Eugen Peter Schwiedland, Geld und Währung (1921)

Eugen Peter Schwiedland’s separately published pamphlet explains money and monetary systems against the background of wartime finance and postwar depreciation, especially in Austria. Its two sections move from the emergence and functions of money to the institutional organization of currencies and the prospects for stabilization. The central problem is how socially accepted purchasing power can acquire a dependable foundation. Schwiedland recognizes that monetary value can become detached from metallic substance, but doubts that state authority alone can secure it. His qualified preference for a metallic anchor rests ultimately on the difficulty of guaranteeing monetary restraint during war.

Section I begins with direct and indirect exchange. Direct barter requires complementary wants; indirect exchange introduces goods acquired for further exchange rather than consumption. A generally marketable intermediary reduces potentially lengthy chains to two transactions. Examples of postwar industrial barter make this developmental account immediately contemporary: monetary breakdown can force advanced economies back into cumbersome exchanges of goods. Money emerges when the intermediary normally circulates instead of passing into material consumption, and when its acceptance extends beyond active traders. Payments outside exchange, including tribute, further generalize its role.

Wir sehen im Geld eine Schöpfung des gesellschaftlichen Lebens selbst und erkennen, daß es die Wirkung hat, die Beziehungen der Menschen zu erleichtern und zu vervielfachen.

English translation: We see money as a creation of social life itself and recognize that its effect is to facilitate and multiply relations between people.

This social explanation establishes the limits of a purely juridical theory. Money facilitates production, broadens competition, and makes prices more representative of market conditions. Its purchasing power acquires goods or services, while its payment power extinguishes obligations. Measurement, saving, and accounting develop around these functions. Schwiedland also describes a progressive dematerialization: clearing and transfers allow claims to circulate without the physical delivery of coins. Nevertheless, he explains the historical predominance of precious metals through both technical properties—durability, divisibility, portability—and socially sustained desires for ornament, prestige, and accumulated wealth.

The confrontation between metallism and Knapp’s chartalism sharpens the distinction between legal validity and effective economic power. Governments can prescribe what discharges debts and what their own treasuries accept. They cannot thereby guarantee how much those instruments will purchase.

Der im Wesen nicht-staatliche Charakter des Geldes ergibt sich daraus, daß eine rückhaltlose Schöpfung von Zahlmitteln, etwa nur nach dem Zahlungsbedürfnis des Staates, die als Geld verwendeten Zahlungsmittel selbst um ihre Fähigkeit bringen kann, Nachfrage nach Waren wirksam werden zu lassen.

English translation: Money’s essentially non-state character follows from the fact that an unrestricted creation of means of payment, for instance solely according to the state’s payment requirements, can itself deprive the means of payment used as money of their capacity to make demand for goods effective.

Schwiedland accordingly reserves money in the strict sense for valuable material or effective representatives of it, describing inconvertible paper as a substitute. Yet his subsequent analysis complicates this restrictive definition: scarcity and payment demand can sustain paper independently of its substance. The pamphlet’s important tension lies between acknowledging this functional autonomy and distrusting its political durability.

Inflation supplies the practical test. Wartime procurement combined price-insensitive military demand, shortages, and unrestricted note issuance. New purchasing power first strengthened particular recipients, whose expenditure raised prices; subsequent wage and salary increases fed further adjustments. Schwiedland therefore connects monetary expansion with production constraints and unequal access to purchasing power, rather than presenting depreciation as a uniform experience.

Die einen schneiden daher bei der Geldentwertung gut ab, die anderen schlecht.

English translation: Some therefore fare well under monetary depreciation, others badly.

Owners of inventories and productive assets, together with debtors repaying nominal obligations, can benefit; creditors and recipients of fixed incomes lose. Deflation reverses these advantages but can also restrict trade and production. Schwiedland distinguishes domestic purchasing power from foreign exchange value, explaining their divergence through distrust, capital flight, import requirements, and foreign holdings of notes. Stabilization thus demands more than administrative withdrawal of currency: he emphasizes production, exports, reduced domestic consumption, and fiscal restraint, while recognizing the contractionary consequences of appreciation.

Section II defines currency as a state’s monetary constitution: a legally coordinated system whose different denominations substitute for one another. It distinguishes metal-bound from unanchored currencies, then examines gold and silver standards, parallel systems, bimetallism, and “limping” standards. Free minting connects coin value to bullion value; restrictions on excessive wear protect metallic content. Fixed legal ratios between gold and silver become unstable when market ratios change, encouraging the displacement of the legally undervalued metal. These mechanisms explain why monetary unity cannot simply be decreed.

Austria-Hungary provides the decisive institutional case. Schwiedland follows its paper issues, the suspension of silver minting, and the introduction of the crown in 1892. Despite gold coinage and exchange-rate management, the absence of obligatory note redemption meant that the monarchy possessed a gold-supported paper currency rather than a fully operative gold standard. Practical parity could exist without legal convertibility, but wartime expansion destroyed its supporting conditions.

Historical restorations of convertibility nevertheless prevent an absolute rejection of paper.

Die Lehre aus diesen Vorgängen ist, daß die Einführung solider Papierwährungen möglich ist, wenn eine entsprechende und unverbrüchliche Begrenzung der Noten gewährleistet ist.

English translation: The lesson of these developments is that the introduction of sound paper currencies is possible if an appropriate and inviolable limitation of note issuance is guaranteed.

The final recommendation is therefore conditional rather than simply metallist. Reliable restraint could sustain national, even international, paper money; war makes that guarantee doubtful. Schwiedland proposes rebuilding a gold reserve and fixing an official relation between notes and gold. The pamphlet’s historical significance lies in this conjunction of social monetary theory, distributional analysis, and postwar reconstruction: metallic backing matters chiefly as a safeguard against the fiscal pressures that undermine otherwise workable monetary conventions.