Darkstone Code

Chapter 1469: Chapter 1467: Something Went Wrong

"There’s some trouble..."

The President of Lemar National Bank was in the middle of convening a meeting of the bank’s middle and senior management. Ever since Lemar’s Grand President voiced his displeasure to the Federation Government, a large number of foreign investors had started frantically pulling out of Lemar.

It’s just that for now, the effects of this foreign capital flight hadn’t yet fully shown themselves.

In the President’s eyes, this country was already held together rather loosely; once foreign capital fled, it was a disaster for the domestic financial market.

Ordinary people might not understand why foreign capital pulling out would spell disaster for Lemar’s local financial system.

In fact, it’s not complicated at all. Just bank loans alone are enough to give people a headache.

During the period when foreign investors were doing business in Lemar, all of their funds were deposited in Lemar National Bank.

The National Bank had the temporary right to use this money, until it was withdrawn or transferred out.

During that time, how to use this money was entirely up to the bank.

Of course, to make sure the bank didn’t overuse these funds and cause some kind of unforeseen trouble, every country sets a bottom line.

In a place like Lemar, where the financial sector isn’t actually very developed and most investment is in real industry, capital controls are a bit looser.

At Lemar National Bank, total loans cannot exceed eighty-two percent of total deposits. Compared to the Federation’s thirty percent lending cap, Lemar’s rule is almost like having no cap at all.

Because at most they only keep eighteen percent of total deposits on hand to guard against a possible run.

There hasn’t been a run, but foreign capital has definitely been pulled out.

Once the foreign funds are transferred out, the bank’s cash flow almost dries up. There’s no helping it—nobody expected the Grand President to suddenly offend the Federation, nor that the Federation’s reaction would be so quick and so fierce.

By this point, anything you say is too late.

The National Bank was simultaneously ordering the various regional banks to recall their outstanding loans, and urging companies and individuals to repay theirs as quickly as possible.

This, after all, is the National Bank’s main line of business.

Because Lemar’s financial markets were orderly and its economic model stable, it had never run into problems before.

Now that a problem had appeared, there was no good way to solve it.

All they could do was ease the liquidity pressure a bit by aggressively collecting on loans.

The President looked at the colleagues seated around the conference table—very serious, yet somehow vaguely irritating—and shook his head.

He tossed his fountain pen onto the table, leaned back in his chair to find a more comfortable position. "Get in touch with those regional banks first. There are still several large transfer-out applications pending. If we keep stalling on approvals, it’s going to cause trouble."

"Also, contact those international bankers and see if they can lend us some funds for the time being."

There were already several large transfer requests submitted earlier. The National Bank had used "procedural review" as a pretext and temporarily held back approval.

Fortunately, last week the Federation people expressed their understanding of Lemar’s decision, easing the bilateral tension; otherwise the pressure to approve would have been even greater.

If it really doesn’t work, we’ll just have to borrow some money from other banks for now, and pay it back once we’ve recalled all our loans.

In fact, borrowing between banks happens all the time. The six major banks in the Federation often lend to each other.

They don’t do it because they’ve run out of money, but because, say, there’s a large withdrawal or an interbank transfer in a certain region, and the branch or sub-branch’s cash falls below its insured level.

Funds sent down from the head office take time to arrive. To guard against the possibility some idiot hears a rumor and triggers a run, the bank will temporarily borrow cash from the other five banks.

These loans are all very short term. Once the money from head office is transferred in, they’re repaid. It might be three to five days, maybe a week or ten days, half a month, but never longer.

The Federation has a very rich financial ecosystem, with many strong banks, so they’re not short of funds.

Lemar, because of its special financial and economic structure, doesn’t see much financial activity.

Sometimes "stable" also means slow, or even backward.

So when a big bank in a small country like this runs short of money, it too has to borrow.

Sometimes it borrows from neighboring countries, sometimes from international bankers.

Borrowing from neighboring countries’ banks is a bit troublesome, because news of it will definitely leak.

A bank actually has no money—this kind of news is fatal to the bank itself. People will immediately ask: Where the hell did my savings go?

Once a run starts, the bank truly can’t withstand it. No bank can.

Because the bank will definitely have diverted some of those funds into other financial operations; there’s no way it can survive everyone trying to pull out their money at once.

That’s why borrowing from international bankers won’t lead to leaks.

Those international bankers are tight-lipped. They know what can be said and what can’t.

The manager in charge of international business nodded immediately. "I’ll contact them as soon as we adjourn."

The President nodded slightly. "Remember, this must not leak. Whoever lets this get out and triggers a run will be the guilty party."

At such a sensitive moment, if a run breaks out and people lose confidence in the banks, that loss of confidence will quickly extend to the state itself. That’s something they must not allow.

Even though a sizable chunk of the National Bank’s shares are held by capitalists, the ones really controlling the bank are still the ruling class. Otherwise they wouldn’t dare call it the National Bank.

After the meeting, the President returned to his office. He hesitated for a moment, then picked up the phone and called Lemar’s Grand President.

Less than half a minute later, the call went through. As the Grand President’s voice came over the line, the President couldn’t help but smile a little.

"Yes, it’s me, Mr. President. I’d like to discuss something with you—about our cash reserves..."

On the phone, he carefully explained how this situation had come about, the process it had gone through, and the predicament they were facing now.

In the end, he also laid out his proposed solution, but he felt it still wasn’t particularly safe.

"What I mean is, in case the situation takes an unexpected turn, could I be authorized to print an additional batch of cash?"

The National Bank has the right to issue currency. As long as the Lemar Government authorizes it, the bank’s printing presses can start moving.

The raw materials were all in storage; if they ran at full capacity, they wouldn’t even need to borrow externally. The newly printed cash would be enough to handle this shock.

The President’s idea was to print the money first to guard against worst-case scenarios. If the things nobody wanted to see really happened, this money would be crucial.

If those terrible things didn’t happen, the money would just sit sealed in the vault for now, unused. When the time came that it was needed, the government could announce a currency expansion, and the bank would immediately be able to produce the cash.

In short, this was a contingency plan, a safeguard against the worst of the worst.

After listening, the Grand President felt a headache coming on. A lot of problems had been weighing on him lately, and with his lack of sensitivity to finance and economics, he wasn’t very clear on what the consequences of such a move might be.

Sometimes he felt like the Sea God was playing a joke on him. How else could things have gotten this bad?

Luckily, the President’s explanation was reasonably detailed. Listening to him, the Grand President more or less grasped the idea.

He hesitated for a bit, but soon his hesitation faded.

Compared to the international situation, what’s a domestic increase in the money supply?

"I agree to your request. Go ahead and arrange it. Does this need to be kept secret?"

The President held the phone with both hands. "Yes, Mr. President."

"All right, I understand. Keep me informed if there’s any new development. The authorization will be delivered to you this afternoon."

That same afternoon, two government officials brought the authorization documents to the President’s office and completed the handover.

Shortly after four p.m., the mint began operating. Large amounts of raw material were brought in and out, and the engineers all returned to work.

In fact, none of them knew what had happened or why there was suddenly a need to print a new batch of currency.

But such matters are classified by nature, and with the President’s explicit instructions, nobody said a word.

The new batch of banknotes didn’t use a fresh design. For the sake of identification and anti-counterfeiting, they only made some minor changes to the existing design.

For example, the print date was changed to this year. And the depiction of the Lemar Islands on the front side of the note was rotated fifteen degrees.

These are the kinds of details that you wouldn’t notice without a close look, but they still play an important role in anti-counterfeiting and limiting the circulation of fake currency.

They worked straight through until after two in the morning. Under the President’s personal supervision, the plate-making process was completed.

Early the next day, a little after seven, the President drove to the mint. When the first printing plate—still warm, smelling of ink—full of freshly printed notes was laid out in front of him, a faint smile appeared on his face.

With this money, the consequences of the foreign capital flight could be offset, which let him finally breathe a huge sigh of relief.

He signed his name on the finalized plate and issued a document authorizing its use. The entire mint then went into full operation, machines roaring.

Those worthless sheets of paper, under the rumbling of the presses, turned from blank paper to lined paper, then, once colored, to paper currency. It actually didn’t take very long.

The notes were stacked up in bundles. With the rise and fall of the steam-powered cutters, they were cut into neat packs of a hundred notes each.

The engineers checked them over repeatedly, and after confirming there were no errors, they took some sample notes and delivered them back to the President.

With that cash sitting in the President’s briefcase, he felt completely at ease.

The Grand President soon learned of it. After confirming that there had been no problems in the printing process, he ended his conversation with the President with a simple, "Contact me if anything goes wrong."

He didn’t dwell on it, instead focusing his attention on some worrying signs emerging at home—signs that were also tied to the flight of foreign capital.

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