Chapter 147: The Economic Crisis is Coming

"Your Majesty, your prediction was simply divine. The United States government has already begun to slow down railway construction. According to our investigation, many railway companies in the United States are currently facing the crisis of bankruptcy; an economic crisis may be coming soon," reported Kadier, head of the Royal Security Intelligence Agency, to Carlos with an excited expression.

"Oh? Is that so? What is the situation in other countries? Has Spain itself been affected?" Carlos asked, feeling a sense of anticipation as he posed his questions one after another.

Since the government work report meeting, Carlos had focused all his attention on the economic crisis about to erupt in 1873.

The Royal Security Intelligence Agency was even fully mobilized, gathering intelligence across European and American nations to determine when the economic crisis would break out in each country.

This economic crisis was primarily erupting in the United States, but it had also spread to various European countries, and its impact would be long-lasting.

What Carlos worried about was that because the Franco-Prussian War had broken out and ended earlier, it might cause the 1873 economic crisis to erupt sooner or later than expected.

Preventing this economic crisis was essential for Spain; there was no room for the slightest negligence. This was also why Carlos had directly ordered the Royal Security Intelligence Agency to closely monitor the economic trends of various countries, as one could simply judge whether an economic crisis would erupt, and its approximate timing, from the stock markets and industry trends of those nations.

Put simply, a capitalist economic crisis is when production far exceeds demand, thereby severely damaging the market.

Judging whether an economic crisis will erupt is also simple: it is a matter of looking at the situation in various industries across countries to see if they are facing a crisis of large-scale bankruptcy.

Economic development in this era was not subject to perfect regulation, and the impact of an economic crisis was extremely vast, even capable of causing a chain reaction across industries and nations.

Under the continuous monitoring of the Royal Security Intelligence Agency, the economic situation in the United States finally showed abnormal changes.

Why focus on the United States? Because besides the fact that the United States was the country most severely affected by the 1873 economic crisis, another major reason was that the United States was a beneficiary of the Second Industrial Revolution.

Carlos was deeply aware of the threat posed by the United States; although the U. . at this time was merely a major power with decent industry and economy, the potential of this country was absolutely extremely powerful.

Since he had arrived before the United States had become truly powerful, Carlos naturally could not allow the U. . to become even stronger.

Even if European powers were strong, there would be other European countries to keep each other in check, so they would not pose too great a threat.

But the Americans were different. If the United States truly became powerful, there would be no country in the entire North American continent capable of threatening it.

North America and South America would become the backyard of the United States, and with the barrier of the Atlantic and Pacific Oceans, no country would be able to threaten the status of the United States.

Fortunately, there was still a long time before the true rise of the United States, and there were many opportunities to limit its rise.

It must be admitted that the fastest way to develop in this era is to build railways. Because a small railway concerns every industry, the most important of which is heavy industry such as steel.

Steel, in turn, concerns the production, mining, and smelting of coal and iron; building railways can directly promote the development of the entire heavy industry sector, allowing a country to quickly enter the fast lane of development.

That is exactly what the United States did. In the eight years from 1865 to 1873, the U. . pig iron production increased from 755, 00 tons to 2. 23 million tons, an increase of more than two times, which was quite exaggerated.

Coal production grew from 22. 59 million tons to 51. 17 million tons, an increase of 1. times. From 1865 to 1872, the total mileage of newly built railways in the United States reached 31, 92 miles, which converts to over 50, 00 kilometers.

50, 00 kilometers of railway built in seven years—what an exaggerated figure that is!

Spain's current railway mileage has not yet exceeded 7, 00 kilometers, and the total railway mileage of super-powers like Britain, Germany, and France is only 20, 00 to 30, 00 kilometers.

The total mileage of railways built by the Americans in these seven years is already the sum of the total railway mileage of Germany and France, and twice the total railway mileage of Britain.

With such an exaggerated scale of railway construction, it was impossible for the 1873 economic crisis not to erupt. Moreover, the funds for American railway construction did not all come from the United States; over half of the investment came from European countries, with the most coming from Britain, France, the Netherlands, and Germany.

This was also one of the reasons why the economic crisis erupting from the United States affected Europe; after all, the capital these countries invested in the United States was real money, and the bankruptcy of American railway companies would naturally affect the capital operations of these countries.

Fortunately, the capital strength within Spain was not great, so it naturally did not participate much in investments in American capital.

The collapse of the American railway industry would not have much impact on Spain; after all, Spain's small-scale construction of only 300-400 kilometers of railway per year basically would not attract the attention of capital from other countries.

Currently, Spain's railway construction adopts two methods: one is direct government investment, and the other is issuing railway bonds to domestic capital and the public.

The disadvantage is that the funds available for building railways are indeed very small, and domestic capital and the public in Spain cannot scrape together much money.

But the advantage is that the construction cost of the railways is within the country's affordable range, and the construction of railways will not trigger negative events like economic crises.

However, such development in Spain is relatively slow, but if it can remain unscathed during the economic crisis, it can instead use this period to develop faster.

At the same time, Spain, having not suffered too much from the economic crisis, could also attract the attention of capital from other countries, thereby allowing domestic development to have more capital-driven momentum.

However, development is development; in Spain's construction, both Carlos and Prime Minister Primo would always be mindful of the influence of capital.

Spain certainly allows the existence of capital, but it does not allow capital to possess too powerful a force, and even less does it allow capital to influence the government through its own power.

In the future, the only entities with significant influence will be royal capital and government capital. The two types of official capital combined can easily control the workers within Spain, turning Spain into a constitutional monarchy supported by the working and farming classes.

According to the current investigation of the United States by the Royal Security Intelligence Agency, the economic crisis will erupt sooner or later, and it might even erupt within a year.

Since last year, the pace of railway construction in the United States has already begun to slow down, and the stock market for the railway industry is no longer as profitable.

Since it is already certain that the economic crisis is coming, the most important thing at the moment is naturally to frantically expand one's own capital reserves.

Because the monetary systems of various countries generally adopt the gold standard, even if they suffer the impact of an economic crisis, the extent of currency devaluation is not large.

In some cases, the currency might even appreciate; after all, the value of gold is relatively stable, and in chaotic times like an economic crisis, it will only appreciate, not depreciate.

There is only one reason for expanding capital reserves: to prepare as much capital as possible to frantically "buy the dip" after the economic crisis erupts.

The eruption of an economic crisis means that many companies and enterprises go bankrupt, which is when the value of these enterprises and companies is at its lowest.

Carlos can easily acquire these companies with less capital; whether keeping them there to continue development or transporting important equipment and means of production back to Spain, it is a guaranteed profit.

In fact, Carlos had also considered warning the Austro-Hungarian government and the Italian government in advance to prepare for the economic crisis, but after thinking for a long time, he finally gave up.

Notifying them in advance might trigger unexpected events, which was not cost-effective for Carlos. Moreover, the economic crisis is borne by the governments of various countries, and the impact on the royal family is not that great.

The Austro-Hungarian royal family and the Italian royal family are clearly more influential than the Spanish royal family. They can deal with this economic crisis more easily, so there is no need to find extra trouble for himself.

Even if the two royal families suffer heavy losses in this economic crisis, Carlos can help them in the future through interest-free or low-interest loans; there is no need to take such a big risk.

Capital reserves and gold reserves are the two most important things during an economic crisis.

The former can purchase low-priced assets from other countries, obtaining many industrial equipment and means of production.

The latter can serve as the most valuable capital reserve, preventing bank runs within the country and worsening the economic crisis in Spain.

"Continue to monitor the economic situation of various countries, and report in time once there is a possibility of an economic crisis erupting.

In addition, conduct an investigation into the enterprises of the United States and various European countries; I need a specific report," Carlos instructed.

After the economic crisis completely erupts, the most important thing is to acquire enterprises and factories in European and American countries.

But the factories in these countries add up to at least tens of thousands, or even over a hundred thousand.

Under such circumstances, without proper investigation, it is very likely that one would buy those shell subsidiaries that caused the economic crisis, rather than excellent companies that truly possess equipment, large amounts of means of production, and many skilled technical workers.

Purchasing companies with real assets can not only obtain a large amount of equipment and means of production but also poach some excellent workers to come to Spain.

But if one buys a shell subsidiary, apart from a few bankrupt railway projects, all one might get are the company's IOUs.

Hearing Carlos's instructions, Kadier, head of the Royal Security Intelligence Agency, nodded very solemnly and said as if giving a guarantee: "As you command, Your Majesty. I will investigate the factories and enterprises of European and American countries clearly and write a report for you."

Carlos was quite confident in the capabilities of the Royal Security Intelligence Agency. Even the previous assassination attempt on Prime Minister Primo was only investigated clearly with the assistance of the Royal Security Intelligence Agency; whether it was domestic surveillance or foreign intelligence investigation, the Royal Security Intelligence Agency had quite good capabilities.

Under Carlos's investment without sparing funds or costs, the Royal Security Intelligence Agency had become Spain's largest intelligence department, and its intelligence capabilities were also quite excellent.

Currently, the number of recorded intelligence personnel already exceeded a thousand; they were scattered throughout Spain and European and American countries, bringing a large amount of intelligence data and first-hand news to Spain.

These intelligence materials could also help Carlos better judge the situation and events in various countries, so as to prepare for Spain's response.

In addition to those thousands of intelligence personnel, the number of freelance intelligence personnel cooperating with the Royal Security Intelligence Agency was as high as several thousand.

These people together formed the intelligence network of the Royal Security Intelligence Agency, allowing Carlos to learn the latest news from all over the world and the latest policies of various governments while in Madrid.

Letting the Royal Security Intelligence Agency investigate the corporate data of European and American countries could allow Carlos to more clearly distinguish whether these enterprises were suitable for acquisition.

After all, only truly valuable enterprises are worth acquiring; those railway companies that were only opened to catch up with the wave of railway construction, and other enterprises founded purely for money without any technology, were naturally not on Carlos's acquisition list.

For Carlos, factories without much means of production and excellent technical workers could be opened in large numbers whenever he wanted.

But those factories that possess unique production technology and excellent production workers cannot be bought with money in ordinary times.

Only during an economic crisis, only when these factories go bankrupt, can one obtain all the shares of these factories and enterprises with very little capital, and then transfer their equipment, technology, and workers to Spain as much as possible.

Of course, while paying attention to the economic trends and stock market fluctuations of various countries, the two major stock exchanges in Spain must also be watched.

Although the scale of the Madrid Stock Exchange and the Barcelona Stock Exchange is not large, they are stock exchanges after all, and there are various entrepreneurial activities and securities issuances.

In 1872 alone, the two major stock exchanges in Spain had a total of over 70 entrepreneurial activities and securities issuances, with a cumulative total reaching 46. 1 million pesetas.

If one does not pay too much attention to the securities trading activities within Spain, the economic crisis triggered by stock exchanges in other European countries is very likely to spread to the Madrid and Barcelona stock exchanges.

Spain's capital system is inherently fragile; even if it only suffers the impact of a minor economic crisis, it would be a devastating blow to Spain's fragile capital.

In order to protect domestic capital, it is necessary to place certain restrictions on securities trading in Madrid and Barcelona, and to conduct stricter screening of companies issuing securities to ensure that there are no companies in Spain founded solely for the sake of securities trading.

This is not groundless. Because of the marriage relationship with the Austro-Hungarian Empire, economic exchanges between Spain and the Austro-Hungarian Empire are also closer.

The entrepreneurial activities and securities issuances of the Vienna Stock Exchange are more frequent than those of the two major stock exchanges in Madrid, and the total amount of funds involved is also greater.

In 1872, the cumulative number of entrepreneurial activities and securities issuances on the Vienna Stock Exchange exceeded 200, which is three times the sum of Spain's two major stock exchanges.

Although such a scale looks gratifying, this is not a good thing. Because of the lack of regulation, a large part of this is due to banks and construction companies set up for speculation.

After these banks and construction companies specifically for speculation flooded into the Vienna Stock Exchange, they did indeed create a brief prosperity.

But if they face the impact of an economic crisis, these enterprises will definitely face bankruptcy at the first opportunity. The bankruptcy of a large number of enterprises will inevitably affect the overall trading volume of the Vienna Stock Exchange, leaving the entire stock market in the red.

Then comes various chain reactions; because the entire stock exchange market lacks regulation, the chain reaction is very rapid and fatal.

By the time the Austro-Hungarian government reacts, perhaps the economic crisis will have already destroyed the Vienna Stock Exchange and destroyed a large number of shell companies that existed only for speculation.

If there were no such shell companies that existed only for speculation, even if an economic crisis came, the order of the stock exchange could still be maintained.

Especially for a stock market like Spain's, because the overall scale is not large, the impact of the economic crisis is destined not to be too severe.

The update is a bit late, sorry.

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(End of this chapter)