War Foreseen (Thanks to Chang'an Wang Jin for the 1,000 tip and Tide X for the 100 tip)

(This chapter is still recommended for repeated reading.)

The Daily Prophet, December 27, 1989:

"After November 9, 1989, Germany began massively issuing its national currency to address the fiscal deficit caused by the fall of the Berlin Wall. This directly worsened domestic inflation in Germany, and the immense inflationary pressure forced the Central Bank of West Germany to raise interest rates. Yet beneath the seemingly ordinary surface concealed by the economic crisis, we still have reason to suspect that the dark wizards of the German magical community still intended to rescue their former leader, Gellert Grindelwald, from Nurmengard."

Jon folded the newspaper in his hands and lightly tapped the table twice with his fingers, earning a glare from Madam Pince, the librarian.

After softly apologizing, Jon rolled up the newspaper, tucked it beneath his arm, and turned to leave the library.

He had been at Hogwarts for a week now. During that time, Helga only met with him once every two or three days. The two had already developed an understanding, and every lesson was timed precisely so that Jon would not be too exhausted the following day.

As for Hogwarts homework, it was not difficult for Jon. He only needed to spend a little time to earn a fairly decent grade. Nor had Jon displayed any exceptional talent in flying lessons, so as long as he did not seek it out himself, Quidditch had nothing to do with him.

The assignments Helga gave him were much broader. For instance, the issue of The Daily Prophet he had just read was an assignment Helga had given him after he shared his thoughts with her on Wednesday night.

Today was Saturday. He would enter Helga's Portrait Space again that evening, and before then, he needed to organize all this information so he could explain it to Helga.

Helga would then make various deductions, including every possible outcome, while Jon was responsible for identifying the most likely one.

Of course, this was no longer homework. It was part of Jon's studies.

Just as Helga had said, an outstanding wizard needed sharp judgment in order to avoid danger as much as possible.

Jon had recently found a small corner on the Seventh Floor of the castle. Its window was located at one corner of the castle and offered a view of all Hogwarts. Since it was on the Seventh Floor, students were not forbidden from going there, but few ever did.

Jon often came here, usually to meditate. Hogwarts had an excellent magical environment, and his progress in meditation here was remarkably satisfying.

The rest of the time, Jon generally spent staring into space, which was not much different from meditating.

But when Jon stared into space, he thought about far more things than usual.

For example, the article he had just read made him realize that not everyone in the Wizarding World was an idiot. There were still people capable of spotting an emergency.

However, publishing that conclusion in The Daily Prophet had been a serious mistake. The people at The Daily Prophet had long since squandered their credibility over the years.

It was true that the paper was the mainstream media of the British Wizarding World, but it had reached the point where, aside from factual news, no one believed any of its speculations.

No one believing it was not the real problem. Even Jon, who had memories of this matter, had not reacted at once. Who would have thought that dark wizards, who worshipped violence, had begun using their brains and trying to use Economic War in the Muggle world to conceal their true purpose?

And in the Wizarding World, the greatest problem was wizards' stubborn complacency. On one side was the hostility and contempt Pure-blood Wizards held toward Muggles; on the other was their excessively high opinion of themselves. They had failed to realize that Britain was no longer the powerful British Empire of old. Nor was the Wizarding world in much better shape than the Muggle world. Promising young wizards from every country were springing up like mushrooms after rain. Though Dumbledore was still one of the most powerful wizards in the world, one man could only do so much. Maintaining the British Wizarding World's influence throughout the magical world was already no easy feat.

Especially after World War II, the country in North America, under the repeated arrangements of that wheelchair-bound leader, had already seized the greatest influence from the British Empire. Accordingly, that country's wizards had risen with the tide and gained more influence at the International Magical Conference.

It was precisely because of this that in 1990, the British Muggle government decided to join a new monetary system created by Western European countries in an attempt to escape American constraints. This monetary system—the European Exchange Rate Mechanism—essentially used a treaty to bind together the currency mechanisms of every country. Put simply, each currency could only fluctuate within a certain exchange-rate range. Once it exceeded that prescribed range, the central banks of each member nation had to intervene in the market to stabilize the exchange rate.

And all of this operated around Germany's currency, the mark.

This system quickly became a tool. A businessman named George, the Muggle representative of the dark wizards, exploited its weaknesses to launch a currency "hunt" against British Muggle society.

In Jon's memories, Britain in his previous life had been utterly powerless against this George and had been beaten into economic collapse in 1992. At the present point in time, British Muggle society was facing rapid economic decline and deflation.

While German Muggle society faced inflation and had no choice but to raise interest rates, British Muggle society, due to its economic decline, instead needed to raise inflation. It therefore urgently needed to lower interest rates to stimulate economic recovery.

The conflict emerged at this moment. To maintain the European Exchange Rate Mechanism, Britain had to keep exchange rates and interest rates as high as Germany's, leaving Britain in a dilemma.

According to Mundell's trilemma, under an open economy, the independence of domestic monetary policy, exchange-rate policy, and free movement of capital could not all be achieved at the same time. At most, only two goals could be satisfied simultaneously, while the third had to be abandoned to achieve regulation. Having already maintained exchange-rate stability and free capital flows, Britain's attempt to also maintain high interest rates was inherently impossible.

And Jon knew that George, the representative of the German dark wizards, was betting that Britain's Muggle government could not maintain all three at once and would have to abandon exchange-rate stability and withdraw from the European Exchange Rate Mechanism. When that happened, Britain's pound would collapse.

Jon did not know that much about economics, but one thing was obvious.

If the economy collapsed, it would inevitably cause social panic. When that happened, the British Wizarding World, which depended on Muggle society, would become a giant sieve, infiltrated by those dark wizards until it fell apart.

"That would be the real disaster!"

Jon sat by the window and muttered.

If you enjoy this book, remember to add it to your bookshelf so you do not lose it next time.