Monetary and Economic Policy Problems Before, During, and After the Great War
Publication Year: 2012
Published by: Liberty Fund
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Title Page, Copyright
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This volume, like the other two in this series, was made possible by the continuing support of Hillsdale College, which arranged for the trans-lations of virtually all the articles, essays, and lectures contained in the volume. I would like to particularly thank Dr. Larry Arnn, Hillsdale College president, and Mr. Mike Harner, chief staff offi cer and assis-...
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This three-volume set of the Selected Writings of Ludwig von Mises has been published in reverse chronological order. The current volume, the last prepared in the series, in fact, is devoted to some of the earliest of Mises’s writings on a variety of economic issues. They mostly cover monetary, fi scal, and general economic policy matters in the Austro-...
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The articles and lectures included in this volume by the Austrian economist Ludwig von Mises were written in the years before, during, and after the Great War of 1914–18, as the First World War used to be called. They focus on the monetary, fi scal, and general economic policy problems of, fi rst, the Austro-Hungarian Empire and, then, the ...
Part 1Austro-Hungarian Monetaryand Fiscal Policy IssuesBefore the First World War
Chapter 1The Political-Economic Motivesof the Austrian Currency Reform
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The fact that from the middle of 1888, changes in the value of the Aus-trian currency had taken on a pattern disadvantageous to domestic pro-duction gave a direct impetus for the reform of the Austro- Hungarian monetary system, a reform that had been dragging on for decades be-The price of 100 fl orins in gold (250 francs) amounted, on average ...
Chapter 2The Problem of Legal Resumptionof Specie Payments in Austria-Hungary
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The currency reform that began in Austria-Hungary in 1892, and for whose introduction great material sacrifi ces were required by the two halves of the empire, still awaits formal conclusion through the legal resumption of specie payments. At the present time, the lawful money Bank is still relieved of the obligation to redeem its notes in specie, a ...
Chapter 3The Foreign Exchange Policy of theAustro-Hungarian Bank
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The monetary system of the Austro-Hungarian monarchy has, during the last few years, aroused general interest in economic circles both at home and abroad. Theorists were fi rst attracted to this question by Prof. G. F. Knapp’s excellent work, which found as many ardent ad-mirers as opponents. In the recent bank enquête [inquiry] instituted by ...
Chapter 4On the Problem of Legal Resumption ofSpecie Payments in Austria-Hungary
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The remarks that I published in this journal last year about the prob-lem of legal resumption of specie payments in Austro-Hungary have received a response by Walther Federn in this journal’s fi rst issue for this year. The author says that my claim that the Austro-Hungarian Bank made foreign exchange available at all times at a rate that was ...
Chapter 5The Fourth Issuing Right of theAustro-Hungarian Bank
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The Austrian law of August 8, 1911 (Imperial Law Gazette no. 157), and the Hungarian Article of Law no. XVIII of 1911 (which are substan-tially the same) brought to a provisional close a disagreement that has continued for several years. They extended the note-issuing right [Priv-ilegium] of the Austro-Hungarian Bank that had already expired on De-...
Chapter 6Financial Reform in Austria
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After more than a century of chronic budget defi cits, about twenty years ago Austria succeeded in reestablishing a balance in its public fi nances. From 1889 to 1909 the national accounts generally showed a surplus. The situation changed again in 1908, and the estimate for 1909 predicted a defi cit, which could be converted into an apparent ...
Chapter 7The General Rise in Prices in theLight of Economic Theory
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The problem of rising prices, which has for many years occupied the attention of our best minds, cannot be dealt with in the usual statis-tical-empirical manner. The collection and comparison of price data is not a substitute for the intellectual work of theoretical economists; nor can it lead to clear thinking and a correct understanding of the ...
Chapter 8On Rising Prices and PurchasingPower Policies
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In the middle of the nineteenth century, prices increased dramatically all over Europe and reached their peak in 1874. At that point, prices began to decline and continued their downward movement until the mid-nineties. Since about 1896 a new upward movement in prices has set in, and its end point is nowhere in sight. This decline in the pur-...
Chapter 9Disturbances in the Economic Lifeof the Austro-Hungarian MonarchyDuring the Years 1912–1913
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In 1912–13 Austria and Hungary weathered a severe economic crisis, its three predecessors in almost all sectors of manufacturing, reached its zenith in 1912; however, 1913 brought a market reversal and the 1. [This article originally appeared in German in the Archiv für Sozialwissenschaft und Sozial-2. Two offi cial publications contain information about the crisis of 1912/13:...
Part 2Economic Policy Issues in theMidst of the Great War
Chapter 10On the Goals of Trade Policy
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The elements of a foreign trade policy can be designed based only on an understanding of what emerges from the free play of economic ac-tivity: a regional division of labor that results in the greatest supply of goods at the least cost. From this point of view, protectionist policies can never be justifi ed on economic grounds. All theoretical attempts to ...
Chapter 11Infl ation
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There are two options for the government to meet its enormously in-The fi rst one is for the government to issue war bonds. Subscribers pay the specifi c amount for the bonds by drawing upon their own capi-tal or borrowing the money from third parties who have the liquid as-sets to lend. A practical and important example of this is the major ...
Chapter 12On Paying for the Costs of Warand War Loans
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The favorable outcome of a war is not solely dependent on the number of soldiers, or the valor and brilliance of their military commanders. An equally important factor is the capacity to provide the army with supporting material, arms, and military equipment of every kind. Mili-tary commanders are thus faced with additional tasks besides recruit-...
Chapter 13Remarks Concerning the Problemof Emigration
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Aside from its general political and economic harmful effects, emigration also involves military disadvantages as well. In the decade before the war the monarchy permanently lost at least 250,000 conscripts in this way.Emigrants abroad give up the use of their mother tongue; they grad-ually forget their homeland; and little by little they become citizens of ...
Part 3Austrian Fiscal andMonetary Problems in thePostwar Period
Chapter 14Monetary Devaluation and theNational Budget
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There exists a close relationship between changes in the quantity of money and changes in the money prices of goods and services. If the quantity of money is increased while other conditions remain the same, then the prices of all goods and services will rise. Of course they will not all rise at the same time nor, as was long assumed, in the same ...
Chapter 15For the Reintroduction ofNormal Stock Market Practices inForeign Exchange Dealings
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Increasingly, goods are offered for sale with the stipulation that pay-ments will be accepted only in foreign currency. Already a signifi cant part of wholesale business and real estate transactions are being facili-tated through the use of foreign money. The crown is starting to lose its standing even in retail business. It is clear what it would mean if this ...
Chapter 16On Carl Menger’s Eightieth Birthday
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Scientifi c development does not take place in a simultaneous and un-interrupted ascent; periods of great achievement are followed by peri-ods of intellectual exhaustion; the masters are followed by the imita-tors, until men of genius again bring forth a new fl owering. Around the middle of the nineteenth century economics had unquestionably ...
Chapter 17How Can Austria Be Saved?
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In spite of the wretched condition in which we fi nd ourselves I con-sider our situation not to be an unfavorable one. Vienna and Austria would have a positive future ahead of them if we didn’t do everything to worsen our own situation. What is occurring is practically the oppo-site of what needs to be done. It is no wonder, therefore, that things are ...
Chapter 18The Claims of Note Holders uponLiquidation of the Bank
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The notes issued by the Austro-Hungarian Bank from the beginning of the war were only pro forma banknotes; in reality, they were govern-ment notes. In order to avoid the unfavorable impression that issuing government notes would have made on the general public, the regime chose not to fi nance the war with its own notes, as it had done in 1866; ...
Chapter 19The Austrian Currency ProblemThirty Years Ago and Today
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From March 8 to March 17, 1892, the government-convened Currency ister [Emil] Steinbach; beside him stood the memorable Eugen von Böhm-Bawerk as section head. Thirty-six experts appeared before the commission to answer fi ve questions that were posed by the govern-ment. No Austrian was left off the list of participants at the inquiry ...
Chapter 20The Restoration of Austria’sEconomic Situation
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The current economic situation is the most dangerous facing the Aus-trian state and its people since the crisis began with the overthrow and economic partition of the former Austro-Hungarian Monarchy. The possibility for an immediate catastrophe confronts us. The continued depreciation of the Austrian crown destroys all prospects for reestab-...
Chapter 21The Austrian Problem
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In his recently published book The Suicide of a Nation, Dr. Siegfried Strakosch undertakes a thorough investigation of the problems facing the Austrian economy. Dr. Strakosch, who is active in industry and agriculture, and who, as a writer on agricultural policy, has earned a reputation that extends far beyond the borders of the German- speaking ...
Chapter 22The Gold-Exchange Standard
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The Bismarck-Bamberger coinage reform of 1871–73 put an end to the fragmentation of the German currency and at the same time shifted the German currency system from one based on silver to one based on gold. The idea behind it was the view that in everyday commer-cial transactions wider scope needed to be assigned to the use of gold ...
Chapter 23The Social Democratic Agrarian Program
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In spite of the collapse of the ideology of socialism, and the failure of its prescriptions for universal happiness, the Social Democratic Party has not disappeared from the scene. It continues to exist, even after renouncing its original program. And although it will not admit it, its In the Austrian Social Democratic Party’s agrarian program, this ...
Chapter 24America and the Reconstruction of theEuropean Economy
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Politically, Europe can expect no help from America for the solving of its own problems. Even in purely economic policy matters it is a fantasy to expect a remedy from the United States for the plight of Europe.Until the fi nal decade of the last century the United States was prin-cipally a supplier of raw materials and an importer of manufactured ...
Chapter 25The Currency and Finances of theFederal State of Austria
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The basic ideas of the reconstruction plan that federal Chancellor Dr. Seipel decided to carry out when he assumed his duties in summer 1922 were extremely clear and simple: the rejection of any further use of the printing press to fund state fi nances, restoration of a balanced budget, and fi xing the gold value of the crown. It was a complete re-...
Chapter 26The Economic Crisis and Lessonsfor Banking Policy
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The events of the last few weeks have made obvious to everyone the de-fects in the German and Austrian banking systems, which previously At least until very recently, English and American banks have acted, in principle, purely as bankers in the classical sense of the term. That is, they have viewed their primary business to be the lending of money. ...
Part 4Interventionism, Collectivism,and Their Ideological Roots
Chapter 27The Economic System of Interventionism
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Two economic systems are struggling for supremacy. On the one hand there is the capitalist system—that is, private ownership of the means of production—advocated by liberalism; on the other hand, there is the socialist or communist system—that is, collective ownership of the means of production supported by socialists of all shades. Between ...
Chapter 28Economic Order and the Political System
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Economic and political liberalism go hand in hand, and appeared in history at the same time. Only in the second half of the nineteenth century did political parties begin to believe that in the long run it was possible to successfully combine liberalism and democracy with interventionist, statist, and socialist economic policies. This view is still ...
Chapter 29Remarks Concerning the Ideological Rootsof the Monetary Catastrophe of 1923
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The ideas that shape the policies of nations do not drop from the sky. They are conceived by thinkers. Whoever wants to write the history of an age must fi rst study the writings that have shaped public opinion. The ideas that guided German policies in the twentieth century were those created by German political philosophy and economists during ...
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Appendix AMaxims for the Discussionof Methodological Problemsin the Social Sciences: PaperDelivered at the Private Seminar
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Appendix BShort Curriculum Vitae of MayerRachmiel Mises of Lemberg
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Page Count: 432
Publication Year: 2012