The Online Library of Liberty

A project of Liberty Fund, Inc.

• Titles In the Liberty Fund Library of the Works of Ludwig Von Mises
• Acknowledgments
• Preface
• Introduction
• Monetary and Economic Policy Problems Before, During, and After the Great War
• Part 1: Austro-hungarian Monetary and Fiscal Policy Issues Before the First World War
• Chapter 1: The Political-economic Motives of the Austrian Currency Reform 1
• Chapter 2: The Problem of Legal Resumption of Specie Payments In Austria-hungary 1
• Chapter 3: The Foreign Exchange Policy of the Austro-hungarian Bank 1
• Chapter 4: On the Problem of Legal Resumption of Specie Payments In Austria-hungary
• Chapter 5: The Fourth Issuing Right of the Austro-hungarian Bank 1
• Chapter 6: Financial Reform In Austria 1
• Chapter 7: The General Rise In Prices In the Light of Economic Theory 1
• Chapter 8: On Rising Prices and Purchasing Power Policies 1
• Chapter 9: Disturbances In the Economic Life of the Austro-hungarian Monarchy During the Years 1912-1913 1
• Part 2: Economic Policy Issues In the Midst of the Great War
• Chapter 10: On the Goals of Trade Policy 1
• Chapter 11: Inflation 1
• Chapter 12: On Paying For the Costs of War and War Loans 1
• Chapter 13: Remarks Concerning the Problem of Emigration 1
• Part 3: Austrian Fiscal and Monetary Problems In the Postwar Period
• Chapter 14: Monetary Devaluation and the National Budget 1
• Chapter 15: For the Reintroduction of Normal Stock Market Practices In Foreign Exchange Dealings 1
• Chapter 16: On Carl Menger’s Eightieth Birthday 1
• Chapter 17: How Can Austria Be Saved?
• Chapter 18: The Claims of Note Holders Upon Liquidation of the Bank 1
• Chapter 19: The Austrian Currency Problem Thirty Years Ago and Today 1
• Chapter 20: The Restoration of Austria’s Economic Situation 1
• Chapter 21: The Austrian Problem 1
• Chapter 22: The Gold-exchange Standard 1
• Chapter 23: The Social Democratic Agrarian Program 1
• Chapter 24: America and the Reconstruction of the European Economy 1
• Chapter 25: The Currency and Finances of the Federal State of Austria 1
• Chapter 26: The Economic Crisis and Lessons For Banking Policy 1
• Part 4: Interventionism, Collectivism, and Their Ideological Roots
• Chapter 27: The Economic System of Interventionism 1
• Chapter 28: Economic Order and the Political System 1
• Chapter 29: Remarks Concerning the Ideological Roots of the Monetary Catastrophe of 1923 1
• Appendixes
• Appendix A: Maxims For the Discussion of Methodological Problems In the Social Sciences: Paper Delivered At the Private Seminar 1
• Appendix B: Short Curriculum Vitae of Mayer Rachmiel Mises of Lemberg 1

CHAPTER 1

The Political-Economic Motives of the Austrian Currency Reform1

I

The fact that from the middle of 1888, changes in the value of the Austrian currency had taken on a pattern disadvantageous to domestic production gave a direct impetus for the reform of the Austro-Hungarian monetary system, a reform that had been dragging on for decades before this.

The price of 100 florins in gold (250 francs) amounted, on average for the year 1872, to 110.37 Austrian paper florins and increased, beginning with this year (with a small interruption), up to 125.23 Austrian paper florins as the average for 1887. From then on, it began to decline. It amounted to:

A widely held view, which met with little opposition, held that these increases in value of the Austrian currency were neither incidental nor temporary phenomena; in fact, they could be traced back to serious, economic causes. There was a perceived agreement that the fall in the agio2 would not come to an end by itself: indeed, it would continue at an increased rate in future years if a change in the currency did not occur at the appropriate time. This view found its most ardent supporter in Hertzka,3 who articulated that opinion in the investigations of the currency commission. If the monarchy persisted with a nonconvertible currency, the florin would continue to increase in value until finally it would equal the gold value of the pound sterling by the end of the nineteenth century.4 Most of the individuals who had their say during the proceedings of the currency commission shared this view; Minister of Finance Steinbach5 repeatedly expressed a similar opinion, for example, in the session of the House of Representatives on July 14, 1892. The generally widespread belief in the continuing “improvement” in the value of the Austrian currency was one of the most effective motives for the accelerated initiation of a reform of the currency.6

The majority saw the most important reason behind the increase in the value of the currency in the fact that there was a legal limit on the maximum quantity of state notes in circulation and a suspension of silver coinage for private uses. This meant that within the monarchy increases in the quantity of the currency could no longer match increases in the demand for currency. This argument, which was an application of the quantity theory to Austrian circumstances, primarily relied upon the fact that the quantity of currency in circulation within the monarchy remained considerably below the quantity in circulation in other countries.

According to O. Haupt, the currency in circulation within the Austro-Hungarian Monarchy amounted to 779 million florins at the end of 1885, which represented a per capita circulation of 20.10 fl. In the most important countries, the per capita money in circulation at the end of 1885, in francs, was [25 shown opposite—Ed.].

Austria was ranked twelfth place with respect to the relative size of the monetary system. However, this factor alone does not absolutely

justify the conclusion that Austro-Hungary’s money in circulation failed to correspond to the demand for it. It is obvious that those Western countries where capitalistic development had advanced far ahead of the Danube Empire had a larger demand for money. In addition, it is not surprising that Italy had a larger quantity of money in circulation than was in the Austro-Hungarian Monarchy, considering that in 1885 Italy was experiencing a period of growing paper money inflation and an increasing agio. It is equally inappropriate to compare the monarchy’s circumstances with those in Spain and Portugal.

The proponents of the quantity theory laid the primary responsibility on the fact that the Austro-Hungarian monetary system lacked the possibility for a currency expansion starting in 1879, and in a certain sense already beginning in 1867.

Admittedly, an increase in the monarchy’s monetary gold reserves was practically excluded. Because gold was not a part of the Austrian currency system, it could only be employed (aside from its use for the payment of customs duties and in some business transactions) as a backing for the notes issued by the Austrian-Hungarian National Bank. However, due to the decline in the price of silver, the Austro-Hungarian Bank could not increase its gold reserves without incurring a loss; in the period from December 31, 1877, to August 10, 1892, these reserves grew by a mere 401.65 kg.8

Since the abolishment of silver coinage for private uses in the spring of 1879, silver face-value coins were minted only for government uses. In the years 1884-91, silver face-value coins were minted at an average annual value of 7 million florins. The entire amount of silver face-value coins minted between 1876 and 1891 amounted to 226.6 million florins. The Austro-Hungarian Bank’s silver holdings increased from 66.6 million florins at the end of 1875 to up to 166.7 million florins at the end of 1891.

The legal limitation on state notes in circulation to 312 million florins was a particular characteristic of the Austrian monetary constitution, under which the quantity of short-term, interest-bearing treasury bills in circulation, and the sum of state notes and interest-bearing treasury bills was prohibited from exceeding a combined amount of 412 million florins. Within this limit, however, the decrease in the quantity of Saltworks notes9 was replaced with an increase in the circulation of state notes. The possibility always existed for satisfying the increasing demand for currency in circulation within this limit through an expansion of state notes in circulation. And beginning in 1888 we see a constant increase in the quantity of these notes in circulation. The entire state note circulation amounted to:

Although until the fourth privilege of the Austro-Hungarian Bank went into effect the quantity of notes in circulation not backed by precious metals was strictly limited to 200 million, the number of bank-notes in circulation increased from 247 million florins at the end of 1867 to 391 million florins at the end of 1887. The system adopted in the Austro-Hungarian Bank’s fourth privilege of an indirect limitation offered a freer scope to the expansion of notes in circulation. It amounted to:10

The entire paper money in circulation (state- and banknotes) amounted to:

This corresponded to a total increase of 71.5 million and an average annual increase of 23.8 million florins. That this increase in the quantity of paper money in circulation did not lag behind the increasing demand for it, or at least not far behind, is shown by a comparison of the numbers from the period after the inauguration of the currency reform. Since then, it is generally accepted that the increase in currency in circulation completely satisfied the needs of business. The monarchy’s money in circulation amounted to:

This represents a total increase of 551 million and an average annual increase of 45.9 million crowns. The average annual increase of money in circulation was thus not larger in the period after 1892 than it was in the years immediately preceding that year.

In light of these facts, the claim that Austrian currency in circulation lacked the possibility for expansion cannot be maintained. However, to conclude that the increase in the currency in circulation satisfied the developing and increasing demand for it would be equally invalid. Such a conclusion would be prohibited because the statistical evidence is completely lacking for determining what were the required amounts of currency in circulation. Irrespective of this, however, even with the presumption of a domestic contraction, a direct causal relationship between such a contraction and an increase in the international value of the currency could not be determined.

It must be acknowledged that as the domestic currency in circulation becomes scarcer, this initially leads to a contraction of credit and an increase in the cost of borrowing, and has the further result of bringing about a fall in the prices of goods. It is obvious, however, that such a drop in prices can be only for those goods that cannot be exported. A decline in the prices of these goods in terms of the domestic currency will not result in foreigners offering higher prices for bonds on the Viennese market. This could be brought about only by a reduction in the prices of exported goods. This could occur only if as a result of the fall in other domestic prices the production of exported goods increased to such an extent that their prices fell due to their increase in supply. The increase in the rate of exchange that would result, however, as a consequence of this increased supply of exportable goods could be neither considerable nor of significant duration, because the decline in their prices would be transferred to the global market within a short period of time. Then any motive that foreigners would have to offer higher prices for Austrian bonds would slip away.11

It is not possible, given the current underdeveloped state of monetary theory and the lack of statistical data, to arrive at any certain conclusions about what influence the limit on increases in currency in circulation may have had on the value of money through its impact on the prices of goods. In other respects, the impact on the foreign exchange rate due to the limit on the maximum quantity of state notes in circulation and the administrative suspension of silver coinage can be determined with certainty: in fact, it was a means of securing the credit of the monarchy. The strictness with which the two governments of Austria-Hungary followed the conservative rules of its currency policy reestablished trust in the two financial administrations’ fulfillment of its monetary obligations, especially after this had been severely shaken both domestically and abroad by the events of 1797-1866. The danger of an inflationary increase in the supply of paper money, much like the danger of a return to a silver-backed currency, retreated into the distance.

The improvement in the creditworthiness of the currency went hand in hand with the strengthened creditworthiness of the government bonds. This was considerably influenced by the gradual disappearance of the threat of war, which had risked the peaceful development of our fatherland since the Congress of Berlin.12

Without a doubt, a war with one of the Great Powers would have forced Austria to resort to a new issue of paper money emissions, to renewed borrowing through the issuing of premium bonds, and perhaps also to a reduction in bond coupon payments, which would have destroyed the national credit for a long time.

The average annual rate of Austrian 4 percent gold bonds on the Berlin exchange rose from 61.05 percent in 1877 to 93.50 percent in 1886. Following a downturn in 1877 to 89.67 percent (during the Bulgarian Question),13 the upward movement continued. The annual average amounted to:

The rate for Hungarian gold bonds was increasing as well. The rate of return on the 6 percent gold bond amounted to (calculated according to the average annual rate) 7.9 percent in 1877, and that of the 4 percent gold bond amounted to 4.4 percent in 1891.14

As long as the concern continued regarding peace in Europe, speculation countered an increase in the note value. Out of fear of a decline in the Austrian currency, investors avoided accumulating large amounts in Austrian cash assets and preferred to deposit their liquid assets in gold bills of exchange. The disappearance of the risk of war allowed such a speculative collecting of gold exchanges to appear superfluous, and the pressure that the domestic speculative demand for gold had exerted on the currency market dropped off.15

If one item in the monarchy’s balance of payments improved in this way, other entries show a favorable pattern as well.

The Austro-Hungarian trade balance for imports and exports amounted to:

The excess exports in the import-export trade amounted to:

Starting in 1889, Austro-Hungarian investments began to immigrate back from abroad. The unfavorable effect that a capital migration of this type is able to exert on the balance of payments, and through this on the bond rate, was alleviated by the fact that new government borrowing by both governments had practically come to a halt in 1889. The domestic demands for investment were extensive enough to take up the funds flowing back into the country without disturbing the currency or bond markets.16

According to Sax,17 the positive balance in the balance of payments amounted to:

The favorable pattern of the balance of payments explains the general improvement in the Austrian currency in the four-year period that began in the summer of 1888. The exceptionally low rate for foreign bonds in the third quarter of 1890 can be traced back to a particular cause: the Sherman Act of July 14, 1890.18

Since the Bland-Allison Act (February 28, 1878),19 agitation by silver proponents in the United States had decreased and, following a break of several years, only resumed in 1889 with new vigor. The movement’s goal was the freeing of silver coinage; however, all that the silver proponents were able to achieve was the Sherman Act of July 14, 1890. An unparalleled bull market speculation was linked to the American agitation. The silver price in London was quoted at:

These bull market movements influenced the Viennese foreign exchange and currency markets. The German Reichsmark was quoted on the Vienna exchange at:

As an aside, it should be noted that circumstances similar to these, which had caused the improvement in the Austrian currency, also drove up the price of the ruble. In this case as well, favorable balance of payments, political quiet both domestically and abroad, and the silver bull market of 1890 were of primary importance. The quote for 100 credit rubles on the Berlin exchange was:

II

The decrease in the agio placed the currency question, which had been dealt with only tepidly for years, back on the agenda.

It is true that, following the unfavorable events of 1848/49 and 1859, the financial administration immediately and energetically tackled the organization of the subverted monetary system; it aimed with vigor and skill at eliminating the forced exchange after the Prussian War, which wrecked the large-scale plans of the elder Plener20 in the same fashion that the French War a few years previously had destroyed similar endeavors by Bruck.21 No serious steps for reforming the currency were undertaken for a long time. The cause for this conspicuous inactivity in the area of currency policy, which contrasted so sharply with the bustling activity of the previous epoch, was not simply the difficulty and complexity that the international currency problem had developed into since the continuous drop in the price of silver. It was, rather, that the project for reforming the currency was absolutely unpopular in Austria, and even more so in Hungary. One could only imagine an implementation of currency reform by means of depressing the so-called agio22 until it disappeared completely. The fast drop of the agio, which had occurred in the first half of the 1860s as a result of the currency reform endeavors, was still an uncomfortable memory for all manufacturers. The fact that the situation had changed essentially since 1879, and that a return of the so-called gold agio at parity to the customary exchange rate for Austria was not possible, was not easy to recognize at the beginning, especially because the designation of the twenty-franc coin as an eight-florin coin gave ample cause for errors.

With the depreciation of the currency in the period 1872-87, the agrarian and industrial manufacturers both capitalized in the same manner. The increasing agio functioned like a protective tariff against the import of foreign manufactured goods, and assisted the export of domestic products like an export premium, and also benefited the debtors. Under such circumstances, support for currency reform plans could not be counted on from the industrial or agricultural circles.

The falling agio affected primarily those who had taken advantage of the previous increases. While the prices on the global market remained unchanged, the foreign exchange rate on the Viennese market dropped, and the exporter who had received 50 fl., 63/4 krona (crowns) for 100 francs in February 1887 received only 44 fl., 541/2 krona in September 1890. The farmer received 10 percent less for his produce than two years previously, but taxes and mortgage interest had to be paid at the old levels.

Up until spring 1890, hope had been placed on an early backlash. The summer of the same year brought such expectations to an end. As soon as the recognition began to spread that the increase in the value of the currency was not based on temporary circumstances, and when it would stop could not be predicted, the demand for currency reform became general. In the first half of September 1890, the Austro-Hungarian Export Association dispatched a call to its members, in which it advocated for action in favor of currency reform. Rallies in favor occurred in all corners of the empire.23 In the general media, propaganda for reform was heard.

Particularly characteristic was the reversal of opinion in Hungary. Hungary had raised constant, fervent resistance to the Austrian currency reform plans, and delivered a decisive veto in November 1884 to the proposals by Austrian Finance Minister Dunajewski.24 Now, however, Hungary ardently advocated for reform. Of primary importance in this decision were the agricultural interests, particularly those of the wheat exporters; a further drop in the foreign exchange should be prevented at all costs. Therefore, the Hungarian Finance Ministry began to buy gold foreign exchange in November 1890, in order to exert pressure on the rate of the paper florin. Over the course of a few months, the Hungarian treasury had acquired about 45 million florins in gold exchange, and the desired result had not failed to occur.25

Along with the agrarian motives, however, which allowed Hungary to call for currency reform as a method to stop the “improvement” of the currency, other motives were also present. For forty years, Hungary’s politics had only one goal: the achievement of economic independence as a precursor to political independence. In the introduction of the gold currency and the implementation of specie payments, those in Budapest saw their most secure means of financially freeing themselves from the Viennese banks, increasing the prestige of Hungarian national credit abroad, and acquiring the means from international capital that were necessary for economic war with Austria.

Since 1890, hardly a single voice has been raised in Hungary against currency reform. With unique unity, the entire nation followed the political rallying cry pronounced by Alexander Wekerle,26 the most knowledgeable Magyar in monetary-related areas: truly an example of political discipline worthy of awe.27

With the reversal of opinion in Hungary, the fate of currency reform was decided. Since October 1890, no one doubted any longer that the currency reform would be tackled as soon as possible, and it was just as certain that the currency’s rate of exchange would be higher than the exchange rate prevailing on the market at that time. The following comparison shows how quickly and correctly the Viennese banking circles grasped the new situation.

On October 2, 1890, Wekerle announced in his exposé the early realization of the currency draft (which was, however, delayed as a result of the Baring Crisis).28 On October 6, he met in Vienna in order to confer with Dunajewski about currency reform. Under the influence of this news, the currency rate soared. German Reichsmarks were quoted on the Viennese market at:

III

The question has to be asked, whether the belief in the continuing improvement of the Austrian currency, and in the general pervasiveness of which belief we detect the main reason for the swift tackling of currency reform, was not based on an error.

It must be noted in advance, however, that even if this question were to be answered affirmatively, one would not be justified thereby in accusing the initiators of currency reform of lacking foresight. Ignoring the fact that a continuation had been presumed to be highly probable of all of those circumstances that had affected the favorable pattern of the balance of payments since 1888, no one in Europe could predict around 1892 which direction the silver question would take in the United States. The majority by which the House of Representatives had voted against the freeing of silver coinage numbered:

One had to come to terms, therefore, with the fact that soon the silver proponents would achieve their goal, which they had pursued for years with an enormous energy. What result this would have for the foreign exchange rate was learned in the summer of 1890.

An examination of the exchange rates shows that the favorable pattern of the monarchy’s balance of payments has been maintained in the fifteen years that have elapsed since the beginning of the currency reform. In 1893-96, however, the exchange rate showed an unfavorable character: in fall 1893, the agio temporarily reached a level of more than 6.5 percent compared with the “relation” established in the Act of ’92. This formation of the agio was traced back to the chance coincidence of a series of unfavorable circumstances.30 Since 1896, the agio has indeed disappeared and, since this time, the exchange rates have maintained parity on average with limited fluctuations. For more than a decade, the monarchy has enjoyed, in this manner, a currency that is stable in value compared with foreign countries.

The means by which this goal was achieved, the well-known foreign exchange policy of the Austro-Hungarian Bank, was made feasible only by the favorable pattern of the balance of payments. Lotz remarked quite correctly, “the Bank can issue exchange only for as long as they can buy foreign exchange, even at a sacrifice. Foreign exchange, however, can only be obtained as long as the Austrian economy possesses foreign receivables or can acquire them through the sales of goods or securities. As long as a country can do this, then gold impoverishment due to an actual specie system absolutely need not be feared again.”31

The well-known appraisals by the Austrian Finance Ministry about the monarchy’s balance of payments yield the statistical proof for the correctness of this statement.

The great advantages that the Bank’s (justifiably praised) foreign exchange policy brought to the economy do not lie, as the naïve layman’s view perceives whenever he hears talk of suspended specie payments, in the fact that it frees Austria from the actual fulfillment of its international obligations, but rather in the fact that it gives the Bank the possibility of separating so-called legitimate requests for gold from illegitimate ones. In this fashion, it was possible to keep the bank rate in Vienna lower than that in Berlin and London; what this means, however, does not require any further explanation. It should be noted in passing that the necessity of dealing differently with speculative demand for gold to exploit the difference in the discount rates than with demand by importers has demonstrated itself elsewhere. The Bank of France does not require a gold premium if it is brought proof that the bearer of the notes presented for redemption requires the gold for the import of foreign raw materials. The German Reichsbank and the Bank of England also only hand over gold coins for export at a weight 2-3 per mill lighter than the newly minted coins.

Just like the German and English gold currency policy and the French gold premium, the Austrian foreign exchange policy is possible only through the monarchy’s favorable balance of payments. That the favorable balance of payments can be established only by increasing external debt through the export of investments is not relevant. The only deciding circumstance, above all, is that the balance of payments is positive. If this were not the case, then the Bank could not sell enough foreign exchange and would have to introduce an agio immediately.

In the past decade, there have been repeated periods in which the foreign exchange rate has been below parity. Gold imports into Austria then took place, and the Bank accepted the gold. In 1901, for example, gold stockpiles of approximately 153 million crowns flowed into the Bank in this manner. The import of gold from abroad continued each time until the foreign exchange rate again had approximated parity as closely as possible, so that additional gold imports were no longer profitable. Under the hegemony of the old Austrian currency system, such gold imports would not have occurred, and this impossibility would have led to an increase in the value of the currency.

If the country had adhered to the nonconvertible currency, then a lack in circulating media of exchange in domestic commerce would have made itself felt soon as well. Even if it is not possible to say something specific about the increase in demand for circulating media of exchange, it remains that the swift (at least for Austrian circumstances) economic development of recent years has broadened this demand to a considerable degree. If this demand for circulating media of exchange were not being correspondingly satisfied (and that that satisfaction was realized was only made possible by the new currency acts), then without doubt, credit reductions and, as a result of them, critical occurrences would have arisen.

The experiences of the last fifteen years confirm the correctness of that theory that a continuing “improvement” awaited the Austrian paper currency.

IV

The increase in the value of the Austrian currency reduced agricultural and manufacturers’ income, and increased the capitalists’ income. The owners of bonds payable in paper or silver saw the value of the debt owed to them constantly increase, and it was understood that they could not be enthusiastic about a currency reform that cut off their hope of additional increases in the value of money.

Nevertheless, the opposition that currency reform found in these circles was powerless, primarily because it lacked even the appearance of a legal foundation. The owners of paper and silver bonds, even of state bonds, had no claim that the country should allow the favorable situation of the monetary system to continue unchanged for their interests alone. The country would have committed no breach of law with regard to them, even if it had freed silver minting again.

The sharp protests that some foreign news media raised against the planned currency stabilization were accorded little importance, because foreign ownership in Austrian investments included only the smallest portions in securities paying interest in silver or in notes, the vast majority of which, however, were paid interest in gold. However, even on the part of the majority of domestic owners of bonds payable in silver or notes, a boisterous opposition was not to be expected. Their standpoint was represented in the currency inquiry commission solely by the secretary general of the First Austrian Savings Bank, Mr. Nava. In the course of parliamentary discussions, hardly any voice had been raised on the part of these doubtless affected interests.

It is surprising, but not inexplicable, that the markets and the banks were not only not opponents of currency reform, but, on the contrary, they exerted so much effort for this cause that those not involved would have acquired the impression that the currency change was primarily in the interests of this circle. The Christian Social Party repeatedly pointed out that high finance decisively advocated for reform.

This opinion of the monetary institutions cannot be traced directly back to the interest that they had in the development of industry and agriculture. Such considerations may well have played a role; however, they were not pivotal by any means. Much more decisive was the fact that, since the Crash of 1873, the banking business in Austria had not really prospered.32 Issuance of securities practically slumbered. In Cisleithanien [Austria], it amounted to:

From 1883 to 1892, only one joint-stock bank was established in the kingdoms and states represented in the state council: the exchange society “Merkur” opened in Vienna in 1887 with capital of 1.2 million florins, which had increased to 1.8 million in 1891. Even two decades after the great speculative crisis, the entire practice of founding institutions still stood under the shadow of a critical breakdown.

Even the bond business had lost its importance since equilibrium had been restored in the state budget. Beginning in 1889, the issuing of new state securities had come to a stop in both halves of the kingdom. The continuing nationalization of the railways withdrew a broad field of activity from private capital.33 The connection between the banks and industry was quite weak, the proceeds from running a business had not assumed the position in the banks’ balance sheets that they enjoy today, and deposit banking was still in its infancy. It was therefore only natural for the banks to link large expectations to currency reform. In spite of this, it could be predicted that this would impact the foreign exchange business, because they promised substantial profits from the issuing of currency certificates and from the acquisition of gold for both governments, and hoped that the simultaneously enacted conversion of the 5 percent bond securities would enliven interest in dividend stocks.

The prospect for large profits that could be made here appeared more appealing to the financial circles than the always doubtful increase in capital bonds. Contributing to this position may have been the fact that the assets of the large capitalists, the bankers and those personalities who directed the policy of the large banking institutions, were predominantly invested in dividend securities and less so in fixed-income-bearing bonds, so that their interests were more closely related to those of the manufacturers than those of the capitalists. The medium and smaller capitalists, mostly owners of public bonds, mortgage creditors, and investors in savings banks, did not have the possibility of effectively representing their endangered interests, because they did not have friends in the media nor in the parliament.

Among the opponents of currency reform that arose in parliament and in the media, the supporters of bimetallism earn a certain respect because two of the most distinguished leaders of the international bimetallism party, Eduard Sueß and Josef Neuwirt, appeared at their head. However, their efforts had to be limited to preventing the implementation of a gold currency in such a way that it would not prevent a possible future transition to a double currency. One could not speak about an implementation of bimetallism in Austria-Hungary alone; it was predictable that the monarchy by itself would not be able to establish a legal exchange rate between the two currency metals and that, under such circumstances, the transition to a double currency would be tantamount to a return to a pure silver currency.34

The primary argument of the bimetallists—the increase in the value of gold since 1873 and its counterpart, the general depression in the price of goods—was completely without effect in Austria, because the value of Austrian paper money experienced greater increases than that of international gold money. The political-economic interests demanded that a currency comparable to that in the Western European nations be established as soon as possible; this pushed into the background for the foreseeable future the demand for a money possessing an invariant purchasing power.

It can only be ascribed to the lack of clarity dominating the problem of the currency system that very few supporters of the international double currency were to be found among the Austrian agriculturists and their close circles. The farmers in countries that had gold currencies were supporters of bimetallism, whose introduction would have meant a decrease in the purchasing power of money. For the monarchy, however, affiliation with an international bimetallism system, which was conceivable only because of the traditional exchange ratio of 1:15.5, would have increased the value of money. “For a country with a gold currency, the transition to bimetallism means a price increase, for Austria, on the other hand, a direct and initial drop in prices,” explained the expert Benedikt in the currency inquiry, because the Austrian seller would initially receive the old amount for his export articles abroad, while those same articles would have a lower value domestically.35

With growing enlightenment about questions of currency policy, the number of bimetallists melted down. There were no supporters of a pure silver currency; this was understandable, since the fluctuations in the price of silver and the fear of a fast rise in value of the white metal if the silver proponents were victorious in North America had given the direct impulse for tackling currency reform in the first place.

One cannot gain a true picture of the position on the currency question held by the individual classes of citizens and interested groups from the reports of the parliamentary sessions or from the news media. Purely political considerations stepped into the foreground and pushed economic opinions into the background. The Croatian and the Young Czech representatives raised fervid opposition to the draft of the reform, because the motto and crest on the coins of the crown currency did not accommodate their constitutional claims. Otherwise, the Czech representatives declared themselves to be completely and fundamentally in agreement with a transition to a gold currency. It is significant for this type of opposition that a few years later their leader, Kaizl,36 when finance minister, cooperated in the continuation of the reform efforts in a distinguished manner.

V

The currency reform met a truly serious and boisterous opposition in the then small, but active, Christian Social Party.

The gold currency was generally viewed with mistrust in the camp of the conservative parties. “The currency reform,” opined Wilhelm Freiherr von Berger, was designed “in the interests of international commerce and international competition, that is, the global economy.”37 He continues, “our limited standpoint allows us to observe humanity in regard to its economic interests as members of naturally and historically determined economic areas; we see grave dangers for these economic interests from a gold currency that appears suitable for assisting the global economy; this is even ignoring for the moment that our monetary system will be abandoned to international gold speculation and exposed to all of the disadvantages associated with the circulation of an international currency.” The advantage from the introduction of a gold currency was “mostly for those elements that believe they have an interest in the development and construction of the global economy, and these are big industry and the large mobile funds.” These two are, by their nature, “cosmopolitan and international.” On the other hand, “the rightly understood interests of all working classes of the truly producing people” depend “on the development of the fatherland as an autonomous national economic state, as an autonomous national customs and commercial area.”38

The uncertain stance of the conservative parties regarding the currency question can be traced partially back to the fact that there were only a few men in their ranks who were capable of making an independent judgment about the difficult and complex problems of the monetary system. They included among their supporters many distinguished agriculturists, several merchants and industrial magnates, but hardly any banking experts, and their scientific party members had consistently dealt more with questions about agricultural and social policy than with policies about the monetary and credit systems. Even a man like Rudolf Meyer39 considered the usual arguments of the bimetallists from gold currency countries to be applicable to the Austrian circumstances, and had nothing to say about the difficulties that arose for Austrian manufacturing from the sinking of the agio.40

Only the events on the foreign exchange market since 1888 and their consequences for agriculture have convinced the conservatives, little by little, that maintaining their opposition to the gold currency was out of place. Finance Minister Steinbach sought out the individual party clubs from the House of Representatives in May and June 1892 and issued explanations to the representatives about all of the important points of the currency question. Indeed, he succeeded in dispelling the misgivings of the agrarian supportive parties, and in winning the Polish Club and the Hohenwart Club, the two most powerful conservative, religious groups in the House, for the draft.

Only the Christian Social Party fought the draft reform proposal with great energy. They were not open even to the necessity of currency reform, and with good reason, as they primarily represented small manufacturing interests. The small manufacturer indeed had less to suffer under a decline in the foreign exchange rate, because he generally did not export anything; he was squeezed by a lack of capital and a lack of credit. The friends of “the little guy” opined that both could be traced back to the lack of circulating media of exchange and considered the most certain assistance to lie in the increase of the nation’s money supply, best achieved through a “moderate” increase in state notes, and eventually through increasing the annual silver minting also, which, however, would be undertaken only for the state budget. The strongest attacks from this side targeted the government’s intention of initiating the currency reform by borrowing a large amount of gold, the proceeds from which the state notes would be redeemed. At least it had to admit, it was claimed, that as a result the tax burdens would be increased and any possible tax reductions would be postponed.

All of these arguments, which had been brought forward by inflationists from all countries and at all times, were accepted by the friends of “our fathers’ paper florin” to defend their standpoint.41 The weapons with which these battles were fought were not always genteel; opponents did not lack for suspicions of and insults toward the “liberal, usurious, capitalistic, national economy.” The objective accomplishments, in contrast, could hardly assert a claim for a serious respect; because even if one accepted all of the inflationist arguments and wanted to admit that “increasing the media of exchange in circulation means welfare and earthly happiness, decreasing misery by the same amount,”42 a series of important considerations remain against the practical implementation of these plans.

When Prince Alois Liechtenstein43 recommended “a rational, moderate inflation accommodating the needs of production but not anticipating them by too much,”44 or Schober desired that the nation might equip the economy “with a sufficiently large amount of non-dwindling money,”45 there was still nothing that could be learned about the goals and methods of a future monetary system policy.

Only Josef Ritter von Neupauer formulated a certain suggestion. Based on chartalist theory,46 he supported maintaining the paper currency; he even wanted to replace the silver florin with notes. Money is, namely, “that which the state declares it to be.” The purchasing power of money is dependent upon its quantity, its velocity of circulation, and the monetary requirements within its geographical area of use. The currency reform, with its transition to specie circulation, was not only squandering the people’s capital, but also was fraught with disadvantages, since it would deprive the government of its ability to influence the value of money by increasing or decreasing the amount of media of exchange in circulation. Indeed, money must not be capriciously increasable. “The natural obstacle to the increase in hard currency,” however, can “be substituted by legal obstacles to the increase in state paper money under public control.” One merely had to detect “an ideal measure of value” that would underlie economic policy. For this ideal measure, however, Neupauer proposed the relative market price of gold for Austrian currency notes. The legislature would have to ascertain a standard price for the yellow metal and decree “by how much the state administration would have to approximate this standard price and counterbalance fluctuations above or below a certain point by regulating the amount of money in circulation.”47

It should be noted that if Neupauer’s proposal had been adopted, which boils down to a type of calculation in terms of gold, the monarchy would have been unable to avoid the effects from a change in the price of gold, whether it were a devaluation due to production exceeding demand, or a rise in its price due to insufficient production. It is inconceivable why Neupauer did not want to endorse the free minting of gold coins according to parity at the standard price. This would offer a secure means against all increases in the international price of gold for the currency, and would place only low costs on the economy, if the circulation of state notes were retained at its entire amount. The primary failure in the Neupauer project, which it shares with all other inflationist proposals, by the way, is the lack of any clear observable indicator for measuring increases in the value of gold. Neupauer carefully skirts another obstacle with which similar proposals usually collide: we mean the difficulty of detecting a reliable criterion for an insufficiently supported demand for currency. Because he starts with the tacit understanding that all other states will retain specie in circulation, a benchmark for the value of the paper currency results directly from its international appraisal. The goal of monetary policy for maintaining the value of money becomes maintaining its parity with a foreign currency; however, the methods that lead to this goal will remain obscure for now. No one can say what effect an increase in the media of exchange by a certain amount is capable of generating. Even Neupauer had to concede this, since he says there might be “by way of a test, a successive increase in media of exchange to be placed in circulation.” The economy, however, is not a suitable object for tests.

It should be assumed with all probability that even the news that a potential increase in the state note circulation was impending (albeit only under legally determined preconditions) would have forced down the price for Austrian money further than would have appeared healthy even to many of the friends of “cheap money.” To what steps would the moderate inflationists then turn? It could have easily come about that the increasing agio would have gone hand in hand with insufficient supply of money in circulation.

The mistrust within market circles and among the broadest classes of the population against any new issuance of notes would have been completely justified. Once such a basis for influencing the value of the currency had been accepted, who could have assured that the agricultural and bourgeois interests (that have prevailed for a quarter century in our politics) would not have soon been pushing for an endless progression on the way to inflation. Where would this have led, if Josef Schlesinger’s48 People’s Money fantasy had become law?

A rational and feasible monetary policy can only make preservation of the stability of the currency’s exchange rate its goal; in the first place, the only means to adhere to this is to maintain specie in circulation, and under the current circumstances this means keeping gold in circulation. Every attempt to promote a single interest group through selective changes in the value of money must inherently fail, ignoring all other reasons, because the economic effects of this kind of measure are only temporary; in order to maintain those effects there would have to be a continuing increase of the notes. This could, however, end in no other way than with a complete devaluation of the money in circulation.49

VI

The power relationships between the parties concerned with monetary policy at the time of tackling currency reform were generally in favor of the introduction of a gold currency. Unimportant in number and influence were those who advocated the maintenance of the current monetary system, because they expected a continuing increase in the value of money. To wit, these were solely the possessors of monetary claims. All other interest groups desired a change in the currency that would offer, at a minimum, a halt to the continuing “improvements” of the value of the currency; all manufacturers belonged to this group, and also the workers and employees, whose interests here went hand in hand with those of their employers. Even high finance, which had substantial words to say about currency questions, was found to be on this side. Admittedly, the opponents of the current currency system were not united in their views about the structure of a future system. However, the efforts to create a “national,” inflationist monetary system were completely futile.

Voices that spoke for the adoption of a gold-backed currency included those speaking for trade and manufacturing interests, and also those voices supporting the gold currency doctrine, the tenet starting from Lord Liverpool’s theory,50 developed further by Bamberger51 and Soetbeer,52 and which remained unshakably standing despite all of the bimetallist attacks. They found solely in the yellow metal a suitable basis for the currency system of a cultured people.

Thus, the question of implementing a metallic currency was already decided before the actual discussions about the reform project had even begun, and general interest had already turned to the so-called relation. This was the point where the parties’ differences most vehemently collided. One ascribed the greatest economic importance to the gold content of the future monetary unit. All investigations about the economic goals and the results of the reform began with the question of the parity exchange relationship.

The importance of the question—whether the new florins would be minted lighter or heavier—was neither to be denied nor underestimated. If one had selected, instead of the parity set by law in August at a base of 2 francs, 10 centimes, a lighter florin of approximately 2 francs or a heavier florin of approximately 2 francs, 50 centimes (the known proposals that were made about the value of the florin fluctuated within these boundaries), this certainly would have exerted a deep and enduring effect on the entire economic system of the monarchy, and the results of such a revolutionary change to the value of money would only have been settled much later. However, there could be no discussion of such a drastic “reform” of the value of the Austrian currency.

The proposals receiving serious consideration for the future exchange value of the currency did not deviate more greatly from each other than the actual fluctuations of the exchange rate on the Viennese market during times of intense movement within a few months or even weeks. That the exchange rate resulting from the currency reform would not essentially depart from 119 was considered to be agreed upon by market circles already one and a half years prior to the introduction of the draft reform in the State Council; and, indeed, it was this fact that constantly pinched the currency rate beginning in fall 1890, far more so than the much discussed gold purchases by the Hungarian government. Also, the apparent difference between average market price and current price, which played a large role in the publicized debates about the draft, lost its importance upon closer examination, particularly if one took into consideration that the difference between these two prices became ever smaller and completely disappeared on the day of the introduction of the draft in the two parliaments, which can certainly be traced back to the activities of currency speculation.

The belief that lay behind the excessive emphasis on the importance of the “relation” in agricultural circles and among commercial manufacturers and the scientific discussions about the currency question (the suspense with which the market followed the battle between the light and heavy florins requires no further explanation) was that the value of money in domestic commerce would not, or would not immediately, change according to the change in the value of the currency on the global market. Or, in other words, it was considered possible, with the transfer to the new currency system, to “eternalize” the currency differential between the Austrian currency and those of the gold currency countries. This view is based, however, on an error. Sooner or later, the prices of all domestic goods and services will adjust to the change in value of money, and the advantages that a devalued currency offers to production, and the obstacles that an overvalued one sets against production, will disappear. This is because the agio as such does not function as an export premium or as a protective tariff; rather, it is merely the increasing agio, or inversely only the decreasing agio, not the low agio in itself, that is able to check exports and boost imports.

The importance of currency policy in relation to currency reform did not lie in the higher or lower “relation,” but rather in that the monarchy converted from a monetary system with a currency that was increasing in value compared with the currencies of the economic Great Powers, to a monetary system with a currency that was stable abroad.

The Act of August 2, 1892, admittedly only arrested the increase in the value of the Austrian currency. Since August 11, 1892, the day that it came into effect, the value of the Austrian florin (2 crowns) essentially cannot rise above the value of 2 francs, 10 centimes or 1 mark, 70.12 pfennig. In contrast, no legal barricade was placed against a decrease in the value of money. This should become impossible in the future due to the implementation of specie payments, which was considered by the creators of the reform act to be its conclusion.

It is certain that the implementation of specie payments was initially postponed only because for its assurance sufficient provisions, most notably the accumulation of a correspondingly large stockpile of precious metal in the bank’s vaults, were necessary, and a favorable configuration of circumstances on the international currency markets had to be awaited. However, it also appeared just as certain that, precisely due to the fact that only a further increase in the value of money had been made provisionally impossible by the adoption of the draft reform, the chance of a possible decrease in the value of money, if one might even discuss such a thing, by contrast remained open, and had assisted in the victory of the reform project. By agreeing to currency reform, the friends of “cheap money” sacrificed nothing and won a great deal: the establishment of an upper limit to the value of money.

The further fate of currency reform admittedly has turned out differently than even the most highly informed circles could have predicted in 1892. After the events on the international currency market in 1893 and 1896 had placed the success of currency reform in doubt, the foreign exchange policy of the Austro-Hungarian Bank, inaugurated in 1896, established the stability of the currency, including a lower limit. It should be noted, however, that this bank policy, initially suggested in 1894 by the then Austrian Finance Minister Ernst von Plener,53 resulted absolutely from the initiative of governmental agencies that were accommodating the desires of the business world. Up until now, it had undergone neither an exhaustive parliamentary criticism nor a corresponding appraisal from the political parties.

Only through the bank’s intervention on the foreign exchange market was the stabilization of the price of the Austrian currency achieved on both ends, and thereby the currency question was solved for the monarchy. Whether specie payments are to be implemented or not is a question of expediency and of the discount policy, in which currency policy considerations play only a limited role. No rational person on this or the other side of the Leitha54 would advocate today against the gold currency.

[1. ][This article originally appeared in German in the Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung, vol. 16 (1907).—Ed.]

[2. ][Agio is the rate at which a currency may be exchanged on the foreign currency market.—Ed.]

[3. ][Theodor Hertzka (1845-1924), an Austrian economist and journalist. In 1879 he founded the Wiener Allgemeine Zeitung, which he edited until 1886.—Ed.]

[4. ]See Stenographische Protokolle . . . der Währungsenquetekommission [The Stenographic Protocols of the Commission for the Currency Inquiry] (Vienna, 1892), p. 96.

[5. ][Emil Steinbach (1846-1907), Austrian economist, jurist, and politician. In 1891-93 served as minister of finance and in 1904-7 as president of the Supreme Court of Justice. He had a decisive influence on social legislation, supported the extension of the right to vote, implemented a currency reform, and reorganized the system of personal taxation.—Ed.]

[6. ]See Carl Menger, Der Übergang zur Goldwährung [The Transition to the Gold Standard] (Vienna, 1892), pp. 10ff.

[8. ]See Mecenseffy, Bericht über den Goldbesitz der österreichisch-ungarischen Bank [Report on the Gold Held by the Austro-Hungarian Bank] (Vienna, 1897), p. 15.

[9. ][“Saltworks Notes” (Salinenscheine) were short-term, interest-earning Austrian treasury bills.—Ed.]

[10. ]Statistische Tabellen zur Währungsfrage der österreichisch-ungarischen Monarchie, p. 145.

[11. ]Compare Heyn, “Das Steigen des Rupienkurses nach Aufhebung der indischen Silberwährung” [The Rise in the Value of the Rupee Following the Repeal of the Indian Silver Currency], Jahrbücher für Nationalökonomie und Statistik, vol. 28, especially pp. 176ff.

[12. ][The Congress of Berlin (1878) was a meeting of the political leaders of European Great Powers and the Ottoman Empire in the wake of the Russo-Turkish War of 1877-78, in order to reorganize the countries of the Balkans. Otto von Bismarck, who led the congress, undertook to balance the distinct interests of Britain, Russia, and Austria-Hungary. However, differences between Russia and Austria-Hungary only intensified, as did the nationality question in the Balkans.—Ed.]

[13. ][As a result of the Russo-Turkish War of 1877-78, Bulgaria regained independence after four hundred years of Turkish rule. Fearful of a Bulgarian uprising in 1876, the Turkish military put down suspected resistance, and in the process killed an estimated 12,000 to 15,000 Bulgarians. This massacre of unarmed civilians created an international uproar against Turkish rule in this part of the Balkans. This led first to a war between the Turkish Empire and Serbia and Montenegro, and then in 1877 to war between Imperial Russia and the Turkish Empire that finally led to a truce in the face of Russian victories on the battlefields, and the settlement in the Congress of Berlin in 1878.—Ed.]

[14. ]See Deutsche Übersetzung der von dem königlichen ungarischen Finanzministerium der für den 8. März 1892 einberufenen Valutaenquete vorgelegten statistischen und synoptischen Tabellen (Budapest, 1891), p. 115.

[15. ]See Benedikt’s articles in the Neue Freie Presse, August 24 and September 14, 1890.

[16. ]See Emil Sax’s article in the Neue Freie Presse, July 28, 1894.

[17. ]Neue Freie Presse, July 28 and August 2, 1894.

[18. ][The Sherman Silver Purchase Act that was passed on July 14, 1890, required the United States Treasury to purchase 4.5 million ounces of silver bullion every month, making it the second-largest buyer in the world, after the government of India, at the time. The act was repealed in 1893.—Ed.]

[19. ][The Bland-Allison Act of 1878 required the U.S. Treasury to purchase between $2 million and $4 million of silver bullion per month. It was replaced by the Sherman Act of 1890.—Ed.]

[20. ][Ignaz von Plener (1810-1908) was a prominent Austrian statesman who initiated what became known as Plener’s Bank Act of 1863, which was modeled after Great Britain’s Peel’s Bank Act of 1844 that restricted the issuance of banknotes to the amount of gold reserves at a fixed rate of redemption.—Ed.]

[21. ][Karl Ludwig Baron Bruck (1798-1860) was Austrian minister of commerce and public works from 1848 to 1851. As minister of finance from 1855 to 1860, he attempted to introduce a series of fiscal and monetary reforms that failed due to the Austrian war to retain its Italian provinces beginning in 1857. Unjustly blamed for Austria’s financial difficulties, he resigned as finance minister and committed suicide the next day. He was officially declared innocent of all wrongdoing in his ministerial position one month after his death.—Ed.]

[22. ]About the applicability of the term “agio” at all to the Austrian currency circumstances prior to 1892, see Spitzmüller, “Die österreichisch-ungarische Währungsreform,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 11, p. 342, note 1.

[23. ]See Dorns, Volkswirtschaftliche Wochenschrift, September 11 and 18, and October 2, 1890.

[24. ]See Neue Freie Presse, November 22, 1884.

[25. ]See Sax, Neue Freie Presse, August 2, 1894, and Carl Menger in the preface to Lorini, La questione della Valuta in Austria-Ungheria (Torino, 1893), p. xix and notes.

[26. ][Alexander Santor Wekerle (1848-1921), Hungarian statesman, who served several terms as Hungarian minister of finance and prime minister. Improved the financial position of the country, carried out the conversion of the state loans, and succeeded, for the first time in Hungarian history, in avoiding a budget deficit. In October 1918 declared Hungarian independence, which brought about his dismissal from office by Austro-Hungarian Emperor Karl I.—Ed.]

[27. ]The credit for winning public opinion in Hungary in support of currency regulation is due to the future Minister President Count Stephan Tisza, who caused a text about the reform of the currency to appear in the Magyar language in 1891.

[28. ][The Panic of 1890 was an acute depression precipitated by the near insolvency of the Baring Brothers bank in London due to poor investments in Argentina. The Bank of England finally bailed out the Baring Brothers. The panic was associated with call money reaching an astonishing 45 percent and a slump in the international commodities market.—Ed.]

[30. ]See Spitzmüller, ibid., pp. 498ff. Then Kalkmann, Wiener staatswissenschaftlichen Studien, vol. I, p. 3.

[31. ]See Lotz, “G. F. Knapps neue Geldtheorie,” Schmollers Jahrbuch 30, p. 360.

[32. ][The Panic of 1873, which affected financial markets on both sides of the Atlantic, especially in the United States and Germany, broke out in Austria on May 9, 1873, with a crash of the Vienna stock exchange. This was followed by a series of major bank failures in Austria-Hungary, from which the Austrian financial sector only slowly recovered.—Ed.]

[33. ][In 1884, the Austrian government founded the Imperial General Directorate of the State Railways and began to nationalize the private railway companies. By 1914, out of about 23,000 kilometers of railway track in the Austrian Crownlands, the government owned and operated nearly 19,000 kilometers of it, or around 82 percent.—Ed.]

[34. ]Compare Karl Menger, “Die Valutaregulierung in Österreich-Ungarn,” Jahrbücher für Nationalökonomie und Statistik, 3, p. 643.

[35. ]Compare Sten. Protokolle, p. 18; in addition, Lotz, Schmollers Jahrbuch 16, pp. 1255-56.

[36. ][Josef Kaizl (1854-1901) was appointed to a teaching position in 1879 at Charles University in Prague, and professor of political economy in 1883. He was a leader of the Young Czech movement that wanted greater Czech autonomy in the Austro-Hungarian Empire in the 1890s. He served as Austrian finance minister in 1898-99, the highest position ever held by a Czech in the Austrian government.—Ed.]

[37. ]Compare Berger, “Zur Währungs- und Valutaregulierungsfrage,” Monatsschrift für christliche Sozialreform 13 (1890): 117.

[38. ]Ibid., p. 118.

[39. ][Dr. Rudolf Meyer (1839-99), a German social historian and economist. He was forced to leave Germany because of a highly critical book against Bismarck and took refuge in Austria, where he soon became the inspirer of the Catholic party and the advocate of Catholic socialism. In 1881 he emigrated to the United States and then to Canada, but he returned to Austria in 1889. He had established personal contacts with Karl Marx, and in the last decade of his life he wrote for the Marxist newspaper Neue Zeit.—Ed.]

[40. ]See R. Meyer, Zur Valutafrage (Vienna, 1894); Der Kapitalismus fin de siècle (Vienna, Leipzig, 1894), pp. 357ff.

[41. ]See in particular Schober, Die Valutafrage (Vienna, 1888) Sonderausgabe desZentrallblatt für die Gewerbegenossenschaften Österreichs I; idem, Die Valutaregulierung in Österreich (Vienna, 1892); Mosser, Zur Torheit der Goldwährung und der Valutaregulierung (Triest, 1889); Neupauer, Die Schäden und Gefahren der Valutaregulierung für die Staatsfinanzen, die Volks wirtschaft und die Kriegsbereitschaft (Vienna, 1892); Gruber, Nationales oder internationales Geld. Die Quintessenz der Währungsfrage (Vienna, 1892); Schlesinger, Gefahr im Verzuge. Gewinn 100 Millionen Kronen auf Kosten des Volkes (Vienna, 1894); idem, Volksgeld, Befreiung der Völker und Staaten aus den Klauen der Hochfinanz (Vienna, 1896); idem, 1250 Millionen Kronen Volksgeschenk zur Erbauung von “k. k. Volksbahnen” (Vienna, 1900).

[42. ]See R. Meyer, Kapitalismus, p. 387.

[43. ][Prince Alois Liechtenstein (1850-1920), member of the Liechtenstein ruling family and radical member of the Austrian Christian social coalition. Served for a total of twenty years in the Austrian parliament as one of the leaders of the conservative clerical party and deputy of the peasants of Hartleb who above all demanded an abbreviation of compulsory school attendance.—Ed.]

[44. ]Session in the House of Representatives, July 15, 1892.

[45. ]See Schober, Valutaregulierung, p. 7.

[46. ][Chartalism called for a fiat, or paper, money system, under which new money is created through government spending. The word is derived from the Latin charta, meaning token or ticket.—Ed.]

[47. ]See Neupauer, Schäden and Gefahren, pp. 1, 3, 25-26.

[48. ][Josef Schlesinger (1831-1901) was an Austrian scientist, philosopher of science, and politician who championed paper money and its expansion as a means to prosperity.—Ed.]

[49. ]See also Helfferich, Geld und Banken (Leipzig, 1903), vol. 1, pp. 528ff.

[50. ][Robert Banks Jenkinson, Second Earl of Liverpool (1770-1828), served as British prime minister for thirty years, leading Britain into an era of unparalleled economic and national triumph. A follower of Adam Smith and steadfast defender of sound economic principles and a specie standard, Lord Liverpool strongly opposed the possibility of maintaining a paper money.—Ed.]

[51. ][Ludwig Bamberger (1823-99), a German economist and publicist, a leading authority on currency problems in Germany. Originally a radical, he became a moderate liberal in Bismarck’s Germany, and in 1871 he entered the Reichstag as a National Liberal. He advocated the standardization of the German coinage, adoption of the gold standard, and establishment of the Reichsbank. He supported Bismarck’s outlawing of the Socialist Party and attempts to nationalize the railways, but he opposed Bismarck’s policy of protective tariffs, state socialism, and colonial expansion.—Ed.]

[52. ][Adolf Soetbeer (1814-92), a German economist and a secretary of the Hamburg Chamber of Commerce, ranked as the leading defender of the pure gold standard, the adoption of which by Germany was brought about largely through his efforts. He wrote numerous monographs and pamphlets defending the cause of gold monometallism.—Ed.]

[53. ][Ernst von Plener (1841-1923), an Austrian statesman, a prominent member of the Constitutional party and one of the leaders of the German classical liberals. In 1893-95 served as Austrian minister of finance.—Ed.]

[54. ][The Leitha, a river in Central Europe that is approximately 180 km. long, was part of the Austrian-Hungarian border until 1921. “Beyond the Leitha” was the Viennese colloquial term for Hungary, while “on this side of the Leitha” meant the region around Vienna, that is, Austria.—Ed.]