Richard Kerschagl, Die Konferenz der südamerikanischen Zentralnotenbanken (1933)

Richard Kerschagl’s journal article examines the fourteen questions discussed at the South American central banks’ currency conference in Lima around the turn of 1931, whose original proceedings had only recently become accessible. Participants included all South American note-issuing banks, representatives of the Federal Reserve Bank of New York, and Professor Kemmerer as an expert. Kerschagl reorganizes their deliberations thematically, moving from reserve management and lending to exchange controls, fiscal policy, foreign indebtedness, and international cooperation. His central judgment is that the conference produced consequential proposals for safeguarding gold-based currencies while opening a practical route toward inter-American central-bank cooperation.

The most important recommendations concern the security of monetary reserves. The conference permitted first-class foreign-currency bills with maturities no longer than ninety days to constitute up to 40 percent of reserves, provided they were payable at gold-standard centres. Gold convertibility was the decisive qualification:

Selbstverständlich dürften derartige Guthaben nur in Ländern gehalten werden, welche ihre Noten unbedingt und unbeschränkt in Gold einlösen.

English translation: Naturally, such balances could be held only in countries that redeem their notes in gold unconditionally and without restriction.

The suspension of gold convertibility affecting London balances made this requirement urgent. The conference recommended liquidating holdings in currencies no longer convertible into gold, notwithstanding losses, and securing agreements guaranteeing conversion of foreign balances at mint parity. Kerschagl judges these safeguards more far-reaching than the results of the Bank for International Settlements’ 1931 conference. He also expects them to influence actual reserve management, rather than remain theoretical declarations.

Domestic lending reform combines greater flexibility with stronger supervision. Recommendations include extending credit maturities to 120 days, relaxing certain borrower limits for adequately secured commodity credits, and permitting exceptional rediscounts against additional collateral within specified ceilings. Preferential rates would encourage first-class bills, while institutions better suited to illiquid lending would take over long-term credits. Kerschagl insists that these measures cannot be understood simply as credit expansion:

Man darf aber, um richtig zu urteilen, nicht vergessen, daß gleichzeitig strenge Kautelen für solche Notkredite gefordert werden und insbesondere Punkt 7 der Resolution zu Frage IV weitgehende Einfluß- und Kontrollmaßnahmen von seiten der Notenbanken hinsichtlich jener Institute fordert, welche solche Kredite in Anspruch nehmen.

English translation: To judge correctly, however, one must not forget that strict safeguards are simultaneously demanded for such emergency credits and that, in particular, point 7 of the resolution on Question IV calls for extensive measures of influence and control by the central banks over those institutions that make use of such credits.

Emergency support thus entails repayment deadlines, restrictions on renewed borrowing, and institutional examination. Other recommendations seek cooperation among central banks and the BIS when international market borrowing becomes unavailable, alongside stable dividend policies supported by special reserves.

Exchange controls produce disagreement rather than consensus. Colombia, Bolivia, and Chile consider experience insufficient and national circumstances too varied for a general verdict. Ecuador and Peru locate exchange difficulties in broader economic imbalances and advocate monetary action on the price level. They regard controls as psychologically destabilizing, vulnerable to evasion, and necessarily temporary. Colombia separately defends its import, export, and gold-flow measures. Kerschagl’s interpretation is deliberately contextual: controls on gold movements have a different significance in a major gold-producing country with a comparatively weak credit system. His account therefore distinguishes transferable lessons from recommendations dependent on national economic structures.

Fiscal balance and institutional credibility form another connected group of questions. The conference treats balanced budgets as indispensable to sound financial and monetary policy. It also seeks protection against excessive taxation that drives capital abroad and supervision that ensures banks honour their obligations. Coordination between fiscal and banking policy must coexist with central-bank independence:

Dabei müßten aber die Zentralbanken von jeder politischen Beeinflussung absolut freibleiben und die Regierung und ihre Funktionäre sich jeder derartigen Einflußnahme enthalten.

English translation: In this, however, the central banks would have to remain absolutely free from all political influence, and the government and its officials would have to refrain from exerting any such influence.

The associated demand that supervisors remain within their legal remit reveals the distinction between legitimate oversight and political interference.

Foreign indebtedness exposes a harder conflict. Falling public revenues and exports threaten debt service and currency stability. Kerschagl reads the conference’s restrained resolution as acknowledging that debtor states, pressed to choose between their international credit standing and monetary stability, have preferred to protect the latter. This limits the immediate relevance of proposals for fresh foreign lending. One-to-three-year credits for productive purposes, especially standard export commodities, remain desirable, but their practical prospects depend on resolving existing international obligations.

The conference nevertheless affirms a return to gold, supported by technical improvements and international cooperation. Kerschagl finds this commitment characteristic, while criticizing the final gold-standard discussion for insufficiently addressing the gold-exchange arrangements examined earlier. His concluding assessment remains favourable. Plans for a 1933 conference inviting all American central banks, closer European and BIS cooperation, and a central focus on inter-American collaboration suggest an institutional opportunity. The article’s broader significance lies in this guarded possibility: continental cooperation, frustrated in other political and commercial projects, might advance more rapidly through central banking.