After a full day had passed since the critical meeting in which Mathew presented his comprehensive report on the trade agreement with Nefara, Arthur awoke early in the morning, as was his daily habit. The first light of dawn was only beginning to break through the horizon, casting a soft golden hue across the capital of Pendralis. The city, a burgeoning hub of industry and commerce, was already beginning to stir as laborers, merchants, and government officials commenced their daily routines.
Arthur wasted no time and, as always, went for his customary morning run through the palace gardens. The crisp morning air invigorated him, the rhythmic sound of his footsteps on the gravel pathways providing a brief moment of meditation before the responsibilities of the day fully set in. After completing his exercise, he returned to his quarters, taking a quick yet refreshing shower. Not wanting to waste time, he opted for a simple but nourishing breakfast, consisting of bread, cheese, fresh fruit, and a cup of strong tea. Once finished, he made his way to his desk, where an array of documents awaited his attention.
Updat𝒆d fr𝒐m freewebnσvel.cøm.
Arthur first picked up the economic report. As he reviewed it, he noticed that the economy of Pendralis was growing robustly. Examining the figures in detail, he realized that the share of the manufacturing sector in the economy had begun to surpass that of agriculture. It was a well-known fact that in pre-industrial economies, agriculture constituted the largest share of economic activity. However, following the Industrial Revolution, manufacturing and services took the lead. Arthur recalled that in his old world, developed countries had agricultural sectors contributing only about one or two percent to their economies. The fact that manufacturing was now overtaking agriculture in Pendralis demonstrated that the country's industrialization efforts were bearing fruit. He felt a deep sense of satisfaction, knowing that his policies and vision were driving Pendralis toward a prosperous future.
He then moved on to the report from the Bureau of Statistics. The numbers indicated that Pendralis was significantly increasing its exports due to industrialization and growing trade activities with neighboring countries and across the White Sea. The vast majority of these exports consisted of iron and steel goods, as the nation's steel industry had surged dramatically. Much like Britain's industrialization in the early 19th century, Pendralis was now producing and exporting a large quantity of goods made from iron and steel, such as cookware, agricultural tools, household utensils, metal furniture, and industrial sewing machines. In addition, the mechanization and industrialization of the textile sector had led to an influx of mass-produced textiles being shipped to foreign markets.
The rise in Pendralis' industrial exports meant that numerous nations were now importing cheap, high-quality goods from Pendralis. However, as in the case of Nefara's raw cotton exports, some nations had started imposing tariffs on Pendralis' manufactured goods to protect their local cottage industries. Arthur was well aware that historically, industrialized nations had faced similar challenges and had often used force to overcome trade barriers. Seizing an opportunity created by the ongoing war between the Usman Empire and the Kingdom of Svyatoslav, Arthur planned to lend money to the Usman Empire, which already had a fragile economy. After the war, when the empire struggled to repay its debts, Pendralis would be in a position to dictate economic terms, effectively opening the Usman markets to Pendralis' goods. Additionally, Arthur intended to establish de facto control over Nefara, using a divide-and-rule strategy to eventually transform the entire nation into both a raw material supplier and a market for Pendralis' industrial products.
As he continued reading, Arthur noticed mentions of increased gold transportation due to rising trade volumes. Reports detailed incidents of gold thefts and losses, which highlighted a growing problem. He recalled that most of the world still relied on gold, silver, and copper coins for trade. In contrast to the previous era of largely agrarian and insular economies with low money circulation, Pendralis' industrialization had led to increased trade activity, expanding markets, and accumulating wealth. With the growing scale of commerce, traders were now exchanging large amounts of gold as payment for goods.
A thought struck him, prompting him to examine reports from the financial sector. As he searched, he found what he was looking for: some large business transactions were already being conducted using promissory notes issued by Pendralis banks, backed by gold deposits. This discovery led Arthur to conclude that the time had come to transition to paper money.
His mind drifted back to the history of reserve currencies in his old world. Throughout history, different nations had established dominant currencies that were widely accepted for international trade and finance.
Historically, the earliest reserve currencies included the Roman denarius, which was widely used across the empire's vast trading networks. The Byzantine solidus and later the gold florins of Italian city-states such as Florence and Venice played a crucial role in medieval commerce. During the Age of Exploration, the Spanish silver dollar (pieces of eight) became a dominant currency, circulating across Europe, the Americas, and Asia due to Spain's vast silver mines in the New World. Later, the Dutch guilder emerged as a widely trusted trade currency in the early modern period, owing to the Dutch Republic's status as a major financial center.
However, it was the British pound sterling that solidified itself as the premier reserve currency during the 19th century. Britain, as the birthplace of the Industrial Revolution, rapidly expanded its production capabilities with steam-powered textile factories, railroads, and steamships. The surge in industrial output increased global demand for British goods, which in turn led to widespread usage of the pound sterling in international trade.
The British government officially adopted the gold standard, ensuring that each pound was backed by a fixed amount of gold. This convertibility increased confidence in the currency. As Britain's economy dominated global trade and London emerged as the financial capital of the world, British banks became the largest lenders internationally. They issued loans in pounds, and British insurance companies dominated global maritime trade. The sterling became the default currency for international transactions.
However, following the devastations of World War I and World War II, the global economic center shifted towards the United States. With America emerging as the world's largest economy and creditor nation, the U.S. dollar eventually replaced the pound sterling as the dominant reserve currency in the mid-20th century.
Arthur understood the immense advantages of having a reserve currency. A nation whose currency was widely accepted as an international medium of exchange enjoyed significant financial and geopolitical leverage. Countries that used Pendralis' currency for trade would need to hold reserves of it, creating demand for the currency and allowing Pendralis to exert influence over global commerce. The ability to issue currency used worldwide would also allow Pendralis to borrow at lower interest rates, finance economic expansion, and mitigate trade deficits without depleting gold reserves.
After absorbing all this information, Arthur cleared his desk and took a blank sheet of paper along with his fountain pen. He began designing Pendralis' banknotes, planning denominations of 1, 5, 10, 20, and 100 units. These banknotes would bear the royal coat of arms and an image of the royal palace of Pendralis. Each note would be backed by gold, ensuring public trust in the new currency.
Arthur knew that despite being backed by gold, paper money would not be immediately accepted by the public. To ensure widespread adoption, he needed to implement policies that encouraged its use. Historically, the British government had employed various strategies to establish the credibility and acceptance of their paper currency. One such policy was mandating that taxes and official transactions be conducted in paper money, thereby ensuring its circulation. Additionally, the British government had established a network of trusted financial institutions that guaranteed the redemption of paper money for gold, reinforcing public confidence. Another effective measure was encouraging major merchants and trading companies to use paper currency in large transactions, setting a precedent for smaller businesses and individuals to follow. The introduction of legal frameworks that penalized counterfeiting and ensured government backing further solidified the legitimacy of paper money. By applying similar policies in Pendralis, Arthur could accelerate the transition from metal-based currency to a paper-based financial system, ultimately strengthening the country's economic position.
Once the banknote designs were complete, he realized that issuing paper money required a central bank. While he had previously enacted regulations for private banks, a central bank was necessary to hold gold reserves, oversee the issuance of currency, and regulate money supply. Thus, he added the establishment of a central bank to his plan, outlining its responsibilities and functions.
After organizing his notes and storing them in his drawer, Arthur stood up from his desk and poured himself a drink. He then stepped onto the terrace to breathe in the fresh air and reflect on the long-term vision. Transforming Pendralis' currency into a reserve currency would take time, but as the nation's industrial exports grew and demand for its goods increased, the financial infrastructure and future global trade network he envisioned would make it possible. By introducing paper money, he would eliminate the cumbersome movement of gold and silver, facilitate commerce, and gradually integrate Pendralis' banknotes into international transactions. With persistence, Pendralis' financial dominance could one day reshape global trade.