Chapter 52
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Translator: 8uhl
Chapter: 52
Chapter Title: A Cold Wind from the New World
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As 1836 drew to a close, a new day dawned.
The outlook for the British people as they welcomed 1837 could be summarized in a single word: hope.
Although the British economy had its minor issues, on the whole, it was enjoying continuous growth.
The textile and iron industries grew larger by the day, and capitalists screamed with delight at their assets, which seemed to multiply overnight.
Stock prices continued their soaring ascent day after day, and the market was awash with money.
The working class was no exception.
With the repeal of the Corn Laws, food prices dropped, bringing a measure of relief to their lives.
They hadn't completely escaped their hand-to-mouth existence, but now a day's wages could feed them for more than two days—and what a difference that made.
The reason for Britain's ever-booming economy wasn't just the continuous growth of its domestic market.
“America! Investing in America is like printing money! Are there still morons who haven't invested in America?”
“If you see a moron like that, you could probably beat them up and get away with it. Real estate is god, and I am invincible. Pour every spare penny you have into America. Especially real estate!”
As the American economy had recently shown remarkable development, British investors found themselves with another new market into which money was pouring.
From its nascent industrialization and the construction of various infrastructures like canals, to land development and territorial expansion.
All these ventures naturally required money and goods, and British companies and investors endlessly fed this goose that laid the golden eggs.
The banks, which should have been managing this, were fueling the trend by recklessly expanding credit and offering unlimited loans.
“Real estate is a sure bet—it always goes up. And if you're not buying American real estate, you're a fool.”
Once started, this frenzy could not be stopped by half-measures, and the U.S. government, sensing that something was amiss, resorted to a drastic measure.
-From now on, all federal land transactions must be made in gold or silver, not banknotes.
It was a measure intended to curb the excessive explosion of liquidity, but unfortunately, it was also proof that even the U.S. administration itself did not grasp the severity of the situation.
This move, meant to cool the overheated economy, ultimately became the spark that ignited the worst possible outcome, one that no one had anticipated.
But for Europe, which had yet to experience a global economic depression, this was nothing more than watching a fire from across the sea.
Only a very small few felt the sense of crisis, the possibility that these flames could cross the Atlantic and engulf Britain.
At least, until now.
***
January 1837.
After finishing the New Year's celebrations, I listened to the Duchess of Kent’s usual complaints and concluded Victoria’s lessons, by which time evening had already fallen.
Unlike last year, which had flown by in a blur, I had a strong feeling from the very start of the year that this one would be long and arduous.
Just looking at the events scheduled for this year, it promised to be a dynamic one.
Victoria, who would come of age this year, would likely be crowned queen around the halfway point of the year.
I, too, had to graduate from Eton, where I had spent so long, and move on to university. Thanks to the paper I wrote last year, I was already being heavily courted by both Oxford and Cambridge.
Of course, as I would also come of age next year, I planned to focus more on external activities than on university, but the advice from those around me was that I should still have the prestige of a top university to my name.
Since I had intended to do so anyway, I readily accepted their advice.
After all, the power of a prestigious education was that it could preemptively silence any talk of 'what would a country bumpkin from Ireland know?'
“Graduating from Eton and going on to Christ Church, Oxford, is the most classic elite path one can think of in this country. For you, getting in won't be an issue anyway, so wouldn't it be best to set that as your course for now?”
“I'll do that. It seems best to secure the title of a student at the British Empire's most prestigious university.”
“Yes, yes. You're starting to attract attention, so you need to manage your image well. You're aware that there's been a lot of talk about you within the party recently, aren't you?”
“I imagine so. I will be an adult next year, after all.”
“Right. So, a rather heated debate has broken out, split between those who argue we should grant you an English title and bring you into the House of Lords around that time, and those who say it's too soon.”
“And has a conclusion been reached?”
As expected, Wellesley shook his head, looking troubled.
“No. It will happen eventually, but the faction arguing that bringing you into the House of Lords right after you come of age is too soon seems to have the upper hand.”
“That's great progress. It means they're willing to let me into the House of Lords at some point, anyway.”
“It's because Daniel O'Connell continues to flex his influence in the House of Commons. Despite constant attacks from various newspapers, he's still holding strong, so the nobles within the party can't help but place their hopes in you.“
“So, the tide is turning in our favor. If the debate is not about *whether* to grant me a title, but *when*, then it's only a matter of time. Opinion will shift to one side after this year, so Lord Wellesley, please don't try too hard to take my side. Just watch and wait.”
No one knows it yet, but when King William IV dies this year, a general election will have to be called to convene a new Parliament.
If Ireland's influence is proven to be as strong as ever then, will the party's senior members still be able to dither and talk about timing?
“But there's a more pressing matter to focus on right now. If we don't want to hand over the power we worked so hard to gain, we need to start preparing now. You've shared the information I gave you last time with Disraeli and Gladstone, haven't you?”
“Of course, I did. Neither of them seemed to take it very seriously, but recently, they seem to be getting the feeling that something is off.”
“As they should. Lord Wellesley, you've grasped it too, haven't you? That British banking policy is looking ominous.”
Not only Wellesley, but also James, who had been buried in a pile of documents without once looking up, finally raised his head and looked at me.
"They've announced consecutive interest rate hikes, haven't they? I hear it's unprecedented to raise rates this quickly."
"That's not all. Just as you warned, Young Master, the banks are virtually freezing all new loans. It must be because they either lack the capacity to lend, or they anticipate that current borrowers will be unable to repay."
"Still, isn't it just a temporary phenomenon? Won't things stabilize again in a few months?"
Considering my track record, he should know that's not the case, yet he still asks.
“Lord Wellesley, if that were the case, would I have been in such a hurry to liquidate all the land I bought in Chicago last year?”
“You did... Now that I think about it, the timing was truly unbelievable. How on earth did you predict that?”
“Land prices are bound to trend upward in the long run. That's a fact, but the current real estate market is far too overheated. The amount of money in circulation and the state of lending are not normal. This applies not just to the United States, but to us here as well. They know it over there too—why else would they have issued such a ridiculous policy that you can't buy land with paper money? Seeing that, the banks here have realized the fire is at their own feet.”
“But even so, it's a problem that erupted in America. Could it really have such a major impact over here? Ah, of course, I do think pulling all your money out of the U.S. was an excellent decision.”
To someone familiar with modern economics, this might sound like utter nonsense, but this was the typical mindset of people in this era.
They were familiar with economic panics within a single country, but they had no experience with a global-scale economic depression.
There had been panics before that had a tremendous impact on a single nation.
The Tulip Mania in the Netherlands, the Mississippi Bubble in France, and the South Sea Bubble here in Britain were representative economic crises of the classical economic period.
However, these panics were mostly confined to their respective countries, and even if they affected foreign nations, the impact was limited.
This was because capitalism had not yet matured enough for the capital of different nations to be as closely intertwined as it is in the modern era.
But in an era like this, where modern capitalism was maturing, things were different.
The economies of European nations were beginning to influence one another, bound by various links, and Britain and the United States, in particular, were engaged in active interaction not only in terms of capital but also financially.
There was a good reason and background for why the economic crisis that began in the United States in 1837 came to be considered the world's first global economic panic.
“Lord Wellesley, you know how many investors have their money tied up in the American market, right?”
“Of course I do. We may have pulled our money out, but even among my own acquaintances, there are members of Parliament who still haven't come to their senses and are talking about buying land in Illinois.”
“It's not just money; the iron and coal companies are in the same boat. They are operating under the assumption that the market will continue to grow, as their sales to America increase by the day. But what happens if the American market suddenly collapses, exports plummet, and the expected revenue never arrives? The human body cannot survive without enough blood circulating. And in an economy, the blood is...”
“Money.”
Understanding the gravity of the situation, Wellesley's face hardened.
James quickly sifted through the documents that had arrived from America, trying to get an accurate grasp of the current situation.
“On our end, the banks are still just managing loans and interest rates, but in America, it seems the market is already in turmoil. Chicago land prices, which had been skyrocketing, have begun to fall rapidly, and I'm told that borrowers are starting to default on their debts. If this trend isn't contained... we could see a chain of bank failures.”
It's not a matter of 'could see'; it *will* happen.
In modern times, it's somewhat overshadowed by the Great Depression of 1929, but before that, the Panic of 1837 was considered the largest and worst economic depression in American history.
“If the fallout from that reaches here, does that mean our banks and companies could go bankrupt too? And even if they don't go bankrupt, their operations will be severely curtailed.”
“Correct. But conversely, this is also an opportunity for me.”
“An opportunity? How so?”
“No matter how solid a company is, it can't escape the effects of a recession. Stock prices will hit rock bottom, and with cash reserves drying up, they will struggle to maintain the scale of their business. The iron companies, currently riding a wave of growth, will also take a direct hit. James, in your opinion, how far do you think the stock prices of such companies will fall?”
"It's difficult to predict right now, but... if it goes as you foresee, Young Master, they're certain to fall by at least half. Ah, by opportunity, you don't mean...?"
Of course, that's exactly what I mean.
Why else would I have been holding on to a significant portion of the cash I pulled from America and the money I won at the casino?
"Yes. James, first, I want you to research and compile a list of sound companies in the iron and coal mining industries in Britain and America—companies that are solid enough to recover once the recession is over. And Lord Wellesley, please meet with Disraeli and Gladstone right away and devise a plan to respond swiftly when the economic crisis actually hits. There's a high probability of an election in the near future, and how we handle this will determine the number of seats we win in the next one."
“An election? His Majesty is indeed old, but... no, my apologies. I'll consider countermeasures under the assumption that an election could be held this year, as you say.”
He'd better. If he had said 'surely that won't happen' again, I might have seriously felt the urge to curse. What a relief.
“The storm that will soon reach these shores may seem like an unprecedented crisis, but this too shall pass. And those who are prepared find opportunity in crisis. By the time this year is over, I suspect a great many things will have changed.”
At my bold declaration, a faint smile appeared on the lips of Wellesley and James, whose faces had been tense with anxiety.
With a clear understanding of our respective tasks, we returned to our duties.
***
In an economy, a period of growth is inevitably followed by a period of correction.
Few people are unaware of this fact.
But most people fall under the hypnosis that as long as their money is in, the boom will never stop.
This illusion, which seemed as if it would last forever, feeds on people's expectations, swelling endlessly before vanishing like a mirage in an instant.
Only then are the majority of people bludgeoned in the head by the mace of reality and reason, snapping out of their collective hallucination.
“Fuck! Nooooooooo way!”
“This can't be happening! No! It can't be! Something's wrong!”
“What do you mean you can't give me a loan?! What kind of bullshit is that! If I don't get a loan, I can't make my overdue payments!”
As defaults surged in America and its economy plummeted endlessly, the British stock market, which had seemed to have nothing but fair winds ahead, took a direct hit.
The stock prices broke at an angle so sharp it would put a major league pitcher's forkball to shame, and those who witnessed it turned deathly pale.
“Aaaaaah!”
“Over here! A body has surfaced north of London Bridge!”
“Hey! H-hey! Look over there, isn't that person about to jump?”
In the Thames, people consumed by despair threw themselves into the water, and the black river, polluted by industrialization, swallowed the poor victims.
But even at this moment, many still believed that this phenomenon was only temporary and that an opportunity for a rebound would come.
How could an economic crisis that erupted in America, a nation so much weaker and more backward than the British Empire, possibly shake this country?
Those who believed this desperately denied reality, clinging to a sliver of hope.
And then, cruelly, just as the full bloom of spring, a stark contrast to the people's ever-freezing sentiment, enveloped the nation.
-New York banks suspend specie payments.
The death sentence fell upon the American economy: banknotes could no longer be exchanged for silver and gold coins.
For Britain's capitalists, a deep and inescapable nightmare had begun.
And I, upon these terrible, stormy waves, shall seek the sweetest of slumbers.