Menger’s pamphlet, a revised separate edition of his journal articles on currency reform, examines Austria-Hungary’s monetary predicament and the conditions for a defensible transition to gold. Its six principal sections move from monetary history through the diagnosis of present dangers to alternative standards and the choice of a monetary unit. Menger supports gold as the most practical basis for international payments, but distinguishes its advantages from the separate requirement of stable purchasing power. Reform must secure the currency without unnecessarily redistributing wealth, intensifying gold appreciation, or disrupting domestic habits of calculation.
The opening sections distinguish successive problems too easily subsumed under “currency regulation.” Between 1848 and 1878, paper money traded below silver. Initially, state borrowing deprived the National Bank of the resources needed to redeem its notes; restoring the currency therefore required repayment and protection against renewed fiscal dependence. After 1866, the bank’s condition improved, but excessive irredeemable state notes remained. Maintaining the circulation of otherwise sound banknotes alongside them required keeping banknotes legally irredeemable and subject to compulsory acceptance. The remedy had become withdrawal of excess state paper, rather than merely repairing the bank’s finances.
The disappearance of the silver premium in 1878 did not demonstrate that this remedy had been applied. Falling international silver prices made importing bullion and minting Austrian silver coins profitable. Arbitrage expanded coin supply until silver money descended to the value of paper, whose supply was more strictly constrained. Suspending private silver coinage in 1879 prevented further bullion depreciation from dragging the whole currency downward. It also produced the defining anomaly: a legally silver-based currency whose purchasing power substantially exceeded its metallic content.
Er ist im eigentlichen Verstande des Wortes ein durch die thatsächlich bestehende, verhältnismäßig strenge Kontingentierung unserer Umlaufsmittel herbeigeführter originärer Seltenheitswert.
English translation: It is, in the proper sense of the word, an original scarcity value brought about by the actually existing, relatively strict limitation of our circulating media.
This “original” value is not borrowed from a superior coin circulating alongside the gulden, as subsidiary coins or silver coins under a gold standard derive their value from the principal currency. Menger thus separates bullion value, production cost, and monetary exchange value. Austria-Hungary supplies empirical evidence against identifying money with a stamped quantity of precious metal.
Section IV nevertheless treats this scarcity-based arrangement as precarious. Fluctuating gold exchange rates impose currency speculation on ordinary foreign business. Monetary isolation obstructs international flows that would otherwise moderate interest rates and settle payment imbalances. The administrative suspension of private minting lacks secure legislative foundations, while excessive state notes leave open the possibility of renewed depreciation during a crisis. Further silver-price falls could deepen the gulf between the currency’s exchange value and its metallic basis. Production costs offer no reliable floor:
Der Markt kümmert sich nur wenig um die Produktionskosten; Angebot und Nachfrage bestimmen die Höhe der Preise.
English translation: The market pays little attention to production costs; supply and demand determine the level of prices.
Expanding mine output, substantial by-product production, and accumulated monetary silver all matter. Existing policies hold large stocks off the market; their release could overwhelm demand even if new production stopped. The danger therefore concerns accumulated supply as well as mining costs.
The extensive fifth section evaluates silver, bimetallism, and several forms of gold currency. Restoring free silver minting at the old coinage standard would depreciate the gulden and transfer wealth from creditors to debtors. Such a transfer would not fairly compensate those affected in 1879: the persons now benefiting and losing would often be different. A heavier silver coin could initially preserve value but would retain exposure to silver fluctuations. National bimetallism would expose the currency to whichever metal became advantageous to mint. International bimetallism receives a more respectful assessment: Menger considers it intellectually serious, but politically uncertain and potentially destabilizing through enlarged silver supply.
Gold offers convenient circulation and participation in the principal international payments system. Yet these advantages do not prove its value stable. Neither changes in the gold–silver ratio nor commodity-price comparisons alone securely identify whether gold appreciation, silver depreciation, or changes in commodities caused observed movements. Menger nevertheless judges further gold appreciation a serious danger, intensified by Austria-Hungary’s own purchases.
His circulation estimates make that warning concrete. Projecting monetary requirements of roughly 950–1,000 million gulden, he calculates alternative combinations of gold, subsidiary coin, uncovered banknotes, treasury certificates, and limited silver currency. Foreign gold requirements would amount to at least about 260,000 kilograms, probably 285,000–300,000. He therefore recommends cautious acquisition over several years and postponement of the conversion ratio and cash redemption until most necessary gold has been obtained and the disturbed market has recovered its equilibrium.
Nicht den Verfechtern der „tadellos feinen“, sondern jenen der möglichen Goldwährung scheint mir nämlich allenthalben die Zukunft zu gehören.
English translation: For it seems to me that everywhere the future belongs not to the advocates of the “impeccably pure” gold currency, but to those of the practicable gold currency.
A strictly limited silver circulation can economize on gold without undermining gold accounting. Menger proposes connecting silver currency with fully silver-backed, redeemable treasury certificates, with their combined circulation capped. International cooperation in clearing, banking, and gold-saving monetary arrangements would likewise reduce appreciation pressures. Currency design becomes a responsibility toward other economies as well as one’s own.
Section VI distinguishes adopting a standard from changing the unit of account. Joining the mark or franc system would impose difficult conversions on domestic contracts and prices for comparatively modest commercial benefits. Menger also rejects supposed connections between a smaller unit, national wealth, thrift, and social welfare:
Der Reichtum der Völker steht in keiner notwendigen Beziehung zu ihrer Münzeinheit.
English translation: The wealth of nations bears no necessary relationship to their monetary unit.
He prefers retaining the hundred-kreuzer gulden over introducing the half-gulden crown. Familiar units protect continuity, intelligible valuations, and less experienced participants; a smaller unit may encourage inconvenient price rounding rather than prevent it. The pamphlet’s governing distinction is consequently between functional reform and monetary purity: international integration is desirable, but stability and domestic usability—not metallic composition or fashionable denominations—must determine its implementation.
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