Chapter 631: Currency Dividend
Joseph wasn't surprised by Archbishop Brienne's concern. After all, the archbishop had never encountered the concept of financial colonialism from later eras, and his understanding of paper currency was still in its most rudimentary stage.
He looked at the Minister of Finance. "Archbishop Brienne, in reality, as long as these countries accept our banknote loans and agree to use them solely for trade, rather than converting them into gold at the French Reserve Bank, then this money won't impact our financial stability."
Brienne and Bailly exchanged glances, their expressions filled with doubt.
Joseph patiently explained, "Simply put, any country that accepts a loan in French francs is essentially acknowledging the value of these 'pieces of paper'."
"Even if they were to immediately use all this money to purchase our goods—which is practically impossible, as transactions have delays, and at least a third would flow into their own production and sales channels during the process.
"For now, let's consider the extreme scenario where all this money truly returns to France through trade. Then, the debtor nations that received the loans would have to consider repayment. The methods of repayment would be either with gold and silver coins or with French franc banknotes.
"If they repay with gold and silver coins, it means we've exchanged paper currency for precious metals, representing a significant profit. This could even lead to an increase in the value of our banknotes.
"Of course, most debtor nations would choose to repay with banknotes. To do so, they would need a means to acquire these banknotes, which could only be achieved by selling goods to our country. In other words, the French franc would become their accepted circulating currency, and our banknotes would continuously flow into their markets.
"Therefore, in neither scenario would our country suffer a severe shock from paper currency. At most, there would be short-term, small-scale inflows of banknotes, with negligible impact on the currency's value. In the long run, we stand to profit."
In later eras, if a country were to take out a loan, it would first convert the foreign banknotes into its own currency, circulate its own money domestically, and settle international transactions with foreign currency.
But when dealing with countries that use gold and silver coins, if you try to settle exchange rates between their precious metal currency and my paper currency, I'm guaranteed to make a huge profit. If no conversion takes place, then my banknotes can only circulate within their own markets, essentially meaning they're exchanging tangible goods for my 'pieces of paper.'
Thus, once they accept a banknote loan, France would only experience brief financial fluctuations, followed by a steady and profitable outcome.
It's much like the Marshall Plan after World War II, where massive amounts of US dollars flowed into Europe through loans, without causing any financial risks in America. Instead, it rapidly expanded the dollar's influence.
Of course, all of this hinges on France's currency credit being trusted by these smaller nations, and on there being substantial trade between the two countries, allowing others to purchase necessary goods from France using banknotes.
However, the European continent is currently on the cusp of a monetary revolution. With Britain and France leading the way, various nations have already begun planning to introduce their own paper currencies.
In fact, countries like Austria and Bavaria had already begun trialing banknotes a few years prior, but their financial reforms hadn't progressed quickly enough to be fully implemented. Therefore, the French franc's banknote dividend would only last for these next couple of years. Once other nations also had their own paper currencies, the system would transition into normal exchange rate settlements.
Brienne and the other ministers were all exceptionally intelligent individuals; they quickly grasped the intricacies of the situation, and knowing smiles appeared on their faces.
Mirabeau immediately suggested, "Your Highness, then we should absolutely increase the loan amounts."
"Trade volume," Joseph stated, tapping the trade documents on the table. "If the loan amount significantly exceeds the trade volume, these countries will inevitably use the surplus funds to buy land in our country or engage in financial speculation, and that would result in a net loss for us."
A jolt went through Mirabeau's heart, and he nodded repeatedly. "Indeed, I hadn't considered it thoroughly enough."
Brienne, standing nearby, added cautiously:
"Your Highness, this matter is very likely being instigated by Britain, so they might try to persuade Württemberg and other nations to reject our loan proposal."
"You're absolutely right," Joseph said, nodding to him approvingly. "This calls for the deterrence I mentioned earlier."
"We must make the South German States understand that renegotiating the Treaty of Rhine-Seine is utterly impossible. At that point, they will naturally accept the loan 'compensation'."
"What kind of deterrence are you referring to?"
"We will discuss this in detail with General Berthier later," Joseph said. "After that, it might require you to travel to Baden to consult with His Majesty Frederick... No, on second thought, I should go myself."
The Frederick he spoke of was not the late King of Prussia, but rather the Grand Duke of Baden, Carl Friedrich von Zähringen.
A week later.
Baden.
The silver-grey "Gem 7L" carriage slowly came to a halt in Karlsruhe Palace Square. As Joseph stepped down from the vehicle, a melodious tune began to play around him.
Grand Duke Carl Friedrich eagerly came forward to greet him, his face beaming with smiles.
As a small state bordering France, Baden was considerably dependent on France, both economically and politically, essentially acting as France's junior partner.
Therefore, the Crown Prince of France's visit was regarded with great importance by everyone in Baden, and the welcoming ceremony was quite grand.
After the customary courtesies, Joseph and Carl Friedrich walked side-by-side beneath the raised swords of the guards, while hundreds of Baden nobles around them bowed in sequence with their steps.
"Your Royal Highness, the banquet is ready," Carl Friedrich gestured enthusiastically toward the palace. "My head chef once served at Versailles; his culinary skills are truly exceptional."
"Thank you for your hospitality," Joseph replied politely. "In fact, to foster the traditional friendship between France and Baden, I have a gift for you."
Carl Friedrich immediately looked surprised and pleased. "Oh, thank you so much! What kind of gift is it?"
Joseph entered the Baroque-style banquet hall, which was modest in size but exquisitely decorated. He sat beside Carl Friedrich and smiled. "Each year, a vast quantity of goods travels from France through Baden to the German States. If a wooden railway track were laid in your country, connecting Strasbourg and Stuttgart directly to the Rhine River, it would significantly increase transportation volume.
"Furthermore, warehouses could be built along the railway, turning Baden into a distribution hub for French export goods."
"Do you like this gift?"
Carl Friedrich felt his breath catch. He knew that trade between France and the South German States had grown rapidly over the past two years. If Baden could become a goods distribution hub, the warehouse rental fees alone would represent an enormous income.
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