Richard Kerschagl’s article examines why modern monetary policy cannot recover the apparent automaticity of the classical gold standard. Moving from historical diagnosis to policy instruments and a comparison of Soviet and American arrangements, it presents currency stability as dependent on production, capital formation, political priorities, and international cooperation—conditions that monetary technique alone cannot secure.
Die Währungen von heute, gleichgültig unter welchen Flaggen sie segeln, sind manipulierte und keine automatischen mehr, manipulierte selbst dann, wenn sie sich Goldwährungen nennen.
English translation: The currencies of today, no matter under what flags they sail, are managed and no longer automatic ones — managed even when they call themselves gold currencies.
This claim organizes Kerschagl’s contrast between nineteenth-century monetary institutions and the postwar economy. Gold redemption, relatively liberal trade, adequate reserves, and acceptance of contraction once supported monetary adjustment. Full-employment commitments now make deflation politically difficult and encourage devaluation instead. Intervention, redistribution, fragile payments balances, and concentrated gold holdings further alter the environment in which central banks operate. The historical exchange-rate mechanism supplies his benchmark:
Die Kurse pendelten im wesentlichen bei Ländern mit Barzahlung um die sogenannten Ausmünzungsparitäten und waren nach oben und unten begrenzt durch die beiden Goldpunkte.
English translation: In countries with cash payment the exchange rates fluctuated essentially around the so-called mint parities and were bounded above and below by the two gold points.
Modern currencies no longer operate within these constraints. Kerschagl treats contemporary Western currencies as effectively paper currencies, supported fundamentally by productive capacity rather than redeemable gold. Formal commitments cannot independently determine their external value:
Die Kurse bestimmen sich — und dies sogar dann, wenn irgendwelche vertragliche Bindungen wenigstens zeitweilig Relationen festlegen wollen — letzten Endes immer durch die Kaufkraftparitäten.
English translation: Exchange rates are determined — and this even when contractual commitments seek, at least temporarily, to fix relations — ultimately always by purchasing power parities.
Purchasing power is itself exposed to forces beyond monetary administration. Kerschagl argues that absolute stabilization would require control over the whole economy, sacrificing economic freedom. Reserve requirements, credit controls, and open-market operations supply partial instruments, not a means of reconstructing the earlier monetary order. His criticism of interventionism thus coexists with recognition that nineteenth-century automaticity cannot simply be restored.
The discussion of policy instruments makes this limitation concrete. Discount-rate increases encounter political constraints, distorted interest structures, and subsidized sectors. Kerschagl also argues that higher interest rates raise production costs, while their price-reducing effects depend on conditions permitting accumulated stocks to be sold. Interest-rate policy consequently functions more reliably as a signal than as comprehensive economic control. Rediscount policy must consider what credit finances, not merely its quantity or the commercial form of bills. Investment goods and consumption goods differ in the delay before expenditure generates additional output. This emphasis on credit use informs his rejection of a fundamental distinction between inflation through bank credit and inflation through banknotes.
Open-market operations require a developed capital market and coherent interest rates; otherwise, they risk becoming fiduciary financing rather than effective regulation. Convertibility presents a related problem of prerequisites. Redistributed reserves and repaired payments balances must support general gold redemption, rather than being expected to follow automatically from it. Regional payments agreements, gradual currency interchangeability, and international credit cushions offer practical advances toward a changed meaning of convertibility.
The Soviet-American comparison places these technical questions within institutional orders. Soviet centralized banking permits extensive direction of credit, prices, and incomes, while restricting money largely to domestic circulation and separating lending from private capital formation. The American system combines sophisticated monetary controls and substantial intervention with private saving, enterprise, and freedom in the use of money. Kerschagl attributes its relative success to productivity and capital accumulation as well as Federal Reserve instruments. Inflationary costs and exceptional resources nevertheless limit the model’s transferability.
The conclusion accepts a measure of economic coordination while insisting that monetary stability retain priority over competing policy uses. Wider central-bank influence should not entail subordination to state budget financing; balanced budgets and responsible wage-price policy remain essential. External stability also requires multilateral cooperation, with corresponding limits on national sovereignty. The central tension is between the coordination needed to sustain stable money and the independence needed to protect its purpose. Monetary reform must therefore address the institutions governing production, ownership, and capital formation rather than rely on a self-sufficient technical remedy.
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