Writer 1879: Solitary Journey in France

Chapter 501 With no money left, how could I not feel lost!
April 7, 1882, the last working day before Easter.

The sky over Paris was greyish-white, with low-hanging clouds pressing down on the city's rooftops.

Parisian readers did not receive Lionel's "explanation," but instead witnessed another massive collapse.

Lionel stood by the study window of his apartment at 117 Boulevard Saint-Germain, looking down at the street below.

There were fewer carriages and pedestrians than usual; Paris was unusually quiet this morning.

He was holding yesterday's copy of Le Figaro, and on the bottom right corner of page two was a short news item, no more than ten lines long:

It is understood that the "United Corporation" stopped making payments yesterday due to excessive speculation in railway, colonial and industrial projects.

The bank's board of directors held an emergency meeting this morning and may announce a restructuring plan.

Market analysts said

Lionel folded the newspaper and placed it on the desk.

He knew what the text message meant; it wasn't "a possible announcement of restructuring," it meant it was all over.

Suspending payments is tantamount to a death sentence; board meetings are merely a formality.

He walked to the desk, where the notary public, Mr. De La Ruwak, regularly delivered market briefings and investment advice.

Last September, the collapse of the Panama Canal bonds triggered a financial tsunami; now, it's the "United Corporation" again.

This bank has a church background and is a favorite of conservative investors, claiming to be a "symbol of morality and stability."

They invested in railways—not only domestic ones, but also those of the Austro-Hungarian Empire, Russia, and even the Ottoman Empire.

In addition, there were extensive colonial investments, including in Congo, Madagascar, and Indochina... their reach extended to every corner of French rule.

Industrial projects are even more numerous, ranging from textile factories in the north to mines in the south.

“Excessive speculation”? That’s too mild a word. They used a lot of clients’ annuities as collateral for financing and then expanded wildly.

However, starting in January of this year, the United Corporation suddenly became unable to repay its short-term debts, its stock price plummeted, and it was subsequently forced to cease operations and undergo liquidation.

The declaration of bankruptcy is simply the final straw.

This triggered widespread market panic—and it's important to remember that the "pension class" is the backbone of society!
In 19th-century France, "annuities" were government bonds issued by the state, paying interest annually or semi-annually, and were considered the safest source of income.

Annuity holders are typically the elderly, widows, independent women, members of the lower class, retirees, and middle-class families.

People who live on annuities do not need to work, do not pursue business ventures, value stability and order, and tend to be moderate republicans or conservatives in politics.

They have always been regarded as a "stabilizing force" in the Third Republic society.

The principal of an annuity is usually not redeemable at will, but it can be resold on the market. Thus, the "joint company" did something dangerous—

Turn your annuity into a "leveraged asset"!
The client pledges 3% of their annuity to it, and it gives the client cash or invests in stocks directly on their behalf.

Customers continue to receive annuity interest, while banks rely on the "stability" of annuities to support their credit and then conduct large-scale financing.

The entire system is built on the premise that annuity prices are always stable and that there are always people willing to buy them.

However, after the bankruptcy of the "United Company", other banks stopped accepting annuities as collateral, and annuities changed from "quasi-cash" to "something no one dared to touch", causing their market value to plummet.

Mr. De La Ruuk also specifically asked Lionel whether he should use his spare funds to buy up annuities at rock-bottom prices, believing that the panic was only temporary and the market would return to rationality.

Lionel thought about it for a moment and wrote back to Mr. De La Ruuk, telling him that there was no need to buy up the annuities at rock-bottom prices, but rather to invest more in the laboratory.

The transformers and voltage regulators overseen by Nikola Tesla have yielded promising results, bringing them one step closer to commercial production.

Lionel is more worried about Zola, Daudet, and Huysmann. If they go bankrupt again, he won't care anymore!

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But there aren't many people in Paris who can remain as detached as he was.

Camille Lefebvre was standing at the entrance half an hour before the stock exchange opened.

He was forty-two years old, a small-time broker with an office on Rue Saint-Honoré and three employees.

He has 27 clients, all of whom are middle-class—doctors, lawyers, and retired civil servants.

They didn't have much money, only 20,000 to 30,000 francs each, totaling less than 800,000, but this was all they had.

Camille also invested his own money, 40,000 francs, of which 30,000 was his wife's dowry annuity.

The news from the joint venture headquarters came out in the evening, after several top agents had privately discussed it.

He knew things were bad, but he still held onto a sliver of hope—maybe it was just a temporary cash flow problem, maybe they would announce a bailout before the market opened today.

The exchange doors opened, and the crowd surged in. Camille squeezed to the front of the price board and looked up.

The price of the national annuity with a 3% return has not yet been released.

The price column for other bonds—railway bonds, industrial bonds, and colonial bonds—is empty.

The traders stood in their positions, whispering to each other in hushed tones.

Camille grabbed the arm of an acquaintance: "How is it?"

The man shook his head, his face pale: "It's over, completely over. They owe at least eight hundred million."

Camille's hand loosened, his mind blank: "Eight hundred million?"

The voices of acquaintances trembled: "It's no less. The agents in London and Vienna all cut off credit last night, there won't be any rescue today."

The clock struck 9:30. The clerk began writing numbers on the board—3% annuity: 80.5.

Camille blinked, making sure he wasn't mistaken—yesterday's closing price was 83.2, a drop of 2.7, not much, but this was national pension funds; it shouldn't have fallen like that! Then he saw the railroad bonds—

Northern Railway Company 5% Bonds: 72. Yesterday 76.

Paris-Lyon-Mediterranean railway 4.5% bonds: 68. Yesterday 73.

Colonial development bonds fell even more sharply, with Congo Railway bonds dropping from 54 to 41 and Madagascar mining bonds from 62 to 48.

……

The clerk's hands were shaking as he wrote the numbers; the chalk broke several times, and he had to bend down to pick it up and continue writing.

The noise in the hall grew louder and louder.

Someone shouted, "Where are the directors of the United Corporation?"

Someone replied: "They ran away! They went to Belgium last night!"

Camille turned around and hurriedly squeezed through the crowd. He had to get back to his office to inform his clients that their bonds had fallen by twenty, thirty, or even half.

He walked to the door and glanced back at the price list—the price of the 3% annuity had changed: 80.2.

It's fallen again!
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By 2 p.m., the atmosphere at the stock exchange had changed.

The morning was filled with shock and panic, which turned into utter panic in the afternoon. The price of 3% annuities has fallen below 80, and is now at 79.1.

Railroad bonds fell by an average of 30 percent. Colonial bonds fell by 40 percent.

The board of directors of the "United Corporation" issued a statement saying that they were "negotiating a restructuring plan with major creditors and asked the public to maintain their confidence," but no one believed them.

Sources say that three members of the board have already gone to Calais and are preparing to take a ship to England.

When Camille Lefebvre returned to the office, his three colleagues were dealing with customers who were blocking the way.

"Northern Railway bonds have really fallen to 70? I bought them last month when they were at 78!"

"What should I do about my Congolese bonds? You said they were a prudent investment!"

"I'm going to sell, sell everything. Now, immediately."

When the customers saw Camille return, they all gathered around her.

Camille could only explain in the calmest possible tone: "Market volatility is temporary. In the long run, these are high-quality assets and will eventually recover."

Selling now would be tantamount to confirming a loss.

It was quite a struggle to finally get rid of the agitated customers.

But Camille herself wasn't sure, so she went there in person to try and withdraw some cash from her credit limit.

However, the bank manager tactfully told him that due to "special market conditions," all credit lines were temporarily frozen, and the resumption time would be announced separately.

Camille exclaimed incredulously, "Frozen? I have 40,000 francs of collateral with you!"

The bank manager's tone was as flat as a straight line: "Yes, Mr. Lefebvre, but the value of your collateral needs to be reassessed."

Based on today's market prices, your collateral may be worth less than $40,000. We are calculating it and will notify you of the results.

Camille Lefebvre felt a jolt in his mind, as if his soul had risen into the air, coldly watching him.

He suddenly remembered what his teacher had said when he first entered the industry: "Remember, the financial market is a game of confidence—with confidence, paper can turn into gold."

Without confidence, even gold is worthless.

"What should I do?" A question mark appeared in Camille Lefebvre's mind.

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The worst off are those who live on pensions.

They originally held annuities so that they could live off the interest and also hoped to sell part of the annuities or use them as collateral to borrow money when necessary.

But this path was instantly blocked! And what they feared most was not the loss, but whether the government would still provide financial assistance next year.

In the panic, widows, retired civil servants, teachers, petty-bourgeois families... all rushed to the market to sell their annuities.

Some need to buy more shares after losing money in the stock market, some need to repay bank loans, and some need cash to maintain their daily lives...

It's important to understand that annuity holders live by not working, not taking risks, not saving, and relying solely on fixed interest and, when necessary, liquidating a portion of their principal.

Therefore, when gold prices plummeted, they couldn't wait for the market to recover; they either sold at the low point or suffered permanent asset depreciation.

Unlike wealthy people with diversified incomes, they simply lack the ability to "weather the crisis".

So even though the weather was still a bit cold, they canceled their budget to buy coal, and some people even fired their maids and started doing the housework themselves.

Large chunks of beef, lamb, and fine cheese have disappeared from daily diets, replaced by chicken soup and hard bread.

"What should I do?" The same question also appeared in the minds of 200 million pensioners in France.

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The headline of the front-page editorial in the last issue of Le Figaro before Easter was quite alarming—

Today, we are all part of the "lost generation"!

(First update, thank you everyone, please vote with monthly tickets!)
　The bankruptcy of the United General Corporation, which led to a sharp drop in pension market prices, was a real historical event that occurred in early 1882, and also triggered a crash in the French financial market.

　　
　
(End of this chapter)