1928: The rise of giant merchants

Tanaka Giichi, who was reprimanded by the Emperor for failing to properly handle the incident in which the Kwantung Army killed Marshal Zhang, finally resigned because of this, left the Prime Minister's Office. The leader of the opposition Democratic Party, Hamaguchi Yuki, officially came to power on July 2, 1929 and became the Prime Minister. He became the 27th Prime Minister in Japanese history.

In 1929, Japan had not yet recovered from disasters such as the Great Kanto Earthquake, and its long-term economic slump became increasingly serious.

Hamaguchi was the first prime minister born in the Meiji period.

The Hamaguchi Cabinet was established very smoothly. His serious character gave the people a high sense of trust and won many praises from the public.

The most striking thing about this cabinet is the appointment of Junnosuke Inoue, the president of the Bank of Japan and highly trusted by the business community, as the Prime Minister.

At the same time, Hamaguchi himself was a well-known financial expert, and he appointed Inoue as Tibetan Prime Minister, allowing the people to see the opportunity for Japan's economic recovery.

Shortly after Hamaguchi came to power, he decisively implemented his promised policies of fiscal rectification and financial lifting (restoration of the gold standard). However, something unexpected happened. On October 24 of the same year, the collapse of the New York stock market triggered a worldwide economic panic that also involved Japan. , this disaster quickly developed into an unprecedented world economic depression after several months.

The restoration of the gold standard system made Japan's economic depression worse, resulting in the current desolate scene in major cities such as Yokohama, as well as Ye Luo's trip to Japan.

The so-called gold standard system is a monetary system with gold as the standard currency. Under the gold standard, the value of each unit of currency is equivalent to a certain weight of gold (i.e., the gold content of the currency); when different countries use the gold standard, the exchange rate between countries is determined by the ratio of the gold content of their respective currencies—the gold parity.

The gold standard became popular in the mid-19th century, and the most well-known gold standard, the classical gold standard, prevailed from 1880 to 1914. Japan has also continued to use this monetary system.

To put it simply, a certain amount of gold is used as a monetary unit to mint gold coins as the standard currency.

Because gold coins can be freely cast and melted, they have unlimited legal solvency. At the same time, the state restricts the casting and solvency of other coins, and uses auxiliary coins and bank notes to freely exchange gold coins or equivalent amounts of gold, with gold as the only reserve.

The gold coin standard eliminates the shortcomings of price chaos and unstable currency circulation that existed under the bimetallic system, ensures that currencies in circulation will not depreciate against the standard currency metal gold, and ensures the unification of the world market and the relative stability of the foreign exchange market. It is A relatively stable monetary system.

Under this system, gold can be freely exported or imported into the country, and a coin-price flow mechanism is formed during the export and import process, which plays an automatic adjustment role in the exchange rate. The exchange rate under this system has a small fluctuation range due to the effect of mint parity and the limitation of gold delivery points.

However, after the outbreak of World War I in 1914, because gold could be used to purchase war supplies, and Britain, France, the United States, Germany, and Russia accounted for 2/3 of the world's gold stock, most of the gold was owned by a few powerful countries. , which weakens the foundation of other countries' monetary systems.

In order to limit the participation of gold in the purchase and sale of war supplies, various countries issued banknotes that were not redeemable and prohibited the free export of gold. The gold standard came to an end.

After the war, Japan had always used a paper money credit system, which led to extremely serious inflation. The incompetent government and Ministry of Finance officials were unable to curb the inflation of paper money, and could only watch the economic and monetary systems collapse.

The only way to solve this problem is to restore the gold standard.

This logic is actually quite easy to understand.

When using the paper currency credit system (which is basically the system now), the government can print and issue banknotes at will to control domestic currency circulation and price conditions. If I want to print more, I can print more, and if I want to print less, I can print less. Anyway, the money printed is only as long as the government Recognize its legal effect, it is valuable currency!

This will naturally lead to over-issuance or under-issuance, leading to uncomfortable economic phenomena such as inflation and deflation.

And when the country adopts the gold standard or the silver standard (the currency system adopted by the Republic of China at this time), the banknotes in your hand are like a bill of lading. With it, you can exchange it for gold and silver of corresponding value from the bank or the treasury——

It is something with real economic value, not a blank piece of paper that is given meaning by the government.

In this way, the government cannot easily control currency circulation and the domestic economy. After all, if you want to exchange paper currency for gold or silver, it must be given to you.

Therefore, as long as the gold standard system is restored, Japan's domestic economic depression will naturally be alleviated. However, the framers will trample on the interests of most of the upper class and will encounter strong opposition and threats.

Yuyuki Hamaguchi came on stage and actually did it.

After the gold standard system is implemented, it will not take long for the people to find that the currency in your hands is valuable and linked to gold. You will be reluctant to use it and have to wait for it to continue to appreciate——

When money becomes valuable, if you don’t use it and don’t consume it, the goods on the market will become unsalable, and the price will come down, and the cycle will continue.

This will trigger a period of deflation.

National consumption power weakens, prices fall, commodity production decreases, factories close down, unemployment rises, and the economic depression caused by deflation is foreseeable.

In fact, after this period of time passed and the market adjusted, the problem would be solved.

With this idea in mind, Hamaguchi Yuyuki and others firmly restored the gold standard system, and thus won the votes and expectations of the people.

The worst thing is that an economic crisis breaks out in the United States.

The United States is the largest inflow country of gold. It suddenly no longer wants your gold. The price of gold has dropped, and your gold standard system will also be affected.

It was clearly during the Great Depression, and society was experiencing deflation. Because the economic crisis was sweeping across the United States, it became more difficult for you to export, your trade deficit became larger, the value of your currency fell inexplicably, and your domestic goods and industries became increasingly sluggish.

Originally I wanted to use this trick to achieve nirvana and rebirth, but now it's better, it's become the straw that breaks the camel's back!

The current domestic situation in Japan is that the yen exchange rate has fallen and has lost international credibility. In order to increase the exchange rate, the government forcibly restored the gold standard at the old parity of one dollar to two yen. Due to the impact of the U.S. economic crisis, deflation and inflation broke out at the same time. The monetary system was about to collapse.

Your gold cannot go out and circulate, your currency is worthless, and your purchasing power is lacking. Prices are falling rapidly due to deflation and rising due to inflation. The price of domestic rice varies every day, and the people will never know who I am. How much will the money in your hand be worth in the next second?

The predicament was established. Unable to reverse course and cancel the restoration of the gold standard system that he had personally promised, Hamaguchi had no choice but to bite the bullet and try to break the situation.

Realizing this situation, Ye Luo immediately called Franklin, who helped him get acquainted with the new prime minister who was determined to save Japan's economic crisis and prevent the aggressive intentions of the militarists.

Hamaguchi Yuyuki's problem is very simple. The gold that was originally supposed to be used in large quantities to purchase American supplies cannot get out now. What to do with it?

And Ye Luo, the president of YB Bank recommended by Franklin and the boss of Ye's Investment, happened to appear, giving him hope of gold outflow.

As soon as gold starts circulating again, domestic currencies can start functioning again! (End of chapter)