Carl Menger, “Die Kaufkraft des Guldens österreichischer Währung” (1889)

This is a single-author newspaper essay: a public monetary-policy intervention by Carl Menger on the Austrian gulden after the suspension of private silver coinage. Its scope is narrow but consequential: it explains why the Austrian silver gulden had come to circulate above the bullion value of its silver content, why this condition differed from other “limping” standards, and why the situation created both temporary stability and serious political danger.

Der Zustand des österreichischen Geldwesens bietet seit ungefähr zehn Jahren das Bild einer volkswirtschaftlichen Anomalie dar, welche zu den interessantesten und merkwürdigsten in der Geschichte der Umlaufsmittel gehört.

English translation: For about ten years the state of Austrian monetary affairs has presented the picture of an economic anomaly which belongs among the most interesting and remarkable in the history of the media of circulation.

Menger begins from an observed disparity: since 1879 the purchasing power of the gulden had exceeded the value of the 11½ grams of fine silver contained in it. The proximate cause was agreed upon: the state had stopped coining silver for private account. But Menger’s central move is to deny that Austria’s case can be explained like the German thaler, the French five-franc piece, or the American silver dollar. Those coins were raised by legal-tender force to parity with existing gold coins. The Austrian gulden, by contrast, was not tied to an actually circulating higher-value coin. Its value rested on an abstract unit.

Das Mass seines Verkehrswertes ist ein blosser Rechnungswert.

English translation: The measure of its exchange value is a mere unit of account.

The essay’s main thesis follows from this distinction. The gulden’s premium over silver was not produced simply by coercive legal tender. It arose because, after silver fell, free coinage would normally have expanded the stock of Austrian monetary media until the gulden’s purchasing power sank toward its silver content. The suspension of coinage blocked that adjustment. Existing silver coins and the paper signs representing them therefore acquired a scarcity value.

Es entstand eine Art von Seltenheitswert des gemünzten österreichischen Silbers und der dieses letztere repräsentierenden Geldzeichen und damit die Disparität zwischen dem Verkehrswerte und dem Silberwerte des Guldens österreichischer Währung.

English translation: A kind of scarcity value of the coined Austrian silver, and of the monetary tokens representing it, arose, and with it the disparity between the exchange value and the silver value of the gulden of Austrian currency.

Menger’s conceptual structure is thus supply-and-demand analysis applied to money itself. He separates the gulden’s metallic content, its market purchasing power, and its accounting-unit function. Because Austria lacked free silver coinage and because silver coins could not flow abroad at their artificial domestic value, the gulden’s value depended on the relation between the stock of circulating media and the needs of trade. State coinage, banknotes, treasury notes, seasonal demand, commercial expansion, and money-saving instruments could all alter it.

Die Kaufkraft des österreichischen Guldens wird wesentlich durch interne Verhältnisse, durch die Grösse unseres Geldumlaufes und den Umfang unseres Verkehrs beeinflusst.

English translation: The purchasing power of the Austrian gulden is essentially influenced by internal conditions, by the size of our money circulation and the volume of our trade.

This leads Menger to reject a common explanation: fluctuations in exchange rates are not the cause of the gulden’s changing purchasing power but only its visible symptom. International payments may cause ordinary exchange-rate movements, but they cannot explain the deeper disparity between coined gulden and silver bullion. The absence of an Austrian silver market obscures the matter; if silver bars were quoted directly in gulden at Vienna, the internal monetary cause would be obvious.

The final section gives the essay its policy force. Menger acknowledges that the 1879 measure, whatever its intention, spared Austria-Hungary a dangerous fall in the domestic standard of value. By limiting the monetary stock while silver declined, the governments unintentionally created a relatively stable internal money.

Österreich-Ungarn hat sich im letzten Dezennium eines relativ stabilen Wertmasses im Inlandverkehr erfreut, ein Umstand, dessen Bedeutung für die Volkswirtschaft gar nicht überschätzt werden kann.

English translation: Austria-Hungary has enjoyed in the last decade a relatively stable measure of value in domestic trade, a circumstance whose significance for the national economy cannot possibly be overestimated.

Yet this stability is precarious because it rests on administrative discretion rather than law. Since the suspension of private silver coinage had been enacted by ordinance, the same authority could restore coinage or expand silver issues, thereby lowering the real value of debts and redistributing wealth on a vast scale.

Die Regierungen von Österreich und Ungarn haben es in ihrer Hand, den reellen Wert sämtlicher in Österreich-Ungarn bestehenden Forderungen im Verordnungswege um ein Fünftel zu verringern, die Verpflichteten um ebensoviel zu entlasten.

English translation: The governments of Austria and Hungary have it in their power to reduce, by way of decree, the real value of all claims existing in Austria-Hungary by one-fifth, and to relieve those bound by them to the same extent.

The essay is therefore both monetary theory and constitutional warning. Its relevance lies in Menger’s analysis of a managed, partially fiduciary currency before formal gold-standard reform: a money can stand above its metal content when institutional restriction creates scarcity, but that same artificial value exposes creditors, debtors, and the whole economy to discretionary state action.