Chapter 727 — Open the Door, Free Trade

"Let's hear your reasoning, Patrick," Gao Yang said, studying the Imperial Minister of Commerce and Finance before him with a grave and serious expression. "You know that introducing fiat currency is a rather radical measure, and an overly large stride in reform means the difficulty and the risk of that reform will climb in a straight line."

"Yes, Your Majesty," Patrick said, pressing at the collar of his short black formal coat. He drew a deep breath, then spoke slowly. "The foremost reason I put forward such a proposal is... Typhon."

"Typhon..." Gao Yang mused briefly. "Go on."

"Your Majesty, you once said that a war between us and Typhon is inevitable—and in my view, that war has in fact already begun. I imagine you think so as well. We have just sidestepped a war of steel and powder, but economically, our contest has only just started, and at this stage the essence of that contest... is a contest over gold settlement."

Gao Yang watched Patrick's eyes. He made no effort to conceal the approval in his own gaze, and gestured for the man to continue.

"Typhon's representative currency is pegged to gold; their banks issue paper notes redeemable in gold on demand. But when it comes to orders with Cecil, since the two sides have yet to establish a new currency interface, we still settle directly in gold. We purchase large quantities of textiles and other primary industrial goods from Typhon, while exporting magical components, trains, and railways. The latter orders are few in number but enormous in value, so on the whole, Typhon's gold is flowing toward Cecil at a slow, inconspicuous rate.

"Your Majesty, you know that Typhon's noble reform was far 'gentler' than ours. They preserved a great many old nobles, and those old nobles, beyond losing their privileges, kept hold of vast private fortunes.

"Put simply, Typhon retains a great many noble treasuries beyond the royal family's control. Much of the gold paid to us... is in fact pooled together by the countless nobles, great and small, of Typhon's interior through private investment, fundraising, and financing; less than half comes directly from the vaults of the Typhon Imperial Bank. So for a long time to come, the Typhonians will not discover that their gold is draining away. This involves not only an immense and long-term statistical undertaking, but also a great many nobles who, to circumvent the railway investment restrictions set by Royan Augustus, are exhausting every means to conceal those fragmentary yet vast flows of gold..."

Listening to Patrick, Gao Yang could not help thinking of what Daniel had reported to him:

Typhon's minor and middling nobles, all scheming to seize a share of profit from the railway system, were doing everything in their power to insinuate themselves into those projects; and to circumvent the series of obstacles Royan Augustus had erected, their most common tactic was to borrow from banks under family guarantees and joint guarantees, then "cooperate" with those banks—after all, half of Typhon's banking system was in the hands of the noble class—to transfer the debt claims to the Cecil Railway Investment Company. Thereafter, in the guise of repaying debt, they would draw on their family treasuries to pay off Cecil's claims in installments, acquiring shares through every manner of shell arrangement and carving out a share of the railway's operating profits...

This intricate and "brilliant" maneuvering had slipped right around their regulatory system.

Royan Augustus might be a ruler of grand ambition and an iron fist; he had used court intrigue to successfully bring Typhon's vast upper nobility to heel, and overawed and subdued the minor and middling nobles across the realm. Yet in the foul ditches and corners he could scarcely attend to, among those petty nobles who were gradually transforming from old aristocrats into capitalists, the "creativity" and "striving spirit" people display in the face of profit had plainly outstripped this Typhon Emperor's imagination.

And so Typhon's gold drained away, furtively, in fragments.

"The most important thing for maintaining this trend is to preserve the status quo of gold settlement," Gao Yang said, picking up Patrick's thread and carrying it slowly onward. "And if we establish a representative currency system, then by the laws of economic development, it is only a matter of time before the two nations build a new currency interface, extend mutual guarantees, and settle in the new currency. And once the settlement currency becomes a new currency wholly under banking control, Royan Augustus will be able to effectively rein in the outflow of gold. He might even promptly discover those traps in his nation's industrial and economic development—discover the things we took such pains to arrange. With his cunning, he would likely resolve those hidden dangers very quickly."

Issuing fiat currency and creating obstacles to new-currency settlement between Typhon and Cecil was the means of preserving gold settlement between the two nations—and of delaying Royan Augustus's response.

"Yes—we must 'help' those Typhon investors keep this 'golden shortcut' open," Patrick nodded. "Of course, even if we opt for a representative currency, we can still continue to demand settlement in gold. There is another reason I support fiat currency.

"The Typhonians will not do business with us alone. They know that goods manufactured in factories must be sold to produce value, and Cecil, as a nation likewise developing a magical industry, will certainly not sit quietly and accept their exports—so they will surely seek new markets..."

Patrick had scarcely said this when Amber, standing to one side and looking for all the world as though her mind were wandering the clouds, suddenly chimed in: "Typhon may be in contact with the Highland Kingdom, perhaps negotiating over the dispute in the Blue Rock region. If so, the talks should be nearly concluded."

"...They intend to open trade with the Highland Kingdom, and may even have their eye on the Silver Empire's market," Gao Yang instantly grasped the answer, but then turned to Amber with a flicker of puzzlement. "That's intelligence from the southern part of the continent. Military Intelligence shouldn't have penetrated that far yet, should it?"

"I saw Soyo this morning; she happened to mention that the Silver Empire has recently been resurveying the disputed logging zone at Blue Rock. Also, in the technical exchange documents between the Silver Empire and the Ministry of Magical Technology from three days ago, there was a line saying that Typhon-made aetherweb units could also operate under standard operating conditions. Apart from the Blue Rock disputed zone—that triangular strip—Typhon and the Silver Empire share no direct border and no direct exchange. The likeliest way they could have obtained Typhon-made aetherweb units is through the Highland Kingdom, by roundabout channels—perhaps they were 'trade samples' Typhon gave the Highland Kingdom. These three countries have been grinding against one another with loves and hates for years now, and it all basically revolves around the Blue Rock disputed zone. So just now I put these things together..."

Amber spoke as though it were the most natural thing in the world, as if all of this were merely what she did in her idle moments while slacking off.

But Gao Yang's eyes had gone wide.

A moment later, he drew his gaze back and nodded with a smile. "Very good. You've done well."

Amber crossed her arms, the tips of her ears twitching: "Naturally. I am a God-Chosen, after all..."