Chapter 1101: The Crash
The London Futures Exchange was in the throes of a massive upheaval.
Shockwaves rippled through the market as rumors of large-scale defaults on contracts in the Prussian region spread. Traders suddenly treated any contract involving the German states like poison; no one dared to touch them.
Fortunately, physical cane sugar was still being delivered normally at the Port of London, which allowed the exchange to barely maintain its operations.
However, the Robert Cooper Trading Company, which specialized in Prussian sugar, had already been hit with hundreds of lawsuits. The total claims for damages had reached over 700,000 pounds sterling and were climbing by the hour.
Meanwhile, a mysterious force continued to snap up every available sugar contract. Rothschild and his associates had raised enough capital to purchase 25,000 tons of sugar, but they had only secured 15,000 tons so far—far short of their target.
Ironically, their intended share had been snatched up by panicked British citizens who had jumped into the fray first.
In an office overlooking the London Futures Exchange, Petty stared blankly at his desk, as if expecting a fountain of sugar to suddenly sprout from the wood.
"My Lord," his assistant whispered cautiously, "should we continue to issue more contracts?"
Moments ago, the final fifty-ton contract for sugar at the Port of London had been bought. The exchange was now effectively bone-dry; there was no more sugar left to buy.
He was supposed to have had another 20,000 tons of sugar under his control, more than enough to bleed the French capital dry. But two days ago, Boris had sent a report stating that Prussia had refused to sell its sugar. The contracts from that region were going to fail on a massive scale.
This betrayal had instantly stripped him of those 20,000 tons. Now, he was left with less than 1,150 tons of Indian sugar, while French capital sat like a predator, watching and waiting to devour these final scraps of inventory.
He let out a low, frustrated growl. 'It was clearly a winning hand! Why did the Prussians betray us?!'
The French had already sunk over 180 million francs into this! It was a sum that surely exceeded the French government's financial capacity, yet he was the one who had been forced into liquidation first...
France had successfully reclaimed its monopoly over the sugar trade. It was easy to foresee that sugar prices on the Paris futures market would soon skyrocket to four or even five francs per pound.
When that happened, France would simply sell off the low-priced sugar they had seized from London, instantly plugging any deficit in their national treasury.
"My Lord..."
"Silence!" Petty roared at his assistant. He grabbed his hat and stormed out, slamming the door behind him.
At 10 Downing Street, the atmosphere was grim.
The senior members of the British Cabinet sat with dark expressions.
"Those damned Prussians," Foreign Secretary Fox hissed, his teeth clenched. "How dare they betray us!"
Petty spoke up from the side, his voice strained. "I heard the French used sugar beet seeds to threaten them..."
"The fools!"
"We cannot let this stand!"
Grenville raised a hand to cut off the chorus of indignation. He turned to Fox. "You must depart for Berlin immediately. Inform the Prussians that refusing to honor their commitments is utterly unacceptable."
"Yes, Prime Minister."
Petty added in a low voice, "But we have contracts for at least 5,000 tons that are due for delivery within the next fortnight. We will inevitably default..."
The room fell into a heavy silence.
After a long pause, William Pitt Junior turned his gaze toward the Chancellor of the Exchequer. "Lord Petty, how much physical sugar do we actually have left in the London Port warehouses?"
Petty blinked, momentarily taken aback. "Roughly 5,000 tons, perhaps 7,500. I would need to check the ledgers."
In futures trading, the actual physical exchange often happened long after the purchase; until then, it was just a contract on paper. Therefore, a significant amount of sugar was still physically sitting in the warehouses.
Pitt turned back to Grenville. "Prime Minister, as it stands, we have lost the ability to control the sugar market. Our priority now must be to minimize our losses."
"What are you suggesting?"
Pitt took a deep breath. "Immediately suspend all sugar deliveries from the London warehouses. Transfer all defaulting contracts to the Robert Cooper Trading Company."
Futures trading did not require the public disclosure of the buyers' or sellers' identities. Only after a default occurred would the specific details of the defaulting party be revealed so the other side could pursue damages.
If the London Futures Exchange engaged in some behind-the-scenes manipulation, they could consolidate all the failing orders under a single corporate entity.
Grenville’s pupils constricted. "No, no, that is out of the question! The Robert Cooper Trading Company has over 600,000 pounds in assets, and it belongs to His Majesty—"
"If we do not sacrifice it, our losses will be far greater!" Pitt interjected, his voice rising. "The remaining 5,000-plus tons of sugar can be used to offset our domestic sugar subsidies, saving the national treasury five or six hundred thousand pounds. If we use that sugar to fulfill these contracts, we will get absolutely nothing in return."
His meaning was cold and clear: let the Robert Cooper Trading Company shoulder the defaults and then declare bankruptcy. The unfulfilled contracts would be rendered void, and the compensation for the breach would be limited to the liquidated assets of the company—at most 600,000 pounds.
More importantly, it would protect the long-term credibility of the London Futures Exchange as much as possible.
"This... this is too risky..." Grenville shook his head repeatedly, but soon slumped in resignation. "I will report this matter to His Majesty."
When George III received the news, he found himself without any other options. Sacrificing a single trading company was better than suffering a total loss.
Britain had already poured 30,000 tons of sugar into this attempt to short the market, losing nearly 2 million pounds sterling. To persist would only line the pockets of the French speculators further.
The King felt as though the mental toll of this crisis was worse than ten rounds of his medical treatments. He waved Grenville away. "Deal with it as you see fit."
The Royal Family owned a quarter of the shares in the Robert Cooper Trading Company. That investment, worth 150,000 pounds, was about to go up in smoke.
The following day, the headlines of every London newspaper screamed the same news: The Robert Cooper Trading Company was declaring bankruptcy after facing astronomical fines for the massive forgery of fraudulent futures contracts.
The three to four hundred international sugar merchants currently trading in London erupted in fury.
While they hadn't suffered direct financial losses—since payment was only required upon delivery—many had missed critical business opportunities and wasted weeks waiting in London.
Immediately, every merchant not tied up in the bankruptcy litigation against Robert Cooper turned their eyes toward the only other place where large quantities of sugar could be found: Paris.
On the day after Robert Cooper went bust, the price of sugar on the Paris Futures Exchange surged to three francs and six sous per pound.
Even then, the daily supply was capped at less than 250 tons.
Joseph knew the power of scarcity marketing better than anyone.
The more the market desperately needed a resource, the more important it was to maintain the illusion of a shortage.
In any case, French citizens were buying government-subsidized sugar using their Identity Cards, so they were completely insulated from the volatile prices of the futures market.
Just three days later, the price of sugar in Paris hit a terrifying peak of five francs per pound.
The London futures market immediately followed suit, soaring to five francs and two sous, but there were no sellers to be found. By now, nearly every source of sugar in Europe was firmly under French control.
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