Recession of 1709

From 1709 AN-1711 AN, the Federation of Nouvelle Alexandrie, Kingdom of Ransenar, Western Natopia, Eastern Natopia, and other Micran nations suffered a spike increase in inflation as disruptions in the supply chain mounted in the lead-up to the Natopian division. Further economic uncertainty and lengthy negotiations throughout the mid-1700s surrounding the division of the Natopian Empire, growing consumer demand outpacing supply and manufacturing capacity in all nations, and disruptions in Ransenar and in Lyrica due to the Great Vanic Revolt all contributed to trade and industrial activity contracting. This caused a fall in GDP in several successive quarters in Nouvelle Alexandrie, Ransenar, Western Natopia, Eastern Natopia, and Constancia. Shortages of key consumer goods and food further drove prices of daily staples upward, placing additional pressures on individuals and governments in the affected economies. The economies impacted by this recession are characterized as deeply interconnected economies through financial, military, political, and cultural common associations such as the Raspur Pact, the Community of Goldfield, and the Euran Economic Union.

The recession of 1709 AN-1711 AN was a relatively mild recession but was longer than anticipated. The recession lasted for 13 months, beginning in late 1709 AN and ending in early 1711 AN. The recession ended one of the longest periods of economic expansion in the history of Nouvelle Alexandrie, which had begun in late 1694 AN. In many countries like Nouvelle Alexandrie, Ransenar, and Eastern Natopia, the contraction in economic activity also coincided with the active work of their governments in closing large budget deficits and many of their central banks raising interest rates to stop runaway inflation.

During this relatively mild recession, the Gross Domestic Products of Nouvelle Alexandrie fell 1.2%, Ransenar's fell by 1.7%, Constancia's fell by 0.3%, Western Natopia's fell by 0.9%, and Eastern Natopia's fell by 0.4%. Though the recession ended in early 1711 AN, the unemployment rate in many of the affected nations did not peak until much later. The most affected economic sectors in this recession were tourism, retail, transport, housing, manufacturing, and banking.

As additional large infrastructure projects in Nouvelle Alexandrie came online and more clarity was obtained on the settlement of the Natopian division, economic growth resumed in all the affected economies by the start of 1712 AN, with improved unemployment numbers and decisive action in the economies of the affected nations by their governments to address the recession.

Impact on countries

Nouvelle Alexandrie

• Quickly rising costs of home buying and renting, especially around major cities, kicked off inflation and reduced consumer confidence/spending. Costs of food and other staples started to rise due to disruptions in Ransenari imports. NAX food production could not meet demand and turned to imports from Ransenar.
  • New Alexandrian housing crisis: ongoing housing crisis, not enough housing for people to buy or rent, especially around on-demand cities or areas;
  • Ransenari farmer-labor crisis, 1709;
  • Economy of Nouvelle Alexandrie.
• 1706 AN-1711 AN: Great Vanic Revolt: attacks on New Alexandrian politicians, military and economic targets in Lyrica, government targets in Cardenas.
  • The Great Vanic Revolt brought up violence as an emerging regular occurrence/a daily concern in the lives of the vast swathes of New Alexandrians that live in safer parts of the Federation.
  • The security condition of the Federation led to decreasing consumer confidence. Businesses started reeling back production, and raw material extraction and processing became disrupted as manufacturing began to reel back.
• Steep decline in tourism in its "normal" hot spots, in particular in the Southern Aldurian Riviera. Tourism declines in "normal" hot spots as it shifts to developing new spots in Nouvelle Alexandrie and elsewhere. The Southern Aldurian Riviera depended heavily on its burgeoning cruise destination / sea-side resort model, especially its wide variety of luxury brands and hotels. When all of these took a big hit after prices went up/inflation ate people's disposable income, tourism and all the supporting businesses around the Southern Aldurian Riviera started failing and this trickled to the rest of Alduria (likely the largest and most advanced part of NAX's economy).
  • 1709 AN - bankruptcy of HotelBev Group, loss of 5,000 jobs in the Southern Aldurian Riviera ;
  • 1710 AN - bankruptcy of the hospitality groups Aldurian Hotels and Inns and the RoseWood Group; further loss of 8,000 jobs in the Southern Aldurian Riviera ;
  • 1710 AN - unemployment claims in Alduria alone spike as the trouble in the tourism industry starts to spread to other depending industries such as restaurants and other ancillary businesses/sectors;
• 1710 AN - New Alexandrian port strikes, 1710 - brief strike in the two largest ports in the country: Port of Jirishanca and the Port of Punta Santiago disrupted most national shipping for a week, resolved by government mediators that arranged for fair agreements in both situations, first contract that will last for next 5 AN years in decades, seen as a major labor milestone;
  • Shipping disruption disasters in internal waterways/railways?
• 1710 AN - Major/large bankruptcies of several businesses/corporations and prominent entrepreneurs, this spread to the banking sector as many companies/entrepreneurs entering bankruptcy had significant debt loads that they could no longer service. Interest rates start to go up as the Federal Bank of Nouvelle Alexandrie battles runaway inflation, credit is expensive and not as available to businesses anymore, unemployment spikes to 12% ;
  • 1710 AN - banking sector reels from major tourism bankruptcies, and companies that held large debt loads have their properties and assets seized by the government to pay creditors. Prized HotelBev possession Hotel du Babkha is seized by the government of Nouvelle Alexandrie;
    • Regional and local banks start to fail (concentrated in Alduria, Santander, Islas de la Libertad, South Lyrica, New Luthoria), two larger banks: the Bank of Southern Alduria and TransFederal Bank file bankruptcy
• 1710 AN - bankruptcy rate in the entire country goes up; the impact of pain in the tourism sector spreads to the banking, retail, and services sectors as consumers start to feel the rising prices of food, mortgages, and other services and consumer goods;
• 1710 AN - the accession of Anahuaco to the Raspur Pact adds additional Keltian trade partner;
• 1709 AN - 1711 AN - Federal Bank of Nouvelle Alexandrie increases interest rates, cooling the overheated real estate markets in many New Alexandrian cities
  • Rental costs continue to mount, however, as there is not enough supply of housing to meet demand currently or in the future.
• 1710 AN - 1711 AN - key victories by the Federal Forces wrap up the Great Vanic Revolt;
• 1711 AN - constitutional reforms, action on housing, the dust settles around Natopian division, Western Natopia and Eastern Natopia divide with no animosity and in cooperation with each other under the Declaration of Lindstrom and their respective laws and regulations.
  • Economic Rights and Expropriation protections were expanded and constitutionally enshrined, which greatly pleased businesses and entrepreneurs.
  • More housing started to come online, government started to enact programs and incentives to build more housing in Nouvelle Alexandrie, giving boost to construction and real estate industries.

Ransenar

In 1709 AN, the Ransenari farmer-labor crisis, 1709 kicked off a widely felt economic shock across many Raspur Pact economies. Critical shortages of labor in Ransenar's agricultural and mining sectors lead to delays in order fulfillment for agricultural and other raw material exports to Nouvelle Alexandrie, Western Natopia, Eastern Natopia, and Constancia. Causing the labor shortages was the increasing rate of retirement of farmers in Ransenar, with the average age of Ransenari farmers being around 53 years old. This further enabled many ancestral and small family farms to be purchased at discount prices by many of the large farming conglomerates in Ransenar, as well as from abroad.

• • Disruption in Ransenar led to food prices starting to go up in the economies that regularly consume Ransenari food: Nouvelle Alexandrie, Western Natopia, Eastern Natopia, and Constancia;
  • The shipping industry in Ransenar was also woefully understaffed, making it more and more dependent on machinery and automated processes that could get easily bogged down;
• Over previous decades, Ransenar has been focusing efforts on modernization through scientific research and development at the University of Goldfield with subsidies and grants. Economic benefits of scientific research have taken quite a bit to materialize, but the University of Goldfield managed to reach lucrative licensing contracts for their desalinization technology in the Alcalá Declaration. These economic investments suffered greatly in the Recession as promises of development around Lake Nerub didn't fully materialize or had to be placed on pause while the economy recovered;
• 1710 AN - Ransenari government bails out several farming cooperatives, food processing companies, farming companies, regional farming banks, and savings cooperatives in the Rescue Our Farmers Act;
• 1710 AN - Ransenari economic reforms: separation of commercial and investment banking (preventing securities firms and investment banks from taking deposits); created new agencies and offices such as the Commission for Banking and Securities' Regulation and the Ombudsperson of the Consumer, among others;
• 1710 AN - Regional and local bankruptcies spike as order cancellations, shipping delays, layoffs, and other effects from large bankruptcies begin to ripple out into the economy. Unemployment spikes to 8%;
• 1711 AN - Economic reforms, repairs to ports, and repairs/expansions to other critical infrastructure to increase trade and commerce begin to lift consumer confidence, and further mechanical and process reforms (aided by engineering teams from the University of Goldfield, SATCo, and Kerularios & Co) help correct disruptions in supply chain automated processes. Job programs are enacted to recruit unemployed with driver's licenses with jobs in shipping.
• 1711 AN - IDP government introduces taxation reforms that impose a minimum corporate tax on all Ransenari companies and close corporate tax and regulatory loopholes;
• 1711 AN - IDP government embarks on a period of austerity to close budget deficits and reduce debt after the farmer, labor, and banking bailouts.

Western Natopia

• Division of the Natopian Empire
  • process of dividing the Empire was complicated and took a lot of consultations, referenda, and debate in the public and private spheres of Natopian society in both halves;
  • process resulted in the Declaration of Lindstrom and successive "common laws" implemented to ensure that Western Natopia and Eastern Natopia shared common defense, economic, and other policy fields where dividing the Natopian effort would weaken Natopia;
  • settlement around common trade and regulatory policies took several months to years, businesses felt paralyzed by rumors and contradictory information in the marketplace;
  • there was no clear notification to the consumer from the government on how services would change and where to find them via phone, online, or physically;
  • national government came to depend a lot on the demesnial governments, enshrining devolution in the nation's key constitutional documents.
• 1709 AN: Uncertainty in the division of the Empire leads to supply chain disruptions and inflation starts to creep up. Consumption starts to slow down and become stagnant, signaling to the market that the economy may head into a recession. Weakening consumption contracted the output. Tourism, retail, and manufacturing hit hardest with bankruptcies and liquidity crises;
• 1709 AN - 1710 AN: With high government spending and other implemented expansionary incentives enacted to prevent/ameliorate a recession, demand accelerated at a faster speed than supply, causing the latter unable to accommodate the demand.
  • Demand was approximately double the country’s GDP potential and the supply side was unable to maintain the economy at an equilibrium. As a result, the demand curve shifted to the right and elevated prices to higher levels.
• 1711 AN: Government raises the tax rates to support higher public spending, however, public revenue dried as ongoing inflation eroded the ability of the public and companies to pay taxes. Budget deficits are addressed with tax reform and spending cuts.

Constancia

The so-called "Food Shock" that significantly impacted the Constancian economy renewed calls for a food security program within the Imperial State, and while exports from Nouvelle Alexandrie and other nearby trading partners helped stem the tide, realization that the Imperial State was admittedly dependent on Natopian and Ransenar food exports caused a stir in the Imperial Synkletos.

To temper potential political unrest, elections for the 12th Imperial Synkletos were surprisingly called for 1710, after many surmised that the 11th Imperial Synkletos would be the first in history to utilize the maximum constitutional term limit of seven years. An announcement was also surreptitiously made that the Prince Iñigo would relinquish the office of Mesazon on the last day of 1709, ostensibly due to his marriage, to be replaced as Mesazon by Imperial Senator Garvin Hendriksson, due to his strong business background.

The establishment of the Constancian National Credit Union was also initiated, to provide some measure of assistance to the masses. The Constancian Privatization Authority, modeled after the Zeed National Debt Management Authority, was also created to purchase or receive toxic assets and equity from financial and business institutions, and sell the same at auction, to better strengthen the Constancian financial and business sector. Withdrawals from the Permanent Fund were also authorized to stabilize the Imperial Stater or to otherwise purchase certain assets.

Civil society and business group clamor (such as the Euran Chamber of Commerce, RPGK Chamber of Commerce, Ransenar-Constancia Chamber of Commerce, Normark-Constancia Chamber of Commerce, and most importantly, the Euran Syndicate of Businesses) and lobbying for the establishment of an independent supranational Euran Development Bank, or one under the aegis of the Euran Economic Union, as well as a Constancian Development Bank for lending and fund access for development purposes.

Ironically, the financial crisis had a beneficial effect for the Trans-Euran Railway, by expanding the pool of kul labour available to the Grand Commissariat of Eura and Corum as an increasing number of citizens and subjects alike sold themselves into conditions of contractual obligation so as to escape absolute destitution and starvation. Set against this was the excessive resource, labour, and capital demands of the Trans-Euran Railway project effectively unleashing heavy inflationary pressures in the Imperial State itself. The disappearance of so many kuls into an open ended construction project that would see three quarters of which focused in the territories of the Suren Confederacy and Zeed, saw the bargaining position of the remaining freeborn workforce suddenly improve - creating a second inflationary shock as emboldened workers embarked upon a series of wildcat strikes in order to secure wage increases.

Benacian Union

Breadline in Avakir, 1709 AN.

The disruption to allied international trade networks, including the loss of access to credit on favourable terms, and a precipitous fall in demand for exported raw materials such as lumber, steel, and natural gas, had a knock-on effect in the Benacian Union where the domestic economy was already under pressure from the impact of the 1709-1710 North Benacian Famine. Although the High Presidium of the Benacian Union was able to mitigate the worst aspects of the famine by maintaining rations for favoured groups, such as the BUDF and N&H, at the expense of communities designated to be enemies of the Union-State, such as the Amokolians and the Elw, the disruption felt by an economy that relied upon resource extraction and heavy manufacturing, was such that a number of armaments programmes were paused by 1711 AN.

The Benacian regime sought to escape this malaise by responding favourably to the accession of Ransenar to the Benacian Union in late 1711 AN and formalising its membership of the Community of Goldfield, which promised to enhance its access to allied international markets and favourable credit terms within the community.

Imperial Federation

The disruption in the significant maritime trade routes that pass between Keltia and Benacia further exacerbated the sting the Imperial Federation felt during its years of overextension, as the so-called Grand Armada of the Imperial Federation (or, simply, the Imperial Navy) was forced to use only a small increase of ships to police and control nearly three times the maritime territory it originally patrolled before the war. While the Imperial Federation would normally have been able to safely patrol its portion of the world's ocean during peacetime, the border conflict with Valora required a strong Navy to deal with, and the Vanic insurgency on Tar-Palantir similarly drew manpower from the farthest, and newest, reaches of the Empire.

Slowed construction (and reconstruction) of its new territories forced a reckoning within the centers of command. The High Command and the recently re-constituted Imperial Senate were faced with a dual challenge. Firstly, the government needed to address the domestic impact of a global recession impacting trade. However, large amounts of manpower originally needed solely on Drag'os to tame its vast hinterlands were no longer necessary there, and an unprecedented construction boom ensued following the reunification of the island and the near-simultaneous expansion of the empire into new lands. Secondly, there were increased demands on the Navy before the investment in material and manpower for new lands was to pay itself out, notably in patrolling new areas, actively ensuring Valora was confined to its own coastlines, and building ships to accommodate invigorated domestic trade and travel between the core lands and the outer territories. While manpower could be called up or reassigned with relative ease, even the mighty Imperial Navy lacked the ships required to comfortably patrol waters and finally bring the conflict with both Valora and internal insurgents to a decisive close.

As such, the Imperial Guilder similarly suffered a decline in international value due to increased government expenditure on shipbuilding, bailouts for the Imperial Federation's growing international trading companies, needed spending on massive new territories, subsidies for reconstruction, and on arrangements for enhanced security for its existing and planned overseas bases. The resulting strain on the central treasury forced the country to invest more in domestic mining industries to ramp up production, and reassigned Army personnel to civil engineering projects to make up for shortages in finances and manpower, further diverting from the border conflicts with Valora.

Without fresh Guilders flowing to the rapidly declining Treasuries, these central banks increasingly faced pressures to either borrow fresh credit from Raspur Pact partners or otherwise declare financial insolvency on more than one occasion. Emperor Anarion (likely egged into the move by his Viceroy) felt compelled to personally lend significantly from his own assets to the Imperial Senate in late 1710 AN The resulting recession only ended in the Imperial Federation near the end of 1711 AN due to investments from colonial trade and infrastructure finally kicking in, relieving the beleaguered Imperial Treasuries in both Glacier City and Gondolin. 1712 AN posted reversals in GDP trends, as revenues began to strengthen, trade restored to the global economy, and Imperial Navy ships finally began entering service to ease the empire's vast maritime infrastructure.

See also

• Community of Goldfield;
• Division of the Natopian Empire;
• Euran Economic Union;
• Raspur Pact.