would result in astronomical losses.
It wasnt just personal assets that needed to be dealt with. The industries of the House of Habsburg also had to be settled. With so many industries intertwined, Franzs scalp was tingling.
This is also a happy problem. In recent years, as the Habsburg dynasty has reigned supreme, the familys industries have also expanded rapidly, with investments in many areas.
This is a good thing in normal times. But it may not be so in an economic crisis. If decisions are made poorly, the fruits of years of hard work will all disappear.
The power of the butterfly effect was tremendous. Historically, this economic crisis began in America in the second half of 1857. With the addition of a rapidly industrializing Austria, who knew how things would turn out?
For some time now, the Austrian government has been continuously launching municipal projects to attract investor capital, which was essentially a means of delaying the onset of the economic crisis.
The launch of these infrastructure projects would naturally consume some industrial capacity, thereby alleviating the overcapacity crisis.
The Austrian government also divested itself of many unprofitable industries. To put it darkly, Franz was also buying time for his retreat, though it was also benefiting the country.
This withdrawal has to happen slowly so that enough buyers can be found to take over. Otherwise, if so much capital is taken out of the market at once, wouldnt it collapse immediately?
Uncertain as to when the economic crisis would break out, Franz began to slowly liquidate his industries from the beginning of 1856 until today.
John Stuart reported: Your Majesty, the last batch of railway stocks has been fully sold, yielding a total of 1.8 million guilders; this month five cement factories have been sold, yielding a total of 780,000 guilders
We estimate that all industries planned for divestment will be cleared in the next two months, collecting approximately 66.8 million guilders.
Franz nodded, expressing his satisfaction with John Stuarts work. Since the beginning of 1856, he has been cashing out an average of 4,000,000 to 5,000,000 guilders from the market each month.
Without causing market turmoil, John Stuart contributed greatly. About a tenth of this money was Franzs personal fortune, the rest came from family industries.
It was evident that European royalty was still very wealthy in this era, with accumulations over hundreds of years not to be underestimated.
And these funds were only part of the royal assets, with even more in real estate. Vienna itself was part of the crowns personal territory. How could the Habsburgs be poor?
Before Franz came to power, the main income of the Habsburgs came from land and real estate, so liquid assets were naturally scarce.
Since the Austrian government was implementing the land redemption policy, it was natural for the royal family to take the lead. Franz released 700,000 hectares of remote land at once, exchanging it for considerable sums of money.
Most of that money was invested in real estate and manufacturing. Currently, the liquidated portion comes from the manufacturing industries, which have become bad assets in an environment of overcapacity.
Real estate, on the other hand, is much more stable. Building houses on your own land saves on land costs. In large cities like Vienna, real estate is often rented rather than sold.
Anyway, there is no property tax, so there is no pressure to hoard real estate. When prices reach their limit and a buyer is found, a property tax will probably be introduced.
Seemingly unrelated, the tax revenue from the royal demesne belongs to the royal family. How else could Franz afford a private army?
The city guard of Vienna, including the imperial army, belonged first to the royal private army and then to the Austrian military. Otherwise, Franz wouldnt have been able to easily take control of the military back then without causing a backlash.
When it comes to reform, Franz wont touch anything that benefits his rule. If he were to surrender these rights to the government, who knows if the bureaucrats below would eventually sideline him?
No matter how powerful one person is, they cant take on the entire bureaucratic group. The best approach is to limit their power from the start.
From now on, we will tighten the money supply and conduct strict evaluations of loan customers. We will no longer accept stocks and bonds as collateral.
Franz certainly hasnt forgotten that his Royal Bank is already one of the largest banks in Austria. Once the economic crisis hits, who knows how much bad debt will surface?
He is raising funds to buy low, not to fill holes for the Royal Bank. Every loan that is not reduced now reduces the risk by that much.
John Stuart explained, Your Majesty, this could easily cause market turmoil and even trigger chain reactions. Currently, our loan approval standards are the strictest among our competitors, so the likelihood of bad debt is not too high.
For the past two years, weve been concentrating on developing the colonial lending business, making loans to those fortunate enough. To date, the Royal Bank has disbursed eight million guilders in loans.
Most of these customers repay in gold, and together with the gold acquired from the colonies, the Royal Banks gold reserves had now reached 58 tons, enough to weather any crisis.
After listening to John Stuarts explanation, Franz suddenly understood why the financial conglomerates didnt tighten the money supply before an economic crisis to reduce losses.
These losses were necessary; if they tightened the money supply in advance, it would signal to everyone that a crisis was about to erupt, and everyone would run for the exits.
There is never a shortage of intelligent people in this world; once the news leaks out early, it wont be so easy to retreat.
In time travel novels, the protagonist warns of a stock market crash before it happens, claiming to minimize losses for the public. Franz chuckled at the thought; if everyone fled, who would step in to buy?
If no one stepped in, it would crash to the bottom, ultimately vaporizing more wealth, not less.
To confuse the public, almost every day experts were predicting a stock market crash. After hearing it so often, everyone became numb. By then, who can distinguish truth from falsehood?
Franz thought for a moment and said, Since were already prepared, then proceed according to your plan. Quickly transport the gold from the colonies. When the economic crisis hits, this world will be restless again.
Yes, Your Majesty! John Stuart replied.
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