I Became The Crown Prince Of The Mexican Empire - Chapter 79



Only Noblemtl

Central Bank and Navy (6)

When the bond sales went smoothly, my father wanted to use the ten million pesos of the money for the original purpose of building a navy, but I stopped him, saying that I had plans to increase the money further.

At that time, I briefly explained the plan and received approval due to time constraints, but as the bill was passed and preparations were completed, I decided to explain it to my father in detail when I had time.

‘Father, you should also know these things well so that you will not make mistakes when running the country.’

The introduction of paper currency and the gold standard had many advantages, but the greatest advantage was that the profit margin on seigniorage was greater than that of metal currency, and that more currency could be issued than the amount of metal held, which he explained in an easy-to-understand manner.

“If what you say is true, then the larger the denomination of currency issued, the greater the profit margin will be.”

“Yes, father. The cost of minting a 5-peso note or a 50-peso note is almost the same. But their ability to pay is ten times greater.”

“Then it would be a good idea to issue larger denomination banknotes.”

The advantage of paper currency in terms of minting profit is felt more significantly when compared to metal currency, but silver coins containing actual silver have very small minting profit because the minting cost and its ability to pay are almost identical.

“For now, we plan to issue only 50-peso bills. Issuing bills of such a large denomination also has negative side effects.”

“side effect?”

“They are easily used for crime and have the potential to cause inflation. And even if you distribute them appropriately and issue notes of 5, 10, 20, and 50 pesos, it doesn’t even cost 500,000 pesos to issue 10 million pesos worth of notes, so the profit from the minting is already sufficient.”

“I see. But paper banknotes are something that people have to exchange for gold when they come to the central bank. Then, wouldn’t the profit from the minting disappear?”

“That’s right. But that happens when the government’s ability to pay is lost due to public trust. Compared to the governments of other powerful countries, our government has huge real assets, so its trust is relatively high, so you don’t have to worry too much.”

“Hmm… I guess we need to carefully decide on that ‘reserve ratio’ you mentioned.”

“Yes, I plan to set it at 25% for now. In the US, there are differences from state to state, from 15% to 25%, but 25% is the most common, and since we have a single central bank system, we need to set it a bit more conservatively.”

These banks are the equivalent of the central banks of each state in the United States, so they have reserve requirement ratios of this level. Regular banks have no legal restrictions, so they maintain reserve requirement ratios at ridiculous levels.

A bank that holds 10% of the money entrusted to it by its customers is a conscientious bank, and even 5% or less was common, but this was later corrected after the economic crisis. Our Mexican Empire is in a similar situation, but with the establishment of the central bank, commercial banks are also planning to have a statutory reserve of 15%.

‘As the economy becomes more advanced, we can slowly lower the reserve requirement ratio, but for now, since we are based on the gold standard, it is safer to operate conservatively.’

“Okay. That would be better. Now we just need to decide who will go into each currency?”

“Yes, you can choose the faces of the people who will be on the 5, 10, 20, and 50 peso notes. Or, even if they are not people, they can be anything that represents our Mexican Empire.”

“No, but I guess people are nice. Let’s see….”

Augustine I seemed to think for a moment, then wrote his name down on the document.

“I think it would be better to include my face. There is no better way to make my face known.”

In the era when media was not developed, most people did not know who their country’s ruler was or what he or she looked like. That’s why they printed the ruler’s face on coins.

“Yes, that would be better.”

This method was so effective that it is no exaggeration to say that there is now no one in the Mexican Empire who does not know the face of Agustin I.

The fact that the authority of the emperor, which had been as light as a feather in the early days of independence, grew stronger day by day was partly due to stabilizing the country, but it was also clear that everyone recognized the face of the emperor printed on the peso.

‘If the situation of the country was a mess, I would have only been criticized instead of being of any help, but as the situation of the country improved day by day, it was a great help.’

“Then it would be good to include your face as well. It would be helpful to know the face in advance. And the other two, it would be good to call them ‘Miguel Hidalgo’ and ‘Vicente Guerrero’.”

“Even if Father Hidalgo is like that, Vicente Guerrero? Is that okay?”

Miguel Hidalgo y Costilla was a Catholic priest who called people from his church in Dolores to join forces against Spain (the Cry of Dolores), which began the Mexican War of Independence.

It would be okay to put Father Hidalgo, who is already treated as a national treasure and is now dead, on the banknotes, but Vicente Guerrero?

After King Agustín I, who had been loyal to Spain, changed his mind and decided to become independent, he compromised with the leader of the independence army and established the Mexican Empire. The leader of that independence army was Vicente Guerrero.

He is still alive and well, serving in the military, and he has republican leanings.

My father told me not to worry about my concerns.

“Vicente Guerrero, it is true that he contributed to independence. By putting him on the banknote, we can show our inclusiveness and help unify the country, and if his reputation goes up, my reputation will naturally go up as well.”

“···That’s what you meant. Okay. Let’s decide that.”

Before changing his mind in favor of independence, Agustin I demonstrated his abilities as a Spanish officer and thoroughly suppressed the independence fighters.

It may not be a good thing for the Mexican people, but it does mean that they defeated the army led by Vicente Guerrero, the leader of the independence army.

‘At least in terms of military capability, we have no choice but to be recognized. Then, only the last and most important step remains.’

“Would it be okay for the government to purchase the gold you have to store at the central bank?”

The government has also collected gold, but it is not enough to issue this amount of banknotes. My father asked me because he knew that I had a huge amount of gold.

“No, if we proceed like that, there might be some talk, so I think it would be better to do it in the form of public purchases for a certain period of time. If we are going to implement a full-fledged gold standard in the future, we need to secure gold released into the market in advance.”

“That would be good. So you can buy as much as you can from the market and buy what you need from your own?”

“Yes, on the last day of the public offering, I will sell as much gold as I need.”

You need to buy 10 million pesos worth of gold. The price is the current market price, so it won’t be easy to collect 10 million pesos worth of gold. You can buy gold at a reasonable price and sell your own to make up for the shortfall.

‘It’s also beneficial for me, since if I were to sell this much gold, the price of gold would inevitably fall, but I can sell it at a fixed price, albeit only for a small amount.’

With this, all preparations for the issuance of currency are complete. The printers and the currency technicians are already prepared before the bonds are issued.

The banknote engineer was scouted in advance from England, and he and Locke Precision Machinery collaborated to create the printing press.

Special care was taken to prevent counterfeiting, which was one of the biggest shortcomings of banknotes, and this was because Britain was also the leader in banknote technology at the time.

His father’s decision was relayed to the Treasury and the Central Bank, and soon public gold purchases began.

***

The Mexican government purchased the entire 10 million pesos at prices corresponding to the prevailing market price.

This was once again carried out in Rios Banks across the country and was met with a greater response than expected.

As the number of gold miners in California increased and a large amount of gold was released into the market, many people were storing their gold instead of selling it due to the falling price.

“Is this price fixed? Are you saying that you will buy it at this price no matter how much you bring?”

“Yes, that’s right.”

“Okay, just wait a minute. I’ll get it right away!”

The government was able to purchase 4 million pesos worth of gold during a two-week public offering, while the remaining 6 million pesos worth of gold was sold by the Crown Prince.

While the public offering was in progress, the issuance of banknotes began.

“The money is being printed and paid out so quickly. It doesn’t seem like money at all.”

Augustin I said this while watching banknotes being printed out of the Central Bank’s printing press.

“Yes, we have to print a whopping 40 million pesos worth of banknotes this time, so even if we print that much, it will take quite a while.”

“I think we need to guard the gold bars well, but we also need to thoroughly protect the printing house and warehouse that produce these banknotes.”

“Yes, I think we’ll need tight security.”

The cost of minting 40 million pesos worth of banknotes, which may not seem like much in percentage terms but amounts to hundreds of thousands of pesos in total, was borne by squeezing the remaining administrative budget.

It could have been financed with the proceeds from the sale of bonds, but the aim was to issue as much currency as possible. The result was an issuance of 40 million pesos, with 10 million pesos worth of gold as a reserve. It was a truly enormous sum.

As we will become more familiar with, this was the first time in Mexican history that such a large sum of money had been raised. The emperor ordered that the gold, printing press, and banknote storehouse be guarded with the same level of security as the palace.

What’s more, he visited several times and showed that he was paying attention, so no one dared to touch him, and fortunately, there was no theft or embezzlement.

The government, having secured a budget, invested some of the funds into its original purpose of training the navy.

“Yes? Are you going to pay the drying fee all at once?”

John Ericksen, president of Mexico Shipbuilding, asked.

“Yes, we will adjust the budget so that we can hire more workers than originally planned.”

The naval officer in charge of communication with the Joseon construction company spoke with a confident expression, unlike before.

In the shipyards of Veracruz, the ship was slowly being built. It had started, but the navy’s budget was so limited that there was no money to buy all the materials, so it was being built slowly, with a small workforce, buying materials. And even then, it was being built only in large docks.

“···Now I feel like working.”

John Eriksen expressed his gratitude to the Crown Prince for solving his financial problems and began to use the generously allocated budget.

A large amount of materials and manpower were invested at once, and warship construction began at a much faster rate than before.

The government also placed orders for all medium-sized and small docks at the Veracruz shipyard.

The budget so far is only 2.1 million pesos.

The large dock cost 1.1 million pesos, including two monitor ships worth 400,000 pesos each, plus 300,000 pesos for the battleships, and fully operationalizing four medium-sized docks and five small docks cost 1 million pesos.

“···There is more money left over than I thought, so let’s build the 3rd and 4th shipyards while we’re at it.”

The order was to build two more ports and shipyards, in addition to the second shipyard currently under construction in the Pacific Ocean, for a total of four ports and shipyards.

“Yes, Your Majesty. And how about increasing the budget for naval training and expanding the troops in advance to thoroughly train them?”

The idea was to train naval officers and sailors in advance to match the rapidly expanding Mexican Empire’s fleet.

“Oh, that’s a good idea. Let me draw up a budget for you.”

“Yes, thank you, Your Majesty.”

Although the Crown Prince said that he had half of the 40 million pesos for other uses, it seemed that even the remaining half was too much to be used solely for the Navy.

This was the moment when the Mexican Imperial Navy finally began to expand.