Chapter 73: Loans (Part 2)

Two hundred thousand Black Flag Bank notes.
The figure was so large that Liu Qing hesitated for a while before finally saying, “Let me think about it…”
To date, the Black Flag Bank had issued a total of four hundred thousand banknotes. Although Liu Yu had recklessly used the bank as his own ATM, he had still exercised some restraint.
Although this was a loan, the two hundred thousand would eventually have to be converted into banknotes. Liu Qing estimated that at least another hundred thousand banknotes would need to be prepared at the Baosheng branch.
There was no shortage of banknotes, but the issue was insufficient preparation to stabilize prices. At present, the Xiliu Camp was fully focused on preparing for war, and most of the weapons and ammunition produced were allocated to equip these two new camps, leaving little for the bank.
Moreover, releasing such a large loan might trigger a chain reaction. While he was still undecided, Liu Yu spoke up, “As long as the collateral is in place, the loan will be granted immediately. Liu Qing, just have the Baosheng branch prepare the banknotes.”
“That won’t work! Introducing so many banknotes at once will shock prices throughout Baosheng,” Liu Qing came up with a brilliant excuse: “Besides, producing that many banknotes will require the mint to work overtime.”
Liu Yongfu found himself suddenly having an unlimited ATM—two hundred thousand Black Flag Bank notes gave him almost unrestricted power. “I hope it can be done as soon as possible. Give me some time!”
Liu Yu, who usually didn’t get involved in business operations, made a decisive decision this time: “As the chairman of the Black Flag Bank, I usually don’t interfere in the bank’s operations. But this matter affects the bank’s development, so I’ll say one more thing…”
“It’s the seventh day of the second lunar month. By the fifteenth of March, everything should be ready—one hundred ten thousand taels of collateral in place, along with the two hundred thousand in loans. Let the subordinates handle the details.”
“That’s too hasty!” Liu Qing grew anxious. “You promised not to interfere in the bank’s operations!”
Liu Yu replied confidently, “That was under normal circumstances. I trust General Liu.”
Liu Qing had no choice but to back down. “Very well! I’ll transfer the funds to Baosheng as soon as possible. Also, the Baosheng branch will need to expand its vault and increase security personnel.”
“I’m sure General Liu will help with that.”
Liu Yongfu was satisfied with Liu Yu’s attitude. “I’m leaving everything in your hands. If you need any help, just let me know!”
Two hundred thousand banknotes equaled one hundred fifty thousand piastres, or about one hundred thousand taels in silver. He could use this money freely over the next three years.
Although he came from a peasant background, he understood well the value of money—something you can’t bring with you when you die. As per his original plan, he would use one-tenth of this loan to expand his warehouse, while the rest would be allocated to the Black Flag Army.
In history, the Black Flag Army purchased around a hundred Remington rifles and revolvers that year to prepare for the impending war, bringing their total firearms to about two hundred.
But in this timeline, the Black Flag Army already had two hundred firearms. Yet Liu Yongfu’s ambitions went beyond that. Though he couldn’t obtain nearly a thousand firearms like Liu Yu, he believed he could achieve half of that number.

He doubled the number of rear-door guns for the Black Flag Army, bringing it above 400. With this amount of money, he felt it would be a straightforward task. Moreover, the Black Flag Army had suffered for too long; even many of his own troops were barefoot. Therefore, he decided to give them two months’ worth of extra pay so they could enjoy themselves, while using the funds to acquire some military supplies. In addition, he could temporarily deposit part of the money in the Black Flag Bank, ready to withdraw it at any time, which was equivalent to having unlimited overdraft power. Even Liu Yongfu saw clearly that the Black Flag Army and the French would eventually clash, and it was necessary to prepare in advance—stockpiling as many supplies as possible and doing everything possible to obtain high-quality foreign guns. He could boldly ask Huang Zuoyan for passports, then purchase arms legally through arms dealers (historically, the Black Flag Army acquired 100 Remingtons and revolvers this way), or smuggle them illegally, or even buy from Liu Yu. Liu Yu seemed to have plenty of Mauser rifles. Although these rifles were slightly inferior to Remingtons, they were still breech-loading guns. He planned to use the loan to buy some, regardless of the high price. “By the way, give me a discount on the Mausers. You give others 60-70% off—what discount will you give me?” Liu Yu gritted his teeth and offered a large sum: “I’ll give you 50% off, but there are only 50 Mausers and 8,000 bullets. Pay in full at once, with delivery over half a year.” Liu Yongfu was quite satisfied: “Give me 100 rifles and 20,000 bullets, all delivered within a year.” Liu Yu hesitated for a moment: “That’s too much. It will take at least a year and three months, starting from June this year.” Liu Yongfu hesitated briefly before agreeing to Liu Yu’s terms: “Just deduct the payment from the loan.” Now, Liu Yongfu was completely satisfied. But once he left, Liu Yu had to face the fury of Agent Liu Da: “Two hundred thousand! My chairman, do you even know what that means? That’s equivalent to issuing 50% more currency!” Liu Qing, however, turned around, brewed another cup of tea from the teapot, and sat down calmly: “Don’t rush! He pledged 110,000 taels of silver.” “The problem is, that silver is with Baosheng, not in our hands. If it were in our hands, we could issue at least one million in currency. But with Baosheng, it’s useless.” He was still worried about the market’s reaction if such a large amount of paper money were released all at once: “Two hundred thousand isn’t a short-term loan for illegal goods. The market definitely won’t accept it—it will cause big problems.” He thought carefully: “Issuing it in installments might work better. Release 30,000 each time, over several times, so the market can accept it more gradually.” Having stayed in this position for so long, Liu Qing’s financial expertise had improved greatly. He knew clearly that a loan of two hundred thousand was a disaster, especially since most of it would likely be in the form of paper money rather than through bill settlements, which made him even more worried. Without reason, he wiped his sweat: “The Baosheng branch is too weak to handle such a situation.”

Liu Yu sat on the sofa, took another cup of green tea, and said, “Send more supplies over. Besides, I’ve already promised Liu Yongfu a hundred Snider rifles and 20,000 rounds of ammunition.”
“That won’t be enough!” Liu Qing was well aware: “With over a hundred thousand in paper money, we need at least six or seven hundred thousand in supplies just to stabilize things. Right now, we appear prosperous on the surface, but in reality we’re empty-handed. We simply can’t mobilize six or seven hundred thousand in supplies.”
A highly mysterious smile appeared on Liu Yu’s face: “We don’t need supplies; we’re already well-prepared.”
“What? Are we going to resort to the old trick of loan fraud again? We’ve borrowed too much fromDongfang Huili. In just the first three months of this year, we’ve used up half of their annual loan quota. If this continues, they’ll become our sole bank.”
Liu Yu wasn’t polite with the French. Now,Bank of China had essentially become a reserve fund for Black Flag Bank, which would occasionally bring out one or two high-quality projects to raise funds.
Their loan fraud tactics were sophisticated, and they managed to secure valuable assets from the Vietnamese government—such as iron mines, coal mines, and copper mines—by selling them at low prices. As long as they could get the money, anything was negotiable.
Shiploads of ore were shipped to Haiphong for sale. Liu Qing was a master at loan fraud—when borrowing 100 francs, he would keep at least 40 francs in Haiphong. He never defaulted on loans, always repaying them immediately.
But this capital chain was clearly failing. Liu Qing complained, “If we keep doing this, even if we don’t collapse, the Haiphong branch will. With such heavy repayment pressures, for every 10 we borrow, we have to keep 4 in Haiphong, and at least 3 more go toward repayments. We end up with only 3 francs!”
Now, Liu Qing enjoyed surface success while secretly suffering nightmares. He was in a difficult situation—Black Flag Bank’s financial condition could collapse at any moment, and his biggest concern was those 200,000 in new loans.
“I still suggest distributing them in installments, up to 30,000 each time. If we keep this up, we’ll be finished, and Liu Yongfu himself will suffer greatly.”
He reiterated his view: “We really only have a few tens of thousands in physical assets for circulation, or…”
“Could it be that the chairman plans to use his own savings?”
To stabilize prices, sufficient reserves were necessary. Liu Yu did have quite a bit of gold, silver, francs, and pounds, but like Liu Yongfu’s 110,000 taels in collateral, these were all dead money. He would never touch them unless it was a critical moment.
Liu Yu smiled even more mysteriously: “That money will only be used in the most urgent situations. Now isn’t the time.”
“But what if there’s a run on deposits? What if prices soar? That’s 200,000 in funds—enough to support only 10,000 people!”
He said confidently, “I’m already prepared! Come with me to see our latest weapons.”

Liu Qing immediately understood: “Has our armory reached the target production capacity? Can we produce two or three Snider rifles a day? That’s far from enough. To stabilize prices this time, I estimate we need at least a thousand backdoor rifles, plus a hundred thousand rounds of ammunition. Are you really planning to hand all these rifles over to others?”
“No! That’s not what I mean.”
Liu Yu said confidently, “Let’s go outside. I’m sure nothing will be a problem anymore. Even if we issue another two hundred thousand in loans at once, it won’t be an issue.”
Liu Qing finally understood.
He felt the future was bright, with the sun shining so beautifully.