Black Friday, Part 4
Any sufficiently advanced technology is indistinguishable from magic. By the same token, any sufficiently advanced modern finance is indistinguishable from witchcraft.
One cannot help but recall the absurd farce that unfolded during the collapse of Japan's bubble economy in the 1980s. The geniuses sitting at the pinnacle of the financial world frequented a dimly lit shrine run by a certain madame. Their purpose? To pray to a miraculous toad deity.
“O Great Toad, O Great Toad. Which stock will rise next?”
Receiving the toad's revelation, the shaman personally divined which stock would soar. Perhaps her spiritual powers were truly formidable, for her accuracy rate hovered near one hundred percent!
The reason? Upon hearing the toad's prophecy, the executives of the brokerage firms aggressively bought up that very stock. Naturally, trading volume and share prices skyrocketed. And once the chart-obsessed hyenas and swarms of retail investors piled in, there was no way the stock wouldn't rise.
Staring at financial charts is, in essence, no different from Shang Dynasty shamans peering at oracle bones to decipher the will of the gods.
Of course, the East—which developed a culture of reason and rationality early on through the Warring States period, relegating folk sorcery to mere occultism—differs from the West. The West has its own unique traditions. Just like the saint in Palestine who cried out, “The Son of Man is coming, and some standing here will not taste death before they see judgment!”, the West has a deeply rooted tradition of “prophets.”
“The bubble is inflating to dangerous levels. We, the House of Rothschild, are preparing to liquidate our stocks and convert them to cash.”
“What about bonds?”
“To be frank... even if we buy bonds, will we ever be able to collect on them? Perhaps government bonds, but otherwise...”
Louis Rothschild wandered through the financial districts, whispering incantations of doom. Of course, he didn't stop at mere words. Awakening like a dark sorcerer, Louis drove heavy spikes into the voodoo doll of global finance, nail by nail.
The countdown to ruin had begun.
The countdown to doom: Four.
Louis gathered every single dollar stockpiled by the Austrian branch and began demanding gold redemption.
“Stop this instant! Have you swallowed rat poison?! What the hell is this sudden madness?”
“If Britain wants to follow suit, they are welcome to try.”
“To pull a stunt like this without even consulting the family council...!”
Naturally, the Rothschilds based in London—the very heart of capitalism—foamed at the mouth. But the biggest question remained.
“Just how... did the Austrian branch accumulate so many dollars in the first place?”
“It makes no sense! Unless Louis is a genius of creative accounting, where on earth did all those dollars come from?!”
“Could it... be?”
True capitalists speak in currency and listen in cash. It was clear that the Austrian branch had joined hands with a colossal power that even the main Rothschild house could not oppose! The only entity capable of mobilizing such vast reserves of cash was...
“Austria. It's Austria!”
“Are you sure? Look at this. The cash flow of the Austrian branch has absolutely no visible connection to the Austrian government.”
This was an operation utilizing the full spectrum of Austria's intelligence capabilities. In truth, once a few hedge funds pool their resources, tracking the ultimate mastermind becomes nearly impossible. And yet... did they not possess the instincts of capitalists?
If a superpower holding nearly half the world's gold was making its move, what choice did the rest of the Rothschild family have but to fall in line?
“We... are dumping as well.”
“What?! Patriarch, but...!”
“The Austrian side is primarily dumping dollars, yes? Then we shall dump pounds.”
Passenger airships existed, but commercial airplanes were still in their infancy. Why bother traveling back and forth to London when they could simply speak through money?
“B-but... is this really acceptable? Can we truly abandon Britain like this?!”
“We have nothing to lose. It is easy enough to sever the tail and claim this was the rogue action of the Austrian branch, not the House of Rothschild as a whole. We will simply ride the wave. If it succeeds... we will reap a sweet harvest. I am sure Louis has drawn up the invoice quite thoroughly.”
The House of Rothschild mobilized their entire currency reserves to launch a gold redemption offensive. There was no need to go through the tedious process of short-selling—borrowing currency from institutions only to sell it back. Hedge funds resorted to short-selling because they lacked capital; the House of Rothschild was an institution in its own right.
Furthermore, the nature of the gold standard made currency attacks incredibly straightforward. You simply gathered the banknotes and presented them; the central bank was legally obligated to redeem them in gold. To refuse would instantly shatter all trust in the currency.
The countdown to doom: Three.
“The Rothschilds have made their move?”
“Yes, sir! They are throwing themselves into the currency markets as if determined to tear capitalism apart!”
“The scale?”
“We cannot be sure if it is entirely the work of the Rothschilds... but the current offensive alone is equivalent to four times the annual revenue of the British Empire!”
Even the mighty Rothschilds could not execute a currency sell-off of that magnitude on their own. Of course, the Rothschild family could easily deduce their own internal limits from their thick ledgers, and they knew full well that a sovereign state stood behind this onslaught.
But ordinary fund managers, banks, and brokerage firms remained completely in the dark. The thoughts of these hyenas and financial thugs, who fed on the shadows of the real economy in this world of witchcraft, were entirely predictable.
“It's obvious everyone else is dumping too!”
“B-but... shouldn't we wait to hear from the US Treasury and the Federal Reserve...?”
“Does that matter right now?! Even if we all go down together, I'll be damned if I watch those other bastards get ahead of us!”
Assuming a panic had already begun, the hedge funds joined the fray, dumping dollars and pounds in a frenzy. Thanks to this, not only Austria—which had drawn the initial aggro—but also the House of Rothschild slipped seamlessly into the pack of wolves, completely obscured.
Next came the banks. Hedge funds were the banks' VIP clients. Now, those clients had lost their minds, withdrawing all their cash to convert it into gold.
Of course, the banks had their own tricks. These were the same breed of people who, even in 2008, wouldn't blink an eye at using customer deposits as collateral, leveraging that collateral for more collateral, and leveraging that collateral yet again in a cycle of absolute madness.
“F-for now... shouldn't we join in?”
The bank clerks almost uttered the insane phrase, “We must protect our clients' deposits!” Instead, the bank directors joined the gold redemption race to maximize profits and minimize losses, while simultaneously calling in loans to cover their dwindling cash reserves.
The countdown to doom: Two.
Ultimately, financial attacks have their limits. Sovereign-level gold redemption offensives were not unprecedented; in fact, they were rather common. In the 1970s of another history, France had openly demanded gold redemption, driving a dagger into the heart of the gold standard. Yet, the United States had survived.
And why? Because the real economy still stood firm.
“The banks... are putting immense pressure on us to repay our loans!”
“For now... we're fine. What about the oil bound for Austria? Their oil orders are doubling next month, so we can just collect the Bancor from that. We'll use that to pay them back.”
“And if that's not enough...?”
“Tell them we'll put up additional collateral! We still have land in Manhattan.”
The American real economy, made even more resilient by the 'French Shock,' was still riding the wave of the ongoing European reconstruction and the resulting boom.
It was not a time when banks and corporations were collapsing in droves, or when unemployment was soaring past fifty percent, as it had during the Great Depression.
It was certainly not a time for wealthy Americans to sit back, stuffed with meatloaf, while the rest of the world starved on turnips.
The market was not composed solely of finance guys who played with numbers on balance sheets without ever seeing a factory floor. The factory owners who fed the people and made the world prosperous, along with the banks close to them, were also market participants.
“The dollar is invincible anyway! This is just a temporary blip, so buy up dollars and hoard them while you can!”
Thus, the United States somehow managed to desperately withstand the coordinated dollar offensive launched by Austria, the House of Rothschild, and the financial beasts.
The United States could endure. At least, the United States could.
“The Bank of England hereby announces the temporary suspension of gold redemption, effective today, and an increase of the discount rate to 25%. We emphasize that this is not a permanent measure.”
Britain was broken!
“C-creditors are swarming the front of the bank!”
Of course, Britain hadn't completely collapsed yet. With the United States still standing, they could somehow hold on. That was why they had explicitly emphasized the word “temporary.”
Furthermore, Britain still had something to rely on. No matter how rigged a custom map in StarCraft might be in favor of the host, a true pro can still compete if they have enough expansions. And Britain had expansions.
From the expansions Britain had established across every corner of the globe, they could squeeze out as many resources as they desired.
“C-could we perhaps offer payment in diamonds for now?”
“Contact all the gold mines in South Africa! Tell them to dig until the veins run dry!”
Britain could somehow stabilize the situation. They could endure by squeezing their colonies, which always yielded resources no matter how hard they were pressed. That was exactly how they had survived the Great Depression in the original history.
The countdown to doom: One.
Of course, placing absolute faith in the United States and the colonies was strictly Britain's perspective. The view from the American side was quite different.
Perhaps because they had grown too accustomed to their old tricks—reaping profits while France and Germany tore each other apart—the British had forgotten just how much their actions reverberated across the globe.
“B-Britain has suspended gold redemption?!”
“Then the United States is next!”
“Contact the Federal Reserve immediately! The real depression is starting now!”
The panic intensified. And yet, the United States could still hold on. Frankly, in terms of sheer industrial output, the entire Prague Treaty Organization combined could barely compete with the American West!
Moreover, Britain's share of the global economy was now negligible. In terms of the real economy, Britain couldn't even compare to China, whose national state was currently in shambles.
The United States simply needed to stand still. However, America—which had sat out even the recent Great War—consistently underestimated its own influence while overestimating Britain's.
When speaking of Americans, one cannot omit their reckless optimism—the belief that “things will work out somehow.”
Even in the original history, when the great crash foreshadowing the Great Depression occurred, the US government had stood idly by, trusting in the “invisible hand” and preaching fiscal responsibility while banks collapsed like autumn leaves.
Yet... for America, that was “normally” perfectly fine! Indeed, that was how they had always resolved crises, and how they would continue to do so. It was just that the Great Depression had been uniquely devastating.
But perhaps because they had been vaccinated so aggressively by the “French Shock,” had even the United States become infected with fear?
The US Treasury had suffered an anaphylactic shock—the economic equivalent of a perfectly healthy person dying from a common cold.
“We shall temporarily raise interest rates by 10%.”
“...I'll take your 10% and raise it by another 5%.”
“Could we perhaps add just a little more?”
The Federal Reserve, which normally wouldn't budge, began hiking interest rates like mad. It wasn't a terrible decision in theory. But in typical American fashion, the bureaucrats moved far too “pragmatically.”
To put it in Nietzschean terms, art is not the only realm where Apollonian reason collides with Dionysian madness. The stock market is exactly the same! Had Nietzsche invested in stocks, he would have described this struggle between Apollo and Dionysus with far greater verve.
In the end, America's hasty measures only stoked the investors' terror. Dionysus had finally beaten Apollo to the ground.
“E-even America... is going down like this?”
“I-it's over!”
“Run to the banks! We have to withdraw every single cent we can!”
Panic. The devaluation of the dollar following the collapse of exchange rates. Bank runs. Aggressive loan recalls and the collapse of trade balances. Followed by a chain reaction of bankruptcies, delistings, more bankruptcies, more bank runs, the evaporation of liquidity, unemployment, and the ruin of the banking sector...
And then: Count Zero.
November 27, 1925. Black Friday.
The Marxists, who had long preached the end times of capitalism, were finally able to enjoy the leisure and abundance of the day after Thanksgiving.
Even the communists, who usually barked at the mere mention of Christianity, would have gladly offered a prayer of thanksgiving upon witnessing the ruin of Britain and America.
In a single day, sell orders reached ten million shares.
Of course, by then, it was already far too late. The Bank of United States, Detroit Banks, California National Bank... countless banking institutions had already collapsed, and the suspension of gold redemption was already a fait accompli.