kscans

Chapter 226 - Episode 18: Part 2. A Pictured Rice Cake Is Inedible, But Pictured Paper Can Buy a Rice Cake.

"There is one more concern. The chaos this massive transfer of funds will cause in the kingdom’s economy."

Volker spoke, his expression grim. It was good that the discussion was now premised on the issuance of bonds. But even so, one final problem remained.

I understood it well. In this world, money was not a purely intermediary tool that could flexibly expand and contract with the scale of the economy. It was a physical substance. In other words, if it was taken from one place, that place would suffer a shortage.

In a sense, it was the same as any commodity. A currency in the form of precious metals may be a medium of exchange, but it functions much like bartering.

To put it in the simpler terms of a commodity like food, it would be like sending all the food to an army across the river, causing a shortage back home and starving the people.

And now, with the construction of the new city and the war against the Magic Insects, a majority of the kingdom’s gold coins would be poured into that effort. What would happen if nearly all the assets of the nobility were converted into these bonds? Even if the nobles’ assets remained unchanged on their ledgers, the amount of gold coins they could freely use would decrease.

That would mean the great merchants who did business with the nobility would be unable to trade. Then the small and mid-sized merchants who supplied the great merchants would be unable to trade. And the artisans and farmers who provided the raw materials would be unable to produce their goods.

In short, a shortage of gold coins would trigger an economic collapse from the top down.

Understanding this, the guild masters’ expressions were also hard. I could tell just by looking at their two faces. They were, to some extent, resigned to this miserable state of affairs.

It was the worst possible outcome for my own objectives as well. The kingdom’s economic growth, which was just now poised for takeoff, would be crushed. And at the pace of this world, if it stumbled badly even once, recovery could take two or three generations. That would call the very meaning of the new city’s existence into question.

"We have a countermeasure for that as well. In fact, this bond itself is a mechanism for that purpose."

So, of course, I had a plan. I stood up, feeling Mia’s gaze upon me.

"The currency imbalance can be resolved by establishing a royal-chartered market for trading these bonds."

I announced. Since there would be no annual interest payments, I could have them turn their attention to this instead.

"In other words, we will provide a means to convert these bonds back into gold coins by buying and selling them."

"You mean they can be exchanged for gold before they are redeemed. However, the shortage of gold coins itself would remain the same, would it not."

"No, the very existence of such a market is what is important. Through it, these bonds will possess liquidity, just like gold coins. That means it will become possible to conduct business by exchanging bonds for goods, and goods for bonds, not just gold coins for bonds. Essentially, the paper certificates called bonds will circulate as a medium of exchange, just like gold coins. This will, in theory, have the same effect as increasing the gold supply by an amount equal to the bonds issued."

We would have credit, not precious metals, fulfill the role of money. It was a case of, "If you have no gold coins, why not pay with pictures of gold coins." This was the kind of talk that would start a riot if we were not facing a crisis of humanity.

"Will paper acquire so much value just because a market exists?"

He sounded doubtful. Of course, that alone would not be enough.

"First, there is the credit of the royal family, as mentioned earlier. Then, it would be impossible without borrowing the power of the state. Especially…"

I looked at Volker.

"The power of the Minister of Finance, who is in charge of tax collection."

I could sense Volker’s guard rising to its maximum. He had remained mostly impassive during Mia’s dispassionate explanation. I wondered what was so different about me.

"Your Excellency, Minister of Finance, I would like you to grant your official approval for these bonds to be used for tax payments, same as gold coins. Of course, we would need to restrict their use for tax payments to a period of at least five years from now. Otherwise, the capital we worked so hard to borrow will simply vanish as a decrease in tax revenue."

A currency, whatever its form, has value as long as there is a guarantee it will be accepted. To take an extreme example, gold cannot be eaten, lived in, or worn. So if everyone decided they did not want it, it would have no value.

But gold carries the reliable trust that it can always be exchanged for food. In other words, the guarantee that people who have goods will "accept it" as payment is what turns gold into money.

If the same conditions are met, even seashells, stones, or with the right approach, tulip bulbs can fulfill the role of gold.

Naturally, however, many people must accept it. For example, if only a very small number of farmers accepted gold as payment for food, the remaining gold would become worthless once those farmers sold out of food. In other words, a fierce competition to exchange gold for food would begin, and as a result, the value of gold would plummet.

The amount of money would become excessive relative to the amount of goods. In other words, inflation.

That is where taxes come in. The ability to pay taxes with something is the state declaring that it will accept that thing. In my past life, this was what backed the credibility of paper money.

"We merchants, with the kingdom’s bond market as our foundation, will reduce the demand for gold coins by trading these bonds. The common people and small merchants can continue to use the existing currency as they always have," said Chairman Kenwell. The representatives of the remaining guilds showed their agreement. If this went well, not only would economic activity not be damaged by a currency shortage, it would expand. This was a monetary policy designed to handle the vast economic expansion brought by the war with the Magic Insects and the new city.

"I was not told it would go this far."

For the first time, Grynisias glared at me.

"Your Excellency the Chancellor, Your Excellency the Minister of Finance, I do hope you will invest in these bonds as well. Doing so will create even more confidence."

"I suppose we have no other choice," Grynisias said to my words, looking as if he were about to sigh.

Volker’s eyes darted left and right. The officials lined up behind him were also murmuring amongst themselves. But the atmosphere was different from the distrust of moments ago. That was because their eyes were bloodshot.

This is strange. I feel like I am bribing politicians with unlisted stock. Oh well, it's fine. In this world, there is no such thing as a transaction that is not insider trading.

A long discussion began between the merchant side, led by the guild masters, and the politician side. The officials who had been waiting in the back swarmed around Mia.

Well, since defeat means the end, no one probably mentioned it, but considering my own objective, there is a fundamental problem. To make all of this work, we need a victory against the Magic Insects that is extremely close to absolute.

I have no choice but to manage it somehow, but the pressure is unbelievable.

◇◇

"Hey Mia. Are you sure it was okay to refuse?" I asked Mia in the carriage on the way back.

"What are you referring to?"

"Well, the consulting contracts with the Carriage Guild and the Construction Guild…"

After the meeting, Mia had been approached by the two guild representatives with just such an offer. She would only have to answer a few questions when they came to her, and only when she had time. For that, she was promised compensation.

Of course, considering Mia’s abilities and the value of her knowledge, it was almost too cheap. The sum was far beyond what one would call a child’s allowance.

For the record, the Vinder Company does not seem to prohibit side jobs. The proof is me.

"Where would I find the time for that?"

"W, well, you have a point."

The cause of Mia’s busyness was my side job, so I could not say anything.

"We’ll have to think of a proper way to thank you, Ricardo-kun," my father said. He was absolutely right. Mia was a shareholder of Vinder. That meant Vinder’s profits were distributed to Mia through her stocks. But the burden on her right now was not something that could be balanced on that level.

"If there’s anything you want, just tell me. I’ll do whatever I can."

I said it. Mia flinched with a start.

"In that case, there is one thing."

"Tell me."

I spoke, feeling a little tense.

"When you go to the new city, Senpai, please take me with you. I don’t want to be left behind guarding the Royal Capital."

"Eh?"

Is that really a reward? No, in the first place…

"That’s something I’d want to ask of you. It looks like our headquarters will be moving over there anyway."

I glanced at the chairman of the Central Garden establishment preparatory committee. My father nodded.

"I can’t do anything without you, Mia. So not something like that, something proper…"

"No, that’s fine. You will not go beyond the great river alone. Please remember that, Senpai."

Mia said it in a tone that allowed no argument. I nodded. Mia’s expression seemed to relax in relief.

"Alright then, Mia. I have something to ask Ricardo," Euphillia said, looking at me with those creeped-out eyes for the first time in a while.

"What is it, Your Grace. I believe I explained everything to you beforehand and even received your advice."

I replied, on my guard as well.

"I have only just now grasped the full picture. This is, while being called a countermeasure against the calamity, really a discussion about how to gather a massive amount of funds for your plan as cheaply as possible. Well, that much is fine. But there is one more thing…"

Inside her own carriage, Euphillia checked her surroundings left and right as if wary of eavesdroppers. Then she hid her mouth with her feather fan.

"…Is this not a scheme to replace the Kingdom’s Currency System with one of your own design?"

Well, yes, that is what it is. But you are not supposed to say that part out loud. Even my father had a troubled look on his face. This was a massive reform, converting part of the currency from precious metals to what was effectively paper money. Something like this could only be done at a time like this.

No, it is not like I did it because I wanted to.

"It was necessary for the fight against the calamity, so it couldn’t be helped. We just discussed how it’s necessary to save the kingdom’s economy, did we not."

After saying that, I lowered my voice.

"Besides, you were both worrying over how to use the increased tax revenues, weren’t you? My dear majority shareholder. And Father, you said that sighing before a growing pile of gold and silver coins wasn’t healthy for a merchant."

The two of them sighed.

"…Everything is for the sake of the kingdom, and for the survival of the human realm," Euphillia said as if in resignation. That is not just a pretext, it is the complete truth.

"Senpai. You have a wicked look on your face."

"Perhaps we really should separate Ricardo-kun from the company," my father said, looking at Euphillia. Between the two of them, they held seventy-nine percent of the voting rights. A crisis of dismissal was brewing. This is bad. I need to implement a stock option plan to distribute shares to the employees and start working on building a majority…

Yes, that is no good. I cannot see a future where the employees would side with me.