The Wall Street crash triggered a wave of bank deposit withdrawals and caused massive unrealized losses on stock holdings. Banks across America found themselves facing severe liquidity shortages. To replenish their funds and deal with mounting non-performing loans, they began aggressively recalling outstanding loans.
Moreover, the Federal Reserve Board (FRB) remained hesitant to lower the discount rate. While officially framed as protecting the gold standard, this meant interest rates stayed high—effectively a death sentence for businesses already struggling with cash flow.
The impact of loan recalls was especially devastating in rural areas.
Before Black Thursday, abundant capital had flowed into Chicago's futures market, inflating prices for agricultural commodities like wheat and soybeans. Rising prices boosted farmers' incomes, encouraged equipment investments, and led banks to eagerly finance farm mechanization and expansion.
However, the crash sent shockwaves through the futures market. Within just a few months, grain prices fell by 60% . At these levels, farmers could no longer sustain their operations.
Without mercy, financial institutions began withdrawing credit from farmers.
Amid this crisis, the Richard Alliance Bank (RAB) stepped in. It actively extended financing to companies and farmers who had been cut off by other banks. It also bought up non-performing loans from failing institutions and gradually acquired regional banks on the brink of collapse.
Most strikingly, RAB offered loans at interest rates between 1% and 4% —unbelievably low by the standards of the time. These were set based on the expectation that deflation (deflation ) would continue for some time.
Deflation refers to a general decline in prices. For example, if the price index stood at 100 points, and dropped to 80 points six months later, that represents a 20% deflation. In other words, while $1 previously bought 100 units of goods, now it can buy 125 units. This means currency gains value over time—within a domestic economy, at least. As a result, people tend to hoard money instead of spending it, further suppressing consumption. However, this situation allows financial institutions to maintain profitability even with very low nominal interest rates.
This is precisely why RAB pushed forward aggressively with low-interest lending.
Additionally, RAB took on what should have been the Federal Reserve's role: supplying dollars to the banking system. It did so by purchasing U.S. government bonds held by financial institutions. Banks engaged in forced loan recalls saw their loan portfolios shrink—and thus, profits fall. If banks had sufficient liquidity, such aggressive recalls wouldn't be necessary in the first place.
Furthermore, to reassure depositors, RAB introduced a special guarantee known as the Romanoff Guarantee as an optional deposit insurance plan. Under this program, depositors paid 0.5% of their balance as an insurance fee. In the unlikely event that RAB collapsed, the Russian government would reimburse every penny.
At the time, there were widespread urban legends claiming the Romanov family controlled one-third of the world's wealth , or that they had enormous deposits in Swiss and British banks. The promise of Romanov-backed security became a major draw, and deposits began pouring into RAB.
Thanks to the market crash, Richard Investment successfully secured $13 billion in capital—a sum equivalent to more than four years' worth of the U.S. federal budget . In Japanese yen, that amounted to roughly ¥27.6 billion , nearly 18 years' worth of Japan's national budget .
Much of this money was deposited into Russian banks, which then lent it to the Richard Alliance Bank (RAB) .
In addition, RAB aggressively purchased U.S. government bonds on the open market. Eventually, RAB came to hold 32% of all outstanding U.S. Treasury bonds .
Thus, the Richard Investment Group steadily deepened its control over the American economy.
———
"What a classic match-pon scheme. Triggering a crash, creating economic chaos, and then 'saving' people with the very money you stole—it's diabolical."
Liliel looked at me with half-closed eyes.
"A crash was going to happen regardless. Black Thursday may have sparked the Great Depression, but it wasn't the root cause. The real causes were the failure to handle bad debts, the forced loan recalls, and most importantly, the enactment of the Smoot-Hawley Tariff Act . That law slashed global trade by more than half and dragged the world toward bloc economies, ultimately paving the way for the rise of Nazi Germany and World War II."
※ The Smoot-Hawley Tariff Act was a U.S. law imposing tariffs of up to 40% on imported goods. Its passage devastated international trade and accelerated the global spread of the Great Depression.
"So… do you think this version of history can avoid another world war?"
"We've already sent numerous lobbyists to Washington to block the Smoot-Hawley bill. We've also made significant political contributions to key senators and representatives. I hope we can kill the bill before it becomes law."
"But even if we prevent the worst of the economic downturn using Richard's strategy, unemployment will still likely exceed 10%. That's better than the historical 20%, but not by much."
"Inevitably, America will move to protect its own industries. France and Germany will bear the brunt of those protectionist policies. That's probably enough to spark another rise of the Nazis. After all, German resentment toward France was already boiling over during the Ruhr Occupation in 1923."
"I see… So war is hard to avoid after all."
"Don't give up yet. The effects of Black Thursday will hit Japan too—this will become the Shōwa Depression . We need to stop that before it starts."
"We managed to block the return to the gold standard—for now. But in our timeline, poor harvests combined with collapsing rice and silk prices led to mass farmer suicides and desperate families selling their daughters. That helped fuel the February 26 Incident . With plenty of available capital this time around, we might be able to stabilize rural areas and keep the military from running wild."
———
"Is Richard trying to play the hero? All that money he's using for aggressive lending originally came from us. It's an insane match-pon operation."
"But if Richard hadn't stepped in with emergency lending and asset purchases, the American economy would have collapsed far worse than it did."
"That only shows how incompetent the Federal government and the FRB were. None of us expected Hoover and Young to fail this badly."
"The profits Richard made from the crash were first transferred to Russia. That was part of a tax haven strategy. From there, the money flowed into the Richard Alliance Bank. And with the Russian government backing its deposits, there's no doubt Richard is working hand-in-hand with the Russian regime."
"This could be an act of economic invasion by Russia."
———
Around this time, two 330-meter cargo ships ordered by a Russian shipping company departed from America bound for Japan. Three more of the same class were under construction.
Thank you for reading Chapter 63.
Economic conquest of the world?
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