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:
| Capital of the stock corporations | |||
|---|---|---|---|
| Excl. the railway companies | Incl. the railway companies | ||
| At the end of the year | Number of stock corporations | In million florins | Austrian valuation |
| 1878 | 460 | 627.7 | 1,447.1 |
| 1892 | 453 | 692.6 | 1,562.1 |
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
