Persian Empire 1845

Chapter 635 Currency Reform
Amir was busy again in Constantinople. With trade flourishing with Iran, he seized the opportunity to push for a unified currency policy. To this end, he specifically invited the governor of the National Bank of Iran to discuss the matter.

At present, more and more people in the Ottoman Empire are using the rial, and shops in Constantinople and other places are accepting the rial. However, in the vast countryside, barter remains the main form of trade.

Given the situation, directly announcing the replacement of the rial would not be a problem. However, the governor raised three current problems in the Ottoman Empire: First, the financial vacuum in rural Ottoman areas. There are no banks, no credit, and barter means our monetary policy cannot be transmitted. Second, the black market for the old lira. If we forcibly set an exchange rate, it will inevitably foster black market transactions and disrupt financial order. Third, and most dangerous, is confidence. The Ottoman people's trust in the paper currency is based on the Shah's prestige and the current stability; any disturbance could trigger a bank run.

Therefore, the first step was to use imperial funds to quickly establish agricultural credit and postal savings offices in Ottoman provinces and important towns. These offices provided small agricultural loans, and their core function was to handle rial savings and exchange transactions, allowing farmers to obtain rial loans by pledging grain, livestock, and other assets.

At the same time, a decree was issued stipulating that all payments for government projects, salaries of officials and soldiers, and national taxes must be settled entirely or largely in rials. It was also announced that old rials could still be used to pay some local taxes for a certain period.

However, a storm was brewing. The reforms affected the interests of too many people.

The first to attack were the old-style Ottoman moneylenders and usurers. They wielded enormous influence in the countryside, and the emergence of the Imperial Credit Cooperatives was tantamount to taking away their livelihood. They began spreading vicious rumors:

“If you use rials, Allah (God) will punish you, and the land will suffer a poor harvest!”

"The government is going to use this piece of paper to steal your last bit of food!"

Meanwhile, Russian and British spies lurking in Constantinople seized this opportunity. Through their controlled channels, they exaggerated the Ottoman Empire's financial difficulties.

The most dangerous crisis occurred in Konya, in central Anatolia. A run and riot erupted against the post office savings bank due to the spread of rumors. Angry citizens surrounded the gates, demanding that all their rials be exchanged for gold, silver, or goods.

The municipal government immediately ordered the local garrison to deploy and protect the cooperative's personnel and property, and to arrest the instigators. An investigation revealed they were notorious local moneylenders and several suspicious outsiders.

When the news reached Constantinople, Amir was not surprised; this was almost an inevitable growing pain of reform. Two telegrams lay before him: one reported that the Konya garrison had successfully brought the situation under control; the other indicated that small-scale panic runs were also emerging in Ankara, Sivas, and other places. Behind this, he believed, were the meddling of Russia and Britain.

“They’ve finally come out,” Amir said in a deep voice to the governor of the National Bank of Iran beside him. “The backlash from the old forces and the sabotage from external forces are faster and more ruthless than we anticipated.”

The governor's expression was grave: "Your Excellency, we must take strong action immediately, otherwise panic will spread and the entire monetary reform may be ruined."

"Not only must we react, but we must take a multi-pronged approach." A sharp glint flashed in Amir's eyes, and he immediately issued a series of orders. This year's grain will be directly purchased by the national government and paid for with rials. Those who incite unrest will be put on public trials. To handle the massive Ottoman affairs, the Iranian government has also urgently launched civil service examinations and transferred some personnel to the Ottoman Empire. Unlike the original local officials, these personnel are energetic and capable of fully carrying out orders from above.

The same goes for the young people promoted from the Ottomans; although their abilities were somewhat lacking, their enthusiasm made up for the vacancies.

While eliminating tax farmers, the government was also cracking down on usury. According to Ottoman government Decree No. 24, any private lending and micro-loan institutions, as well as loans with interest rates exceeding 4%, were illegal. The Financial Authority dispatched special teams throughout the Ottoman Empire to raid these institutions and confiscate their assets.

In Galata, Constantinople, the task force raided 534 illegal establishments and arrested 3596 people, mostly Greeks, Jews, and Armenians. The total assets seized included:
The collection includes various metal currencies worth approximately 1.2 million rials. These include a large quantity of Ottoman rials, Iranian rials, British gold pounds, French gold francs, and Austrian and Russian gold coins.

Tons of gold bars and silver ingots, along with countless gold and silver jewelry, religious artifacts, and luxury tableware confiscated as collateral, were seized, with a total value of approximately 8000 million riyals.

The confiscated deeds to houses, shops, and warehouses filled three rooms. In Constantinople and its surrounding areas alone, over 1000 prime properties were seized, including dozens of luxurious mansions and trading houses along the Golden Horn. In the provinces of Anatolia and Rumelia, deeds to vast amounts of farmland and estates, obtained through fraudulent means of mortgage, were also confiscated, with an estimated area exceeding 45 hectares.

In addition, dozens of iron cabinets were found containing IOUs totaling approximately 5 million riyals. The interest rates on these IOUs generally ranged from 20% to 50%. A large number of trade bills with Europe and Russia were also seized, along with hidden equity certificates related to mines, shipping, and primary processing plants within the Ottoman Empire.

Of course, there are also the most important ledgers. The thick ledgers not only record dirty financial transactions, but also contain a large amount of evidence of loans, bribery, or involvement in the transfer of benefits by former Ottoman bureaucrats, local dignitaries, and even individual court members.

This crackdown on financial forces in the Galata district resulted in the seizure of assets valued at over 8 million riyals, not including incriminating political materials and long-term profits from real estate.

The citizens were outraged when they saw the gleaming gold on display. They worked themselves to the bone just to support their families, while these people were enjoying themselves at home, with money seemingly flowing to them automatically.

They wanted nothing less than to beat these people to death, if no one had stopped them. Their crime, of course, was disrupting the nation's financial order.

This naturally poses a huge challenge to the judicial system, but religious forces have no objection. Since usury is also illegal, the government's actions are justifiable.

But this has also sparked opposition from other ethnic minorities, especially the Greeks, who did not betray the Ottoman Empire during the Greek War of Independence. It is unfair that they are being used as an example now that a new Sultan has taken over!
(End of this chapter)