Black Friday, Part 5
Capitalism requires an essential link between the real economy and financial markets. Without banks and stock markets, there is no capitalism. Money is borrowed from banks and shareholders to invest in factories, which run vigorously on that investment, churning out goods that yield massive profits for those very banks and shareholders. Perpetual motion achieved! But just as in physics, there is no such thing as perpetual motion in the real economy. This is the grim reality of a financial crisis.
"...B-Bankruptcy, just like that? How does this make any sense?"
"We're about to go under ourselves. Actually... scratch that. We'll probably be bankrupt within a day or two, so extending your loan is out of the question."
"But concrete is still pouring out of our factories! And it's not like we don't have buyers. Vietnam, Japan, Germany—they're all begging for concrete!"
"...What do you want me to do about it?"
Of course, it wasn't on the scale of the Great Depression of the original history, which swept away everything in its path. Perhaps... a true Great Depression could be averted thanks to proper preventative measures and the new economic policies devised by Shtal and Keynes. The fact that the bubble had already burst once before, leaving things at a manageable level, played a major role. Furthermore, the world as a whole was not nearly as interconnected as it would be in 2008, or even in 1920. The three anomalies of international relations born from three revolutions—the Prague Treaty Organization, the French Purification State, and the Russian Soviet Republic—remained largely unaffected by the chain reaction of the financial panic. Consequently, they became the lifelines that could keep America afloat.
Thus, rather than a "Great Depression" that triggered a fatal crisis in both the real economy and finance, terms like "Great Recession" or "financial crisis" might be more appropriate. Of course, just because you caught pneumonia instead of AIDS doesn't mean you can breathe easy. Finance is the lifeblood of a factory. As is always the case with capital, factories do not run on 100% of their own money. When the currency attack wiped out the banks and stock markets, the factories inevitably collapsed along with them.
In Detroit, cement factory workers loitered around their silent, ruin-like workplace today, just as they had yesterday.
"...Looks like they have no intention of opening today either."
"How does something like this happen so suddenly? I mean... the assembly lines were running perfectly fine right up until the day before they locked the gates!"
"We might as well give up hope. They didn't open today, they won't open tomorrow, and they won't open the day after that."
"But still, maybe...!"
Just then, another worker came sprinting toward them, clutching his hat to keep it from flying off.
"The boss couldn't pay his debts! He skipped town to California!"
"See? What did I tell you? Come on, let's go line up at the soup kitchen."
"Damn it! You couldn't have told us three hours earlier? By the time lunchtime rolls around, the line at the shelter is going to stretch around the block!"
Scenes like this played out all across the city. When construction—a sector heavily reliant on finance—ground to a halt, the cement factories stopped. A train conductor stared blankly at his fully loaded cargo cars and muttered in despair.
"Has... has the owner of this coal still not shown up?"
"Damn it! Do we have to head back like this?"
"Even if we want to go back... if we can't unload this, our company is going bankrupt too."
Next to fall were mining and the railroads. First the construction sites, then the cement factories, and finally the trains ground to a halt. The daily smog, the rowdy arguments of the laborers, the simple pleasure of a post-work beer... all those noisy signs of life vanished. The city fell into a heavy silence. All that remained was the sight of gloomy faces waiting endlessly in soup kitchen lines.
The construction industry, which relied on massive loans, was the first to collapse helplessly. Then, the highly finance-dependent steel and shipbuilding industries began to crumble one by one. The workers standing in the soup lines and the ruined middle class all shared the same agonizing question.
"Why... why did this happen?"
"Sure, there was a bubble, but it shouldn't have been this bad, right?"
"And that bubble already burst once before."
"Even an uneducated guy like me knows that raising interest rates is supposed to fix this kind of situation. They did everything they could!"
"Then why, damn it, why?!"
Was it because of Austria? While it had started with Austria and the Rothschilds, Austria's true involvement remained hidden beneath the surface. Besides, it was hard to pin all the blame on them. Austria could never have pulled this off alone without the pack of hyenas that had swarmed in at the first scent of blood. As mentioned before, even though the banking sector as a whole had collapsed, someone had profited.
"We have... an astronomical amount of gold in our hands. What do we do with it?"
"It's not like we're a bank anyway. We're just a hedge fund."
"Well... then we should reinvest it to keep it growing."
"Where's the best place?"
The brokerage firms and hedge funds that had made a killing through short-selling remained. They began buying up shares of blue-chip giants like U.S. Steel at rock-bottom prices, injecting vital liquidity to prevent the nation's core industries from completely collapsing. At the same time, they turned their attention to another asset class.
"Real estate! Properties are flooding the auction blocks!"
"Hmm... real estate, you say?"
"Now is the perfect time. I don't believe the economy is going to completely die. In times like this, we have to look at long-term investments."
"True enough. Buy up every single piece of real estate that goes to auction."
Indeed. Even as the banks collapsed, a few far-sighted banks and brokerages managed to survive, and they began buying up real estate in bulk. Perhaps they were America's last hope—the ones who had somehow captured the wealth that might have otherwise vanished into thin air.
"I heard they're throwing another party on Wall Street today."
"They're the scum who bet on America's downfall. Of course they're thrilled."
Originally, the short-sellers had been the hyenas. But now, the roles had reversed. The wolves were now the workers standing in the soup kitchen lines—and those wolves were starving, surviving on bland, nutrient-deficient charity meals. The Calvin Coolidge administration, which had responded to the panic with relatively sharp instincts, found itself begging those very hedge funds.
"You want us to invest in that garbage stock? No thanks. That company is going to be bankrupt within a month anyway."
"P-Please, I beg of you. If not stocks, then at least buy our bonds."
"Why should I?"
"If the banks in Kansas and Utah fail, our entire agricultural sector will plunge into the abyss!"
"Bonds... Hmm. Well, if the Treasury guarantees them, I suppose it's not entirely out of the question."
The Treasury officials of the Coolidge administration trembled with rage at the funds' sheer arrogance. But what choice did they have? Even the President had ordered them to defend the agricultural sector at all costs. After all, how could a nation like the United States allow its own citizens to starve to death? Naturally, the public was absolutely furious to see their government groveling before the very hedge funds and brokerages that had caused this disaster.
President Calvin Coolidge let out a long, heavy sigh and pondered.
'Is the mastermind behind this... really Austria?'
But what did it matter now? Even the help of a single hedge fund was desperately needed at this point.
'What did Shtal do... when he was backed into a corner like this?'
Futures prices plummeted, the currency lost its value, and agricultural prices crashed. With even agriculture on life support, the rock-bottom real estate prices were a disaster for the home-owning middle class, but they should have been a blessing for the homeless and the poor. Even if food and clothing—two of the three basic necessities of life—had collapsed, they could at least keep a roof over their heads.
But when those hedge funds began driving up real estate prices as well, the working class, who had nothing left but a handful of barley, finally reached their breaking point.
"Winter is almost here... and you're telling us to get out?! This is too much!"
"The original landlord went bankrupt, and a new owner bought the building. ...They ordered me to raise the rent. I'm sorry."
Having lost their very last sanctuary, the workers' eyes burned with fury. If they stayed outside in this winter cold, they would freeze to death anyway. What difference did it make how they died? One by one, they began to gather on the streets, filling the avenues and city centers.
Naturally, the largest crowd gathered on Wall Street. Even in an era before modern road networks were fully developed, people converged on Wall Street by the thousands. The atmosphere was highly volatile.
In the end, Calvin Coolidge managed to recall what Shtal had done. Conrad von Hötzendorf, Roman von Ungern-Sternberg, Führer Apis, and looking a bit further back, even Mayor Karl Lueger...
"Call MacArthur."
"MacArthur... N-No, Mr. President! You can't!"
"Why not?"
"The people gathered on Wall Street aren't communists. You know that, Mr. President. You know how much we've suffered at the hands of those financial bastards..."
Calvin Coolidge shook his head.
"I know."
"Then why...!"
"Because I am going to sweep away the ones who are actually disrupting the capitalist order."
In the original history, President Hoover had deployed MacArthur to brutally disperse the Bonus Army—veterans demanding their pensions in the depths of the Great Depression. This time, it was different. The target of the crackdown was the exact opposite. There is a common misconception about American history: the Republican Party was originally a left-leaning party.
In truth, America was in relatively good shape. Its construction and shipbuilding sectors had collapsed, and steel and chemicals were barely hanging on by a thread, but it was still somehow weathering the storm on the sheer strength of its real economy. On the other hand, Great Britain—the very birthplace of capitalism, whose industries had long since been eclipsed by Germany—had staked its national fortune entirely on finance and its colonies. Naturally, the fallout of the financial crisis there was catastrophic.
"We must open soup kitchens and shelters! The workers are literally going to freeze or starve to death this winter!"
"Shelters? And where exactly are we going to get the funds to run them?"
"B-But..."
It didn't help that the Conservative Party was in power, harboring a hostility toward Stahlism and "modified capitalism" that was even deeper than America's. It was, after all, the very place that had inspired Karl Marx to write Das Kapital. Although it was America that had popped the bubble with its heavy-handed response, President Calvin Coolidge was at least attempting to resolve the crisis through "extraordinary measures."
"If anything, Great Britain... we might be able to boost our exports due to the devaluation of the pound. We might actually be in a better position than America!"
"Exports? To where?"
"The Prague Treaty Organization! President Calvin Coolidge is already screaming at the top of his lungs to meet with Vice Chairman Shtal. We cannot afford to fall behind!"
The Prime Minister's face instantly contorted. The Liberals and the Labour Party could babble all they wanted about the domestic economy. But it was India, not factories, that had built the empire on which the sun never set. No matter how dire the nation's circumstances, holding hands with Shtal—the man who sought to strip Britain of India? For the Conservatives, who prioritized the colonies and imperial management above all else, that was absolutely out of the question. Furthermore...
"The financial sector hasn't completely collapsed yet, has it?"
"Pardon?"
"We can simply enlist the help of the financial sector, starting with the Rothschilds."
Bound by their alliance with financial capitalists, Prime Minister Stanley Baldwin and his Conservative Party—the vanguard of capitalism—still clung to the myth of laissez-faire. As a result, the devastation of the panic spread uncontrollably. Factories went bankrupt, and agriculture collapsed. Ah, but there was no need to worry just yet.
"Still... we must run the soup kitchens. Bring in rice from India. Throw in some Irish potatoes as well."
Unlike the American Republican government, which poured its soul into resolving agricultural issues, the British at least didn't have to worry about starving to death. Extorting the natives of Ireland and India solved everything! Plunder their food to put out the immediate fires. Mine their gold to fill the vaults of the Bank of England and defend the financial sector. Seize raw materials at near-zero cost to prop up domestic factories. Bill the colonial governments for the costs of administration, and even raise taxes to cover the deficit.
"At least we have our colonies. We've avoided watching the country completely fall apart."
Unlike America, Great Britain was struck by a shock far worse than a mere depression, and its exploitation of the colonies grew exponentially harsher. Needless to say, India—which had always quietly endured the blows—was finally on the verge of exploding.