Chapter 13 - 13 Price Manipulation
Steve had been told by Emmanuel that he was being harassed in the copper trade.
"Lately, when we deal in copper in Sowell Land, there are some fellows who come in and find fault, asking if it's the real thing. They shout in the shop that the reason the producing mine isn't clear must be because it's a fake."
"If that's the case, have copper sales dropped?"
"No, despite finding fault, they ultimately purchase everything. Other customers won't come near, though. Besides, the price of copper has been rising, so sales are actually up."
"Hmm. Something's strange. Well, if this harassment continues, our house might have to take action, so please consult with my father again when that time comes."
"Understood."
Shortly after that conversation, Steve had come to Sowell Land at the summons of Margrave Sowell. The location was the salon of the Margrave's house. Only three people were present: Steve, Aurora, and Harry.
After drinking the tea served to him, Steve asked about the business at hand.
"I heard you wished to consult regarding the futures market; what might it be about?"
"Actually, the price of copper is being artificially manipulated. Viscount Karsh is the culprit."
According to Aurora's story, Viscount Karsh, a noble of the Western faction, was unfairly driving up copper prices. Behind this was the fact that he possessed one of the country's leading copper mines, and that while there were two highways connecting the Margrave Sowell territory and the Royal Capital, both passed through Viscount Karsh's domain. Copper production in the Kingdom of Cascade occurs east of Viscount Karsh's territory, and to reach the territory of Margrave Sowell—where copper futures are traded—by land, one must inevitably pass through the Viscount's lands.
Setting his sights on this, Viscount Karsh detained copper shipments passing through his territory under the guise of inspections. Then, he bought up all the copper west of his domain. By doing so, copper became scarce and the price rose.
Those troubled by this were speculators aiming for profit from futures trading and merchants who dealt in copper. When the spot price rises, the futures price naturally rises as well. Speculators who are short-selling are naturally squeezed by the price hike, and merchants who deal in copper and have sold futures are forced to buy back futures at high prices because they cannot obtain physical copper by the delivery date, leaving them in a short position.
Their losses go straight into Viscount Karsh's pockets.
Because copper is easier to process than iron, demand for it as a material is high. If its price rises, it begins to affect the lives of the common people. At worst, public order will deteriorate and crime will increase, so it cannot be left unaddressed.
"It would be one thing if he were just withholding his own copper, but to stop shipments by virtually blockading the highway is quite a bold move. Even without calling me, wouldn't it be fine for Your Excellency to personally impose sanctions?"
Steve suggested this to Aurora. He thought that if the mastermind of the market manipulation and their methods were known, it would be easy for a person in power to crush the manipulator.
However, Aurora had her own circumstances.
"Viscount Karsh has ambitions to replace our house and become the leader of the Western faction. He believes he is more excellent than anyone else and looks down on others. Even if I applied pressure here, there's no telling what kind of retaliation he would take later. As the one who devised the system of futures trading, you must have anticipated such a situation. Since he's made a move on the market, I want to strike back through the market and break that arrogant nose of his."
"I understand. If we are to engage the opponent, I first want information. Please tell me the production volume of Viscount Karsh's copper mines, the amount of copper he has hoarded, and the Viscount's assets. Oh, and also the nobles and brokers under his influence."
"Understood. I'll investigate and contact you immediately."
"Please do. On my end, I'll look into the price movements of copper."
Steve parted with Aurora and headed for Emmanuel's trading company. Emmanuel was a broker and should have records of the price movements. Therefore, he intended to have him show them.
The Emmanuel Trading Company in Sowell Land was a building about the size of a school gymnasium. Steve had heard it wasn't a new build but was bought as-is. Originally a merchant with a single cart, he had reportedly purchased this massive building to handle the products supplied by Steve.
When Steve stepped inside, he saw Double Pot Refrigerators and Reversi sets placed alongside flour and salt. Emmanuel, who happened to be in the shop, noticed Steve's presence.
"Well, well, Steve-sama. Welcome. Had you contacted me, I would have come to receive you myself."
"No, I was called by the Margrave today. Based on that content, I have something to discuss with you, Emmanuel."
The other clerks had looked down on Steve because he was a child and hadn't attended to him at all, but they were shocked when the guildmaster himself gave him such a polite reception. They braced themselves for the lecture that surely awaited them after Steve left.
"There are many ears here, so I'd like to talk somewhere else."
Emmanuel, sensing the scent of gold in Steve's tone, guided him to a room for important business negotiations. The walls here were thick, designed so that voices would not easily leak outside.
"In here..."
"Thank you. Well then, to get straight to the point, I want to view the records of the spot and futures price movements for copper recently."
"May I ask the reason?"
"Of course. Actually, it seems Viscount Karsh is manipulating the copper market to make a profit. I've been consulted by the Margrave to see if something can be done. First, I want to confirm their methods. Also, I think there will be a big showdown in the next two months to half a year. I intend to use you as my broker, Emmanuel, so I want you to tell your employees to accept my orders without fail."
Hearing that, Emmanuel thought for a moment.
"By 'big,' specifically what scale are you referring to?"
"To the extent of seizing all the assets of Viscount Karsh and his faction. Since the Margrave is serious, it will be a war of hitting each other with money until one side collapses."
"The Margrave..."
Hearing 'the Margrave,' Aurora's face came to Emmanuel's mind. While the Margrave was Aurora's father, his illness was not improving, and it was Aurora who effectively managed political affairs. When nobles or merchants said 'the Margrave,' they referred to Aurora. And her masculine, strong-armed methods and cunning mind were feared in the Western region.
"The customers you mentioned before who found fault with the copper, Emmanuel—they are likely part of Viscount Karsh's faction. They're probably buying up the copper to drive up the price. Finding fault is just to keep other customers away."
"That makes sense now. However, speaking of Viscount Karsh, he is a great noble second only to Margrave Sowell in the Western region. Is there a prospect of winning?"
"Our main export is copper. What are we doing if we don't earn in this chance?"
"That is true. In that case, shall I participate with a proprietary trade as well?"
(T/N: 'Proprietary trade' [tebari] refers to a brokerage trading with its own capital rather than just executing customer orders.)
"Now we're in the same boat. Well then, could you show me the copper price movements?"
"Understood."
Emmanuel showed Steve the sheets recording the copper market movements in the shop. Steve drew candlesticks while looking at them. And below the candlesticks, he recorded the volume.
Candlesticks are the most basic chart, representing the opening, low, high, and closing prices, and whether it's a bearish or bullish line. They are for confirming the momentum of the market. By adding volume to that, one reads the psychology of the participants.
At the same time Steve was investigating the copper market in Sowell Land, Viscount Karsh was holding a meeting at his castle in his domain, gathering the nobles and purveyor merchants belonging to his faction. Viscount Karsh had blond hair and a mustache of the same color. He was in his mid-thirties, in the prime of his life. Having inherited the domain after his father's sudden death, his face overflowed with confidence that he could develop it even further.
"Ever since that vixen started futures trading, our finances have only flourished. By squeezing the supply of copper, our holdings sell at high prices, and the sellers of futures have to buy back at high prices. As expected, the difference is here."
Viscount Karsh lightly tapped his index finger against his head. A purveyor merchant flattered him there. The merchant's name was Charles Valier. Though a wily merchant in his late fifties, he held a complex about being unable to get a foothold with Margrave Sowell and thus being unable to stand at the top of the Western region.
"Your Excellency's insight is admirable. There is no one in this country who understands the market as well as Your Excellency."
"Is that so? At this rate, I shall increase my wealth and become the leader of the Western faction."
"When that happens, I ask for your continued favor."
"I know. Besides, you are earning quite a bit yourself, are you not?"
"Not as much as Your Excellency. And I doubt I even reach the level of the luminaries gathered here today."
Laughter broke out among the nobles gathered here as well.
"None of us can die until we see Lord Karsh ruling the Western region."
"What, by next year, His Excellency will already be the leader of the Western faction."
They grew lively with such talk. They were desperate to be liked by Karsh even a little.
And Viscount Karsh seemed quite pleased as well.
"If that vixen tries to take measures against the soaring copper prices, blocking them will surely bring other nobles to our side. Inspections of cargo within one's domain is a noble's right of autonomy recognized by His Majesty the King. If I show her being outdone, her prestige will also be damaged."
A certain Baron asked the smiling Viscount Karsh a question.
"However, wouldn't it be bad if they sent troops? Even if we gathered our soldiers, we might not be a match for the Margrave's army."
"Hmph, if it becomes an infringement of autonomy, the national army will also side with us. If this is left alone, other nobles will follow suit, and the country will fall apart. His Majesty would not overlook such a thing."
"Oh, that is certainly true."
Laughter filled the meeting again. Charles Valier also wore a smile, but in his heart, he was concerned about Emmanuel's trading company. A merchant selling copper of unknown origin. No, he knew as far as the origin being House Archibalt. However, there is no copper mine in the Archibalt Territory. Even if they were developing a mine in secret, he knew that with the number of people in that territory, they couldn't manage decent production.
In that case, where was House Archibalt obtaining copper from? Because he didn't know that, he had an indescribable anxiety.
"Valier, pour in all the profits so far and keep buying up copper. Naturally, buy futures as well. Those who are selling cannot obtain copper. Since they must buy back no matter how high the price, buy it up without hesitation."
"Understood."
Ignoring Charles Valier's anxiety, Viscount Karsh ordered further cornering of the market. Among the sellers were also the purveyor merchants of Margrave Sowell. Since it was a once-in-a-lifetime chance to kick them down, Charles Valier pushed his anxiety deep into the bottom of his heart.
After three days, Steve received a summons from Aurora. The content was, of course, that the investigation into Viscount Karsh's assets and such was complete. Once again, the three of them—Steve, Aurora, and Harry—gathered.
"Honestly, while we were investigating, the price of copper went up, finally reaching triple. At this rate, even considering the cost of making copper coins, it's only a matter of time before melted-down ones start circulating. Here, these are the materials you asked for. Taking them out is a no-go, so just look through them here."
Aurora grumbled so. Currently, about 200,000 copper coins can be made from one ton of copper. What used to be worth 200 gold coins had a material cost of about 1/3 until now. Now, it has risen to parity. Currency has a value that adds the material and the national power. The currency of a country without national power has only the same value as the material, but if the national power is great, the value increases accordingly. It's natural if you consider that paper money holds value.
And now, copper coins are worth about the same as the material value and there is a feeling that prices will rise further, so if one is prepared to commit the crime of melting down currency, profit can be gained by collecting and melting copper coins. If such a crime occurred in her jurisdiction, the Margrave's face would be completely lost, so Aurora wanted to lower the copper price no matter what.
While looking through the materials, Steve listened to Aurora's grumbling.
"I thought it would take about half a year at most, but I suppose we have to settle the match in a shorter period."
"It would be a help if you could do that. So, since you say that, you have a chance of winning, right?"
"If it's just lowering the copper price, I can do it any which way. However, if it's to inflict great damage on Viscount Karsh and his lot, it will be a bit of a struggle. May I use Your Excellency's assets and brokers freely?"
Hearing that, Aurora made a sour face.
"Using assets freely is impossible. Not unless I know what scale you're thinking of."
"What I'm thinking of is more than double the assets of Viscount Karsh and his faction. To deal them damage to the point where they cannot recover, we need to set a trap of our own accordingly."
"That trap will cost money, is what you're saying."
"Yes."
Here, Aurora thought for a moment. She couldn't immediately judge how much she should trust the boy in front of her.
"Could you tell me the strategy for winning? Also, your reward when successful, and the compensation if you fail."
Steve answered Aurora's question.
"First, please look at my magic."
So saying, he created a lump of copper in front of him.
"Wha—!?"
Aurora barely managed to suppress her surprise, but Harry couldn't do so and let out a voice of astonishment.
"So that's the secret plan for winning."
"Yes. Even without a copper mine, I can create copper with magic. Since it requires magical power, it won't work infinitely, but it means a copper procurement route that the opponent doesn't know about is created. With this, we'll lure the opponent in and break them by selling."
Aurora was convinced by Steve's strategy. With this, she felt it would be no problem to let him use the funds freely, but as expected, her pride as the House of the Margrave would not allow it.
"Even so, as expected, I can't let you use the funds freely. However, if you indicate the timing for buying and selling, I will do as you say."
"That will be fine. As for the success fee, in terms of amount, our share can be ten percent of the profit. In exchange, I would like you to permit the migration of citizens to our house's territory."
"Ten percent is fine? That's quite a generous story. It's scary as if there's something behind it."
"It's a simple thing, but since we will inflate the losses until the opponent has no ability to pay, ability is also required to collect. Therefore, even if I demanded half, our house couldn't collect it, so I shall leave the money to Your Excellency."
Steve thought that collecting a debt from a higher-ranking noble was impossible. Therefore, monetary profits and such were pie in the sky, and as a practical benefit, he desired the acquisition of territory citizens through migration.
Aurora was satisfied with this explanation and stopped asking about the compensation if he failed.
Since Steve said he would return to his territory once, the talk ended there.
Harry, who remained in the room, asked Aurora.
"Milady, was it alright not to hear the story about when he fails?"
At that question, Aurora's face looked as if she had chewed a bitter bug.
"There's no need to ask. Since he has magic to create copper, defeating those fellows who are cornering the market by selling must be easy. But, that means that boy can freely manipulate the price of copper. If that boy becomes an enemy, there will be nothing we can do. It's vexing to think I have to be careful around him from now on."
Aurora once again recognized Steve as a dangerous existence.