Chapter 155: Cook Bank

With the development of industrialization in various countries, the economic ties between nations around the world will become increasingly tight.

This has also led to a rather serious problem: the outbreak of an economic crisis will not affect a single country alone, but will instead expand its impact to the entire world.

Although the economic crisis did not have a very serious direct impact on Spain, it still affected Spain's import and export trade.

On May 14, 1873, Prime Minister Primo specifically convened a cabinet meeting to address the potential impact of the economic crisis on Spain.

Carlo was also quite concerned about this economic crisis; he listened to the entire meeting and offered several of his own suggestions for preventing the impact of the economic crisis.

At the meeting, Finance Minister Ewald Bartel said with a furrowed brow and a worried look: "Your Majesty, Mr. Prime Minister. After the outbreak of the Vienna economic crisis, our import and export trade has suffered a relatively serious impact.

As the economic crisis gradually affects other European countries, it may cause a more serious blow to our import and export trade.

Since the outbreak of the economic crisis, our daily volume of import and export goods has been continuously decreasing. If the economic crisis continues, it is estimated that the total volume of import and export trade this year will fall by at least 30%."

Why would the economic crisis affect Spain's import and export trade?

The actual reason is that the economic crisis has affected the economic environment of various European countries, leading to a large number of factories and enterprises being on the verge of bankruptcy or even going bankrupt directly.

The public has also lost their jobs as a result, and naturally, they will not have such strong purchasing power.

In a situation where the economies of other countries are in chaos, even if Spain's industrial production has not been greatly affected, the goods will certainly not sell.

By the same token, in a situation where the economies of other countries are relatively chaotic and factories and enterprises are going bankrupt in large numbers, even if Spain wants to import in large quantities, it must depend on whether other countries have the ability to produce them.

The contraction of imports and exports during an economic crisis is an unavoidable matter; unless one waits for the economic conditions of other countries to gradually improve, one can only silently endure the impact on the economy caused by the massive reduction in imports and exports.

"Doesn't that mean our economy might face negative growth this year?" Carlo asked.

Since Spain's reforms, the economy has seen positive growth every year. Moreover, the growth rate is extremely fast, which is also the reason why the Spanish government feels at ease using a large amount of the fiscal budget every year for various infrastructure projects.

As long as the economy maintains a good growth rate, government investment will not only not lose money but will instead return to the government as more tax revenue.

If the economy faces negative growth due to the economic crisis, government tax revenue will also decrease. But those projects that have already started cannot be easily stopped, which also means that the government's finances this year may face a relatively large deficit.

"Yes, Your Majesty." Ewald Bartel nodded and replied: "In a situation where import and export trade is affected, it is difficult for our economy to continue to maintain positive growth."

Carlo nodded expressionlessly, but his heart was very relaxed.

The negative economic growth caused by the reduction in import and export trade can be salvaged, and the method of salvation is also very simple: increase the intensity of infrastructure construction, thereby expanding the demand for domestic products.

At the same time, large-scale infrastructure construction can also provide more job positions, which also has a good driving effect on Spain's economy.

The only downside to doing this is that the government needs to use a large amount of funds, and the current Spanish government is not lacking in funds.

Although the value of that treasure is only over 900 million pesetas, the value of gold is not calculated this way. If gold is used to issue currency, it can issue currency several times its own value.

In other words, the Spanish government can rely on these 80-plus tons of gold to issue currency equivalent to the value of several hundred tons of gold.

At this time, Prime Minister Primo also stood up at a very appropriate moment to introduce to Carlo the plan that the cabinet government had long since prepared: "Your Majesty, in order to cope with this economic crisis, the government expects to increase investment in public infrastructure again over the next two years to create more job positions and stimulate the improvement of the Spanish economy.

In terms of infrastructure, our investment is mainly concentrated in three areas: the improvement of road traffic, small-scale water conservancy projects in villages and towns, and slum renovation projects.

In order to protect some of our affected enterprises, the government will launch a short-term tax exemption policy for certain enterprises and encourage Spaniards to purchase Spanish local products in large quantities, expand our domestic demand, and reduce the impact of reduced exports."

Previously, the renovation of slums was also limited by finances, and the scale had always been small, concentrated in Madrid.

Since the government is no longer short of money now, and there is enough time during the economic crisis to engage in infrastructure construction, then naturally, the renovation of slums must be vigorously promoted.

Transforming those dilapidated slum houses into high-rise buildings can not only effectively improve the urban appearance of Spain but also allow these slum dwellers to have a better living environment.

In fact, this economic crisis is not entirely bad for Spain; the benefits are also visible everywhere.

For example, during the economic crisis, the scale of industrial and agricultural production in various countries is continuously declining, and the prices of various industrial finished products are falling again and again.

Spain can completely purchase a large amount of mechanical equipment in various European countries at extremely low prices, and can even purchase corresponding production materials and technology.

Some small and medium-sized factories are already facing a bankruptcy crisis; being able to sell technology and equipment in exchange for a portion of funds is naturally better than the entire factory and enterprise going bankrupt.

As for the harm of selling technology and equipment to factories and enterprises, that is no longer something they can consider. After all, if the enterprise goes bankrupt, they will also have nothing, so it is better to exchange equipment and production materials for some funds to allow the enterprise's finances to circulate.

After determining the prevention policy for this economic crisis within Spain, the topic of discussion quickly turned to what products should be purchased by utilizing such a good opportunity.

What cabinet officials discussed most was actually the production equipment and technical data of various countries' factories, including advanced steel smelting technology, production data and production lines for military weapons, the chemical technology in which Spain is relatively weak, and some mechanical equipment, etc.

These have extremely important help for Spain's industry and are also things that Spain lacked the most before.

Although there is assistance from Italy and the Austro-Hungarian Empire, some relatively advanced technology and production data are not so easy to purchase.

Either the price is too expensive, or it is directly confidential technology that some enterprises do not open to the public, and one cannot buy it even if one wants to.

The current economic crisis is a good opportunity. Production equipment and technical data that were expensive in the past are basically at cabbage prices now.

The money that could only buy one copy of data before can now buy several copies of data, and can even come with a piece of mechanical equipment as a gift.

Those confidential technologies that were originally not to be passed on by small and medium-sized enterprises are now products that can be taken away by just naming a price. Precisely because of this, Spain must not miss this good opportunity for a big shopping spree no matter what.

This economic crisis is bound to affect European and American countries, which also means that Spain can take funds to unscrupulously select production equipment and technical data in these countries.

According to later data, during this economic crisis, the number of enterprises that went bankrupt and closed down in various countries around the world totaled nearly 10,000 each year, and more than 50,000 enterprises went bankrupt during the entire economic crisis (1873-1879).

Although many of these 50,000 enterprises were those relatively ordinary factories that did not have any relatively advanced production equipment and technical data.

But there were also a small number of factories that possessed relatively strong scientific research capabilities, and the equipment and data in their hands are what Spain currently lacks the most.

However, the action of buying, buying, and buying in European and American countries still needs to go through a certain amount of camouflage. If one were to purchase bankrupt enterprises and factories in various countries in the name of the Spanish government, it would inevitably attract the attention of these countries.

Even if it were to provoke public anger, it would be more than the loss for Spain.

The purchasing personnel heading to various European countries will disguise themselves with various identities, but their goals are consistent: to select bankrupt enterprises worth acquiring, or to purchase production equipment and technical data from those enterprises on the verge of bankruptcy.

In the economic crisis, one country played the role of the unlucky one.

Which country is it? Naturally, it is the United States, which relies heavily on foreign investment.

European countries are plagued by the economic crisis, and their first reaction is naturally to withdraw their investments in the United States, or at the very least, to immediately terminate investments.

And the Americans themselves need a large amount of foreign investment to maintain their crazy construction; after foreign capital began to withdraw, the economic environment of the United States collapsed instantly.

What's more, the economic environment of the United States itself has relatively large problems.

It was mentioned before that the railways built by the United States in this recent period are more than the sum of those in the United Kingdom and Germany combined.

And this also gave birth to a problem: a large number of railway companies were born in the United States, and these railway companies are constantly seeking loans to build railways.

Among the many bankers in the United States, the Cook family is definitely one of the more famous private bankers.

Perhaps Cook himself did not know that one of his investments directly led to the beginning of the American economic crisis and also led to the American industrial production facing a devastating blow.

For Cook himself, this investment was very ordinary.

The object he cooperated with was the Northern Pacific Railway Company. This railway company also has quite a reputation in the United States, having built multiple sections of railway and achieved relatively good results.

Perhaps it was precisely because of the good reputation of the Northern Pacific Railway Company in the past that when Cook agreed to help the railway company underwrite bonds, he actually did not think too much and agreed to underwrite 100 million US dollars in railway bonds.

The value of the US dollar is not low; it is much higher than the franc and the peseta.

The value of 100 million francs in bonds is equivalent to more than 500 million pesetas, which is the Spanish government's annual fiscal revenue.

Such large-scale bond sales are not so easy, especially since the sale of bonds at that time faced the war between Prussia and France.

During wartime, not many people are willing to use real gold and silver to buy bonds that are just a piece of paper. The result is also very obvious: the sales of bonds were not satisfactory, and the construction of the railway was difficult to maintain.

If the railway could not continue to be built, it would be a huge blow to both the Northern Pacific Railway Company and Cook's bank.

In order to save the railway company, Cook could only issue short-term loans to it.

Although the interest on short-term loans is high, it can at least ensure that the railway of the Northern Pacific Railway Company continues to be built. As long as the railway is completed, the railway company can at least recover a portion of the funds and rely on the operation of the railway to obtain income continuously.

But things often do not turn out as wonderfully as expected. After the outbreak of the Vienna economic crisis, European capital quickly withdrew its investment in the United States.

Cook's bank was also seriously affected, and the pressure on funds doubled.

As luck would have it, the Northern Pacific Railway Company also encountered trouble at this time. The railway company not only could not repay the principal and interest of the short-term loans on time but instead needed Cook to invest more funds to continue to maintain it.

It is very obvious that Cook at this time had no money.

And the railway company, lacking capital investment, quite simply declared bankruptcy.

Accompanied by the successive bankruptcies of the Northern Pacific Railway Company and Cook's bank, coupled with the panic caused to Americans by the European economic crisis, it quickly caused fluctuations in the US stock market.

The bankruptcy of Cook's bank caused panic among Americans. People rushed to the bank, just wanting to withdraw their money from the bank account as early as possible.

But where would there be so much money in the bank's account?

The previous era of prosperity was not only the prosperity of construction companies and railway companies but also the prosperity of the banking industry.

These banks obtained high income through large-scale lending, and there are currently a large number of bank loans that have not been recovered.

Banks do not have enough funds available for exchange, so naturally, they have to face a serious bankruptcy crisis. This wave quickly affected a large number of banks, and at the same time, many investment companies and railway companies were also affected.

From the beginning of the bankruptcy of Cook's bank and the Northern Pacific Railway Company in early June to the formal closure of the New York Stock Exchange, it only took two and a half weeks, but these two and a half weeks were a devastating blow to the US economy.

In these two and a half weeks, at least hundreds of banks went bankrupt one after another, including relatively large chain banks.

Investment companies were even more tragic; at least hundreds of investment companies declared bankruptcy due to the collapse of the capital chain.

The bankruptcy of banks and investment companies quickly affected railway companies. Many railway companies that had to rely on loans and bonds to survive could not continue at all in such an economic environment, and the wave of bankruptcy rose again.

For the United States, this was just the beginning of the disaster.

Like other European countries, the United States at this time also did not establish a supreme bank to control finance and bonds, and even the issuance of bonds was done by authorizing private banks to act as agents.

Because there was no supreme bank, the US government simply could not save American enterprises by providing currency supply and relief to companies on the verge of bankruptcy, and in the end, it could only helplessly sit and watch the economic crisis intensify in the United States.

And precisely because bonds were handled by private banks, the mass bankruptcy of these private banks was not a good thing for Americans.

Not only did their deposits disappear along with the bankruptcy of the banks, but even the bonds they originally purchased also vanished into thin air.

After all, the banks were gone, so where were they supposed to go to redeem the bonds they purchased?

For the United States, a country that is developing savagely, the impact caused by the economic crisis is even more serious than that in European countries.

The industrial and economic growth rate of the United States during this period was indeed far higher than that of European countries, which also proves that the comprehensive potential of the United States is higher than that of European countries.

But it is very obvious that the development speed of the United States is relatively savage growth, lacking government control.

Two and a half weeks were enough to make the United States face the bankruptcy of nearly a thousand enterprises, among which there was no lack of medium and large-scale enterprises and factories.

This also means that in a short period of time, more than 100,000 American citizens have suddenly become unemployed, and 100,000 families have seen their incomes plummet.

(End of chapter) ===== CHAPTER 156 =====