Richard Reisch: Why Austria Needs the Nationalbank (1922)

Richard Reisch’s journal article Warum wir die österreichische Nationalbank brauchen. Eine Aufforderung zu ihrer Zeichnung combines an explanation of monetary reconstruction with an appeal to subscribe to the new Austrian Nationalbank’s shares. Its central claim is that recovery requires more than stopping currency depreciation: Austria must restore the distinction between money, credit, and productive capital, and rebuild the confidence connecting them. The argument moves from the dissolution of the Habsburg monetary system through the institutional safeguards of reconstruction to exchange-rate policy, ending by making subscription an act of economic self-confidence.

Reisch begins with a sharply political diagnosis. He blames Article 206 of the Treaty of Saint-Germain for ordering the liquidation of the Austro-Hungarian Bank without providing adequately for the successor states’ monetary institutions. Their improvised state banking offices could not supply the foundations of an orderly currency. Reisch also defends his own decision, as finance secretary in December 1919, to retain the old bank’s Austrian operating apparatus during liquidation. Administrative continuity was useful, but necessarily temporary. Establishing the new bank now becomes, in his account, evidence that Austria can retain a leading role in Central European financial organization despite its diminished circumstances.

The reconstruction programme resolves a dispute about sequencing: should a central bank precede financial rehabilitation or crown its completion? Reisch supports undertaking the League of Nations loan, budgetary consolidation, and bank foundation together, although this separates the bank’s establishment from definitive currency reform. The decisive enabling condition is external finance. Only because the state can meet indispensable borrowing needs elsewhere can it credibly renounce the printing press. Institutional reform and international assistance thus make one another effective.

His conceptual argument attacks the belief that printing notes creates the resources required for investment. Parliamentary appropriations for rail electrification, hydroelectric development, housing, and public enterprises do not themselves supply productive capital. Capital consists of saved economic goods withheld from immediate consumption and devoted to later production; credit transfers command over those resources. Inflation confuses these distinctions while undermining their common foundation:

Alle diese Begriffe beruhen nämlich in letzter Linie auf dem Vertrauen, und ohne Vertrauen gibt es unter den heutigen Verhältnissen kein Geld und keinen Kredit, ohne Geld und ohne Kredit aber gibt es auch keine Kapitalsbildung und keine Kapitalsübertragung.

English translation: All these concepts ultimately rest on confidence, and without confidence there is, under present conditions, neither money nor credit; without money and credit, however, there is neither capital formation nor capital transfer.

Confidence here has concrete allocative consequences. Savers must expect to preserve or recover equivalent value. Otherwise they stop saving or redirect wealth into property, foreign currencies, foreign investment, gold, jewellery, and antiques instead of domestic production. Reisch connects this withdrawal to stalled hydroelectric construction, declining demand for production goods, and emerging unemployment. Monetary disorder is therefore not merely a disturbance of prices: it interrupts the formation and circulation of productive resources.

His institutional prescription follows a traditional banking rule: notes issued beyond metallic reserves should rest on short-term credits whose repayment returns the notes to the bank. Budget-deficit lending violates this principle because it becomes prolonged, recurrent, and unsecured. Whether depreciation is explained through quantity theory, additional purchasing power, or lost confidence matters less to him than the practical convergence of these explanations. The prohibition on financing state needs through the new bank, reinforced by League obligations and assistance, is the essential safeguard against further depreciation.

Reisch nevertheless distinguishes monetary discipline from an immediate balanced budget. He considers complete budgetary equilibrium within two years possibly utopian; a sufficiently reduced deficit could still be financed through ordinary borrowing. Nor does he dismiss public investment as undesirable. His objection concerns its financing: worthwhile projects still require voluntarily supplied domestic or foreign savings. Credibility cannot simply be proclaimed:

Dieses Vertrauen muß durch entsprechendes wirtschaftliches Gebaren täglich neu verdient werden, um ungeschmälert erhalten zu bleiben.

English translation: This confidence must be earned anew every day through appropriate economic conduct if it is to remain undiminished.

The exchange-rate discussion qualifies any reading of Reisch as advocating appreciation without limit. Restoration of the crown’s former value is impossible, and continuing appreciation can disrupt economic activity as much as continuing depreciation:

Eine geregelte Wirtschaft verlangt eben einzig und allein nach einem stabilen Gelde als Voraussetzung und Grundlage jeder sicheren Kalkulation.

English translation: An orderly economy requires, quite simply, stable money as the prerequisite and foundation of every reliable calculation.

Yet stability does not require accepting the current exchange rate as permanently correct. Reisch pictures prices across domestic, foreign, luxury, necessities, and property markets as uneven waves rather than a level surface. Adjustment takes time. Ending monetary financing may reveal that part of the crown’s weakness expressed distrust rather than underlying economic conditions. A moderate appreciation could therefore emerge from restored confidence, without becoming an overriding policy target.

The concluding subscription appeal translates this analysis into action: finance the state through the gold loan and establish the bank through share subscriptions. Reisch acknowledges that inflation helped Austria through emergencies, but rejects dependence on it:

Aber Inflation ist nur ein Narkotikum, kein Heilmittel, sie beruhigt vorübergehend, zerrüttet aber endgültig jede Volkswirtschaft, welche sich an ihren Gebrauch gewöhnt.

English translation: But inflation is only a narcotic, not a remedy; it soothes temporarily, but ultimately ruins every economy that becomes accustomed to its use.

The article’s significance lies in this conjunction of banking doctrine, international reconstruction, and public persuasion. Its promised recovery rests on work, saving, and expenditure constrained by available resources, supplemented where possible by foreign capital. Subscription is presented as both material support for that programme and a public demonstration of the confidence on which Reisch believes its success depends.