Richard Reisch, Stellung und Aufgaben der Österreichischen Nationalbank innerhalb des Wiederaufbauprogrammes (1923)

Richard Reisch’s article records a lecture delivered to the Niederösterreichischer Gewerbeverein by the president of the Austrian National Bank and former finance minister. It combines an account of Austria’s stabilization with a theoretical and practical defence of the new bank’s policies. Its central claim is that reconstruction requires stable money, secured by independence from government deficit financing, adequate foreign-exchange reserves, and disciplined lending. Reisch moves from the origins of the League of Nations reconstruction programme through the choice and defence of the exchange rate to the problems of interest rates, speculation, and capital scarcity.

For Reisch, the dispute over whether public finances or the wider economy must recover first obscures their common monetary condition. Neither can recover while government deficits continually depreciate the currency. He therefore interprets the League loan primarily as an instrument of monetary stabilization: covering two years’ anticipated deficits was the indispensable means of ending dependence on the printing press. Establishing an independent bank forbidden to extend further state credit belonged at the beginning of reconstruction. Domestic bridge loans and subscriptions to the bank’s capital also demonstrated Austrian self-help during the delays in securing international assistance. Confidence was already economically effective before the promised funds arrived.

Reisch’s theoretical argument distinguishes a large money stock from continuing inflation. Inflation is a process of monetary expansion unsupported by corresponding goods or stable backing, not simply the existence of more notes than before the war. An economy can adjust to a fixed quantity of paper money; persistent changes in its value undermine economic calculation.

Das der österreichischen Nationalbank vorgezeichnete Ziel war also die Schaffung eines stabilen Geldwertes.

English translation: The goal prescribed for the Austrian National Bank was therefore the creation of a stable monetary value.

Stability does not mean restoring the crown’s prewar gold value. Reisch distinguishes domestic purchasing power, measured through commodity prices, from the currency’s external exchange value. International trade tends to bring these valuations toward a world parity of commodity prices, although restrictions, administered prices, and differences in living standards obstruct convergence. The stabilization rate should consequently minimize another general price adjustment rather than embody an arbitrary ambition to strengthen the crown.

He defends approximately 71,000 crowns to the dollar on these grounds and because that rate encouraged foreign-exchange inflows. The accumulated reserves helped the bank resist pressure when confidence weakened early in 1923. Appreciation might have produced a stronger nominal crown but fewer reserves and harmful disruption to enterprise. Reisch nevertheless identifies creditors and rentiers as the decisive exception to his argument that economic activity can adapt to different stabilization levels. Inflation permanently reduced their claims while relieving debtors. He condemns this redistribution, but assigns possible compensation to legislation rather than currency policy.

The lecture’s technical centre explains why the subsequent expansion of circulation need not repeat inflation. Reisch includes both notes and the bank’s transferable balances in circulation, acknowledging their substantial growth. The crucial distinction concerns what stands behind them: depreciating state promises had been replaced by liquid foreign-exchange assets of stable gold value.

Notenausgabe gegen Erwerb von Devisen ist also keine Inflation, aus ihr ist für die inländische Kaufkraft, wenn sie mit der nötigen Vorsicht und ohne Überstürzung durchgeführt wird, nichts zu befürchten; für den schlimmsten der Fälle aber verschafft sie selbst uns auch schon das Gegenmittel, mit welchem wir eine etwa doch eintretende Schwächung der Kaufkraft zu bekämpfen hätten.

English translation: Issuing notes in exchange for acquiring foreign exchange is therefore not inflation; provided it is undertaken with the necessary caution and without haste, nothing harmful to domestic purchasing power need be feared from it; even in the worst case, however, it itself already provides us with the countermeasure with which we could combat any weakening of purchasing power that might nevertheless occur.

That countermeasure is monetary elasticity. Selling reserves to meet demand for foreign exchange withdraws crowns from circulation, tightening their supply and supporting their value. Credit restriction and higher interest rates could reinforce this defence. Reisch qualifies his confidence by excluding extraordinary political catastrophes and leaving the prospective trade and payments balances outside his discussion. He also defends continued exchange controls while neighbouring countries retain theirs, and the 9 percent bank rate as appropriate to an impoverished economy needing savings and foreign capital.

The closing discussion addresses why commercial credit remains expensive despite stabilization. Inflation had redirected investors from fixed-income securities toward shares; habits of speculation and high returns on stock-exchange financing persisted after their original justification weakened. Together with taxes and restrictions on financial transactions, these practices diverted funds from banks and productive lending. The bank cannot remedy the resulting shortage simply by issuing more credit, because real capital consists of goods saved for subsequent production.

Solche wirtschaftliche Güter können durch bedrucktes Papier, als welche sich Inflationsnoten darstellen, nicht ersetzt werden.

English translation: Such economic goods cannot be replaced by printed paper, which is what inflationary notes amount to.

Accordingly, Reisch advocates short-term, fully secured lending, especially against genuine commercial bills, alongside saving, productive work, foreign investment, and financial reform. His lecture is significant as an institutional defence of stabilization that also defines its limits: a central bank can protect money and facilitate commerce, but cannot manufacture the resources destroyed by war and inflation. Its concluding appeal returns to confidence as both external credibility and domestic agency.

Vertrauen aber ist ein Doppelbegriff, er umfaßt nicht nur das Vertrauen der Dritten zu uns, sondern auch das Selbstvertrauen in uns.

English translation: Confidence, however, is a twofold concept: it encompasses not only the confidence others place in us, but also our confidence in ourselves.