Black Friday, Part 3
Wall Street, the financial district where business ethics were practically non-existent, was as bustling as ever. Planting spies in major corporations to steal insider information and profit from the arbitrage was barely even considered illegal here.
"Alright, let's paint the tape! Keep buying and selling a single share back and forth! Once they see the trading volume skyrocketing, the retail herd will swarm in on their own!"
"Uh... but the company we invested in is on the verge of bankruptcy..."
"Call up the press. Tell them to run a story about some fancy new technology they just developed. We'll pocket the gains and get out."
Wash trading to inflate volume and spreading rumors were just the tip of the iceberg; there were countless other ways to make a buck. Borrowing money using clients' accounts as collateral, colluding to ensure sure-win stocks were never sold to customers, shaking the market to squeeze out retail investors—Wall Street was peaceful today, as always. Surely, this was what it meant for capital to be alive and kicking.
But into this peaceful financial haven, an immense wave of selling pressure began to pour.
"Wait a minute. That chemical company we invested in? The stock price is suddenly cratering!"
"W-what's going on? Damn it, some deep-pocketed whale is shorting us!"
"W-what should we do?"
"What do you think? Buy! Hit the bid! They'll take a quick profit and back off."
A robust individual with a strong immune system might only suffer a runny nose when hit by the flu. Naturally, a virus targets the weak, the sick, and the elderly. The Austrian locust swarm began targeting small and medium-sized enterprises—companies with unstable cash flows, low productivity, and those destined to be swallowed up by economies of scale without leaving a trace.
If they were mere hedge funds, Wall Street's old guard would have easily blocked the assault. After all, the only reason those zombie companies survived in the first place was because the beasts of Wall Street toyed with their stock prices. But while the attackers appeared to be just three or four ordinary hedge funds, a sovereign state stood behind them. It was not a scale that a single fund or bank could hope to withstand.
To make matters worse, the Austrian locusts were not the only ones in the market.
"Hey! A massive player just jumped in!"
"Whoa! Let's go scavenge!"
"It's a money-printing event! Get in, quick! Call the insurance companies and borrow some shares right now!"
Naturally, the beasts of New York joined the short-selling frenzy. And that wasn't all. Investors, terrified by the short-selling onslaught and disgusted by the rotten state of these companies, began dumping their shares in a panic. The result? Predictable. Delisting! Just like that, several financially crippled small and mid-sized enterprises instantly went belly up. Well, there was nothing unusual about that.
"Isn't this strange? Manhattan Steel, Eastern Engine, Washington Insurance... sure, they were all sketchy companies, but they weren't in bad enough shape to go bankrupt, were they?"
"Well, so what? Look at the times we're in. Is it really that shocking for poorly run companies to go under?"
Unfortunately, neither the Republican Party's fiscal experts, the government, nor the beasts of Wall Street noticed anything amiss in this series of events. The correction triggered by the French shock had actually made the market healthier. Swept up in the grand illusion of European reconstruction, companies that should have gone bankrupt long ago were wiped out in one fell swoop by the French shock. Wasn't this the very purpose of short-selling? Since only the companies that deserved to fail were being purged, there was no cause for concern.
"Let's take this opportunity to clean up our portfolio a bit."
"Yes, sir. Understood."
In the grand scheme of the massive American market, the collapse of a few garbage small businesses was hardly surprising. No one noticed the truth. Except for one person.
In the end, stock prices are entirely driven by psychology. The moment investors sense an ominous shift and think, Wait, something's wrong, the market plunges like a roller coaster. That is the genesis of a panic.
"Everything is going according to plan. But... the American market is far healthier than either I or Vice Chairman Shtal anticipated."
Of course, if they maintained their short positions in the futures market and launched an all-out assault on the British pound—the relatively weak link—the American market wouldn't be able to hold out forever.
"Still, it won't be easy. Is it because they've already tasted recession due to France?"
European political instability was supposed to trigger the Great Depression. However, because everyone had anticipated the collapse of France, its impact on the stock market was milder than expected. If anything, the French collapse had acted as a vaccine. The US government had already raised interest rates to cool down the overheated investment frenzy. As dozens of small businesses collapsed in succession, institutions rebalanced their portfolios, leading to a steady stream of selling. Of course, forcing several mid-sized banks into bankruptcy during this process was a major victory. If the Great Depression had proceeded exactly as it did in the original history, the selling pressure should have snowballed by now. Hjalmar Schacht frowned, feeling a sense of unease.
"Even with the backing of the Clearing Bank, we might be lacking a bit of 'madness.' I'll have to keep shorting while inducing gold withdrawals to drain their reserves first."
There were still plenty of weapons in his arsenal. Unlike the Prague Treaty Organization and its Bancor system, which had long abandoned the gold standard, the United States and Great Britain still clung to it. This meant their foreign exchange and gold reserves could be completely drained through currency short-selling. The only regret was... they lacked sufficient ammunition.
"Damn it. No matter what tricks we pull at the Clearing Bank, bringing down the United States is no simple task. What if they remain perfectly fine even if Britain collapses?"
Destroying Britain through economic warfare was easy enough. But Schacht worried that even if they shattered Britain, the weak link, the United States might somehow refuse to fall. It was like a battered boxer standing in the ring, inexplicably growing tougher with every blow! It made sense, given that the American people possessed one of the most optimistic national characters in the world. Sometimes optimism was the root cause of a panic, but conversely, it was also the ultimate shield against one.
As Schacht was lost in thought, there was a knock on his office door.
"President Schacht, excuse the interruption, but... you have a visitor."
"Hmm? Did I have an appointment?"
"No, sir... but they insisted on seeing you."
Schacht tilted his head in confusion, gesturing for the guest to be let in.
"...Rothschild? What brings you here?"
It was none other than a member of the legendary Rothschild family. A staple of conspiracy theories and sensationalist media, the Rothschilds also operated a massive business in Vienna, Austria. While the British branch of the family focused primarily on finance, the Austrian branch dabbled in various non-banking sectors like steel and railways. Although the Wittgenstein family had become Austria's premier conglomerate through cooperation with the Emperor and Shtal's backing, and traditional banking had lost much of its luster with the advent of the Bancor system, a Rothschild was still a Rothschild. Very few people could secure an unscheduled meeting with Schacht, the President of the Clearing Bank. Without beating around the bush, Louis Nathaniel de Rothschild, the head of the Austrian Rothschild branch, made his intentions clear.
"You seem to be orchestrating a very interesting affair in America."
Schacht's grip faltered, nearly causing him to drop and shatter his coffee cup. But Schacht, too, was a veteran of the financial world, a place teeming with beasts devoid of business ethics. Though his field was slightly different, he was a man who had skillfully sparred with manipulative traders and even smugglers. Despite Rothschild's bombshell revelation, Schacht managed to maintain his composure.
"I have no idea what you are talking about."
"It's nothing major. It simply appears that someone is desperately trying to induce a global stock market panic. I merely came to report this in the interest of the public good."
"I am not interested."
"Very well. I shall report this to our British branch instead."
Only then did Schacht stop him.
"Suddenly, I find myself growing curious."
"It is a well-known fact that the Clearing Bank acts as the 'invisible hand,' regulating trade flows through Bancor. But for us Rothschilds, tracking the flow of gold is child's play."
"Even so, the claim that we are behind this... is simply not true."
"If someone stands to profit, they are the culprit. Surely, the Soviet Reds aren't the ones pulling the strings here."
Schacht scowled. Indeed, no matter how well they hid their tracks, once an all-out currency war began, a single misstep would expose the mastermind in an instant. Still, he hadn't expected to be found out this quickly. The only option left to Schacht was to deny everything and halt the operation. But Louis Rothschild hadn't visited the Clearing Bank just for amusement. If his goal had been to sabotage them by informing the British, doing so directly would have been far more effective.
"I am well aware that Representative Shtal despises financial oligarchs."
"And?"
"Perhaps that is why our Austrian branch managed to survive. The branches in Paris—which is now ruined—and London focused primarily on finance. But we could become excellent partners, much like the Wittgensteins."
Schacht narrowed his eyes, studying Louis Rothschild's sly expression. Indeed, the Austrian branch was quite different from the others. They were currently reaping massive profits from heavy investments in Vietnam under the Bancor system, and they were even expanding into Joseon to lay down railways. There was absolutely no reason for them to clash over financial matters.
"If your intention is to render their currency worthless and trigger a foreign exchange crisis, why not launch an overt attack?"
"That is absurd."
"All you need is a reliable shield, isn't that right?"
In truth, the Treaty Organization's goal wasn't merely to profit from short-selling and currency arbitrage. Granted, Shtal was obsessed with the conviction that 'a depression is inevitable' and was aggressively shorting the market to prepare for it, but the Treaty Organization and Schacht did not share that delusion. They were not policymakers; they were administrators operating within the bureaucracy. As administrators, their duty was to turn Shtal's vision into reality. In other words, they had to trigger a depression!
"If we launch an overt attack... it certainly wouldn't be difficult to induce panic in the market."
"Exactly. Especially if a family with our reputation takes the lead."
To put it simply, the Rothschild family would plant their flag in New York on behalf of Austria, openly drawing aggro by shouting, "We are attacking here! Join us!" It wasn't a bad proposition. However...
"What do you stand to gain from this?"
Surely the Rothschilds weren't acting out of pure altruism or patriotism. Anyone who believed such nonsense would have their intelligence questioned.
"When the Bank of England is on the brink of ruin, won't they come crawling to the family that holds the largest private gold reserves in the world?"
"Surely not. You will be branded as the architects of the depression."
"In politics, perhaps. But capitalism doesn't work that way. Even if they have to grovel to their worst enemy, they won't tolerate going bankrupt."
"You are cooperating with us for just that reason?"
Louis Rothschild shook his head.
"The original home of the Rothschilds was in Germany. Then, our center of gravity shifted to London. Why can't it be Austria this time?"
"...So that was your goal?"
"Even if it isn't. I would rather invest in 'Bancor' than in 'gold,' which is destined to fade away as a relic of a bygone era."
Schacht and Louis stared each other down over their coffee cups for a long moment. In the end, the two men shook hands.