Rise of Empires: Spain.

Chapter 154 Cook Bank
As industrialization in various countries develops, the economic ties between countries in the world will become increasingly close.

This also leads to a rather serious problem, that is, the outbreak of an economic crisis will not affect a single country, but will extend its impact to the whole world.

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

On May 1873, 5, Prime Minister Primo convened a special cabinet meeting to deal with the possible impact of the economic crisis on Spain.

Carlo was also very concerned about the economic crisis. He listened to the entire meeting and put forward some suggestions of his own on how to prevent the impact of the economic crisis.

At the meeting, Finance Minister Ewald Bartel frowned and said sadly: "Your Majesty, Prime Minister. The outbreak of the Vienna economic crisis has had a serious impact on our import and export trade.

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

Since the outbreak of the economic crisis, our daily import and export volume has been decreasing. If the economic crisis continues, the total import and export volume is expected to drop by at least 30% this year.

Why does the economic crisis affect Spain's import and export trade?
The actual reason is that the economic crisis has affected the economic environment of European countries, causing a large number of factories and enterprises to be on the verge of bankruptcy or even directly bankrupt.

As a result, people have lost their jobs and naturally their purchasing power will not be as strong.

In the context of economic chaos in other countries, even if Spain's industrial production was not greatly affected, its goods would certainly not be sold.

Similarly, when the economies of other countries are in chaos and factories and companies go bankrupt in large numbers, even if Spain wants to import large quantities, it has to see whether other countries have the ability to produce them.

The shrinkage of imports and exports during an economic crisis is inevitable. Unless we wait until the economic conditions in other countries gradually improve, we can only silently bear the impact of the massive reduction in imports and exports on the economy.

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

Since the reform in Spain, the economy has been growing every year. And the growth rate is very fast, which is why the Spanish government is confident to use a large amount of fiscal budget for various infrastructure projects every year.

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

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

"Yes, Your Majesty." Ewald Bartel nodded and replied, "With import and export trade affected, it will be difficult for our economic crisis to continue to maintain positive growth."

Carlo nodded expressionlessly, but he felt relieved inside.

The negative economic growth caused by the reduction in import and export trade can be saved, and the way to save it is very simple, that is, to 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 jobs and provide a good boost to Spain's economy.

The only disadvantage of doing this is that the government needs to mobilize a large amount of funds, and the current Spanish government is not short of funds.

Although the treasure is worth only 9 million pesetas, the value of gold is not calculated in 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 use these more than 80 tons of gold to issue currency equivalent to the value of hundreds of tons of gold.

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

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

In order to protect some of our affected companies, the government will introduce a short-term tax exemption policy for certain companies and encourage Spaniards to buy a large number of Spanish products to expand our domestic demand and reduce the impact of reduced exports. "

Previous slum renovation was also limited by financial constraints, and the scale has always been small and concentrated in Madrid.

Now that the government is no longer short of money and has enough time to develop infrastructure during the economic crisis, it will naturally vigorously promote the reconstruction of slums.

Transforming all those dilapidated slum houses into high-rise buildings will not only effectively improve the urban appearance of Spain, but also provide these poor people with a better living environment.

In fact, this economic crisis is not all bad for Spain, and benefits can be seen everywhere.

For example, during an economic crisis, the scale of industrial and agricultural production in various countries has been declining, and the prices of various industrial products have been falling again and again.

Spain can easily purchase a large amount of machinery and equipment from various European countries at extremely low prices, and can even purchase corresponding means of production and technology.

Some small and medium-sized factories are already facing bankruptcy crisis. It is naturally better to sell technology and equipment in exchange for some funds than to let the entire factory or enterprise go bankrupt.

As for the harm that selling technology and equipment would cause to factories and enterprises, they were no longer able to consider it. After all, if the enterprise went bankrupt, they would also have nothing. It would be better to use equipment and means of production to exchange for some funds to allow the enterprise to turn around its finances.

After determining Spain's domestic policy to prevent the economic crisis, the next topic of discussion quickly turned to what products should be purchased to take advantage of this good opportunity.

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

These are of great help to Spain's industry, and are also what Spain lacked the most before.

Although there was assistance from Italy and Austria-Hungary, some more advanced technologies and means of production were not so easy to purchase.

Either the price is too high, or some companies simply do something wrong, and the confidential technology is not available to the public, so you can’t buy it even if you want to.

The current economic crisis is a good opportunity. Production equipment and technical materials that used to be expensive are now basically dirt cheap.

The money that previously only allowed you to buy one set of information can now be used to buy several sets of information, and you can even get a piece of mechanical equipment for free.

Those confidential technologies that were originally kept secret by small and medium-sized enterprises are now available for purchase at a reasonable price. That is why Spain cannot miss this great opportunity to buy.

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

According to later data, during this economic crisis, nearly 1873 companies went bankrupt and closed down every year in countries around the world. During the entire economic crisis (1879-5), a total of more than companies went bankrupt.

Although many of these 5 enterprises are relatively ordinary factories, they do not have any advanced production equipment or technical information.

However, there are also a small number of factories with strong scientific research capabilities, and the equipment and information they have are what Spain currently lacks most.

However, the large-scale purchases in European and American countries still need to be disguised. If the Spanish government buys a large number of bankrupt companies and factories in various countries in the name of the Spanish government, it will inevitably attract the attention of these countries.

Even if it angers the public, it will not be worth the loss for Spain. The buyers going to various European countries will disguise themselves as various identities, but their goal is the same, that is, to select bankrupt companies worth acquiring, or to purchase production equipment and technical data from those companies on the verge of bankruptcy.

In the economic crisis, there is one country that plays the role of the unlucky one.

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

European countries are suffering from the economic crisis, and their first reaction is of course to withdraw their investments in the United States, or at worst to terminate their investments immediately.

Americans themselves need a lot 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 US economic environment itself has major problems.

As mentioned before, the United States has built more railways in recent times than the United Kingdom and Germany combined.

This also gave rise to a problem, that is, a large number of railway companies were born in the United States, and these railway companies were 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 US economic crisis and also caused the US industrial production to face a devastating blow.

For Cook himself, this investment is very common.

His partner was the Northern Pacific Railroad Company, which was also quite famous in the United States. It had built many sections of railways and achieved relatively good results.

Perhaps it was because of the Northern Pacific Railroad's previous good reputation that when Cook agreed to help the railroad company underwrite bonds, he did not think too much about it and agreed to underwrite $1 million in railroad bonds.

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

The value of 1 million franc bonds is equivalent to more than 5 million pesetas, which is the Spanish government's annual fiscal revenue.

It was not easy to sell bonds on such a large scale, especially when the bonds were being sold in the face of war between Prussia and France.

During the war, few people were willing to use real money to buy a bond that was just a piece of paper. As a result, the sales of the bonds were not satisfactory, and the construction of the railway was difficult to maintain.

The inability to continue building the railroad would be a huge blow to the Northern Pacific Railroad and Cook's bank.

In order to save the railroad company, Cook had no choice but to issue him a short-term loan.

Although the interest rate of short-term loans was high, it at least ensured that the Northern Pacific Railway Company could continue to build its railways. As long as the railways were completed, the railway company could at least recover part of the funds and continue to earn income from the operation of the railways.

But things are often not as wonderful as expected. After the Vienna economic crisis broke out, European capital quickly withdrew its investment in the United States.

Cook's bank was also severely affected, and the financial pressure doubled.

As luck would have it, the Northern Pacific Railroad also ran into trouble at this time. Not only could the railroad fail to repay the principal and interest of short-term loans on time, but it also needed Cook to invest more funds to continue to operate.

It was obvious that Cook had no money at this time.

The railway company, lacking capital investment, simply declared bankruptcy.

The successive bankruptcies of the Northern Pacific Railroad and Cook Bank, coupled with the panic caused by the European economic crisis among Americans, soon led to fluctuations in the U.S. stock market.

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

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

The previous era of prosperity was not just for construction companies and railroads, but also for banking.

These banks have earned high incomes by making large amounts of loans, and currently a large amount of bank funds have not been recovered.

Banks did not have enough funds to exchange, so they naturally faced a serious bankruptcy crisis. This wave quickly affected a large number of banks, as well as many investment companies and railway companies.

It took only two and a half weeks from the bankruptcy of Cook Bank and Northern Pacific Railroad in early June to the official closure of the New York Stock Exchange, but these two and a half weeks were a devastating blow to the US economy.

During these two and a half weeks, at least hundreds of banks went bankrupt, including some large chain banks.

The situation was even worse for investment companies, with at least hundreds of them declaring bankruptcy due to the collapse of their capital chains.

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

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

Like other European countries, the United States did not establish a supreme bank to regulate finance and bonds at this time. Even the issuance of bonds was authorized to private banks.

Because there is no supreme bank, the U.S. government is unable to save American businesses by providing money supply and rescuing companies on the verge of bankruptcy. Ultimately, it can only watch helplessly as the economic crisis intensifies in the United States.

Precisely because the bonds are handled by private banks, the bankruptcy of a large number of these private banks is not a good thing for Americans.

Not only did their deposits disappear with the bank's bankruptcy, but even the bonds they had originally purchased disappeared.

After all, the banks are gone, so where can they redeem the bonds they purchased?
For the United States, a country that is developing rapidly, the impact of the economic crisis is more serious than that of European countries.

The industrial and economic growth rates of the United States during this period were indeed much faster than those of European countries, which also proves that the overall potential of the United States is higher than that of European countries.

But it is obvious that the development speed of the United States is relatively barbaric and lacks government control.

In just two and a half weeks, the United States has faced the bankruptcy of nearly a thousand companies, including many medium and large-scale enterprises and factories.

This also means that in a short period of time, more than 100,000 Americans have suddenly lost their jobs and the income of 100,000 families has plummeted.

(End of this chapter)