Chapter 1224 The Empire's Weakness (Second Update, Please Subscribe)
His Majesty summons you!
After receiving a call from the palace, Hu Xueyan, the president of the Imperial Bank, immediately rushed to Zhongdu on the "Star of America".
The car sent by the palace was waiting for him on the platform.
"Something big must have happened!"
Hu Xueyan was thinking this in his mind. He ignored the surprised looks of others and got into the car directly. When the car left, he had a slightly worried look on his face and was thinking over and over again about various problems in his mind.
What big deal will it be?
What big thing is related to banks?
Emperor Zhu asked as soon as he entered the imperial study.
"You've come just in time. I have something to ask you. What's the recent silver price situation?"
"Silver prices have fallen again! The current exchange rate is 1 to 18.3. According to our estimates, by the end of the year, the gold-silver exchange rate may fall below 18.6 or even 19!"
When Your Majesty mentioned the price of silver, Hu Xueyan immediately understood the reason - the price of silver!
Your Majesty is concerned about the price of silver!
Silver was the legal tender of the empire.
“What caused the silver price to fall?”
In response to His Majesty's question, Hu Xueyan replied.
"Your Majesty, since the United States abolished the gold and silver dual standard 12 years ago, the international silver price has begun to fall continuously. Of course, the decline is within a controllable range, and the decline in silver prices is beneficial to the Empire's exports. After all, the Empire is an industrial exporting country, and appropriate depreciation has a certain stimulating effect on the Empire's economy..."
"So what if the decline continues? Like a further plunge."
"Further plunge?"
Hu Xueyan raised his eyebrows and replied.
"If the empire allows the price of silver to fall, it will not only cause a severe blow to the empire's financial industry, but also mean that the empire's monetary system will fail. The empire is likely to face an unprecedented crisis."
Hu Xueyan's brows were locked in a knot. In fact, several years ago, the Imperial Bank had fully assessed the various impacts of the decline in silver prices.
"For the empire, if this happens, it will either have to make a bold move and change the empire's gold and silver bi-standard to the gold standard, or it will have to vigorously purchase silver and restore the silver standard."
After pondering for a moment, Emperor Zhu asked back.
"So in your opinion, what should we do?"
"this……"
After thinking about it, Hu Xueyan said.
"Your Majesty, the Empire and its allies own the world's largest silver mines. Our and Mexico's silver production accounts for 70% of the world's total. Moreover, the Empire, Tang, Mexico, and other South American countries all implement the silver standard. From this point of view, we must choose the latter because the silver standard is related to the financial and monetary security of the Empire and its allies."
When Hu Xueyan mentioned "financial and monetary security", Emperor Zhu had already stood up. He walked to the window, looked at the royal garden outside the window, and stared at the sky in the distance.
Emperor Zhu knew very well what this "financial and monetary security" meant.
Unlike the 21st century, where the value of money depends primarily on the confidence of the people and the market in the government, in the 19th century, many people believed that money would be worthless without precious metal coins as a reserve to back it up, because the holder of the paper money had to be able to redeem it for metal at a bank or the Treasury.
Now all the paper money in the world are "gold and silver coin certificates" that can be exchanged on presentation. Because South America is rich in silver, it has not only supplied silver to the world in history, but also has been circulating silver pesos locally. The legal currency of the Ming Empire is also silver coins. Of course, because it implements a dual gold and silver standard, the Imperial Ministry of Revenue also mints gold coins, but silver dollars are the main currency in the market. Although the actual currency in circulation is silver dollar certificates, it is essentially still silver dollars.
Once the silver price plummeted, silver depreciated significantly. This also meant that the Ming Dynasty's currency and social wealth depreciated significantly. In the world, Ming Dynasty, Mexico and Tang Dynasty all used silver as the main currency.
"Indeed, even if we don't count Mexico and the Tang Dynasty, the loss of wealth caused to the empire by the devaluation of silver is incalculable. Every 10% drop in the price of silver means a 10% decline in the empire's economy."
This regression does not seem to be an industrial regression, but the depreciation of silver has caused the valuation of local currency assets to decline, leading to a recession in related fields such as finance and insurance, which in turn has dragged down the country's overall economy.
This is the most typical feature of the "currency war". It seems that there is no smoke of gunpowder, but the more invisible the war is, the more tragic it is.
Edward Elias Sassoon...
With a cold smile, Emperor Zhu said.
“So what will happen if India abolishes the silver standard and implements the gold standard!”
"What!"
Hu Xueyan said in a lost voice.
"Your Majesty, is this news accurate?"
"I'm asking what if!"
"Your Majesty, the only countries in the world that are implementing the silver standard are the Ming Dynasty, the Tang Dynasty, and India, which are the largest silver-based countries. As for Mexico, Persia, and South America, they are not worth mentioning at all. If India implements the gold standard, it will kick silver out of the monetary field. As we all know, the demand for silver as a currency is a huge demand. Therefore, this move will cause the demand for silver to drop drastically, which will definitely lead to a significant depreciation of silver."
Hu Xueyan said almost subconsciously.
"Your Majesty, although the amount of silver circulating in the Indian market is not as much as that in the Empire and the Tang Dynasty, once India abolishes the silver standard, it will not only reduce the demand for silver, but will also further affect market confidence. Confidence... confidence is the most important thing."
With his brows furrowed, Hu Xueyan continued speaking.
“Once India, the world’s third largest region implementing the silver standard, switches to the gold standard, it will inevitably severely damage the silver standard from the root. Faced with the reality of a sharp drop in silver prices, other countries will inevitably follow suit. In the international market, silver prices will plummet as it loses its qualification as an international reserve, and confidence in the silver standard will also be destroyed. Once confidence is destroyed, silver prices will not just fall, but plummet! The gold-silver price ratio may even fall below 30!”
Emperor Zhu shook his head and said in a very affirmative tone.
"It will fall even more! In the long run, it may even fall below 70!"
The reason why Emperor Zhu made such a judgment is that in history the price of silver did fall to this point of 1 to 70!
And now it’s 1 to 18, which has fallen to that extreme. What does it mean?
"1 to 70, this is equivalent to shrinking the empire's economy..."
After a moment of astonishment in his mind, Hu Xueyan hurriedly spoke.
"Your Majesty, with the discovery of many silver mines in the United States, the world's silver supply is increasing. The depreciation of silver is inevitable. We must make plans early to avoid a severe blow to the empire's economy. Perhaps it is time to consider implementing the gold standard. After all, the gold standard is now the mainstream..."
(End of this chapter)
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