Chapter 12 The Secret Garden of Exchange: After Training the Dog, Continue Making Money

The gentle afternoon sun of a spring day in Italy bathed the lush green grass of a small garden, where yellow and white daisies danced in the slightly salty sea breeze. Lilith and several other aristocratic ladies of similar age gathered in the secret garden behind the villa of one of the noblewomen. They sat comfortably on a picnic blanket, enjoying the sunshine, sipping wine and various desserts, and chatting casually.

However, for Lilith, such occasions were never just entertainment activities to pass the time with friends, but also business opportunities.

"My closest relative, Aunt Elena, is coming back from Florence to attend the Easter and St. Mark's Feasts."

Lilith wore a light black gauze dress, and the black veil in her headdress was secured to her high updo, swaying gently in the breeze. Several noble girls she had known from her convent school surrounded her. They were generally younger than Lilith, dressed in brightly colored clothes, as radiant and beautiful as flowers blooming in spring.

Heinrich stood at a distance in the corner of the garden, attending to his mistress. This morning, under Sherlock's direction, he had spent the entire morning calculating accounts, finally managing to balance both sides of the books with considerable effort. Being able to accompany Lilith out for some sunshine in the afternoon was a welcome respite.

Lilith's eyes always lit up when she talked about Elena. If Sofia was her best friend and biggest client, then Aunt Elena was her most respected elder and most trusted partner, as well as her currency exchange agent in Florence.

"Is she the navigator lady who joined the merchant ship escort at the age of fourteen?"

"Is it still that Knarro businesswoman who runs a silk and wool business in Florence?"

“Yes, yes, Aunt Elena is amazing.” Lilith said, taking a small bite of her butter cookie. “When I was little, I always wanted to be as amazing as her. I wonder what Florence is like; I’ve never been there.”

“I’m going to Florence with my husband next week to visit relatives,” a young lady in a bright yellow dress shared with everyone. “I’ve never been there before, but I’ve heard it’s a very charming city.”

“They’re famous for their wool fabrics and leather goods. I’ve heard there’s a new style of wool fabric that’s very lightweight and breathable, perfect for spring and autumn.” Lilith sensed a business opportunity and began to introduce the product with great enthusiasm. “However, they use florins as currency there, and merchants only accept gold coins with iris patterns on them. They don’t accept our St. Mark’s statue.”

"Then what should we do? Can we take the Ducat there and exchange it for Florin later?" the girl in the yellow dress asked, puzzled.

“Of course you can, but you’d need to hire at least five scruffy-looking guards, and equip them all with the latest German-developed muskets and plate armor,” Lilith suggested with a smile. “However, I can actually help you solve this problem. I’ll write you a letter of introduction, and you can take it to Miss Elena’s office in Florence. They’ll hand you the beautiful, clean iris-shaped gold coins directly.”

"Really?" The girl in the yellow dress opened her eyes wide in surprise.

“Of course it’s true. We’re all friends, it was just a small favor.” Lilith smiled sweetly. “When you get back from your trip, just return Ducat to me in Venice.”

"Great, this is so convenient!"

The girl in the yellow dress smiled happily. The other, younger girls exchanged puzzled glances, then gradually changed the subject. Lilith suddenly winked at Heinrich, giving him a meaningful look.

When the party ended, Lilith smiled and handed the letter of introduction, which Heinrich had drafted, to the girl in the yellow dress. The letter clearly stated that the amount of Florin to be exchanged in Florence was 100, the issuance date was March 20, the redemption date was April 1, and the repayment date was May 1, one month after the redemption. The exchange rate for repayment was 1 Florin = 1.1 Ducat.

In other words, Lilith's new client will arrive in Florence 10 days later and collect 100 Florins directly, then return to Venice a month later and return a total of 110 Ducati to Lilith.

This exchange rate was, of course, the result of Lilith's adjustment—according to the latest market data from Tata, the price of ducats at the Rialto Bridge currency exchange market in Venice was actually slightly higher than that of florins, roughly 1 ducat to 1.2 florins. If settled at this rate, Lilith, lending 100 florins, should only receive 83 ducats in repayment. The extra 27 ducats covered transfer service fees, real-time exchange rate risk, and loan interest. The essence of this series of operations was to use exchange rate differences to replace interest rate differences, implementing credit under the guise of foreign exchange, and successfully circumventing the Canon law's requirement that "no interest can be charged."

Of course, the wealthy noblewoman wasn't stupid. The compromise on the exchange rate was achieved partly due to Lilith's labor costs, and partly because the Florentine was the local currency, more valuable and thus had a different exchange rate than in Venice. Furthermore, commodity prices are always unpredictable, and agreeing on a slightly higher exchange rate beforehand served as a safeguard for both sides.

This approach wasn't Lilith's invention; on the contrary, it was something almost all the major banks in northern Italy did. The sheer number of merchants frequently traveling between the two regions led to a corresponding surge in demand for foreign exchange and loans. Lending money to a noblewoman for her travel expenses was just a small, one-off transaction, but if Lilith could establish long-term, trusting partnerships with major banks, her credit business would see a steady, continuous influx of funds.

All of this can only be done with the premise of obtaining an operating license from the money exchange guild.

The Knarro family and Lilith already had an awkward relationship, so naturally they wouldn't step in to help her. Moreover, banking, with its gray-area nature under canon law, was always associated with being a "lender," hardly a respectable business. This was why, aside from her personally trained slaves and a Jewish accountant she knew by marriage, she couldn't find anyone to work for her.

For this reason, Heinrich had to take on multiple roles. In the morning, he would be busy preparing accounting documents for the audit, in the afternoon he would accompany her to complete a new exchange transaction, and then he would rush home, put on an old cloak he bought from the second-hand market, mess up his overly neatly combed blonde hair, leave through an inconspicuous back door, and blend into the crowd of people coming and going on the street.

Investigating Mauro, while an extra task, granted Heinrich the privilege of moving freely without Cecilia's surveillance. As a burly German man, taller than the average Italian man, he was hardly suited for tasks like stalking or surveillance. But that didn't matter; he could always find someone better at it.

Lilith gave Heinrich a Ducat investigation fund. He didn't need to spend that much money all at once, so he asked Cecilia to exchange the gold coins for sixty Grosso silver coins, then went to a street money changer to exchange the Grosso for some smaller denomination Suldi silver coins, and even asked Ivanka for some candies and desserts that Lilith didn't like and was going to throw away from the kitchen.

After living in Venice for about a week, Heinrich had a good grasp of the streets and alleys of the upper-class neighborhood in the city center. In a small, empty square, he found several homeless children wandering the streets. These children often lived with their families in slums, and when they had free time, they would go to the neighborhoods where the wealthy lived to beg or do errands. When they couldn't find anyone, they would wander around the streets and alleys.

No one was better suited to be a follower than the natural components of these street scenes. Heinrich gave each of them a few sourdoughs and candies, asking the children to keep an eye on Mauro's movements. Having done this, he immediately left the square and headed towards the German Trading Company near the Rialto Bridge.

The shops had closed by evening, but the merchants still liked to gather in the Bavarian-style taverns near the street to drink, chat, play cards, and roll dice. These taverns even offered all sorts of bizarre "convenience" services to the merchants living in foreign lands, such as faster mail delivery than the official postal channels, document translation in Italian and German, and even prostitutes offering German-language services.

Heinrich bought a mug of rye beer for a few soudils and sat quietly in a corner, listening to the merchants' conversation. He remembered the family mission he had undertaken when he was married, though it might never be fulfilled—to form a commercial alliance with the Knarro family. The Schmidl family was responsible for producing fine iron, plate armor, swords, and muskets, while the Knarro family opened trade routes for their goods in Venice, selling these weapons to merchant ships sailing the oceans, mercenaries in northern Italy, or shipyards east of Venice.

Prior to this, the Schmidl family did not have their own exclusive distributor in Venice and could only resell their goods at low prices to traveling merchants, who would then resell them in small quantities to other regions. However, if they could establish a complete sales chain and eliminate the middlemen's markups, the Schmidl family's profits would increase significantly.

However, due to Heinrich's "death," negotiations for commercial contracts awkwardly stalled. The market was quickly seized. According to discussions among the merchants, the Fugger family now held a near-monopoly on the steel trade in Venice. In order to open up maritime trade routes, they even sent their youngest son to a Venetian trading company as an apprentice to learn the most advanced accounting theories, and then used the opportunity to penetrate the local market.

From this perspective, Heinrich's work experience would be seen as a valuable learning opportunity by other German businessmen. If he could master the use of various financial instruments during this period and successfully open up sales channels for his family's products, then his experience of enduring hardship would not have been entirely fruitless.

He sent another letter to his brother William through the tavern's mail. Before receiving a reply from the Schmidl family, he first received information about Mauro's week-long itinerary, gathered by the children. The results were astonishing. Before proceeding with further investigation, he needed to report his findings to Lilith.

A note from the author:

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This is a transitional chapter; the next chapter will feature the part I really enjoy, hehe. The next update will be on Wednesday. My current plan is to update on Mondays, Wednesdays, Fridays, and Sundays. If there are more word count requests from the rankings, I'll add extra updates on weekends.