Holy Roman Empire

Berlin Palace, Frederick III only felt an immense pressure bearing down on him. Affected by the war, the economic crisis erupted, and the Kingdom of Prussia fell early into the Great Depression.

The Berlin Government had been able to hold out until now, that was by flipping the table and seizing assets to obtain a sum of money.

Flipping the table came at a cost, though Frederick III had taken decisive measures and promptly restored production, the government’s fiscal revenue was still greatly impacted.

If that were all, it wouldn’t be so problematic; things would eventually recover over time.

Unfortunately, it was a case of misfortune pouring down like rain in a leaky house; just as factories had been distributed, and everyone was ready to roll up their sleeves and get to work, the global economic crisis struck.

An overabundance of products piled up like mountains, yet they couldn’t be sold. The officials and soldiers who had received the factories naturally turned to the government for solutions.

Without sufficient markets, Frederick III couldn’t conjure one out of thin air. All over Europe, there was a surplus of production capacity, and the two big bullies, England and Austria, were shamelessly engaging in dumping.

This led to international commercial product prices being lower than the production costs of Prussian enterprises. It wasn’t just the prices that couldn’t compete; the quality of Prussian products was far inferior.

The Berlin Government had an agreement with the British creditors, and in theory, they could use industrial and commercial products to offset the debt, but regrettably, the power to set prices was in British hands.

For instance, now the British would refer to the wholesale prices on the international market and give a thirty percent discount, then deduct further for a quality assessment, resulting in the final price.

According to the British pricing, most goods’ prices did not even reach half of their production costs.

To "sell" would mean a heavy loss, and this deficit could not be borne by the producers; otherwise, if calculated, every single factory in the country would go bankrupt.

This was something the Berlin Government could never accept; these factory owners had become the cornerstone of the Kingdom of Prussia.

Only with great effort had they used economic incentives to coax the Junker aristocracy into accepting disarmament, and to immediately smash their livelihood now would spell death for the government.

The revolutionary tide in Europe was so turbulent, and the Kingdom of Prussia was able to maintain stability because it secured jobs.

Since the factories were owned by the workers themselves, unemployment was not an issue. To soothe the public’s mind, the Berlin Government had assured them that they would guarantee a cost price safety net.

Under normal economic operation, this promise would pose no problem. Businesses are meant to profit, and no one would intentionally produce a bunch of unsellable products to cause trouble for the government.

But now it was different, the economic crisis had erupted, and the market was terribly bad, with businesses unable to make any money.

According to the agreement, now that everyone’s products couldn’t be sold, the Berlin Government was obliged to help them offload at the cost price.

Prussia had no colonies, and to engage in dumping of goods, it had to compete with other European countries. n/ô/vel/b//jn dot c//om

From a purely economic perspective, the British pricing was reasonable. Prussian industrial and commercial products indeed lacked competitiveness and could only engage in a price war.

As for the European Continent, one should not hold out hope. Affected by the economic crisis, most Europeans were impoverished, and unless it was for essential goods, it was very difficult to find a market.

For many people at this time, essential goods meant food, and regrettably, Prussia itself had insufficient supplies, making exportation out of the question.

These inferior industrial and commercial products could only be dumped overseas. There was no doubt that Prussia lacked the capability to engage in global dumping, as they could not gain access to most overseas markets.

The countries that possessed relatively sophisticated commercial networks and were capable of dumping products in most parts of the world were just a few.

These were the United Kingdom, Austria, France, Spain, the Netherlands, and Portugal—all of which had one thing in common—a Colonial Empire.

Among them, Spain, the Netherlands, and Portugal were in decline. While their commercial networks remained, they scarcely had any colonies left and lacked the capacity to absorb Prussia’s industrial output.

France had numerous colonies, but not a large market. Its domestic capitalists were already insufficient to share the spoils, so naturally, they wouldn’t allow Prussian goods to enter.

Austria’s colonial development was not bad, and the markets were relatively efficient. Unfortunately, Austria’s own industrial capacity was so vast that there was no surplus market to offer.

Moreover, even if Prussian goods were allowed in, they would not sell in the face of competition from Austrian goods.

The British had the most colonies, and relatively sufficient markets, with internal competition not being so fierce. It could be said that Britain was Prussia’s only option.

Under these circumstances, the British naturally started to push prices down. On one hand, they exported industrial raw materials to Prussia, and on the other, they accepted Prussian industrial and commercial products as payment for debts. It seemed as though they were helping the Berlin Government, but in reality, Prussia was toiling for them for nothing.

It was not just unpaid labor, but now the British went even further, expecting the Kingdom of Prussia to operate at a loss.

Frederick III’s mood was akin to toiling away for a year to find that at the year’s end, he had not earned a single penny, and instead he was even deeper in debt.

Yet, he couldn’t refuse, because without work, the mortgage, credit cards, and all sorts of loans would come pressing down, which would be…

Life had to go on; "a blood loss" was still better than "losing all one’s blood." Being pressured to lower prices had to be accepted, and the Berlin Government had no choice but to grit its teeth and bear this loss.

Eagerly, Frederick III inquired, "How did it go? Have the British agreed to defer the debt?"

With no choice, as the Kingdom of Prussia was lacking in resources and had to import industrial raw materials, they had to spend foreign currency since their Marks were not accepted.

The product compensation agreement reached with the British did not mean that Prussia could just hand over goods to the creditors. The Berlin Government wasn’t that domineering.

Prussia’s creditors were mostly banks and financial institutions, players in finance who were not interested in international commercial trade.

The reality was that Prussia sold industrial and commercial products to British capitalists in exchange for foreign currency, which, after deducting costs, was used to pay debts.

The role of the "agreement" was for the British Government to allow Prussian goods to enter as well. Otherwise, under the free trade system, Prussian goods could only be sold within Britain, and it was obvious they would hardly sell.

Now, faced with a drastic price drop, the selling price of goods did not even cover the cost of industrial raw materials. Incurring a loss on these transactions meant the Berlin Government naturally had no "foreign exchange" left to pay off debts.

Freedman, the Foreign Minister’s complexion immediately darkened: "We have tried everything, and even secured the support of the London Government. But in the end, negotiations failed.

This economic crisis has impacted Britain more than we originally thought. Banks are short on money now as well."

"One of our creditors, Garrett Bank, went bankrupt due to a broken funding chain during negotiations."

The creditors also lacked money, which complicated matters greatly. Especially for a bank like Garrett, which had gone bankrupt because of a broken funding chain, it was even less likely to agree to defer debts.

Frederick III sighed deeply and asked the Finance Minister, "How much foreign exchange do we have now, and under normal circumstances of debt repayment, how long can we sustain?"

Finance Minister Ovitz frowned and answered, "The situation is very bad. All our foreign exchange combined is worth approximately 7,656,000 Pound Sterling, including 3,540,000 Pound Sterling, 5,680,000 Divine Shields, and 8,000,000 Francs…

Theoretically, if we were not to incur any other expenses and only use it to pay off debts, we could last at most seven months.

In reality, this is impossible. We must import industrial raw materials, machinery, agricultural products to meet the domestic requirements for production and living necessities."

Foreign exchange has both inflows and outflows; normally, with the export of industrial and commercial products, it is still possible to maintain a balance of payments.

After all, for domestic industrial raw materials and labor costs, foreign exchange is not needed; these can be resolved with Marks.

7,656,000 Pounds Sterling converted into gold is 56.04 tons, which in this era is undoubtedly a fortune, exceeding the gold reserves of many countries.

If there were no foreign debts to pay, such an amount of foreign exchange reserves would be more than enough for a small country to live comfortably.

Unfortunately, there are no ifs, and the Kingdom of Prussia has a huge amount of foreign debt to repay. This vast sum can only cover seven months of debt service.

In fact, we cannot hold on for that long, as influenced by the decline in the price of export goods, the Kingdom of Prussia has already entered an era of trade deficits.

Unless the creditors are willing to accept payment in Marks, it is utterly impossible for the Berlin Government to pay off its debt on schedule.

...

Upon receiving the Berlin Government’s distress telegram, Franz’s initial response was to encourage the Prussians to default on their debt.

Once this idea surfaced, it clung like an obsession he could not shake off.

"What would the consequences be if the Berlin Government defaulted?"

Foreign Minister Weisenberg’s complexion changed slightly, "Your Majesty, Prussia’s economy is heavily influenced by the British, and the Berlin Government does not have the capacity for debt default.

If the Berlin Government defaults on its debt, the British need only impose trade sanctions, and Prussia would collapse within half a year."

That was the truth, should the Royal Navy blockade the coastline, the Kingdom of Prussia would find itself in a distressed state due to the lack of industrial raw materials and a shortage of markets for its products.

Of course, they could still take to land routes, passing through neighboring countries, except that the cost would be enough to bankrupt any business.

Prime Minister Felix countered, "Not necessarily! In ordinary times, perhaps the British would do so to ’kill the chicken to scare the monkey.’

But now it’s different; the revolutionary wave in Europe is intensifying.

The French Revolutionary Party has already occupied Paris, and the situation in the Kingdom of Prussia is also grave, with the possibility of a revolution breaking out at any moment.

As long as the British are not prepared to collect debts from the hands of the revolutionaries, they cannot afford to let the Kingdom of Prussia perish.

The Berlin Government genuinely lacks repayment ability now, and defaulting on debt is just a matter of time; the London Government should also be prepared.

As long as the Berlin Government does not outright declare a default and comes up with a reasonable excuse for a debt extension, the British Government will not resort to extreme measures.

The ones who lent money to the Berlin Government are banks, financial institutions, and speculators, whose influence in Britain is strong, yet not strong enough to make decisions for the government.

The British Government is unlikely to disregard strategic considerations for their interests; without government support, these interests cannot trouble the Kingdom of Prussia.

If the situation in Europe further deteriorates, the Berlin Government can even negotiate with the British to seek a reduction of debt."

This is not the post-World War II era when the Aristocratic Group is at its zenith; it’s pure fantasy for consortia to think they can control the government.

The French Revolution is frightening enough; if the Prussian revolution also succeeds, the revolutionary wave in Europe will become uncontrollable.

Although Britannia stands alone overseas, they were not spared by the revolutionary wave.

For many years, Britain and France have been mutually exporting revolutions, and should these spread, neither will be able to remain unaffected.

...

On May 1st, 1882, the Kingdom of Prussia was swept by a massive hunger protest, with countless people taking to the streets demanding the government import more food to alleviate the domestic famine.

After the outbreak of the hunger protests, the Berlin Government responded swiftly, seeking international aid in the shortest time possible.

At the same time, as a large amount of foreign exchange had been drained by debt repayments, and with no money left to purchase food, they requested a delay in debt payments from their creditors.

Unquestionably, this didn’t seem like a "request" but rather a notification.

While making the request, the Berlin Government had already suspended the debt payments scheduled for May.

It was announced that the funds allocated for May’s debt settlement were being used to purchase food to address the domestic famine.

Most of the Kingdom of Prussia’s creditors were in England and France, holding 95.4% of the Berlin Government’s external debt.

If the major creditors, England and France, were settled, then effectively all creditors were settled— more precisely, it was enough to reach an agreement with Britain.

The French, currently preoccupied, were embroiled in civil war and couldn’t afford to be distracted by such minor matters.

Did the Kingdom of Prussia really suffer from a famine?

It now depended on how Britain saw it!

If the London Government accepted this rationale, then the Kingdom of Prussia had "truly" experienced a famine.

If the London Government did not acknowledge this rationale, then there was no famine in the Kingdom of Prussia.

Politics only need to weigh pros and cons; the truth is not essential.