The New York Herald Newspaper, May 26, 1869, Page 13

8 WORLD. Saxony LESSONS FROM THE OLD Eehary pote aap ee ty ware ere ly. Nevert heless, with all its faults, the form of this, one of the earliest edition of State notes in the his- tory of modern civilization, has an undeniaple histo- rical importance, on which account I subjoin here the formulary of one of them, a formulary waich, a the kindness of the West Austrian Minister of Fi- nance, your correspondent has been allowed to copy from the Patent of 1762 as preserved among the archives of the Finance Department:— FORM OF NOTE: This 1s — florins ‘A bank note. which {s receivable in all the tax recei ving offices of the Hun- garian, Bohemian and Austrian hereditary lands in payment of half of the taxes, the other half to be pald in coin ; more, over, it is permitted that for such bank ‘notes to the value of 00 th \d upward, but not under, interest bearing bank bonds at five per cent, may be exchanged, ‘Vina, July 1, 1703, The experiment succeeded beyond the expectation of the imperial royal government. Tne increase of the circulation gave a much needed impetus to the national industry. ‘The general puplic preferred the new notes to metal, and such a glow of confidence and optimism took possession of the community that in less than eighteen months after the first issue Austrian Currency as Compared with the Cur- rency System of the United States. Objections to a Metallic Currency as National Money. History of Austrian from the First Issue of State Notes, in 1762, Down to the t Day—Forced Suspension of Specio ente=Gradual ResumptionSuggestive Reliable Authorities —Usetul ‘Vienna, May 6, 1869. two years ago you laid before the American pub- | of State ee the SVERIGE was ry! ie cee the pith and sub: . | quence of the amount of money offering itself to it, y stance of the currency expert- | {> Teduee the mterest on the State debe trom six to of England; and these contributions of yours to the general stock of knowledge on this rather Qdstruse and little popularized subject of currency ‘Undoudtediy aided in changing the opinion of Con- 80 a3to make it hostile to the polloy of con- lon and favorable to that advocated by the IRALD, namely, “letting well alone.” Myself a )wenty years’ student of currency theories and an Dbserver of cnrrency facts, I have felt tt a pleasura- ble duty to avail myself of the advantages which peo i of your Vienna correspondent confers to five per cent and shortly afterwards to still reduce it, in the same unobjectionable manner, to four per cent. 171, August 1,—By this time no less than 7,000,000 of the 1762 edition of State notes had bee: printed, The power of converting them into metal remained unused by the public. At the above date, therefore, the government issued a second edi- tion of 12,000,001 florins, but not exactly on the same terms as the first edition. The patent authorizing the second edition corrected the first and defects in substance of the first patent and declared that the State notes should henceforth be received by the State in perme of the full amount of taxation due by the citizen to the State. The third substantial defect, namely, the right to fund the notes in a five per cent stock, was abolished, and rightly so, for, we repeat, taxation money, When not in excess, should be kept tn circu- lation, and, moreover, should not burden the State with interest. The highest denomination of State note was raised from 100 to 1,000 florins. Already, tup immediately for the journall am proud to present, and mediately for my fellow citizens @t home, the valuable and little kuown history of Austrian currency and to throw into rellef so much Of tne same as hasabcaring upon the present our- Yenoy situation of the United States, Icame to the | then, from this date onward we find the State nobes ndowed with all tho attributes possess e ibject prepared to find it an instructive one. Now | progsian and Saxon treasury apeor modern ‘mes, hat Ihave fathomed it to the bottom I can assure the reader that the currency history of Austria, from the first issue of State notes to the present time, is her aud more diversified than that of England ince-1797, and that in particular the currency rong of Austria since 1848, in its numerous revolu- ¥ and counter revolutions, in the multttudinous riments of whichit affords examples, exceeds thing that any modern State has to exhibit in and like them not endowed with the tei ot legal tender as between citizen and citizen. The form of this note of the 1771 edition ts simple and all but perfect in its way, and with the excep- tion of the misnomer bank note has uever been im- proved upon since, It rans thus:— florins. A bank note, which is accepted in payment of all ‘taxes ns, the equivalent of coin in all the tax-recoiving offices of the Hungarian, Bo- hemian and Austrian hereditary lands. ‘ViENNA, July 1, 171. genre, When I say that in the eighteen ebpees frverpe harp unanengeds vaconmnons ihe ears thet are included in the term of | fanco Ba eee tert niga zettel wero issued. The reader will observe ears 1943-66 there was a forced suspension | that it avoids the grave fault in paint of form of the United States Treasury note, which contains on its face an unmeaning promise to pay. It 1s an ele- mentary axiom of monetary science that taxation notes should be promises to receive, not promises to pay. 1795, JUNE 1.—At this date the notes of the 1762and 1771 editions were cailed in and 20,000,000 new were bd in thelr stead on the 1771 model and condi- jons. 1788.—In this year, the year preceding the outbreak of the French Revolution, which was to have so pow- erful an effect upon the increase of paper money in port 10,942,000 florins more of State notes were ued. 1792, APRIL.—In this month the French so-called “patriot” government declared war against Francis L, the last emperor of Germany. At this moment, which must be considered epochal in the history of paper money, the exact amount of State noves (iax- ation money) afloat was 26,729,130 florins, The French government began their war upon Assignats and continued it upon the same, but the Austrian government, out of opposition to Jacobini- cal Dnancial policy. did notin the first war against Of specie payments, followed by a partial resump- Yon in the gutumn of 1868, and that this rtial resumption was followed by a second sugpen- ion in the spring of 1859, and that in 1865 and 1866 jteps towards a second resumption had been taken 0 far as that the legal tender papér Money had been rought almost tp to par with silver, and that this Bituation had been scarcely reached ere it was com- letely turned upside down by the war with Prussia the summer of the same year; that State notes ve been issued, called in and cancelled and again issued during this period of twenty years; that there have been the while two separate breaches and ‘One renewal of the Bank of Austria’s charter, I have ven merely the baldest possible summary of what contained in the third section of my treatise. Jt is only fair to contess at the outset that lama firmed anti-bullionist and entirely share’ the ’ the French tepublic, which ended with the treat, jurrency views of General Butler. Ihave two Qb- of Campo Sreme (1797), notably increase ring jections to a metallic currency a8 a national money } amount of the taxation money ailoat. In- fsmail change always excepted) and to paper money | deed, the first idea of Austrian statesmen was to imitate Engiand and Mr. Pitt and carry on the war witha bullion currency, With view to this end the Austrian government contracted Taw bullion loans and called upon the clergy to meit down their gold and silver plate and contribute it to the nationalfaud raised for the war against a sacrilegious and God-defying nation. Accordingly, at the end of 1795, after three years and a hait of war, the Treasury notes in circulation only amounted to 35,495,785 florins, The Austrian government, however, made the discovery—at least as early as Pitt made it—that a great war caunot be carried on upon bullion alone. 1796, AvausT.—The Austrian government called in all the old notes of the various editions, aud an- nounced its intention of issuing new ones in e: change therefor, Two new points of great signii- cance distinguished this emission from its predeces- sors. In the first place, the amount of the issue, which had always on previous occasions been stated in the royal patent or ministerial order relating thereto, omitted this declaration on the present occa- sion, Secondly, the clause stating that the treasury notes were nol to be legal tender between citizen and citizen was also omitied. 1797, APRIL 7.—This significant omission wis fol- lowed up on this day by an edict deciaring the treasury notes to be legal tender between man and man. Thus the Austrian government at length clothed its taxation money with that attribute which was accorded to the United States taxation money by the Legal Tender act of February, 1502, and the Austrian taxation money in.1849 and 1866, At the same time the quality of convertibility into coin was withdrawn from the notes, so that from this time forth until after the peace, the Austrian State notes have all the attributes of taxation money, It is in- teresting to observe that this suspension of cash payments for the Austrian State followed hard upon the suspension of cash payments by the Bank of Englana in February 17 From and after April, 1707, the treasury notes stand at a slight discount as compared with silver, the standard metal. But at the end of 1797, when the amount of treasury notes afloat amounted to 74,228,900 florins, silver was only quoted at 102 a 100 (or 102-100) in the legal tender currency, and at the end of 1708, when the amount afloat had increased to 91,801,996 florins, the premium had fatlen to 101 @ 100 (101-100). 1799, 1800, 1801 AND 1802.—The currency history of these years proves how much sirain and stress the valuable institution of taxation money will bear ‘without breaking down under the test, The ce of Campo Formio was of short duration, and was followed by the second war with the French repub- lic, In the last year of the century (1800) one and two florin notes were issued by the government for the first time, By the end of 1801 the premium on silver had riseu to the sttil tolerable figure of 116 a 100, and the amount of treasury notes im circulation to 262,030,002. By the end of 1802, while the amount in circulation had increased to $37,102,3300., the premium on silver bad only reached the still not alarming premium of 120-100, Had First Consul Bonaparte only rested esatisied with the excellent position in which France was left by the peace of Laneville (1801), the history of Austrian taxation money would not have been disiigared with the melancholy and disastrous chapter of events which followed the war, levied by the Purst Consul against South Germany and Austrta, Indeed as Frederick the Great and the French republicans may be deemed, the one to have indirectly brought into being the institution of Austrian treasury notes, and the second to have developed them into 4 per- fect system of taxation money, and to have muiti- piled to the full extent compatible with a healthy system of currency (a smatl discount being not incompatible with a state of health), so by parity of reasoning, the first Bonaparte, with his tusatiabie lust for war, must be regarded as the contriver of the ruin of Austrian taxation money, for by his ag- gressive policy he forced the Austrian government grossly to abuse this valuable resource of govern- ment and delicate instrument ofexchange. I ap- pend at this point a table recapituiating the stages of the expansion of State paper money in Austria down to the end of 1802: Percentage of Premiun mnvertidle on demand into the same. The first and rincipul of these objections is that the national cur, oy of & country ought not to be subject contraction and ex pansion in obédience to the bbs of bullion from and the floods of bullion to- ,Wards its shores; in other words, that a national or lomestic currency snould not be sensibly affected yy the fact of the balances of tn'>raational trade ing “active or “passive,” or “fay ? Reine, cies) P v7 Ol avorable” or My reading has convinced me that every one of eriodically affected een due to the cir- e monetary panics which have reat Britain since 1830 have in m; While I am equally persuaded that the immu- ity from panic (yea, the power of assisting panic- icken. England) which the United States has joyed (to the astonishment of European and merican bullionists) since the conclusion of the ar, aNd especially in 1866, 1s due to the circum- tance that the American people have had a paper urrency based on a taxation standard of value, and t Sold bullion has been reduced to its proper, @, commodity level. My second oujection to a bullion and bullion based stem 1# that it is uneconornical and therefore un- lemocratic. The positive part of my creed includes e f oliowing pouits:— Forst-—Chat it is not only the right but the duty of 6 State which levies taxation on its citizens to fur- ih the taxpayer with the means of poring ina articular form of money, called taxation money, \d that this taxation money should furnish at least kernel of the domestic or national currency. Second—That @ banking currency should exist longside of a government pote o because while government has a right to issue its notes as the presentative of taxation, it 13 not good to letit ve the exclusive right to issue @ paper currency, oh @ monopoly in the hands of statesmen being ery le to abuse, Third—That gold and silver coin shonid be reserved form an international currency and a fund for the ayment of the national creditors in cases where the mtract is to pay in metal. Fourth—That the slight fiuctuations in value hich a well regulated amount of State notes 18 gatject tw in times of peace and security are a much evil ‘han the tremendous evils (of which evils Fapid aud immense fluctuations in the prices of all reperty and in the rate of discount are only a small ) to which a bullion system inevitably subjects a pation wich adopts it. #isth.—That the remedy for the fluctuations in the etal Value of Ne asin natioual or symbolic cur- mey (if greater fixity be demanded) is to be sought ther in the use of (a either metal contracts or (b) contracts quitable in paper but graduated on etal prices, Which latter m of contracts are in ogue with the Austro-Hungarian railway and tele- iph companies; but such remedy is not to be ught in the resumption of a specie currency. But uming for the sake of argument that a nation ht to return to specie payments afier having mice gol rid of them, then Sixth—I prefer the plan of those modern builionists who seek to reach the desired end by the “growing *? and gradtal process to the cruel and terribly icacious plan of contraction of the currency as ad- rocated by the extreme bullionists. Sevenih—On the same assumption I hold with the oderate bullionists in favor of smali notes as being ferabvle to cola, because the former are @ cheaper Instrument than the latter, and help to educate the ple into the true idea that their domestic ex- can be carried on by paper media, and though neither gold nor silver are in actual circu- jon. This is another point on which, happily, the ullionists differ from each other, Such are my principles, and now to returnto my theme, which is naturally divided into two sections, First, the period from the issue of State (1762) to the 1848 revolution, and secondly, the od from March, 1848, to March, 1869. R PHRIOD FROM THE FIRST ISSUE OF STATE Flor ins. on Silver. OTRS (1762) TO THE OUTBREAK OF THB 1848 RE- 12,000, 0 OLUTION. isepend : For most European nations the French Revolution 26,729'130 0 the wars which followed so quickly in its train 36,495,786 0 the occasions which forced the State to resort ; earees 0 its sovereign power of issuing paper money; but stent oes ; Austria the first issue of treasury notes, State 141,018,640 7 Motes or taxation money dates a generation earlier, Hy 1s contemporaneous with the Seven Years’ War, serine 4 is singular that it was a king of Pru who 4 ms 1803-15,—I shail not dwell iong on the currency hie- @a 6ver unwilling A us vernment to Pop ay tory of these thirteen years, I concede to the builion- both its Mrst (1762) and last (1866) editions of Rot Wishi ill to Austria, Frederick the | {st that in the events of these years may be found an Q 10 to th at rded by the avsiguats aga! ie ice, They hel wo Tevens " rene © Eterna abuse by the State of its pret y ve of issuing paper Aust statesmen their hands a valuable and hitherto resource, The royal patent authorizing issue of treasury notes or taxation money June 15, 1762. It tried the experiment on modest scale, for it limited the issue 12,000,000 from five florins upward to one jundred ditto, These treasury notes were declared be receivable in payment of taxes to the amount one-half of the t liability, They were both vertibie Into coin at the metropolitan and pro- treasuries, and were also fundabie at the ite of five per cent interest. They were not legal between ae and citizen, These notes of rogal money, Such justification for currency abuses as can be afforded by political calamities the Austr government certainly had. In February, 1811, t State decreed an arrangement with its creditors, {i cluding the noteholders—in other words, became bankrupt. Nevertheless, the State notes issued be- fore 1709 were regarded by the State as at par with sliver and were exchanged \for an equal nominal sum of the einlosungs acheine, or new government currency, Which was issued in substitution for the old wo-called banco zettel. 1816.—The peace of Paris was signed on November 20, 1816, and in less than twelve months from that date Austria had assumed specie payments So far as my investigations entitle or en: to form an opinion, | do not think that thi ings of the mass of the population which ensued from this measure have found an echo in the literature of this empire, and that for very good reasons. In the first Pifce, Austria had no political literature at that te, and the Austrians were not allowed by the Cree to have any. It considered to the duty of the eubject, who suffered from the measures of the government to suffer in silence. Hence tt was ible Thomas Atw should arise and give voice and workii laas- sof taxation money there may be and two opinions as to whether it should be by the State which issues itto be legal ween citizen and citizen our cotrespond- t has expressed his opinion on this point i troductory section): but thore is no difference of mm upon the point that such notes, when not ed in excess, Ought to be received by the State in ment of the whole (not the half) of its tax bill. second substantial defect was that they were aoe into coin on demand, this being a viola- Be eee ian me ae cece | cs wnetnns being ie navjocts of reckices oufreney ‘ Fchnne tion with of dependence upon interna. | experiments ana comnter revolutions. In the second money, The third substantial defect was that | place, It may be the comperatively just way in , Sof by an addition Of tir eae ar pat ent porate his valuable treatiso on 1891), has some perti- jarks on reasons why the resumption of 1816-18 in Austria was less cruel in its effects than the resumption of 1816-20 in Great Britain was. We quote the relevant passage:— pened in Austria after 1816 and 1818 it fs trae, f Austria, and ry ase, and linen fabrics which rey sented Austria in ‘kets of the world so worthily were then in full bloom. Moreover, Austria, in consequence of the reduction of the capita! and interest of the State debt pe owed only, relatively, small sums to Soreness On it had to draw from foreign poris than the be mee In a word, the commercial and the general balance of transactions was what {s technical) itrQ00 dorian in aras ount) and ase yf br ht jorins unt) and a series of loans broug! it eriod a considerable sum of metallic currency into Austria; that the prospect of the rehabilitation of the State debt was an inducoment to the Soretgnee: to buy and not to sell his so oon. trian stock, and then may we uot main- tain that in 1818 ali the elements for the success of @ return to a metal standard were extant ? That transfer into gold of panite and private obli- gation contracted in depreciated paper, as carried out in Britain and as demanded by the bulltonists in the United States, that operation which was, in my opinion, yeaa stigmatized by the late Sir Jamea Graham in pamphiet on “Corn and Ourrency”’ as “a fraud pot every debtor, public and private,’’ was avoided by the absolutist statesmen of Aust and the Austrian (first and last) total resumption o! specie payments has left no such melancholy traces upon the page of history as those left by the British resumption. Nevertheless the general policy pursued by apn trian statesmen at this juncture was such as no ad- vocate of State ae money can approve. Austrian statesmen had before them the experience, in the matter of State notes, of more than half a century. Di two-thirds of that period the issue of Stal notes in moderate quantities had proved to be emi- nently beneficial to the community and con- venient to the state. These State notes, 80 wisely regulated in their issue, had been able to circulate at par, with a gold and silver standard during the whole time of during several years of war. The latter Miteen years of the said period had likewise afforded an example of the flagrant abuse of the prerogative of the issue of paper money. Now, what was the most reasona- ble deduction from this long series of experiments? 1 contend that that deduction was that the State should keep in circulation 50,000,000 or from that to 100,000,000 florins of taxation money, and that such measure would not even have been inconsistent with a metallic standard, as experience had already proved that such a quantity of notes would circulate at par with coin. In making use of this argument as a good one against the bulliontst I must guard against the inference that, per’ se, 1 am in favor of @ metallic standard. I advocate the issue of taxation money by the State, whether or not it can be kept at par with coin. On the other hand, the doctrine on which the then Austrian states- men proceeded was to pass condemnation on and surrender in toto the prerogative of the State to issue paper money and to give @ charac- ter toa body of private capitalists, incorporated asthe National Privileged Austrian Banking Com- pany, which charter, granted in 1816 for @ term of twenty-five years, conferred upon this company the exclusive privilege of issuing ambit of the Austrian empire. These notes were, of course, convertible into coin on demand. To the new bank was also entrusted the duty of exchanging, at a two-fifths nominal value, the old State notes for the new bank notes, and an interest bearing debt, amounting to 110,000,000 florins, due from the State to the bank was incurred on this account. This debt, be it said en passant, was gradually liquidated by a sinking fund, but was only Dnally got rid of on the 3ist of December, 1806. Such was the conse- quence of converting a non-interest bearing floating debt into an interest bearing funded one—a stroke of finance which seems to have captivated Mr, McCul- loch’s imagination. 1816-48.—Mailers remained on this footin, until 1848, the Bank charter having been renewed for a second period of twenty-five years on the expiry of the first term in 1s41, the taxpayers the while paying off in bank notes the mstalments of capital and interest for the exunetion of the debt due to the bank on the account of the exterminated State notes. On the last day of 1847 the State debt to the bank om ail accounts was 132,452,364 florins. The smallest denomination of note was five florins, Having now brought this section toa close, and being desirous of enabling others to follow over the ‘more ily termed “in its favor." ney paid by Fran eace and aper money in the track Lhave traversed, I mention as mg principal authority for this period “Hauer’s Beitriige zur Fi- nanz-Geschichte (esterreichs,” Vienna, 15448. FRoM MARCH, 1548, TO MARCH, 1869.—The French Revolution of February, 1848, came to break up this period of currency repose, and threw the citizens and statesmen of this empire upon the open sea of currency experiments, painful Indeed to those sab- jected to them, but instructive to the rest of the World, and to none more go than to the American ople at the present juncture. ‘The storm of revolu- ion broke upon Austria in March, 1848, and one of the consequences thereof was that the bank suffered & drain of its bullion, which on the 1st January, 1843, had stood at 70,000,000 florins in round numbers, had fallen on the ist June of the same year to 20,000,- 000 forms, and threatened in a few days to fall to zero. Under these clroumstances, and very unwill- ingly, the government, on the 24 June, authorized the suspension of specie payments, At the same time it declared the new inconvertible bank potes to be legal tender between man and man. It at the same time allowed the bank to issue notes of one and two florins denomination, and from that day to this, in some form or another, the citizens of Austria have eure the advantage of a small note circula- tion, The one florin note, so detested by the bullion. ists, has never since then departed from the land. Immediately after tne issue of the rescript of June 2the bank notes fell to a slight discount, slight be- cause the amount of the same was by no means excessive—a little over 220,000,000 florins. In August, 1848, the premium on silver wag the nearly nominal one of 135 per cent only. It was the October revolution In Vienna, the revo- lutionary attitude of Hungary and the diMicuities in Italy which at length forced the government to dis- regard the bank charter and to resume the preroga- tive inherent in every State—a ee tive whic! ought never to have been alienated—of issuing State notes, receivable in payment of t jon at the State treasuries. paper money issue at this juncture must be divided into three categories— namely: first, the West Austrian; second, the Lom- bardo-Venetian, and third, the Hungarian. The West Austrian category of State notes (first emis- sion) bears date January 1, 1849, and ranges from the denomination of 5 florins upwards to 1, forins, The one fault of these State notes, called cassa- anweisungen, Was that they were interest bearing. The 5 and 10 florin notes, carrying interest al 1 4-5 per cent and the higher denominations ai per cent. ‘ihe Lombardo-Venetian series, dating from April 1, 1849, ranged from 6 lires up to 2,400 lires, the 5 and 10 lire notes being non-tnterest bearing and the higher denominations, like the higher cassa ancesungen tn West Austria, bearing tnterest at the rate of three per cent, Tne Hungarian series of notes differed from the West Austrian in form and sabstance. In the first place they were ail non- interest bearing, and in the second they were Issued at the low denomination of 2 fortns. The formulary which I subjoin was printed on one side in German It ran as follows:— and on the other in Hungarian. ten of the Kingetom of 1 Th ‘of the Kingtom of Hungary. The chief once tor the receipt of taxes In Ofen. and al fecal ofliees in Hungary will accept the present check instead of coin for —— floring, and every citizen is bound to accept the od for the said amount in ail payments, i March 1, 1849, As even in spite of a fatiie prohibition against the export of coin, even the metallic small change dis- appeared, a paper currency of the denomination of a tenth part of a florin was issued by the Austrian ernment both at Vienna and Ofen in July and tivel At the same time a rational to supply the public with metallic small change by the emission of silver pieces of the tenth part of a stiver florin, on which “dimes” A seignorage of no less than 23 per cent was levied, Nevertheless, this high seignorage did not prevent the great majority oi these pieces from emi! grating abroad. They were unable to compete with th Paper dare, 1850, Bi Ki the Finance in Marl jaron von Krai Minister Otte da vied Ber A check on the rev y, convoked in Vienna a nam! of men supposed to be the wiseacres in currency and banking with a view to obtain their opinion as to the policy which the State ought to pursue on the cur- rency question. The report of this currency com- mission was handed in on Avril 26 of the same year, and published in the Avstria, an official organ, on May 9. The commission, as we shall see, surren- dered themselves entirely to rigid bullionist theories. All the more valuable, therefore, is their statement of the amount of the currency on February 26, 1560, ‘The following {s their statement of the legal tender paper money on the last named date:— 1. Notes of the privileged banks of Austria. 2. Three per cent West ry) ‘Treas 5. Treasury nges secured on Hun 4 Lombardo- Venetian treasury n 6 pty ey! fractional curren 6. Hungarian fractional currency. . From this it is clear to arerr one not wedded to bullionism—first, that, estimat tion of the empire at 85,000,000, the amount of cur- fency was by no means excessive, a contention which is confirmed by the fact that the premium on silver, on the day to which the statement relates, was only 1444; secondly, that the State, by the issue of about 100,000,000 floring of treasury noves and fractional currency, had made an extremely mode- rate and Peace use of its Rrerogative, notwith- anding that in 1848 and 1849 the government had ore than once been on the Tn spite the then popula int of political ruin. of this mi the commission of wiseacres made the following recommendations:— 1, To fund the State notes of all kinds issued since January lta te nay nt a etd aig upon the oa a mere "Hons when compared with Te feoue a new edition of noglegal tender treasury What Caen res to a metal standard, but it was no per anya of ie jue of the money with that of coin, 7 the reduction of ng paper money, It | *ato metal furally ma redeem tal a sum of paper ft jue than to redeem nglan ‘Moi there were at that er circumstant vored the transition e ay ms By the financial catas- rears’ war the prosperity of Austria bad been shaken to {ts foundations, Tne enor- mous por of Gey had produced a remarkable cheapness (calculati @ prices on the metal standard) and & great depression of the consvming power of the nation, The foreign trade, thanks to the continental blockade and the pronihitive systems, had produced @ balance of trade in favor 00 florins, an as should not takep up ‘commission of the bullioniste s id be o forced loan, bearing, by way 7. That after resumption of specie payments yy by wage, for which, however, BO definite timo was Axe pe 9 ‘foring were to be entirely withdrawn from clroula- mm by the 8. until that time the small notes be made convertible ‘at the State treasuries, 9. That after resumption by the bank it should issue no notes smaller than ten florina, 10, In the meantime gold and silver contracts were to be legalized. 4 Such was tho programme of the bullionist and bank monopolist commission, and to that portion of it ie aera to Coe ord Pate sinall c for paper represen e ten! ora forin, also to that which recommended the State to pay off its debt to the privileged Austrian banking corporation, the anti-builionist would not merely not object, but would heartily commend, Moreover, as a lover of liberty of contracts he could have no valid objection tu metal contracts, gold and silver be! under his system, degraded, and pro- pery % led, to the level of all other commodi- ut his approval of the recommendations of this report must stop here, The Finance Minister, himself wedded to bullion- silver soon disappeared from circulation, were either melted down or exported and have never appeared since. During my fifteen months’ residence in Aus- tria I have caught a sight of only four, and three of them I have preserved as 80 many mannmens. of the folly of bullionist theories. In 1860, notwithstand! the continued issue in 1859 of the metallic ,~ change, there was sucn a dearth of it that the State was compelled to hasten back to the humiliating ex- pedient of issuing a paper fractional currency, al- though no State notes were issued on this occasion. At whe end of the year 1859 the premium on silver, as compared with the inconvertible bank notes, amounted to twenty-four per cent. A glance at Appendix I. will show that the war of 1859 caused & considerable, and, to the industrial classes, a wel- come addition to the currency. Tne bank notes in circulation, which at the end of 1858 had amounted fem, took this report of April, 1850, as his leading- string, and would doubtless have been glad to carry out its recommendations concern! ee. the restoration of the bank charter in its integrit: and the extermination of the small notes. Bui great social facts are not always under the cont of fanatical theorists, and these facts kicked hard against the bullionist policy. On the Ist January, 1951, the State issued in place of the cassa-anwels- to 870,600,000 florins in round numbers, had in- creased by the last day of 1859 to 466,750,000 florins in round numbers, In 1861 we came to the era of the Schmerling and sham constitutional Ministry. Herr yon Plener be- comes Minister of Finance and Herr von Piener was then aa fanatical a bullionist as Mr. McCulloch has shown himseif to be. Indeed, it seems to have been considered by the Schmerling Cabinet as one of their ‘ungen on both sides of the Leitha, a new edition of notes of 100, Lead 1,000 florins, bearing three per cent interest aud of 66, 10, 6, 2and 1 forin, without interest. In this respect and in conferring upon them the attribute of legal tender the government ‘were not so bullionist as the commission. But tho cloven foot of bullionism appeared in the delusive and never performed promise of conversion ite sil- ver contained in the formulary of these new notes, called reichsschatz scheine, or Imperial Exchequer bills, Here is the formulary:— FLORINS. Imperial Exchequer Bill, The Imperial Treasury and all decal oflicers will accept the present exchequer bill on the ovcasion of all payments as jorins, instead of coin. The exchequer biil will ‘changed for silver coin at the Imperial Treasury. Spec! ordinances will appoint the mode and time of this conversion. ‘Vienna, Jan. 1, 1851. Our comment on the concluding clauses of this formulary is that the government never found itsel Ne a posites. to convert its notes into coin, an therefore that the prom'sed “special ordinances” never saw the light, The trouble with Prussia at the end of 1850, and the expenses incurred by Austria during the Crimean war (1853-5), disabled the government irom amassing @ large metallic fund, or enabling the bank to do so, by squaring ac- counts with it with a view to the restoraiion of specie payments. ‘On February 23, 1854, an important step was taken towards the restoration of the bank’s monopoly of issue and the resumption of specie payments. The State transferred to the privileged Austrian bank all the treasury notes (exciiequer bills) in circulation, amounting at that time to about 150,000,000 florins— @ by no means excessive, aye, a very moderate amount. These State notes were to be retired and replaced by bank notes, It was at the same time ordained that after the 1st of November, 1856, no State paper could be used in payments or be changed by the bank; but, in point of fact, the bank exchanged ali the State notes it ever did exchange (145,200,000 florins in amount) within o twelvemontn from the date of the ordinance, and Februa;y, 1855, must be assigned as the date when the issues of State payfer money called forth by the events of 1848 and 1849 ceased to exist. As part of this plan the State agreed to pay the bank at ieast 10,000,000 florins a year in silver, with a view to eu- able the bank to amass a metal fund preparatory to the resumption of specie payments, At thé ume When the State notes were ceded to the bank the premium on silver stood at twenty-nine, Still the builionists’ eyesore, an inconvertible paper currency, remained. Lhe State had surren dered its prerogative; the State notes were doomed; but the bank notes were still inconvertible. It was Baron von Brick, who, by bold coup, yawned This boid ood for —— to force a resumption of specie payments. fou was to contract @ now so-called ‘tonal’? loah, as security for the repayment of wiich the State was to pledge, with power of sale, its domains, and of which the proceeds were to be paid to the bank, with a view to reduce the debt owing to it by the State, which then amounted to 263,000,000 of florins, to the normal amount of $80,000,000 of florins. This, of course, with the ultimate aim of enabling the bank to re- sume. This loan was offered in October, 1855, and Baron von Brack then announced that by the month of August, 1858, the bank would be in a position to resume specie payments, ‘A reference to appendix No, 1 relating to the bank note circulation will show that the governmental aud bank authorities, although they did not allow the State and bank notes to expand with the great expansion Which Austrian trade, manufactures and public works assumed in 1560-3, yet did not pursue any cruei policy of absolute contraction, such as the extreme builionists are always the advocates of, In February, 1850, a8 we have seen, the total bank and State note currency, exclusive of the fractional cur, rency, Which was never retired, amounted to about 351,000,000 florins, In 1851-2-3, the bank note circu- lation fell in consequence of repayments of the State debt to the banks; but the vacuum was ilied, but not more than filled, by a corresponding expansion of the state note currency, On December 31, 1854, when the State notes were already included in the bank’s monthly statements, the bank notes amounted to 383,491,000 florins; on December 81, 1556, to 877,800,275 florins; on December 31, 1856, to 80,181,085 florins; on December 31, 1557, to 383,430,788 florins, and on December 31, 1858, to 870,480,789 florine. We have seen that in October, 1855, Baron von Brack has indicaté August, 1858, as the period when specie payments should be resumed, By an international treaty Austria, in the most solemn manner, bound herself to resuine gpecie payments at latest by the close of that year. by the mouetary treaty with the Zoliverein of January, 1867, Austria bound herself in a mutual contract with the States of the Zoliverein not only not to issue any more inconvertible paper money but to withdraw it all before the Ist of January, 1869, An inspection of Pee No. 2, under the ap- propriate years, will show that since the fifth month of 1856, at whic! riod the premium on silver stood at twenty-elght, the difference between the value of inconvertibie paper and metal kept steadily dimiutsh- Ing, 80 that by the Ist of April, 1866, the premium stood at the low figure of two and a half, aud from that time forth unui its disappearance hever for @ day rose higher than nine. The table for 1858 shows that the last quotation of a ng on silver at this epoch happened on Sep- mmber 29, 1858, on Which bef it stood at the merely nominal rate of only one-half per cent. Add to this the relative contraction of the currency caused by a refusal of the bank to extend Its issues according as the demand for currency required, aad we have the conditions from Which a great disturbance of values, fe, &fali In the prices of ail commodities except the ‘precious metals, might, without more, be de- duced by any one at all conversant with monctary science, Such a fall in prices did take piace in 1563, and inthe autumn of that year the bank made a partial return to specie payments by deciaring its Teaciness to convert ou demand its notes of the de- nomination of ten foring and upwards. The return ‘was partial in that the large number of one and live florin notes were still not convertible. The bank was unable to resume in regard to the smali notes be- cause there was no silver coin in circulation or even minted to take their places. Now, according to the builionist theory, 1858 ought tohave been a flourishing year for Austrian indus try, while, according to the anti-bulitonist theory, it ought to have been the very reverse of that. Now what were the facts? Let Mr. Stroche, in lis pam- hiet on “The Currency in Austria,” quoted tn the rst section of this article, depose to the same, and the deposition is all the more valhable as it comes from a bullionist. Mr, Stroche wrote his little work in 1861, aud therein said upon this point:— By all those who have an interest in Austrian maaufac- tures the distress which befell our manufactur! rest in the year 1858 Is atill too keenly remembered to mi ‘ary to paint the picture in its detaiia, According to the bullionist theory the Austrian manufacturing interest ought to have suffered atly between 1549 and 1866, when the buliionist’s agbear—a depreciated paper currency—-was in cir- culation. But did they in point of fact? Let us hear the same buliionist authority on this poilnt:— However be yr to our manufacturers the recollection the years 1x49 to 1866 would gladly resiga th Trot tibee "good ‘ined tf is only to tuauufacturers underwent 10 1867 and Indeed the sufferings of the epee | dis. tricts were so t that the government found itself morally compelled to appoint ission to inquire into the causes of the industrial distress. Commis- sioners of ag seem to be the inevitable accom- 4 of the application of bullionist theories, et in this case that application was @ compara- tively wild one. Partial as the resamption of 1853 was, and far from extreme asthe measures wore by which it was carried out, it brougut down upon Austria, as we have said, the visitation of an industrial crisis. On the other hand, it ts admitted that the years from 1849 to 1856, When inconvertible and depreciated paper currency was afloat, were extr ily good ones for employers ani employed. Finally, in 1863, the State having in this year adopted the decimal system, issued some new siivet five, ten and twenty pay ad ate hon & view to the withdrawal of the paper fractional currency. These new coins were in ont with the stipulations of the Monetary Internationai treaty of 1857, mentioned above, and therefore of standard value. The conse. quences resulting from their high standard of value made themseiyves apparent in the following year, 1860, How long the industrial stagnation of 1563 would have lasted had no new currency revolution supervened no one is ina position to determine. Mr. Stroche admits that at the end of 1853 the cul- minating tof this stagnation had not yet been reached; that a better time was yet awaiting both employers aud employés, lad not a historical event of magnitude arrived to change the situation, to Lit bulliontem a body blow, and to relieve the industrial egmaen, “Pp event was the New Year's Day aata- tation of the Napoleon to the Austrian Am- ‘Lassgdor ( hla as it first duties to restore specie payments and introuuce @ metallic currency instead of the small notes. The means by which this end was sought to be brought about was the highly effective, but also ruthlessly cruel one of contraction. This policy wag fezcea on the bank directors by the Pixence Minister. The bank notes, Which at the end of 1861 had amounted to 465,874,423 florins, were contracted in the teeth of the increasing wants of the population to 396,655,626 florins, at the end of 1 to $47,893,628 florins, at the end of 1864 and reached their minimum of 326,- 000,000 florins in March, 1866, Now if the reader will turn to the silver premium appendix, he will see how rapidly the premium sank under the procrus- tean remedies of Herr von Plener, The premium on silver, which on January 2, 1861, h: amounted to 3034, was pressed down by January 2, 1503, to 12% y July 16 of the same year to9%. Then the Schleswig-Holstein war stopped the process of contraction for a little, and the premium recovered somewhat; but in 1865, the last year of the Schies- wig Ministry, contraction began again, and the oes mium was brought down to 6 by December 16 of that year. By March 1, 1866, when the bank note circulation was at iis lowest the ary had been down to 1610. But in the following month the dear-bought triumphs of tho bullionist Sisyphus came to a stop and the stone began to roll down the hill again, But before I enter npon this last and important section of my essay I must refer, first, to the renewal of the bank charter, and, secondly, to the effects of this contraction policy upon the well being of the population, ‘phe terms of the second renewal of the Bank char- ter were debated in the Reichsrath in the autumn of 1862, and the new act dates from January 3, 1863. It conceded the pou of monopoly of issue until December 31, 1876. It stipulated that cash paymeuts were to be resumed by the bank-on or before the end of 1367, thus giving five years’ ‘law’? to the directors. In reference to the regulation of the note circulation it allowed notes to the amount of 200,000,000 of florins to be issued without having a stock of bullion to meet them; but for every note issued above that amount the bullion must be there to meet it. It fur- ther stipulated that the one and five florin notes were to be withdrawn from circulation by the end of 1866, stly the bank notes were made legal tenders. ‘The effects of the contraction policy of 1863 and 1865 and the first quarter of 1866 were fearful. Pe ple in the provinces were reduced to a state of bar- ter. The construction of railroads in Austria was for @ time Nl a to a standstill by it, The reve- nue declined. Recall to the living generation the memory of this period of suffering, and, though they know nothing of the science of money, they never speak of the time of the great dearth of cur- rency Without @ shudder. So loud became the com- Cry of the people that the government, in 1864, alted in its policy, but began it again hotiy in 1865, being determined to restore specie payments at fil hazards, and that long before ihe expiry of 1567, the maximum term, as set by the Bank Charter act of 1803, Atlastevensome of the political economists themselves began to open their eyes to the trath, and in October, 1565, Professor Loreat Stein, the first economical publicist in Austria, wrote in the oficial economical journal (the Austria, to wit), of which journal he was then tke editor, two elaborate arti- cies against the ruinous policy which the govern- ment Were forcing upon the bauk, and boldly laid down the doctrine that the industrial life of the em- pire demanded asuppiy of bank notes to the amount of not less than 500,000,000 florins, For this act of imprudence the government dismissed him from the editorship of the Austr 1866.—Tuls was another epochal year in the history of Austrian currency. In the carly part of this essay We saw that It was Frederick the Great who first forced the Austrian State to make use of its sovereign right of issumg treasury notes or taxation money. Again, it is a king of Prussia and a push- ing, unscrupulous Prussian minister who compels tue Austrian State to resort for a third time to the use of the aforesaid prerogative. During this year tne constitution of 1861 had remaimed suspended, and a Ministry of noblemen, largely of Slavic blood or sympathies, and therefore Little under the influ- ence of builionist theories and Jewish money deal- ers, were in favor. As the probability of a war with Prussia began to wax into certaiaty (middie of April) rumors began to obtain currency that the govern- ment, 1n spite of the terms of the Bank Charter act ot i Would soon issue State notes, Accordingly, on May 4, a vescript changing the five aud one florin ‘notes of the privileged Austrian Bank Stute or taxation notes was issued the Beleredis-Geiuchowski-Mensdorff Minis- try. These notes, amounting to 112,500,000 florins in round numbers and the bank’s sum of notes which on April 26, 1866, amounted to 230,000,000 florins, had fallen by May 9% to 255,000,000 florins. The premium on sliver waich in March had been 16-10, had risen by May 1 to 94g, then jumped up by the 15th of the same month to 2934, and reached its maximum of 39 on June 16 (see Appendix 2). On July 11 the Bank Charter act was formally sus- pended and the State began to issue one, ive and iifty forin notes of its own, partly in substitution for the bank notes takea over and partly in competl- tion with the bank note circulation, ‘fo the bank was left the exciusive privilege of issuing 10, 100 and 1,000 forin notes, and these only, and the State further engaged not to issue more wan 300,000,000 of florins of taxation notes, The bank, on the other hand, aiter the government had paid back to it the war joan of 60,000,000 dorins, Was heid to its en- gagement not to issue more notes than came within the figure of 200,000,000 florins the amount of bullion tn its coffers. formulary of the State notes issued in unimpeachable in form and substan The notes are avowedly taxation money, and the mistake of 1349, /. ¢, the making these notes interest-bearing, has not beea repeated. Premising that ail the State notes now in circulation bear the date and follow the formulary of July 7, 1866, 1 subjoin the last of the formularies With which I shall test your eudurance: us phe 866 is LORIN. ed and paid out by all the State ‘occasion of all payments in for one florin of Avatri This State note treasuries and oilict law exprossly pays’ rency. For the Imperial Royal Central Treasury, A. B. VIENNA, July 7, 1580. 1800—The aforementioned arrangemem between the State and bank as to the respeciive limits of their note issue 18 the basis of the existing currency sys- tem of Austria and Hungary. The State has gone to the full lengta of the tether it meted out for itself, but not beyond it, On the ist of March, 1869, the date of the latest published monthly account at the time of writing, the State notes ia circulation amounted exactly to 300,014,011 florins, = barring a few hundred thousands, more or leas, this may be regarded as a fixed sum. incon- sequence of the drawing in of the paper ten kreut- zer bits, Which is now taking place, the Finance Do- partment claims to have the power of issuing State notes to an amount equal to the sum retired. This would allow at the present moment a margin of about 4,500,000 florins above the 300,000,000 florins to the Finance Department, This margin, as will be seen below, is acarcely yet Eapinged upon. The bank circulation falls and rises with the de- mands of its discount and loan business, but Roepe between 250,000,000 and 900,000,000 florins. On date of the last published weekly account its circus lation amounted to exactly 334,397,450 florins. now endeavor to give an estum Iading th ing, in the acetro Hangariek exclu 1@ CO) ir col ne rigvoodou Mareh 1 of the present yeurt= empire as it stood ou Mare State notes of 1, 6 and 60 florins Bank notes of 10, 100 and 1,000, t pines Of silver alloy, 1849 date... 8, 1268 and 1869, silver alloy, 20 kreuteer Ctl ‘Went Austri 4. 1568 nnd 1569, silver alloy, ‘Kreutzer pieces, Hungarian fesue.s 8,000,000 — Total... « [No deduction fs of ought to State notes, inasmuch as the bauk notes are not courertibie, as the American national bank notes are, into State notes.) —in round numbers 610,000,000 forins for a ye. tion of 36,000,000, which gives just 7 in- convertible per florins per capita. Reducing these 17 37 paper florins to silver one: reckoning sliver at 20 premium, we deduce that there 18 afloaty among the people of this empire the equivalent of 145 silver forins of the international and treaty standard; in other words, the equivalent of 34 franes, per head. No one butan ultra | wiil contend that this amount is excessive. Nor wil any one but a ter of the moneyed power con- tend that the Austro-Hungarian government is yb ower of issuing taxation money. Ite r O00 DOO. forins Litt ‘within witch it restrains 880, 1 n ag judiciously chosen as it has been scrupurously a ceeted for the joint annual revenues of West Austria and Hungary amount to about 420,000,000 florins, and an amount of taxation mone; falling about 30 per cen’ short of the annual amou of the taxation levied by the State on tho inhadix tants 18 near, open to the reproach of Li cessive, While the State notes mt the Axed element of tho currency, le part of the @ seignorage of twenty-three per «°C perder grineeeana ae aay led by paper, an year su. Dack to us from South Germany in great Viewty the worse for wear. In such plenty came 1."0¥, ag to enable the government to commence the tirement of the paper bits, However, a3 thes’? Bi x coins were struck nine years before the dec*mak z ayatem Was introduced info Austria, the governmens — are now issuing some new dimes aud double dimes of 1868 and 1809 date, alloyed to the extent recom mended by General Butler, and these pleces are not labie to be exported and are helping the 1849 cots to replace the gradually retired paper. i te paper bits are withdrawn the coins of 1849 will im eir turn doubtless be retired in favor of the 1888 impression. CONCLUSION, Austrian and Hungarian statesmen have agreed to “Jet well alone” in the currency situation, This community is either, as the moderate bullionist would say, “growing up to specie payments" OF, @& |. the anti-bullionist would fain hope, growing out of ~ all desire to return to them. Since tue reconciliatiom —— with Hungary there 1s no part of the civilized world » which has made greater strides in material progres® — than this empire. While in Great Britain, Frauce ~. and Germany stagnation of wade is the order of the day, here dirk petty oe instinct with life and pro gress. Capital 1s plentiful and confident, {ts optims- ing disposition is never “sicklied o’er by the pale cast’ of @ currency panic, nor do “enterprises of great pith and moment lose the name of action” ag the result of @ high pressure rate of discount r ‘ne Bourses of Vienna and Pesth are in goud, aye, in madcap humor, The Turkish Minister of Pubic Works, desiring to have his network of rail roada constructed, wends his way nob to. Paris nor to Lomlon, but to Vienna, because in the former cities — Capilalists are timid and discouraged, while in Vienna they are « col us aud sanguine. 1t foliows that when capital is courageous and in full employment labor ig in great demand and well remunerated (as the world goes). When the working ciasses are ty full work ay coneniny Hoe - Cy ORR aS h creases rapidiy, and such is indce fact instance. Such are the frults of a two and a halt years’ trial of the present system. The ony piansinle objection that is made to 4 Cur reucy which is cenveven ete, of taxation and 3 he credit off the nation is that it 1s liabie to great- r fluctuations of Value than gold and silver colua, mm this point also Austro-Hungarian practice may be consulted with advantagé. ‘Ine railroad and telé~ ph com es fix their prices on @ silver or in- rnational money scale and then adept these prices to the legal tender or national money by adding to the silver prices the current premium, The premiui arged is fixed once @ month, and the reader ustrian or Hungarian journals will on the first of ap every month see various advertisements of some - thing like the following tenor:— qThe promium addition (ayio-suschlay) on the Kaiserin Eligme tte Western Rallroad for the month of February, 156, will W per cent. ' Thus, while the sliver or international prices re- main unchanged, the paper or national prices are adjusted to a metallic standard once a month, and in this way the advautage of the greater fixity which in normal times a metallic system has is sulored hand in hand with all the advantages which ® cheap, plentiful and stable inconvertible paper cure rency aifords. I respectfully recommend te prac tice of the Austrian railroad and telegraph com- pantes to the consideration of all those who are really incommoded by the fluctuations of inconvert. ible paper money, though at the same time 1 contend § that this outcry is in the main a@ factitious one, got 5 ten up by the’ bullionists to throw Gust in the of the people, in order that under its cover they may be permitted to contract at pieasure. With the expression of : hope tuat the Forty-first Congress will open {ts mibd to light on this subject ~ from all quarters, and especially will seek toyieam wisdom from the accumulated experience of We Old World, I now subjoin the two appendices to which I have often referred in the course of the com- munication:— APPENDIX I. THE NOTE CIRCULATION OF THE PRIVILEGED BANK OF AUSTRIA FROM DECEMBER 31, 1847, 10 DEGRM= BER 31, 1583. Bank Note Stock of Bullion 5 Circulation, or Bullion Billie Ps: Fiorins. Floring, 219,000,000 y ot December 81, 1847... December 81, 184 December 81, 184! December 31, 1850. December 31, 185: December 31, 18: December 31, 1853". December 31, 1854t. December 21, 1855 December 31, 1801 December 31, 186’ December 31, 1858, December 81, 185' December 31, 1860, December 81, 1861, December 31, 1862. December 81, 1863. December 31, 1864. December 81, 1865, December 31, 186! December December 31, 108, 642,878 Tt * The contraction during these three years was consequent on the repayment by the State of its new debt to the bank, , the contraction of the bank notes was met by aa equi expanaion of the State note circulation. Expansion of bank notes in consequence of the Oak avieghaastand the Blake motos oa tinted in the Seared Ha essay. ‘ Great increase of bullion these three years by way of prev “3 paration for resumption of specie payments, : 1 Diminution fa consequence of the State's having assumed the small notes of the bank, as stated tn the essay. I subjoin some of tie montliy statements of circur lation in 1866:— 877,800,275 380,181,055 833,430,738 370,482,759 Florins. Florins, January 31... 341,104,078 July S1......, 961,770,478 Maren 31..... 325,937,972 September 90. 815,616,158 April 30 837,923,886 November 30. 299, ee May ai. 267,822,565 December Sl . 283,983, APPENDIX U. EXHIBITING THE WAIN FLUCTUATIONS OF THE PRE ae SILVER FROM MARCH 26, 1849, TO MARGE 15, 1869. 9. Month. Premium, Months Premium, * March 2 12 August 22. Ww September 9 September 22. 5: October 12.. 7 November 12 7 Bg - 2 November 8 + * November 13° a nue November 21* . 2 November 25" - 40 % November 26* - 68 * - 29 August 3. ‘ 36 September 11 es ’ October 19.... ++ January 23. February 16. March 18, March 31. 9 usso-Tarkish war to make eases through 1936 and declines 1854, , July 10., —— 7 rember 15. % : Metoter v9, quotations of prémum <td