Raising Funds

"Sir Ernst, if you have no objections, we can sign this agreement."

Ernst gave the agreement one final careful review, then signed his name.

The visitor was from the Prussian Royal Family. Recently, Prussia had been arguing fiercely over the privatization of the Cologne-Minden Railway.

This showed that the Kingdom of Prussia was resorting to every possible means to raise funds for war, and Ernst, another big fish, had naturally caught Prussia's eye.

After all, the Hohenzollern Conglomerate was now a star enterprise throughout Germany. It owned a sizable bank, a world-class daily necessities company, Hohenzollern Tobacco...

The enormous wealth Ernst had rapidly amassed in such a short time naturally drew attention. Fortunately, Ernst truly was born into nobility. He had no inspiring tale of a commoner's rise to prominence, and compared to the self-made geniuses of his era, he was not particularly conspicuous.

But wealth could not lie, especially when the Prussian Royal Family knew best, because they themselves were Ernst's clients.

The purpose of the Prussian Royal Family's representative coming to Ernst was self-evident. Compared with selling off a strategic facility like a railway, it was better to first seek solutions elsewhere.

The Cologne-Minden Railway was one of Prussia's earliest railway lines. Designed in 1833 and fully completed in 1859, it had become a hub of the Prussian railway system.

The original purpose of the railway project had been to transport coal from the Ruhr region cheaply to Prussia's industrial production bases.

In fact, the Cologne-Minden Railway had been a large public infrastructure project led by the Prussian Government from the very beginning. The Prussian Government directly purchased one-seventh of the original shares and guaranteed the railway's bonds, worth 14 million thalers, to be issued at a coupon interest rate of 3.5 percent.

In return, the government could purchase the company's publicly traded shares in installments and ultimately become the railway's sole shareholder, completing a gradual nationalization.

Railway nationalization was a strategic decision for Prussia, because Prussia valued the railway's ability to transport troops and supplies.

But at present, the conflict between Prussia and Austria had intensified, and the upper ranks of the Prussian Government were actively preparing for war.

War could not be waged without financial support, and it was against this backdrop that the Cologne-Minden Railway had been brought up for discussion.

Bismarck's preparations for war against Austria required a total of roughly 60 million thalers. The burden of raising such an astronomical sum fell upon Breschlau's shoulders.

In fact, as early as December 1862, after careful calculations and repeated consideration, Breschlau had proposed the highly controversial plan to privatize the Cologne-Minden Railway.

The core of his proposal was this: rather than having the government spend vast sums in 1870 to acquire all the railway company's shares, placing immense pressure on the treasury, it would be better for the Prussian Government to renounce nationalization in exchange for immediately receiving compensation from the railway company. At the same time, it could abandon its guarantee of the bond interest and immediately free up part of the 14 million thalers in collateral.

The proposal met with opposition from many people as soon as it was introduced. They believed Breschlau's plan would sacrifice the government's long-term interests to allow railway company shareholders, including Breschlau himself, to reap immense profits. Under this plan, the government would lose rights and interests totaling as much as 30 million thalers, in exchange for only 10 million thalers in compensation and 4 million thalers in usable collateral.

The already completed Cologne-Minden Railway was a highly profitable government investment project. Privatization could provide the government with emergency funds in the short term, but the price was selling a prime asset at less than half its value while also surrendering future long-term revenue rights. No matter how one looked at it, it was not a good deal for the government.

Based on history, Ernst also knew that unified Germany would eventually nationalize the railways anyway, so the current railway privatization was merely a sacrifice that had to be made.

But it was impossible to expect capitalists to perform good deeds. They pursued higher profits, so patriotism was out of the question.

The Rothschild family's shadow lay behind this Prussian railway privatization, and Breschlau was their employee.

The Rothschild family's headquarters were now in Vienna, Austria. It would not be wrong to call them Austrian nationals, yet they were helping prepare war funds for an enemy country.

Their conduct truly had no scruples, but the benefits they gained were real enough. Had this been in the East, the Rothschild family would have been executed to the ninth degree of kinship by the emperor long ago.

Only Europe's present social system protected them. Of course, none of that had much to do with Ernst.

What Ernst cared more about was the agreement before him, the result of bargaining between the Prussian Royal Family and Ernst.

Although Ernst was very wealthy now, he also had many things to do. In particular, the development of the East African colony, population migration, grain reserves, production tools, colonial weapons and equipment, and even the staff's wages all required his own money.

Thus, after deducting the operating capital needed by the entire conglomerate, the East African colony's expenses, and emergency reserve funds, he only had a few million thalers available. But that was enough. The Prussian Royal Family had not expected too much to begin with. A few million thalers was already an enormous sum in this era. After all, even through privatizing the Cologne-Minden Railway, the Prussian Government could only obtain an initial 4 million thalers.

One important reason the Prussian Royal Family sought Ernst's help was their hope that he would have more conscience than banks and conglomerates that pursued nothing but economic interests.

No matter what, Ernst was one of their own, a member of the House of Hohenzollern. Ernst indeed had little need for railway claims; what he had his eye on now was East Africa.

So Ernst also stated the benefit he wanted: in the future, Prussia had to guarantee the Hechingen Royal Family's interests in East Africa.

Prussia's most urgent task was now to unify Germany. It did not care much for colonies, so since Ernst wanted Prussia, after unifying Germany, to support all of his interests in East Africa, then it would support them.

Thus, both sides signed the agreement. This agreement included the Prussian Government, the Prussian Royal Family, and the Hohenzollern Conglomerate represented by Ernst.

Its specific terms were that the Hohenzollern Conglomerate would provide funds to purchase 40 percent of the government-held shares in the Cologne-Minden Railway, and that the Hohenzollern Conglomerate would not prevent Prussia from repurchasing Ernst's Cologne-Minden Railway shares in the future at above-market prices.

This was really a trick of moving money from the left hand to the right. Ernst handed idle funds to the Kingdom of Prussia for its war effort, and once the war ended, Prussia only needed to settle the account to return the railway to national ownership.

Of course, Ernst was not giving without compensation. In exchange, the unified German government had to recognize the Hechingen Royal Family's ownership of the East African colony and support the Hohenzollern Conglomerate's expansion throughout Africa.

Though this gentleman's agreement was not foolproof, it could avoid many troubles. In Ernst's previous life, German East Africa would then have completely lost its basis for existence and legal legitimacy; this time, it would be the Hohenzollern Royal Territory.

As a supplement to the agreement, Ernst also used this opportunity to obtain the admission ticket he had long dreamed of.