The Stahl Plan

Keynes spent about six months drilling economics into Stahl's head, giving him no peace. Though Stahl had been a graduate student in his past life, he hadn't cracked open a textbook in years. Keeping up with Keynes's brutal lectures was no easy feat.

"Vice Chairman Stahl. Exports have surged, bringing in a massive influx of foreign currency. Consequently, the government has purchased a vast amount of this foreign currency. In this scenario, will prices rise or fall?"

"Uh, um... do they fall?"

"Whether the government buys foreign currency or not, the money supply increases! And what happens when the money supply increases?!"

"Uh, well..."

"Prices rise! This is freshman-level material! How can you still not answer within a single second?!"

"Can't you just handle it yourself, Professor Keynes?"

Stahl was utterly exhausted, but Keynes showed no mercy, continuing his relentless tutoring.

"I am a man who will soon depart. The one who must lead this system is you, Vice Chairman."

"...I suppose so, but..."

"Hold out your hand."

"...Pardon?"

"How many strikes do you want?"

Because Stahl had spouted utter nonsense just to keep Keynes by his side, warning sirens were blaring in Keynes's mind. If the Greek Prime Minister, or even someone like Ludendorff, had said such things, Keynes might have ignored it. But the leader of Europe's greatest superpower was this clueless? A sudden dread of global annihilation and another world war flashed through Keynes's mind.

And so, Keynes whipped Stahl into shape, training him over and over again. Naturally, Stahl delegated all state affairs entirely to Ferdinand II and devoted himself solely to his economics lessons with Keynes. Thus, six months of brutal, secluded training continued...

Psssshh...

Like a martial artist emerging from a cave with his inner qi doubled, Stahl stepped out into the sunlight for the first time in ages.

"Now... I have passed on everything I can."

Of course, Stahl wasn't the only one who had suffered. Keynes did not yet know of the Great Depression or World War II. Though he had served as a financial official for the British Empire, he lacked the actual experience of managing the entire global economy. Even so, driven by a profound sense of crisis, Keynes produced the masterpiece of his life: a refined version of the Stahl Plan.

In original history, Keynes, the father of Bretton Woods, had ultimately failed to build the Bretton Woods system the way he wanted. The United States had simply been too powerful! But history was different this time. Unlike the dollar-dominated Bretton Woods system led by the US, this was a system designed to minimize imbalances between nations. A system that would completely dismantle trade deficits and surpluses!

"This is the end of my secret technique. Now, I shall... take my leave. ...Do watch out for colds."

Keynes, who had always been cold and demanding while tutoring Stahl, offered a warm parting word for the first time. With a deeply moved heart, Stahl shouted after him.

"I owe you a damn lot! Thank you for everything!"

With Keynes gone, Stahl immediately set off for the Ottoman Empire at a breakneck pace. September 1918. In the brief time Stahl had been away, the world was already beginning to warp again. He had to go and set it straight.

Rising empires always produce the right talents for their times. Declining empires are the exact opposite. Either an incompetent ruler ascends the throne, or a capable one takes power but is a poor fit for the era. Sometimes, even a brilliant leader who perfectly matches the times is crushed without ever getting a chance to shine. Heungseon Daewongun was a prime example. No matter how capable he was, and no matter how well he read the shifting tides of the era, Joseon ultimately fell. The Ottoman Empire was in the exact same predicament.

"The oil fields! We must protect the oil fields at all costs! Without them, we will face absolute ruin!"

"The Saudi rebels, backed by the British, are waging guerrilla warfare and cutting off our oil supply from the Arabian Peninsula!"

"What are we to do...? As if Kemal shaking our control over the mainland oil fields wasn't enough! What about Iraq?"

"The Hashemite clan in Iraq is acting highly suspicious, Your Majesty. They will likely launch a rebellion in the near future."

Indeed, a doomed empire was destined to fall. Just as Wilhelm II of the German Empire had been brought down by Ludendorff. War? Of course, war was a decisive factor. But the root cause of that war was inextricably linked to the empire's own incompetence. The war had merely exposed that incompetence and accelerated its collapse. Mehmed VI wanted to weep at the sheer weight of the burden he had inherited. He had ascended the throne, yes, but he had inherited a ruined nation.

Observing the state of the Ottoman Empire, Stahl recalled Keynes's advice.

While Britain backed Arab power players like the House of Saud and the Hashemites, the Ottoman Empire desperately chanted the name of Stahlism in an attempt to forge a connection with another great power. Of course, Austria and the Ottoman Empire had historically been part of the Balkan region's endless conflicts, constantly at each other's throats. Many believed their ancient rivalry was far from over. That was when Stahl paid them a visit.

"I am merely the Vice Chairman of a single nation. How is it that the Padishah of the Turks welcomes me with such grand hospitality?"

"No, not at all! We are in desperate need of your cooperation!"

Stahl offered the Emperor a faint smile.

"What I offer is... merely loyal advice. Austria has absolutely no intention of interfering in the internal affairs of the Ottoman Empire."

"I know that."

"What the Empire needs is a revolution. Not reform—a revolution. The collapse of the empire is inevitable anyway. Iraq, Arabia, Syria, the Levant... you must effectively partition the empire while retaining Turkish hegemony over the core."

Well, from the Ottoman perspective, this was a somewhat familiar system. After all, they had once maintained a similar relationship with North Africa, leaving it as a semi-autonomous ally.

"However, you must never lose control over the oil fields."

"But how are we to manage that...? We have no power."

"Through trade. First, we will 'advance' weapons, military advisory services, and mercenaries. In return, you can provide us with oil as payment later on."

Exporting revolution, political stability, and military power, while importing oil in return. Thus, a grand "trade" was established between the Ottoman Empire and Austria.

Stahl's next destination was Germany. He recalled Keynes's next piece of advice.

In the original history, the United States had directly injected oil and infrastructure into a war-torn Germany. But that was because they were the United States.

"Vice Chairman Stahl! Thanks to your country's food aid, we've finally managed to catch our breath. You have my gratitude."

"Think nothing of it. More importantly... I hear Germany is facing a severe oil shortage that is hindering your industrial reconstruction."

"Indeed. We would like to ask for your assistance, but the Galicia oil fields alone can barely sustain your own domestic industries, can they?"

Stahl smirked. The Austro-Hungarian Empire was not the United States. They could not maintain the same overwhelming hegemony... But they could at least act as a "coordinator" that balanced the system and built the network. Besides, didn't the Empire possess plenty of gold?

Until now, the Austro-Hungarian Empire had supplied goods directly. Now, they would act as the "guarantor" for trade transactions. All settlements would take place under the system Austria created, and industrial standards would follow the Austrian model.

"I will connect you with the Ottoman Empire. Arab oil is currently flowing into our empire at dirt-cheap prices. We will pass it along to you at those same dirt-cheap rates."

"Hmm... Actually, we were considering purchasing directly from the Ottoman Empire ourselves..."

True. There was no reason for Germany to buy "through Austria." But Austria had already laid a trap in the Ottoman Empire for this exact reason. Nowhere else in the world could anyone obtain Arab oil cheaper than Austria. Why? In signing the economic treaty with Austria, the Ottoman Empire had secured another condition: they were allowed to dump all of their low-quality manufactured goods onto Austria.

When Stahl explained this, Ludendorff still looked uneasy, clearly worried about economic dependency. And Stahl recalled Keynes's final piece of advice.

Yes. This was the core of Keynes's advice. First, form mutually equal economic blocs. Second, ensure that no "trade imbalance" ever persists within those blocs. Stahl smiled as he explained the new system.

"If you are worried about trade imbalances, you have nothing to fear."

"Why is that?"

"We intend to implement a system that penalizes both deficit and surplus nations. Taxes for surplus nations, and austerity for deficit nations. The greater the surplus or deficit, the harsher the penalty."

Germany had nothing to lose. For the time being, Austria was bound to run an overwhelming trade surplus with Germany. But what if the Krone actually became the key currency? Then Austria would eventually run an overwhelming deficit. Of course, Austria could just print more money, but a permanent trade imbalance would eventually solidify. That would be detrimental to both Germany and Austria. But under the new trade system Stahl proposed? Even if Austria ran a surplus and profited, it wouldn't be an issue.

"In any case, all the surplus we gain will be funneled back as loans for your infrastructure reconstruction and recovery. There is no downside for you, is there?"

Thus, even Germany was successfully integrated into Austria's "bloc." Along ‍‍‌‌⁠​​⁠‌​​‍​​‍​‌​⁠‍‌‍⁠⁠‌⁠‌‍‌‍‌‌‌‍⁠​‌​‌​‌‍‌‌‌⁠‍​​‌‍⁠‌‌⁠⁠with Greece, Romania, Poland, and others... Stahl spent six months traveling in person, successfully bringing them all into the fold.

January 30, 1919. Naples, Rome, Germany, Poland, Greece, Bulgaria, the Ottoman Empire, Persia, and Vietnam. A total of nine nations gathered in Prague. Keynes watched Stahl with a proud expression. Conscious of Keynes's gaze, I continued my speech.

‍‍‌‌⁠​​⁠‌​​‍​​‍​‌​⁠‍‌‍⁠⁠‌⁠‌‍‌‍‌‌‌‍⁠​‌​‌​‌‍‌‌‌⁠‍​​‌‍⁠‌‌⁠⁠

"We have endured a devastating war. And so, I pondered: what if nations were so economically intertwined that they literally could not afford to wage war against one another? A peaceful world would surely follow!"

The Bancor system advocated by Keynes was finally complete. Each nation would use an artificially created reserve currency called the "Bancor" for trade. Their respective national currencies would be pegged to the Bancor. Of course, actual transactions could still occur between currencies, or even through barter. It was simply that all trade transactions would be denominated in the unit of Bancor.

This Bancor would be managed by the newly established Prague Treaty Organization, with all transaction records transparently logged. If a nation ran an excessive deficit? Naturally, exchange rate adjustments would be made. If a nation ran an excessive surplus? This time, a penalty tax would be levied. In this manner, trade would proceed without anyone suffering from unfair imbalances. If Germany sold too many goods, it would have to invest in the Ottoman Empire. Conversely, if the Ottoman Empire ran a deficit? Just like the IMF of the future, austerity adjustments would be enforced. Thus, the Ottoman Empire and Germany would be forced to negotiate and compromise.

An ideal world created by Keynes, where negotiation and compromise naturally occurred! Now, the member states of the Prague Treaty Organization were tightly bound together economically.

Heh. All those lessons certainly paid off.

Indeed. So what did Austria stand to gain from this? First, we could "export" our political influence. This was the core. We had turned political power itself ‍‍‌‌⁠​​⁠‌​​‍​​‍​‌​⁠‍‌‍⁠⁠‌⁠‌‍‌‍‌‌‌‍⁠​‌​‌​‌‍‌‌‌⁠‍​​‌‍⁠‌‌⁠⁠into a commodity. On top of that... the fact that the Prague Treaty Organization was in my hands was also key. In the 1980s of my past life, the United States had established various funds and international organizations, joining them as a member. What did they gain? By establishing international norms, they secured global hegemony. We would display our hegemony by coordinating the international order and resolving disputes. In the first place, this system could not function without us. Who would guarantee the credit of the Prague Treaty Organization and the Bancor? Ultimately, this organization could not exist without Austria's gold reserves. Of course, we wouldn't be able to brute-force our way like the Marshall Plan did, but still.

Thus, Europe slowly began to rebuild itself around the Prague Treaty Organization and its new currency, the Bancor.