The roots of what became known, alternately, as the Railway Crash, the Banking Crisis and Vesperian’s Folly rested in three factors, all introduced – deliberately or otherwise – by Emily.
First, the spread of the New Learning (everything from abacuses to steam engines) encouraged a rapid growth in craftsmanship and opened up whole new vistas for technological advancement and profit. As a free city, situated close to the Barony of Cockatrice, Beneficence was well-placed to take advantage of these developments without interference from a jealous monarch. Steam engineers and artificers, for example, were happy to move to the city and start training apprentices, who would in turn train others.
Second, the issuing of microloans from various banks, particularly the Bank of Silence, ensured a thriving commercial sector. Anyone with a dream – and a semi-workable proposal – could apply for a loan and most of them would be granted. (And most of them would repay the loans.) This fueled the growth of an investment infrastructure and, eventually, the first true stock market.
Third, the collapse of the Accountants Guild – a direct consequence of the spread of new forms of bookkeeping and cheap paper – ensured that there were few old-style professional financiers within the city. Of those who remained, only a handful were savvy enough to see the danger signs and issue warnings, none of which were actually heeded. Like financial bubbles on Earth, everything looked good until it suddenly wasn’t.
Vesperian, a wealthy merchant who had made his first fortune through trade, was ideally placed to take advantage of the industrial boom. His first investments in steam technology produced an improved steam engine that opened up whole new vistas for both steam-powered ships and railway engines. The opening of the Beneficence-Cockatrice Railway – a direct link between Beneficence and Cockatrice City – suggested that tying the remainder of Zangaria and even parts beyond would be a relatively simple task. Accordingly, Vesperian started work on the Beneficence-Zangaria Railway. It would rapidly become known as Vesperian’s Track.
He did not, however, have the cash reserves to fund the project himself. Reluctant to approach his peers or King Randor for a loan, Vesperian solved the problem by selling shares in the railway to all and sundry. These investments, which rapidly became known as ‘notes,’ promised repayment within two years, at (originally) a rate of ten-to-twelve. If someone were to invest, for example, ten crowns in the railway, they would receive twelve crowns at the end of the two-year period. Through a great deal of marketing, aided by the success of the Beneficence-Cockatrice Railway, Vesperian managed to raise a staggering sum and work began.
Problems appeared, however, almost at once. The task of gaining permission to construct even the first stage of the line (Beneficence-Cockatrice-Swanhaven) ran into political problems within Swanhaven. Vesperian switched to another barony, but the ruling aristocracy required a great deal of expensive soothing before they would grant the necessary permissions to start construction. Worse, the sudden demand for everything involved in producing railway track and steam engines drove up prices all across Beneficence, sending the costs of even the first stretch of track into the stratosphere.
Unable to repay his first set of loans, with the first set of creditors baying at his heels, Vesperian struggled desperately to raise more money. This forced him to up the promised repayment rate (at the height of the bubble, he was issuing notes promising repayment at ten-to-twenty) and, while he was successful in paying off most of his early creditors, this created the impression that the line was already earning money. Bizarrely, Vesperian’s early success only ensured that the eventual – inevitable – collapse was a great deal worse.
By this point, it seemed the entire city had caught railway fever. Thousands of investors poured money into the project, from children offering their pocket money to bankers and wealthy guildsmen offering vast sums. The few dissenting voices – mainly people who had been priced out of the market by the rising costs of iron products – were roundly ignored or mocked. No one wanted to believe that the whole affair was about to end in tears.
Complicating matters was the simple fact that Vesperian was not a very good bookkeeper, let alone an accountant. He wasn’t keeping close track of the number of notes he was issuing, and his estimates of how much money he owed were off by at least an order of magnitude. By the time he realized how badly he was on the hook for literally tens of thousands of crowns it was far too late. Rumors were leaking out and some of his older creditors were demanding repayment. His attempt to convince Emily to invest in the project was a final desperate bid to repay his debts. When it failed, he knew he was done for. His death, seemingly at the hands of a god, marked the moment the bubble burst.