Of the twelve members of the board of the world bank, six officially resigned the following week and four others were dismissed. Only two members of the old line-up remained and one new member was added. This meant that the board currently only consisted of three people.
As she often did, Reyji went to the kiosk on Palace Square that morning to get a coffee and cigarettes. In the magazine rack, she spotted 'THE ECONOMY' with a special edition and the lurid title: 'The End of Baele'. Someone had been blabbing and it would not be difficult to find out who it was.
When she looked in the magazine, there were quotes from Marah's appearance at the board and there were also the full papers from the file. It was all revealed. Even the list of things worth promoting was among the documents. It was actually a secret document for the loan. According to the newspapers, the rest of the press already knew a lot.
At first, many people were still undecided how to react. From that day on, the chaos took its course...
First of all, the new spokeswoman for the board of the world bank announced a firm date for leaving the free banks and then that the key interest rate of the S-Mark would be set at 0% from the current 2% with immediate effect. The way she made these announcements did not help to ease people's uncertainty. At the press conference, she did not answer a single question. She read a handful of sentences from a piece of paper and then she left.
The following week, the fixed exchange rate between the currencies fell and the S-Mark plummeted. Although initially only visible on the financial markets, it was the first time since joining the free banks that the S-Mark had significantly lost purchasing power. Without the coupling to the Fee and Nitzia, it lost value.
Marah herself was supposed to take part in a public meeting to calm the markets, but what she said there had the complete opposite effect. When the moderator asked her: "What happens to the Black Mark?", she replied: "What do they expect? It falls and falls and falls and when it hits the ground, it will explode." then she laughed hysterically. Everyone was silent. The audience was shocked. Marah spoke up again and corrected herself: "It was just a joke. I apologize for that. The S-Mark is of course a stable currency. There is no need for concern. You should trust me and the board of the world bank. We know what we are doing." then she smiled confidently. Nevertheless, the audience was not convinced. People were afraid of inflation.
Marah reiterated on many occasions that there was no cause for alarm, but the mistrust remained. Some prices were rising.
On the first day of the next month, THE ECONOMY published another special edition. This one revealed and proved that Marah had already exchanged a large part of her bank assets into foreign currencies weeks ago. The very next morning, it became known that the state bank was going to reduce the material value of the coins in the latest edition.
It was the drops that made the barrel overflow. The S-Mark plummeted. It lost a quarter of its value within two trading days. State employees had only just been paid. Worried, everyone bought as much as they could. The situation escalated. People started hoarding. The stores were overrun. Prices rose sharply. The value of the S-Mark continued to plummet. Rich people exchanged everything they had for other currencies or material assets. In some cases, they paid several times more to get a safe store of value.
The list of things worth promoting did not help the development. Household magazines advertised heavily. The advice was to quickly get the free credit and buy while the offer lasted. After all, if the S-Mark continued to fall, the items were almost a gift. You had to get the loan directly from the state bank. In the meantime, the state bank was already accepting the first non-banks as customers. In some large cities, provisional branches had already been opened in the citizens offices. The interest rate was the same as for all customers and consequently also for non-banks at 0%. The private banks still had their licenses. However, the S-Mark loans there were at extreme interest rates or had to be repaid in foreign currency. So it was better to get an account with the state bank and get the loan there. You could only win. You exchanged quickly falling debt for things that would retain their value. The amount of credit granted for consumer loans in this period was nine times higher than in the same period the previous year, but this was also due to the inflation. The amount of money in circulation continued to rise. Prices continued to rise. Inflation continued to rise. The value of the currency continued to fall.
The money creation process continued as normal. The production of coins ran at full speed. The only anchor of the S-Mark was the value of precious metals and jewels.
Everything was bought. Everything was paid for with a lot of money. A loaf of bread cost more and more every day, if you could get one at all. Inflation reached a new high with every measurement. With every delivery, people fought over the goods. Panicked, they gave away all their money to exchange it for things to save their fortunes.
In the meantime, exports had to be restricted, which also dealt a severe blow to the S-Mark. Ships stood in the harbors for weeks without cargo.
It was pure chaos. Marah was laughing her head off.
The first retailers finally stopped accepting the S-Mark. The first private companies promised to pay their employees in Fee. The state companies only paid in S-Mark. Some employees handed in their resignations in order to be paid elsewhere with usable money. As a result, the productivity of the state companies fell somewhat. It could have been a wave of resignations, but it was not. High and middle-ranking employees accepted the losses because it was rumored that the S-Mark would soon be replaced. Lower-level employees accepted payment in S-Mark because their minimum wage was linked to inflation. Most of the resignations were at management level.
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Some employees of private companies already received their wages in Fee. The employees of state companies were still all paid in S-Mark. The stores were emptied. Everything that went on sale was always bought quickly. Imports remained restricted throughout. Exports were also restricted.
The end of the transition period had been reached. The world bank was officially a state bank again and already had a branch in every citizens office. The private banks lost their licenses for the S-Mark. They could not care less. The economy was running on Fee now. Although the S-Mark was down, it remained stable for the time being. It could hardly fall any further because it had almost reached its material value. The state bank guaranteed that the material value would not be lowered again, but had already been lowered by them as a precaution in anticipation of this development. People half believed it, but it did not matter if they did. The S-Mark remained stable as long as they could provide the coins.
Many people had lost their fortunes or were bankrupt. Many companies had lost their capital or were bankrupt. Tens of thousands had lost their jobs. Unemployment temporarily rose to 7%. Crime rates increased slightly. The suicide rate quadrupled that year. Employees of state companies had to pay with checks at the supermarket because the money had become too cumbersome.
Marah was pleased. Reyji did not know why, but she was.
On one day, the spokeswoman for the board of the state bank unexpectedly called an unscheduled press conference. The public's assumption was that it would be a new currency, but instead of a new currency, a minimum exchange rate in favor of the S-Mark was announced. The press people thought it was a joke. But it was not.
The rate was, if you wanted to exchange S-Mark, you got an exchange into a foreign currency at the real rate, but if you wanted S-Mark, then the minimum exchange rate applied. To everyone's surprise, this rate was: 1.00 S-Mark was at least 100 Fee. At the private banks, you could exchange S-Mark at the real exchange rate. Nobody would take advantage of this offer. Apart from that, nobody wanted S-Mark anyway. In some stores, it was not even accepted anymore.
Immediately afterwards, the key interest rates were abolished. Until that day, the prime rate was the interest rate for all customers. You could get a loan at 0% or none. But from that day on, this no longer applied. The state bank now had a broad base and had enough staff of its own to grant loans on a fully individual basis. The criteria were secret. Nevertheless, you would not be completely in the dark. The state bank made contracts with states and companies, wrote out additional interest rates for various purposes and guaranteed them in part over a certain period of time. From then on, the State Bank would also publish a full annual report, in which, among other things, the amount of money created and the average interest rates of all loans granted of one type were stated.
On the day the minimum exchange rate was introduced, Marah herself made several announcements from the balcony of the palace overlooking Palace Square.
Marah declared the S-Mark to be the only national currency once more. All payment transactions with the state were therefore only possible in S-Mark. Until then, taxes could also be paid in Nitzia or Fee. This freedom was thus abolished. It was to be expected that Marah would take this step in order to give the S-Mark more stability. What was not expected was everything else.
Marah declared the S-Mark to be the only currency. In principle, this meant that the state of Baele no longer acknowledged any other currencies as a means of payment. In Baele's eyes, other currencies were just metal and printed paper. State companies were no longer allowed to use foreign currencies domestically. If you wanted state goods, you could only pay in S-Mark. At the end of a short transitional period, the state bank would no longer announce exchange rates or exchange money, because the state bank would from then on only know the S-Mark worldwide. If you still wanted to exchange money, you had to do it at a private bank. In principle, it was a declaration of economic war. If you wanted to trade with Baele, the S-Mark was the only currency you could use. It was a shock for many.
Marah had other announcements that nobody could understand at first. The recently extended restrictions on exports were lifted again. The requirements to participate in exports would be lowered for smaller companies in order to get more goods abroad. Then came the most relevant part. The disaster protection act came into full effect. This was the first time since the resolution. Export companies were given permission to sell their entire stocks domestically. The disaster protection act was considered by many to be the biggest waste of money since the invention of money, but for Marah it was an important tool in her toolbox. The majority of all goods stockpiled through the disaster protection act came from state companies. If you sold the goods of a state company, you could be paid whatever you wanted, but the state company ultimately had to be paid in S-Mark and the prices were set by the state. The stores were all still empty and foreign countries had long been hungry for new goods due to the restrictions on exports, but if you wanted some of these goods, you suddenly needed S-Mark.
Everyone needed S-Mark to pay for state goods and taxes. The private banks increased the exchange fees unexpectedly quickly and repeatedly, so that the costs soon exceeded the old minimum exchange rate again. It was not even two weeks before the S-Mark had almost regained its old value. People were like vultures. Traders had to accept the high exchange rates of the private banks or only sell state goods directly for S-Mark. No matter which trader decided to do what, the S-Mark continued to rise. The state companies, which had previously operated normally, temporarily increased working hours to double shifts, depending on the sector. Private companies also increased working hours slightly in order to take advantage of the new freedom to export. The productivity of the country as a whole increased and the S-Mark continued to rise.
Reyji did not know what the point of it all was, but she was impressed that the value of the S-Mark could be changed upwards so easily.
.../ End Part