Richard Reisch’s essay is a single-author monetary-theoretical intervention from the interwar stabilization period. Writing as theorist and central banker, he argues that war and inflation made the older doctrine of the note bank insufficient: central banking must now be understood as the governance of a whole credit-money order, not merely as the administration of metallic redemption.
Das Ergebnis war in allen Ländern Europas, daß die Gold- und zumeist auch die Silbermünzen vollständig aus dem Verkehr verschwanden, der fortan ausschließlich durch Papiergeld bedient wird.
English translation: The result was that in all countries of Europe the gold and mostly also the silver coins disappeared entirely from circulation, which from then on is served exclusively by paper money.
This displacement of specie is the starting point. Reisch does not treat paper circulation as a temporary anomaly; it changes the function of the banknote itself. The note is no longer best grasped as an ordinary claim to coin, but as a public guarantee of monetary value, sustained through reserve policy, discount policy, and exchange-market action. Gold and gold-devisen still matter, yet their significance is qualitative and prudential rather than automatic.
The new central-bank balance sheet therefore becomes a central object of analysis. Reisch distinguishes liquid commercial assets and metallic or foreign-exchange reserves from claims on the state, which often entered the note cover as a legacy of war finance. Such assets may satisfy legal cover rules, but they tie the note issue to fiscal needs and weaken the bank’s freedom of action.
Als Unterlage der umlaufenden Noten dienen — außer dem Barschatz und den eskontierten Warenwechseln — derzeit in weit größerem Ausmaße, als dies früher üblich war, Forderungen gegen den Staat.
English translation: As backing for the notes in circulation there serve — besides the metallic reserve and the discounted commercial bills — at present, to a far greater extent than was previously customary, claims against the state.
Reisch’s position is neither simple metallism nor inflationism. He accepts the gold-exchange reconstruction where it stabilizes purchasing power, but warns against treating stronger cover as permission for new credit expansion. The central bank should intervene in foreign exchange and husband reserves; where gold pours in excessively, even non-use can be a stabilizing act.
Es ist daher gewiß richtig, wenn die Federal Reserve-Banken die ihnen überreichlich zufließenden Goldmengen in weitem Maße „unausgenützt“ in ihren Kellern einsperren und nicht als Grundlage weiterer Kreditexpansion verwenden.
English translation: It is therefore certainly correct that the Federal Reserve Banks largely lock away "unused" in their vaults the excessively abundant gold flowing to them, and do not use it as a basis for further credit expansion.
The conceptual middle of the essay extends the same logic from notes to giro balances and private bank credit. Central-bank deposits are economically akin to notes because they can immediately perform the same payment functions. Bank credit, however, is not arbitrary creation. It rests on expectations of future payment, collateral, liquidity, rediscountability, and confidence, and it remains bounded by the real goods available to complete production. Money and credit allocate claims over resources, but do not themselves create the real fund of production.
This underlies his account of crisis. Following the Böhm-Bawerk, Wicksell, and Mises line, he treats the loan rate as dangerous when central-bank policy pushes it below the rate warranted by real saving and capital supply. Cheap credit lengthens production beyond the available goods fund, generates price pressure and malinvestment, and ends in liquidation and unemployment. The point is not hostility to credit but proportionality between fiduciary media and the economy’s real capacity.
The closing critique of L. Albert Hahn rejects the fantasy of unlimited cashless credit. Even a giro economy needs immediately available settlement balances, and private banks remain constrained by liquidity, reputation, rediscount access, and the central bank’s ultimate position at the apex of clearing and confidence. The decisive question is therefore how far fiduciary issue can responsibly go.
Daher stellt die Frage, inwieweit von dem Rechte zur Ausgabe fiduziärer Banknoten Gebrauch gemacht werden soll, eine sehr verantwortungsvolle Aufgabe der Notenbank dar, deren Bedeutung bisher wohl noch viel zu wenig gewürdigt worden ist.
English translation: Therefore the question of the extent to which the right of issuing fiduciary banknotes should be exercised constitutes a highly responsible task for the central bank, whose significance has hitherto been far too little appreciated.
The essay’s enduring significance lies in its early macroprudential conception of central banking. Reisch’s note bank is not a passive printer, a profit-seeking bank, or an omnipotent stabilizer; it is guardian of a layered credit system whose money remains sound only when credit remains disciplined.
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