kscans

Chapter 166 - Episode 5: Part One, Questions and Answers

Information is a commodity of the new city. The most critical type of information specifies "what time, for how much, and in what quantity." This is what the futures market creates. I waited for the explanation to sink in with the audience.

Almost simultaneously, multiple hands shot up. It was Q&A time.

"You call it public trading, but even without guild restrictions, I don't think it's possible for everyone to freely buy and sell wheat."

It was Jean who spoke first. I replied.

"The public disclosure of price information and the ability to participate in trades are two different things. For each commodity, eligibility to participate will be managed through membership rights."

"What about food items other than grain, Dalgan asked?"

"The range of commodities handled will gradually expand. If stored as salted or smoked goods, even meat might be possible. Even if it's just wheat initially, the existence of benchmark price information will benefit other commodities as well."

"Compared to grain sellers, the scale of buyers is smaller. Our benefits are still difficult to see."

"I believe it will bring not only stable supply but also stable quality. It's easier to paint on a uniform white canvas, isn't it? If a flow of information gathers in the futures market, information about rare fruits and other items will also become easier to obtain. We can expect the range of colors in our palette to increase."

I said this, recalling the white mousse Plural had served at the Shoken Festival.

In my original world, cacao was also traded, I believe, but I can't make promises lightly. The Empire seems to have cacao, but the details are still unknown.

"Um, excuse me. Like, tea..."

Sherry tentatively raised her hand.

"Regarding luxury goods, we're still exploring. If possible, please lend us your wisdom. However, the luxury goods market has a large growth rate if the overall scale of business expands, doesn't it?"

If wheat transactions increase from 100 to 120, luxury goods like tea could see transactions rise from 1 to 2. What Belmini handles is an even rarer green tea among those.

"Even with a membership system, it will involve transactions with far more people than before. What about collateral for credit?"

The chairman of Kenwell Company spoke, as if snapping back to reality.

"The exchange will hold it as margin."

"Then funds will be tied up. We can't commit funds equivalent to the entire transaction just for insurance."

"Transactions will be settled on margin. For example, if it's a purchase and sale of 100 gold coins, they cancel each other out. If it's a transaction of 100 coins and 110 coins, only 10 coins are transferred to the other party."

Margin trading should have been the reason Dojima Rice Exchange was considered the precursor to modern futures markets.

"What about the actual exchange of goods?"

Giverny said. While his main business is land transport, he also needs to be our connection to river transport.

"The transactions themselves involve the buying and selling of certificates, so goods don't move. Goods are only moved from the warehouse when they are delivered on the due date. Even so, a large variety of goods will be transported in the city. That's why we're currently standardizing cargo containers."

"You did say to standardize cargo containers, considering their use on ships, Giverny growled." We absolutely need his help in the construction and operation of the massive warehouses.

"I thought it was rather reckless for individual merchants to primarily handle international trade. But if the system takes care of it to that extent... Hmm. Then, how will the futures market itself be funded?"

"For each completed transaction, we will charge a certificate issuance fee. In return, the exchange will undertake the settlement operations for the margin trading I just mentioned."

I answered each question. I said it casually, but the issuance and trading of certificates are an even bigger bombshell, something not to be spoken of before the futures market is even established.

As I answered questions, understanding spread across the faces of the older participants. They must be forming an image where information, credit, and money are all connected. Merchants are inherently professionals who deal with something in between money and information.

They mediate the trading of less liquid goods using highly liquid money as a medium. However, if they are not constrained by tangible goods, their role is information transmission itself. Money merely gives form to credit information.

And by moving information, which is the easiest to move, the movement of money, goods, and people will all accelerate. That means economic growth.

"I have one question."

Just as the atmosphere in the venue began to heat up, a dignified female voice spoke. The chattering merchants immediately fell silent. Euphillia, Grand Duchess Bertold, the head of the kingdom's largest noble family, had spoken.

Euphillia's position was entirely different from ours. The foundation of the nobility is immovable land and unwilling liegemen.

"Does that mean if the people of the kingdom are starving, but the Empire offers a higher price, the food will go to the Empire?"

A question from a ruler had emerged. Naturally, no, it should be said that it is reassuring to see this sense of crisis in a kingdom that has enjoyed consecutive good harvests in recent years.

"I will not deny it. However, I do have a counterargument."

"Let's hear it."

Euphillia's eyes were not smiling. Beside her, Craig, who had been composed and magnanimous moments before, now looked at me with sharpened intensity. The lively atmosphere that had filled the venue vanished, replaced by a tense silence.

An anomaly residing in the Commercial Guild. The next king, who commands the kingdom's highest military power, and the greatest archduchess. While I had received assurances from the King and the Chancellor that the new city's operation would be entrusted to me, these two possessed enough power to overturn that at any time.

"Firstly, the rapid and guaranteed information provided by the futures market will reduce the occurrence of famine itself. I will provide you with data compiled by Mia on this later. Looking at past famine records, you will find that even when there was enough food overall, the panic caused by poor harvests led to a halt in transport and trade, which then expanded the damage."

Even in large-scale famines on Earth, it was rare for an entire country to genuinely lack food. There would be situations where one region had an abundance while another faced shortages. For example, during a poor harvest, everyone restricts not only goods but also information.

Simply put, it's suspicion and distrust. As a result, transactions that could have been completed if only information were available are cut off in many places, leading to a chain reaction. In finance, this is called systemic risk, but it can also happen with food.

From a noble's perspective, this is a huge blow, not only in the year of the poor harvest but also in the long-term reduction of tax revenue thereafter.

"The futures market will disclose information about food shortages before anyone else. Information like 'this is the current market price for selling' or 'this is the price at which it can be obtained' will be formed. It will work to remove the biggest cause of famine, which is the halt of transactions."

"Conversely, what if it's abused for hoarding or other schemes?"

"This is where the advantage of having aspects of public trading comes in. Anyone who attempts such transactions during a national crisis will be exposed to public scrutiny. Records of transactions are indispensable for public trading."

It becomes difficult for merchants to form price cartels behind closed doors. Of course, not everything can be prevented.

"Conversely, is there a possibility that prices will fall uncontrollably due to a bumper crop?"

"If it becomes known that prices will be low, new demand will be easier to cultivate. Also, measures such as increasing stockpiles will be easier to implement. Your concern, Grand Duchess Bertold, is essentially that by everyone having information, there is a possibility that confusion might spread, correct?"

Euphillia nodded at my words.

"It is possible. Therefore, by narrowing the source of information dissemination to a single point, the new city, we create a controllable situation. Its location at the junction of the Kingdom and the Empire also serves this purpose."

A policy experiment in a quarantined special zone. It is the same as Bertold's workshop.

"You also said it would be far from the meddlesome Royal Capital, but..."

"That was a joke... No, it wasn't. To fulfill the functions I just explained, the state's involvement in the futures market must be based on rules. If information is distorted by state power, the functions I just mentioned will be impaired. Conversely, if it goes through rule-based procedures, measures such as temporary market suspensions can be accepted."

The level of public education is different from Earth. Even within the scope of my past life in modern times, with its widespread education, financial panics still occurred.

"In fact, the policy measures of rulers will also be conveyed quickly. The reverse of what I just said, but if the state announces the release of its stockpiles, the soaring prices can be quelled through the futures market."

I added. Euphillia picked up her fan, hid her mouth, and pondered.

"So, you're saying that the information created by the futures market itself is neutral, and if everyone utilizes it from their own position, things will naturally settle where they belong."

"Yes, I believe we will move closer to such a state than we are now."

With Euphillia showing a high level of understanding, relief spread across the merchants' faces. But then...

"That was quite an interesting discussion."

Another comment from a powerful figure brought tension back to the room.

"As expected of Ricardo. Everyone here has been thrown into disarray and had a hard time. If I had gone along with Ricardo, I might have found myself installed as the next king before I knew it."

Craig wore his usual jovial, almost boisterous, smile. Royal jokes brought laughter to the venue.

"Actually, when I first heard this story, I thought Ricardo might want his own country, separate from both the Kingdom and the Empire."

Craig continued, looking amused. Hey, a future king calling this rebellion is no laughing matter. Look, the merchants who were laughing just moments ago have frozen their smiles, as if asking, "To laugh or not to laugh, that is the question."

"But, after hearing your explanation now, it seems like more than that. It sounded as though merchants would dominate both the Kingdom and the Empire. You must tell us what would happen to the states."

Ah, he found out.