1636: The Viennese Waltz

CHAPTER 31

October 1635

Liechtenstein House, Vienna

“Theoretically it’s a full reserve bank,” Sarah explained, “but in fact it operates as a fractional reserve bank.” She was talking about the Bank of Amsterdam, but the servant didn’t hear that part.

“What’s a fractional reserve bank again?” the lawyer asked. Over the past months since Sarah had been in Vienna, she had found herself with an extra occupation. And it was all Karl’s fault. He had introduced her as an expert witness in several of the cases against his family that were based on the Kipper and Wipper panic, which happened ten years before the Ring of Fire. Mostly, what she had done in those cases had been to explain that Liechtenstein, Wallenstein, and the others hadn’t known any better because no one had known any better. But to do that effectively, she had had to demonstrate that she did know better and was recognized by the financial community as an expert in financial matters.

Based on her proven expertise, she had been asked to testify in all sorts of cases that involved finance in some way. This case involved the Bank of Amsterdam and its double bank structure, which gave the illusion of being a full reserve bank, but with many of the advantages of a fractional reserve bank. The servant put the hot tea with lemon and honey on the table and Sarah thanked her, then answered the lawyer’s question. “They don’t have enough silver in their vaults for the amount of money they issue.”

The servant left the room and the lawyer asked how they got away with it. Sarah explained, but by then the servant was down the hall, convinced that the Royal Bank of Austria-Hungary didn’t have enough silver in its vaults for the reich money issued. This information, she repeated with great confidence. Then added that as an employee of the Barbies, she got paid in BarbieCo.

* * *

The maid was by no means the first person to suggest that the full reserve Royal Bank of Austria-Hungary didn’t, in fact, have enough silver to pay off all the people who were carrying around and circulating bank notes. The level of confidence in that claim had never been great, and the unwillingness of the crown to allow independent confirmation had done nothing to reassure the financial community. Abraham and Moses Abrabanel’s reassurance had helped some, but Gundaker’s somewhat strident insistence had actually hurt confidence.

Now, according to rumor, Sarah Wendell, in a deposition, had said there wasn’t enough silver in the Royal Bank of Austria-Hungary. Sarah Wendell was both engaged to marry Karl Eusebius von Liechtenstein and a recognized up-time expert on money. In the course of a couple of days, the rumor had turned the deposition into a “secret” deposition.

* * *

BarbieCo Preferred traded on the Grantville exchange, the Magdeburg exchange, the Amsterdam exchange and the Venice exchange. In all those exchanges, it traded as a stock, not a currency. The price quoted for a full share of BarbieCo Preferred-also known as a judi-was, according to the last September issue of The Street, thirty-one American dollars. The price of a reichsthaler was twenty-two American dollars. It wasn’t an obvious thing, since the prices were listed in different sections of the paper.

The difference in price wasn’t any big secret. Moses Abrabanel had discussed it with his father, with Gundaker von Liechtenstein, and Susan Logsden. However, the new issue of the financial paper had an article about the difference in prices and what they meant in terms of money versus stock and bonds. The article was a “thought piece” and encouraged readers to invest in the market, and in most of Europe that was how it was taken. However, in Vienna, its main effect was to make Grantville’s view of the relative value of a judi versus a reichsthaler obvious to anyone.

Beauty Parlor, Race Track City

“What do you mean, it costs more if I pay in reich money?” Liana asked. Maximilliana Constanzia von Liechtenstein was so obviously put out by the sign that Frau Lechner pulled out her copy of The Street and handed it to Liana. But she didn’t wait for the noblewoman to read it. She pointed out the specific passage and the line that followed it, about the writer’s belief that the difference in price was simply going to increase.

As it happened, Liana had both reich money and BarbieCo stock in her purse. She did quite a bit of shopping here and often got barbies in change. She glanced over the article, but didn’t really follow it all that well. She was literate and reasonably bright, but not particularly well-versed in business. However, she got the point and paid in reich money. After all, the barbies were going to get more valuable. It said so, right there in The Street.

Barbies were disappearing at a remarkable rate all that day, and the next. By Thursday, it was hard to find one even in Race Track City and essentially impossible in Vienna.

Frau Winkler’s Boarding House, Vienna

“Herr Maier, you get paid tomorrow, don’t you?”

“Yes, Frau Winkler?” Herr Maier wasn’t behind on his rent, not since his third week working at the Liechtenstein Tower construction project. It was hard, dangerous work, but Karl Johann Maier didn’t mind that. They paid well and on time, every week.

“Well, I want my rent in BarbieCo, so just you make sure you get barbies.”

“There’s nothing in our agreement that says I have to pay in barbies.” Karl Johann wasn’t all that happy with the landlady. She had been a constant pain while he was behind on his rent and not much nicer since he had gotten the good job. Besides, there were rumors that a barbie was worth more than the reich money.

Frau Winkler’s blotchy face got even blotchier, but he had her and she clearly knew it. “I will give you a discount for barbies,” she said grudgingly.

And they were off. The bargaining took fifteen minutes and he would save two trudies on a week’s rent. Karl Johann left the apartment building with a spring in his step and a song in his heart.

Frau Winkler was worried. Not all her tenants worked for the Liechtensteins or the Barbies. She had no idea why reich money wasn’t worth as much as barbies. She just knew that it wasn’t.

Royal Bank of Austria-Hungary, Vienna

“We need to open the second vault,” whispered Franz Traugott to Karl Lang.

“This is crazy,” Lang whispered back. “Why are they all here?”

“Didn’t you hear? Sarah Wendell reported to the emperor that there wasn’t enough silver to support reich money. No one trusts paper money anymore.”

“Don’t be silly,” Lang said, starting to get a really bad feeling about this. “How could she know?”

“Her up-time computer worked it out, the one she brought with her from the Ring of Fire. You know that they can calculate anything.”

Karl Lang didn’t know a thing about what computers could or couldn’t calculate. But he did know that the vaults weren’t as full of silver as they were supposed to be.

Another customer came up to the window with a stack of reich money. “I will have silver, if you please,” the man said. He didn’t look like a silversmith.

Lang went toward the second vault while his mind whirled. It was the silver. All that silver, just sitting there. And he’d had expenses. And it wasn’t fair! The emperor was always late with the pay. Maria was expensive. A man liked to give things to his lady love and Maria was so grateful when he got her a new dress or shawl. Besides, his wife needed stuff too, even if she wasn’t so grateful. There were the children to think about.

It had seemed so simple. They never used the second vault. The first vault was mostly left open, so the bank could provide silver for people who had some reason to need it, mostly silversmiths. They brought in paper reichsthaler and bought silver to use in their craft. And, of course, when people brought in old silver coins to have them assayed, they went in to the first vault. It was only after they had been melted down, refined and made into silver bars that the silver went into the second vault. The second vault was just for storage.

Storage for stacks of silver bars that never got used for anything. And it was easy enough to stack the silver bars so that they looked like there were more of them than were actually there. For someone with the key to the second vault, it wasn’t that hard to make the switch now and then. Lang was almost sure that he wasn’t the only one doing it.

Those thoughts had taken him to the door of the second vault. He unlocked the vault, then stopped. He had only taken just a few bars from the second vault. There might not be a problem. . but if this kept up it would be noticed and Lang was one of only three people who had keys to the second vault. He would be discovered. Karl Lang wasn’t a brave fellow and he didn’t like to gamble, not at all. It had taken six months of the second vault only being opened at the beginning and end of each business day before Karl had worked up the nerve to take his first bar.

Lang turned the key the other way and slipped out a side door of the bank. He managed to keep from running till he was a block away. It was the hardest thing he had ever done in his life, but he did it. Once he rounded the corner and was out of sight of the bank, he ran. And, at least in the figurative sense, Karl Lang would never stop running as long as he lived.

* * *

Franz Traugott was getting worried. Karl should be back by now, pulling a cart of silver bars. He motioned over a guard. The Royal Bank had a gracious plenty of those.

“Go to the second vault and see what’s keeping Herr Lang, please.”

The guard went back to ask and returned quickly. “He left out the side door,” the guard told Franz. “Georg saw him.”

“Why didn’t Georg stop him?” Franz hissed.

“Why the fig should he have? Herr Lang didn’t even open the second vault. He put the key in, then pulled it out again and went out the side like he had just remembered something. At least, that’s what Georg told me.”

Franz looked at the line of customers and at the shrinking pile of silver and was very tempted to make a run for it himself, in spite of the fact that he had done nothing wrong. But he was made of sterner stuff than Karl Lang. “Listen, send a runner to Herr Maurer’s house. Tell him that we need him and his key down here now. And you’d better send another to Liechtenstein house and tell Prince Gundaker von Liechtenstein that we need his key as well.”

“What’s going on?” the guard asked.

“I don’t know. Maybe Karl had a good reason to leave, but what I’m afraid of is that he had a very bad reason to leave. Whatever the reason, if we don’t get a key to the second vault here soon, we are going to have a run on the bank.”

The guard paled. There had been seven bank runs that had made the international press since the Ring of Fire. In five of them, someone had ended up executed. In one, twenty-three people involved with the bank had been executed.

By the end of the day there had been eight bank runs. Gundaker was at the palace and Herr Maurer was enjoying his day off at the water park at Race Track City. The bank ran out of silver hours before either of those worthies were found. Word spread like wildfire and the Royal Bank of Austria-Hungary had to close its doors. By the time Gundaker von Liechtenstein got there, the building was surrounded by guards and there was the next best thing to a riot out front. It wasn’t a riot of poor people. The upper crust of Vienna-burghers, masters, Hofbefreiten, and nobles-were up in arms. They had put their silver in the bank and they had been promised that they could get it back when they wanted it.

* * *

Gundaker von Liechtenstein, whatever else, was a brave man. He went out to face the rioters, pistols in hand, and backed by the bank guards.

He fired a pistol into the air to get the attention of the rioters. Once the shouting died down, he roared, “What is wrong with you people? Is this any way for the greatest nobility in the world to behave?”

The uproar started again. “Where’s our money?” came a shout from the crowd.

“It’s in the bank!”

“Then why can’t we get it?”

“Why would you want to? What has caused this unseemly demonstration? Where is the courage of our noble blood? Where is the trust in our emperor?”

“It’s not the emperor we don’t trust! It’s his banker.” Which was a direct shot at Gundaker. As the chancellor of the exchequer, he was the official head of the royal bank, which was why he had the third key. For political reasons, the Abrabanels were officially simply depositors in the royal bank, though Moses was present at the board meetings and had much to do with its design, using information from his family in Grantville.

“The bank is closed while we inventory the silver stocks and will reopen day after tomorrow.”

“Why do you suddenly need to run an inventory?” came from several voices.

The one thing Gundaker didn’t want to say was that they were afraid some of the silver had gone missing and didn’t know how much. He considered saying they needed to assay some of the recent silver deposits, but that would only cause more panic and he knew it. Finally, he just got stubborn. “Because I’m not going to let a mob of peasants into the emperor’s bank,” he roared at the crowd.

The roar that came back was unclear, but not at all difficult to interpret. The mob didn’t care for being called peasants.

“Then stop acting like base-born villagers! Go home, get some sense. Let us do our jobs and come back when you have some reason other than panic to need your silver.” With that, Gundaker turned his back on the mob and went back into the bank, followed by the guards. They prudently barred the doors. With no one to shout at and not quite ready to burn the place down-or go into open revolt against the crown-the upper crust of Vienna went home. At least, some of them did. Rather a lot went to the palace to complain to the emperor about their treatment at the bank.

The Hofburg Palace, Vienna

“It’s Sarah Wendell’s fault,” said Gundaker. “How did she know that there had been pilfering?” The audit of the bank had in fact found that there was silver missing. However, it was less than five percent of the amount that was supposed to be there. Of greater concern was something they had discovered after the printer for the royal treasury had turned up missing the day after the bank closure. It turned out that the man had been printing a little extra money with every print run. He had been paying two guards to look the other way. One was under arrest, the other was also missing. It still wasn’t a massive amount, not even a percent, but it was enough to set all three men up for life. Set them up in luxury.

“It’s not her fault,” said Moses Abrabanel. “For one thing, in the rumor I heard the secret report was made to Your Majesty and myself. That’s why I was asked about it. When I told them that there had been no such report, all I got was warned that they were going behind my back. So tell me, Prince von Liechtenstein, why wasn’t I informed of the meeting in which Sarah Wendell informed you and the emperor that half the silver in the national bank had been siphoned off to buy off Wallenstein?”

“There was no such meeting,” Gundaker said.

“Precisely my point.”

“Is the bank opened again?” the emperor interrupted.

“Yes, and there are lines around the block,” Gundaker said. “No one is taking paper reich money, just silver and barbies.”

“Sarah Wendell is not the cause, but she may be the solution,” Moses offered.

“You’ve been pushing that since she got here,” Gundaker told him. “And I will even grant that she does have a good understanding of the art for someone her age. But she is a girl and a peasant. No one is going to take the word of a peasant on matters of this import.”

Moses looked over at Gundaker in frustration and suddenly a demonically delightful thought occurred to him. Moses felt himself smiling. He turned to the emperor. “Ennoble her, then. If it’s her lack of title that causes the problem, give her one.”

Gundaker went pale. He despised Sarah Wendell and most of the up-timers, but he also found them useful. If they were ennobled, especially Sarah, that would mean that a marriage between her and Karl wouldn’t be morganatic. At least, the marriage wouldn’t have to be, and knowing Karl, he would insist that it not be.

* * *

Ferdinand III was aware of the issues involved and, under other circumstances, he would have been in sympathy with Gundaker’s attempt to ensure his family’s property. Gundaker was sworn to the empire and Karl Eusebius was sworn to Wallenstein, so Ferdinand would prefer Gundaker’s branch of the family to inherit control of the family wealth. But not now. Not today, when his people were lined up around his bank demanding silver.

“Gentlemen, I need money. I need it to pay my armies and to run my government. I wish to speak with Sarah Wendell. Arrange it.”

“It might be better if you let me talk with her, Your Majesty,” Moses said.

“Why?”

“Well, there is the matter of Duke Leopold and her sister, and the rumors about her comments on the banks. If it looks like we are arresting her or attempting to coerce her or her sister there could be a reaction. It might be better to have someone else talk with her at first.”

Ferdinand considered. “I think I will have Mariana talk with her.” He shot Prince Gundaker a look. “Someone she will be more comfortable with.”

The Hofburg Palace, Vienna, the next day

Sarah wasn’t happy with the summons. It had been phrased as a request to visit the empress but Sarah had heard the rumors too, and was a little afraid that the emperor was going to have her arrested.

She had had no involvement in the Austro-Hungarian Imperial Bank. And every time she had commented on it in the presence of Gundaker, he had, in essence, told her to sit down and shut up as much because she was female as because she wasn’t of the nobility. She had given up trying over a month before.

So she approached the Hofburg with no joy in her heart. She was surprised to be met by the empress. Even if it was an ordinary visit she would have expected to be met by a functionary and put somewhere to wait on the empress’s pleasure.

Empress Mariana was very friendly and reassuring. “We just need you to explain to us how you make the barbies work.”

Sarah looked at the empress. “I’m not sure what to say.”

“Well, nothing right here. Follow me and we’ll find some place comfortable and not quite so public.”

A few minutes later, seated in a richly brocaded chair in a room full of candles and golden ornamentation, Sarah was asked the question again.

“How do you make people accept the barbies?” Mariana asked. “I could understand if it was just your employees. After all, it’s a job, even if it’s only paying in paper. It’s still better than no job at all. But a day after you pay your workers, you can’t find a barbie anywhere.”

“Your Majesty, imagine you have two coins. They are both of gold, they are the same weight and purity. But one of them has a note on it that says if you keep it for a while, it will grow by a silver pfennig. There is something you want to buy that costs a gold coin. Which coin will you spend and which will you save?”

“I’ll spend the one that won’t grow a pfennig. But they aren’t both gold. One of them is paper.”

“No, Your Majesty. Both of them are paper,” Sarah said. “One is backed by silver, and the other by the goods and services owned by BarbieCo, but both are paper, backed by perceived value and both have the same value marked on the front of the bill. So people save the barbies and spend the reich money.”

“But they aren’t spending the reich money. They are trading it in at the bank for silver.”

“Yes. What happened with that?”

“A sneak thief we think.” Mariana’s expression was sour. “At least he’s gone missing and quite a bit of silver is missing from one of the vaults. We discovered the situation because there was a crowd at the bank and Herr Lang panicked. What we don’t understand is how the rumor got started that you said there wasn’t enough silver in the bank to cover all the money.”

“I have no idea. I’ve made no comments at all about the Royal Bank of Austria-Hungary. I’ve commented on the Bank of Grantville, the Federal Reserve Bank of the USE, the Royal Bank of Bohemia and the banks in Venice, Amsterdam, Paris, and Moscow. It’s my field of expertise, but Gundaker von Liechtenstein won’t talk to me about your bank. It’s come up in a couple of depositions, but all I’ve ever said is that I don’t know anything.”

“Perhaps that’s the problem. .?” Mariana tapped a finger on the table and Sarah noticed that she was wearing red nail polish. “Could someone have taken your silence to be hiding something?”

“I guess. . but I don’t know how they get from that to ‘there isn’t enough silver in the bank.’”

“I don’t either. But however it happened, the run on the bank and the closure have left very little confidence in the reich money. We desperately need you to wave your magic wand and make our money good again.”

Sarah blinked. There was no answer to that. Well, there was. . but the answer was I can’t. . and Sarah couldn’t say that. Not because she was scared of imperial retribution. No, what froze the words in Sarah’s throat was the sudden realization that she had probably destroyed Austria-Hungary. That the presence of the BarbieCo money had exposed the weakness of the the reich money, and in exposing, magnified those weaknesses to the extent that it was likely that the reich money would not recover. Without any trusted money supply, the sputtering Austro-Hungarian economy would collapse entirely and depression would be the least of their problems. There would be blood in the streets of Vienna in months.

“Is it that bad?” Empress Mariana’s face had gone a bit pale, apparently from seeing the expression on Sarah’s.

Sarah wished she had Judy’s poker face. “We need Judy!” it came out as almost a shout.

“What?”

“We need my sister Judy. The rest of the Barbies, too, especially Trudi. But most of all, we need my little sister Judy.”

“But I thought you were the economist?”

“I am. But what we really have here is a perception problem. There are major economic aspects to it and economic constraints that will limit the options, but when it comes down to it. . what we have is an image problem and Judy does image better than anyone I know.” Sarah paused. “Please don’t tell her I said that, Your Majesty. She’d never let me forget it.”

Sarah saw Empress Mariana’s mouth twitch up on the left side.