Emil Lederer, Die Valutastabilisierung (1922)

Emil Lederer’s newspaper article examines currency stabilization as an immediate Austrian policy problem and a prospective German one. Its central argument is that stabilizing an exchange rate requires more than foreign credit: it depends on domestic economic adjustment, the management of currency holdings abroad, and a politically consequential choice of the rate to be maintained. Stabilization and appreciation are distinct objectives. Restoring a higher currency value could injure production and employment while benefiting recipients of fixed monetary incomes. Lederer moves from the mechanics of Austrian credit assistance to these distributive conflicts, finally extending his warning to Germany.

Die Fragen der Valutastabilisierung, welche bisher lediglich theoretisch erörtert wurden, sind nunmehr in Oesterreich zu praktischen Problemen geworden.

English translation: The questions of currency stabilization, which until now have been discussed only theoretically, have now become practical problems in Austria.

This opening establishes the article’s practical orientation. Foreign loans are intended both to cover Austria’s unavoidable import deficit and to keep its currency at a steady level, but Lederer doubts whether their scale will suffice for both purposes. Germany should follow the Austrian debate because the Genoa conference raises the possibility of addressing German economic problems internationally. Austria thus supplies a concrete case through which to examine the conditions and dangers of a stabilization policy.

Lederer first distinguishes immediate relief from durable equilibrium. Financing imports with foreign credit would reduce the government’s need to purchase foreign currency and thereby remove an important pressure on the krone. It would not, however, definitively secure the exchange rate. He identifies two further requirements: eliminating the budget deficit and subsequently the import deficit, and counteracting the pressure exerted by foreign holders selling their kronen. Budgetary balance belongs primarily to domestic economic policy. Higher production and restricted consumption would have to make a sufficient increase in state revenue possible. Because this adjustment cannot be expected quickly, the loans must be large enough to sustain the intervening period.

The second requirement exposes a paradox of successful stabilization. Foreign holders may previously have retained kronen in anticipation of an eventual recovery. Once an effective policy makes the future rate predictable, the prospect of speculative gains from appreciation disappears. Holders may then exchange their notes for stronger currencies. Stabilization can therefore precipitate the liquidation of accumulated balances precisely when the authorities begin to establish confidence in a fixed rate. Lederer acknowledges uncertainty about the size and previous market effects of these holdings, but regards their prospective sale as a serious demand on the available credit.

Unless those balances can be consolidated into a long-term loan—a possibility he considers unpromising—the government must use borrowed resources to absorb the excess supply. This expenditure would come on top of financing current imports.

Sie wären gleichsam eine nachträgliche Bezahlung von Importen, welche früher durch den Export von Noten vorläufig beglichen worden waren.

English translation: They would, as it were, constitute a retrospective payment for imports that had previously been provisionally paid for through the export of banknotes.

The formulation connects financial intervention to the history of the external deficit. Currency held abroad represents imports previously financed by exporting notes; absorbing those notes later makes that provisional settlement a renewed claim on foreign resources. Lederer consequently treats the sufficiency of the loans as a question involving both present import needs and liabilities inherited from earlier transactions.

He then turns from the resources required for stabilization to the level at which it should occur. Raising and maintaining the krone above its current exchange rate would require much greater expenditure of foreign currency than preserving the approximately stable rate already reached. Yet the choice cannot be reduced to the amount of credit available. The eventual exchange rate determines the domestic price level compatible with world-market prices. In Lederer’s example, doubling the krone’s external value would ultimately halve prices expressed in kronen relative to stabilization at the existing rate.

The decisive qualification is that this adjustment would not proceed evenly. Appreciation would rapidly diminish exports and provoke an industrial sales crisis. Wages would have to fall, while prices would decline only hesitantly. The resulting interval would damage both workers and entrepreneurs.

Eine solche Störung des Wirtschaftslebens würde Unternehmer und Arbeiter schwer schädigen und nur die Geldrentner würden eine Verbesserung ihrer Lage erfahren, weil ihre Einnahmen nunmehr kaufkräftiger wären.

English translation: Such a disruption of economic life would seriously harm entrepreneurs and workers, and only recipients of fixed monetary incomes would experience an improvement in their position, because their incomes would now have greater purchasing power.

This distributional argument explains the Austrian political conflict. Workers’ representatives seek stabilization near the existing rate; the Christian Social Party, presented as representing the middle strata and especially property owners, demands stabilization at a higher rate. Lederer condemns the latter policy as risking a severe economic crisis and undermining the entire assistance operation. His concern is therefore not simply monetary steadiness, but steadiness compatible with continued production.

The concluding application to Germany adds public debt to this analysis. A higher stabilized mark would increase the economic weight of the Reich’s debt and make its interest burden harder to meet; a lower rate would reduce that burden.

Auch für Deutschland kann nie mehr die Erreichung des alten Markwertes in Frage kommen, ja man kann im Gegenteil sogar sagen, daß eine Wirtschaftspolitik, welche sich dieses Ziel setzt, sämtliche Wirtschaftskräfte lähmen müßte.

English translation: For Germany, too, attaining the mark’s former value can never again be contemplated; indeed, one can even say, on the contrary, that an economic policy setting itself this goal would necessarily paralyze all economic forces.

The article’s relevance lies in its refusal to equate monetary recovery with restoration of an earlier currency value. International credit can support stabilization, but neither replaces domestic adjustment nor resolves the conflict over who gains from the chosen rate. Austria’s experience matters to Germany because demands made in the interests of fixed-income recipients could turn an ostensibly restorative policy into an obstacle to economic recovery.