Persian Empire 1845

Chapter 200 Economic Crisis
Napoleon III showed Nasserdin the best of France, held numerous banquets, and demonstrated that their lifestyle represented the highest level in Europe.

Nasserdin also visited the Paris Stock Exchange, where the situation was worse than a vegetable market. Everywhere was filled with shouts of buying and selling stocks; the only sound was the clamor of money. Even a second's delay could result in significant losses.

Has the Persian Bank sent any messages?

"According to their recent intelligence, some stocks on the exchange have fallen, the growth momentum of railroad stocks has slowed, and banks have doubled the number of thugs they have hired to collect debts."

Naserdin lit his pipe, took a slow puff, and then spoke.

“Send a letter to New York, telling them to keep a close eye on the stocks of Pennsylvania Railroad and New York Railroad, and to buy some of the others if they become suitable.”

Naserdin had long coveted these two railway companies, which controlled most of the railways on the Great Lakes and were the most profitable enterprises. Of course, there was also the booming manufacturing sector, but given the impending economic crisis, buying up assets at rock-bottom prices was what a bank should be doing.

In fact, even without Shah's prompting, Sharif had already started keeping an eye on the stock exchange. This bubble frenzy was nearing its end.

This bubble began in the railroad industry. In 1850, the U.S. Congress passed a land grant law, which attracted private investment in railroad construction by granting land. Each white family could apply for 320 to 640 acres of free land. After the law was passed, the enthusiasm for building railroads in the United States further increased, and nearly half of the railroads thereafter were built under the impetus of this law.

However, the rapid expansion of the US railroad industry led to overinvestment, with many railroads becoming excessively large. Subsequently, cheap grain from Russia flooded the European market, severely impacting US agriculture, which was highly dependent on exports.

American farmers have a long-standing tradition of large-scale land acquisitions, and since the rise of the financial industry, borrowing to purchase land has become a new trend. This export slump has left many farmers without sufficient funds to repay their loans, and the American financial industry has also been impacted.

The first to run into problems was Michigan Central Railroad, whose president abruptly resigned, citing a desire to "spend more time on personal matters" as the reason. This excuse was tantamount to telling people that the company was about to face serious trouble. The market began to question the true state of the railroad industry, and other blue-chip railroad stocks followed suit, marking the beginning of the bursting of the railroad bubble. Simultaneously, the railroad companies' inability to repay their debts resulted in a large number of bad loans for banks, further triggering default risks in the shadow banking sector, which in turn further fueled the decline in railroad stocks.

The company's stock price quickly plummeted from $85 to $67, and other railroad companies fared no better. Erie Railroad's stock fell from $34 to $21, and New York Central Railroad's from $83 to $74. New York newspapers described it this way: "There were plenty of teetering, eagerly awaiting shares on the market, but not a single buyer could be found, and there was no demand whatsoever."

In this situation, the British began to reassess their investments in America, and the results shocked them: as early as 1851, Britain had already transformed from a gold importer into a gold exporter. With the outflow of gold, their funds were already stretched thin.

The Bank of England's decisive move to raise the minimum discount rate to a record 10% triggered public panic. People lined up to withdraw their deposits, severely impacting the UK financial industry.

As a leader in the Western world, any fluctuation in the British economy could trigger a global chain reaction. France, Germany, and other countries fell victim, and the world experienced its first global economic crisis.

On February 24, Ohio Life Insurance Company went bankrupt, kicking off a wave of bankruptcies in the United States. Immediately following, all stocks on the New York Stock Exchange plummeted, banks experienced runs, and companies were forced to lay off employees or go bankrupt.

"The stocks of Illinois Central Railroad and Michigan Railroad are falling faster than we expected."

"How quickly?" "It's already dropped to $19 and $38."

"Buy with all your might"

Sharif and the local Jewish bankers didn't get along, not only because of religious differences, but also because of the Shah's demands.

First, Americans are not trustworthy.

Second, the British are not trustworthy.

Third, Jews are not trustworthy.

Fourth, Jews in the United States and the United Kingdom are even less trustworthy.

These four requirements effectively allowed the Persian Bank to expand single-handedly. Taking advantage of the recent stock market crash, the bank could accumulate shares in a number of excellent companies. Even better if it could maintain control over them.

Of course, besides the battles in the North, investing in the West was also part of the banks' business. The area west of Minnesota possessed vast amounts of land and mineral resources, and the banks began investing in local agriculture, mining, and forestry, attempting to gain an early advantage.

A few days later, the Persian Bank also experienced a run, with over 30% of deposits being withdrawn. Fortunately, the Shah's earlier emergency injection of funds alleviated the difficulties, allowing the bank to continue acquiring shares.

As a result of the crisis, 62 out of 63 banks in New York stopped making payments, and the stock market fell by 20%-50%, with many railroad companies' stocks falling by more than 80%.

Looking at the world, this crisis rapidly escalated in just three weeks. As the largest investor in the United States, Britain suffered a sharp devaluation of its securities due to the bankruptcies of American banks, railroads, and commercial companies. This marked the first time Britain had been severely weakened in its overseas colonial endeavors, especially considering that its investment in the United States was more than ten times that in India.

The number of people living in extreme poverty in Scotland and Wales increased by 10, and workers' wages in various countries fell by half or more. Massive unemployment led to a survival crisis, highlighting the threats of hunger and death. Overall social purchasing power shrank sharply, and the contradiction between industrial overproduction and insufficient consumption capacity became more acute, ultimately resulting in social unrest and severe hardship for the people.

Countries on both sides of the Atlantic were plunged into crisis, and businessmen from all nations were going bankrupt. Nasserdin watched the daily sell-offs on the Paris Stock Exchange and felt the terrifying nature of finance.

“If our merchants run into trouble in Europe, we tell them to go to the Persian Bank; if they want to go to the Americas, we send them there.”

Nasserdin doesn't want to see Iranian businessmen, whose businesses haven't yet recovered, crippled by the economic crisis. He's currently in Paris monitoring the situation around the world; those who can emerge directly from the crisis have undoubtedly reaped substantial rewards. This would translate into profits from overseas investments.

(End of this chapter)