Chapter 279: Bonds (Bonus Chapter)
Finance Minister Karl exclaimed joyfully, Your Majesty, the 50 million pounds of bonds we issued in London have been completely sold out.
Its truly been too smooth, or perhaps its because the British have too much surplus capital. By dominating much of the international trade market, the British have accumulated too much capital.
The domestic market cannot absorb it all, so of course they have to turn to overseas markets. But even overseas markets have barriers; not everyone is qualified to participate. Those who are not strong enough can only invest in stocks and bonds.
The construction bonds issued by the Austrian government are undoubtedly high-quality assets, which naturally attracted the enthusiasm of small capitalists and the middle class.
50 million pounds sold out in less than a week; this speed clearly indicates a buying frenzy. Its worth noting that the annual interest rate on these bonds is only 6.5%, which isnt particularly high.
Of course, this is not the final cost of issuing bonds. There are still bond issuance fees, advertising fees, printing fees, and exchange fees that must be paid after the money is received.
Franz asked worriedly, What about Paris and domestically?
Of course, since this is a bond issue, it cant just target the London financial market. Paris, Vienna, and Frankfurt are also financial centers in Europe. How could Franz overlook them?
Finance Minister Karl replied, In Paris, 650 million francs have already been sold, and the remainder is expected to be sold out within a month; domestically, 94.8 million guilders have been sold, and the remainder is expected to be sold out within two months.
(1 pound = 2 guilders = 25 francs = 7.32 grams of gold)
Franz asked in amazement, Does Viennas financial market have such a strong capacity?
To put on a full show, since theyre luring the capitalists into the pit, the Austrian government must also have real money and assets. The capitalists are not fools, they will not shoot without seeing the rabbit.
For this reason, the Austrian government issued 350 million guilders in construction bonds to the outside world, with the assurance that this money would be used exclusively for domestic infrastructure development.
Of these, 100 million guilders were issued in London, 80 million in Paris, and the remaining 170 million in Frankfurt and Vienna.
According to Franzs estimate, given the capacity of the domestic financial market, the construction bonds would not be fully absorbed before the outbreak of the economic crisis.
As private funds buy bonds, the flow of money into the stock market decreases, and the flow into the real economy also decreases.
After the economic crisis hits, everyones losses can be minimized, and hopefully, far fewer people will jump off buildings, preserving as much strength as possible.
Karl explained, Your Majesty, Frankfurt has considerable influence in Central Europe, attracting investors from the German Federal Empire, Switzerland, Belgium, and the Kingdom of Prussia. The volume of bond sales even exceeds that of Vienna.
After pondering for a moment, Franz suddenly understood. Under normal circumstances, Frankfurt could not compete with Vienna, even if it attracted capital from the surrounding areas.
But the capital conglomerates in Frankfurt have the power to do this. They can simply buy the bonds themselves and then gradually sell them to the outside world.
This is not only to show goodwill to the government but also to demonstrate their strength to the Austrian government in order to gain higher political status.
Franz understood their intentions and, of course, knew how to reciprocate. Frankly, if Vienna wasnt the capital, with its abundant resources and a large group of wealthy individuals, it wouldnt stand a chance against Frankfurt.
In modern times, Frankfurt has always been the financial center of Germany. In another timeline, in the 21st century, Frankfurt became Germanys largest financial center.
Fortunately, Frankfurt is a free city. Despite its economic strength, it has no potential for expansion. Otherwise, Franz would have a headache.
Franz thought for a moment and said: In the navys new shipbuilding plan, add another ship named Frankfurt.
Yes, Your Majesty! replied Navy Minister Filkos with delight.
Of course, with Franzs personal intervention, the increase couldnt be in sailing ships. What everyone is paying attention to now are the ironclad ships.
As a land power, the Navys military budget is naturally limited. Although the Austrian government has an advantage in this naval technological revolution, there are no grand plans to expand the navy.
The Navy Ministry fought hard for only two ironclad budgets, and not even for one year, but for a three-year shipbuilding budget.
One is the Imperial or the New Holy Roman Empire, and the other the Vienna.
Nothing is wrong with this, as everything is filled with strong political symbolism. The addition of a Frankfurt ship at this time undoubtedly demonstrated Frankfurts importance in the Empire.
This is Franzs positive acknowledgment of the goodwill of the capitalists in Frankfurt. If other state governments are willing to align themselves with the central government, he wouldnt mind adding a few more ironclads.
To put it plainly, a single ironclad costs only a few hundred thousand guilders, and the more you order, the better the deal. The first ship, the Frederick, cost 800,000 guilders. Now, with the improvements in the second batch of warships, there has been a slight increase in performance, but a decrease in cost.
The main reason for the reduced cost is the initial research and development, and the testing of new technologies, which increased the cost of shipbuilding. Now, starting to build two ironclads at once has reduced the unit price to 580,000 guilders. If three ships were started at once, the unit price would drop further.
There werent many states in the New Holy Roman Empire, so even if they named one ship for each state, it would only increase the cost by 2,000,000 to 3,000,000 guilders, which was well within the budget.
The real money drain for the Navies would start with the dreadnought era, where a single battleship could cost several million guilders, a truly gold-devouring beast.
In addition, military costs are not borne by Austria alone; all states in the Empire must share the costs proportionally based on their respective fiscal revenues.
Franz said solemnly, Since the funds have been raised, urge the winning capitalists to begin work as soon as possible, and all projects must proceed according to the terms of the contract.
The Ministry of Finance and local governments will work together under the close supervision of the Anti-Corruption Bureau. Absolutely no irregularities or violations will be tolerated.
It is necessary to start work, otherwise, it would be embarrassing if an economic crisis broke out and the winning capitalists admitted defeat, forfeited their deposits, and left. If word got out, people might even say, The Austrian government tricked everyone into forfeiting their deposits.
To avoid such a terrible outcome, Franz must make sure that everyone gets to work. Among so many projects, there are small ones that can be completed in a few months.
Upon completion, there will be a settlement. As long as the money is received, no one can claim that the Austrian government cheated them out of their deposits.
If large projects could not be completed because of the economic crisis and the broken capital chain, the bidders themselves were to blame. There was a price to pay for biting off more than they could chew.
Yes, Your Majesty!
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