Richard Reisch, Die höheren Aufgaben einer modernen Notenbank, insbesondere in Krisenzeiten (1925)

Richard Reisch’s journal article reproduces a lecture delivered to the Cobden-Bund in Budapest on 27 November 1925. Speaking as president of the Austrian National Bank, he examines how a privately constituted central bank acquires public responsibilities extending beyond note convertibility and shareholder returns. The argument moves from institutional independence and monetary policy to economic observation, crisis prevention, and exceptional rescue operations, concluding with a defence of Austrian interventions. Its central claim is that the privilege of issuing money carries unwritten obligations to protect the wider economy—but never at the expense of the currency itself.

Reisch begins with the apparent contradiction between the central bank’s joint-stock form and its national authority. State-issued paper money invites distrust because governments repeatedly exploit monetary creation for fiscal purposes. Private organization, commercial management, gold backing, and statutory independence offer safeguards, although he acknowledges that central banks have not prevented wartime inflation. Gold supplies an ostensibly objective constraint on both government and bank management; replacing it with an index-based currency would, he argues, expose monetary standards to political and sectional discretion. Independence therefore means neither unrestricted managerial power nor freedom to maximize profits.

Indeed, central-bank earnings can increase precisely when the economy suffers: money scarcity raises interest income, while depreciation enlarges accounting profits. Reisch consequently treats shareholders as participants in a public undertaking, entitled to capital preservation and reasonable remuneration but obliged to accept the financial consequences of its higher duties. Reserve accumulation helps reconcile those claims. Management bears the active responsibility for this officium nobile, while shareholders must tolerate its costs. The practical difficulty is that monetary instruments affect competing interests differently:

Der Notenbank stehen bekanntlich zwei scharfe, aber zweischneidige Waffen zur Verfügung: die Zinsfuß- und die Devisenpolitik.

English translation: The central bank has at its disposal, as is well known, two sharp but double-edged weapons: interest-rate policy and foreign-exchange policy.

Exchange-rate movements redistribute advantages between importers, exporters, creditors, and debtors; cheap credit can stimulate production or encourage stockholding and overinvestment. Policy therefore requires situated economic judgment rather than a universal formula. Reisch contrasts his limited leverage over Vienna’s speculative boom in 1923 with his successful opposition to an allegedly groundless revival in June 1925. These examples also establish limits: monetary policy cannot indefinitely defeat economically justified movements. Employment, humanitarian considerations, relatively inflexible wages, and supply fluctuations further qualify the influence attributed to interest rates. Against Fisher and Keynes, he disputes both monetary policy’s presumed command over prices and the unconditional desirability of a constant price level.

The preventive task begins with knowledge. Credit transactions provide a sensitive indicator of economic disturbances, making the central bank especially well placed to coordinate domestic observation and exchange information internationally. Reisch welcomes statistical departments, university research, and increasingly comparable central-bank reports. Yet forecasting does not confer control:

Gleichwohl dürfen die hierauf gegründeten Hoffnungen nicht überspannt werden, denn selbst die richtigste Erkenntnis der bevorstehenden Entwicklung gibt noch lange nicht notwendig die Mittel und Macht zur Beeinflussung, Förderung oder Abstoppung derselben an Hand, und ich habe schon früher erwähnt, daß jedenfalls die der Notenbankpolitik zur Verfügung stehenden Mittel sich für ein so hochgestecktes Ziel als unzulänglich erweisen.

English translation: Nevertheless, the hopes founded on this must not be exaggerated, for even the most accurate understanding of impending developments by no means necessarily supplies the means and power to influence, promote, or halt them, and I have already mentioned that, in any event, the instruments available to central-bank policy prove inadequate for so ambitious a goal.

Crisis prevention thus depends also on economic actors moderating their self-interest. Reisch favours autonomous coordination within business over administrative commands, presenting the central bank as a leading participant whose warnings derive force from knowledge and authority.

Once crisis threatens, the argument shifts from observation to organized intervention. Bank failures and market panics can spread like avalanches, destroying sound enterprises alongside unsound ones. Where government cannot act effectively, the central bank should assemble and lead voluntary support from banks and industry. Assistance may provide liquidity, enable an orderly settlement, or exceptionally absorb losses when doing so prevents greater public damage. Its justification is systemic rather than personal:

Richtig ist nur, daß nicht Hilfeleistung für das einzelne Unternehmen Zweck der Stützungsaktion sein kann, die einzelne Firma vielmehr nur als Glied des Ganzen, eigentlich als Mittel zum Zweck, in Betracht kommt.

English translation: What is correct is only that assistance to the individual enterprise cannot be the purpose of the support operation; rather, the individual firm comes into consideration only as a member of the whole, indeed as a means to an end.

Protecting a large institution can therefore protect its smaller clients, debtors, and other victims. Punishment of culpable managers belongs to the courts; economic guardians must consider the consequences of uncontrolled collapse. Nevertheless, rescue resources are finite. The printing press cannot legitimately finance doubtful assets merely because intervention seems desirable. Eligible backing and the bank’s own reserves constrain assistance, and those reserves principally serve monetary stability.

Reisch defends the Depositenbank rescue attempt and stock-exchange support on these grounds. Although their immediate objectives were not ultimately achieved, he argues that they softened the initial shock and prevented wider losses. Such benefits resist measurement because the outcome without intervention remains unknowable. His concluding position is deliberately exceptional: rescue leadership is an emerging central-bank responsibility, not an established universal doctrine or a guarantee against bad management. The article’s lasting significance lies in joining public-purpose discretion to strict monetary limits, while identifying the difficult comparison between visible rescue costs and invisible damage averted.