Alfred Amonn, Fünf Jahre tschechoslowakisches Bankamt (1924)

Alfred Amonn’s article assesses the first five years of the Czechoslovak Bank Office, beginning with its first statement in April 1919. Its central argument distinguishes legislative intentions from the practical formation of monetary authority:

Fünf Jahre sind seither verflossen und die praktische Tätigkeit des Bankamtes hat während dieser fünf Jahre die Währungspolitik der Tschechoslowakei mehr bestimmt als die zur Bestimmung der Währungspolitik eigentlich berufenen Gesetzgeber.

English translation: Five years have since elapsed, and during these five years the practical activity of the Banking Office has determined the currency policy of Czechoslovakia more than have the legislators actually called upon to determine currency policy.

Amonn examines two connected responsibilities: regulating domestic credit and managing exchange rates. The Bank Office initially possessed inadequate instruments for either task. Its inherited assets consisted largely of uncertain claims against the liquidating Austro-Hungarian Bank, while its liabilities included substantial monetary obligations. It lacked both sufficient claims on the domestic market and the precious-metal and foreign-exchange reserves necessary for external intervention.

Immobilizing three billion crowns of payment means initially gave the institution leverage over domestic credit:

Das hatte eine Geldknappheit zur Folge, derzufolge der Markt auf das Bankamt angewiesen war.

English translation: This had a scarcity of money as its consequence, in consequence of which the market was dependent upon the Banking Office.

Amonn distinguishes this operation from a straightforward withdrawal of circulating money intended to reduce prices: it chiefly withheld dormant reserves. Yet building foreign reserves required issuing new payment means, counteracting domestic restriction. The difficulty was structural, not simply a matter of choosing the right objective:

Bei der Lage, in der sich das Bankamt befand, konnten beide Ziele nicht gleichzeitig verfolgt werden, weil die hiefür in Betracht kommenden Mittel einander widersprachen.

English translation: In the situation in which the Banking Office found itself, both aims could not be pursued simultaneously, because the means that came into consideration for this purpose contradicted one another.

The Bank Office consequently concentrated first on the money market. Amonn’s analysis turns on the distinction between discounting commercial bills and lending against securities. Wartime reliance on cash settlement had displaced commercial bills, forcing the institution to employ Lombard credit. Such lending lacked the close connection to commercial turnover and automatic return of issued money associated with bill discounting. Restricting it also risked depressing securities prices. Its expansion reversed the initial contraction: payment means increased from seven billion crowns to thirteen billion by late 1921, weakening the Bank Office’s influence over the market.

Nevertheless, Amonn does not treat this departure from note-bank principles as sufficient evidence of failure. Under inherited conditions, Lombard lending supplied liquidity needed for the postwar expansion of 1920–21. Maintaining the original restriction would probably have obstructed recovery. His judgment is conditional: accommodation could be necessary before effective restraint became possible. Subsequent reductions in Lombard credit lowered payment means issued outside bill discounting to eight billion crowns, strengthening domestic monetary control.

Exchange-rate management followed a similarly uneven path. Political instability and inadequate reserves initially left the crown below its domestic purchasing power. After the failed Habsburg restoration attempt in Hungary and the easing of the political crisis in November 1921, accumulated reserves and a strong trade surplus made intervention feasible. Relatively modest expenditure initially brought the exchange rate into alignment with domestic purchasing power. Appreciation in summer 1922, however, carried it substantially beyond that level.

The problem then became sustaining the exchange rate while domestic prices and costs adjusted. Amonn examines reserve movements and delayed trade responses rather than treating appreciation as an uncomplicated success. Adjustment occurred during winter 1922–23 after some exchange-rate retreat, but its commercial consequences appeared later. Exports continued from inventories even while production for future sale stopped. When lower costs permitted production to resume, firms required foreign exchange for raw materials before renewed exports could replenish the supply. The Bank Office financed this temporary imbalance from reserves, which fell to approximately 1.6 billion crowns by April 1924.

Amonn nevertheless regards the institution’s position as stronger than in winter 1922–23. Provided credit policy remained unchanged, contraction of domestic circulation would limit continuing demand for foreign exchange. The article presents monetary authority as a capacity acquired through practice. Inherited constraints made domestic restriction and reserve accumulation initially incompatible; accommodation sustained economic activity, while later restraint established greater control. Policy success depended less on immediate conformity to monetary doctrine than on managing conflicting instruments and allowing time for economic adjustment.