Ludwig von Mises, Entgegnung (1912)

Mises’s Entgegnung is a short polemical reply to Federn concerning Austro-Hungarian monetary and central-bank policy. Declining to reopen their entire dispute, Mises concentrates on the meaning of the upper gold point. His argument distinguishes an operative threshold for private gold exports from an analytical benchmark for exchange-rate management. That distinction leads to his central claim: the Austro-Hungarian Bank can prevent foreign-exchange quotations from exceeding a specified price only by supplying foreign exchange without restriction at that price.

The reply opens by associating Federn’s proposals with previously refuted doctrines of an “isolated” currency and gold-premium policy. Mises invokes the opposition of monetary specialists, but his substantive rebuttal turns on a precise banking definition:

Als Goldpunkte pflegt man die beiden Grenzkurse der Devisen zu bezeichnen, bei welchen der Bezug oder die Versendung von Gold anfängt lohnend zu werden.

English translation: By gold points one is accustomed to designate the two limiting rates of foreign exchange at which the procurement or the shipment of gold begins to become profitable.

Gold points thus depend on the feasibility and profitability of transactions, not merely on calculations around mint parity. Mises explains that Austria-Hungary had possessed a lower, or import, gold point since the currency-regulation laws took effect on 11 August 1892: the Bank was obliged to exchange gold bullion for notes according to the statutory coinage standard. The opposite transaction was institutionally different:

Hingegen kann bis heute von einem oberen Goldpunkte (Ausfuhrgoldpunkt) in der Monarchie nicht gesprochen werden.

English translation: By contrast, there can to this day be no talk of an upper gold point (gold export point) in the Monarchy.

Private exporters could neither obtain substantial quantities of gold from circulation nor receive gold from the Bank for export. Consequently, there was no practical exchange-rate threshold at which their gold exports became profitable. Figures for an upper gold point in arbitrage manuals were calculated rather than observed; official currency statistics accordingly treated only the import point. A footnote further distinguishes private exports from those of the central bank, whose incentives Mises argues obey different principles.

Mises then explains why his own earlier writings nevertheless employed the expression “upper gold point.” He used it deliberately to emphasize the fundamental similarity between Austrian and foreign monetary arrangements despite their legal differences. His “ideal” upper point described the Bank’s policy of supplying gold-based foreign exchange sufficiently close to parity to keep fluctuations within the range found in countries maintaining cash redemption. It was a comparative policy benchmark, not an assertion that private gold-export arbitrage operated in Vienna.

To support this interpretation, Mises cites the explanatory report accompanying the new bank law. The report presents the Bank’s established exchange-stabilization practice as becoming a statutory obligation and expressly allows fluctuations comparable to those between countries maintaining cash redemption. Mises draws the conclusion:

Es geht also daraus klar hervor, daß die Regierung der Ansicht ist, daß es das Ziel der Politik der Bank gewesen ist, zu verhindern, daß die Devisenkurse stärker schwanken, als dies auch in barzahlenden Ländern der Fall ist.

English translation: It thus emerges clearly that the government is of the opinion that it has been the aim of the Bank's policy to prevent the rates of foreign exchange from fluctuating more strongly than is the case in cash-paying countries as well.

The legislative evidence connects institutional difference with functional similarity: exchange-rate stability could be pursued through foreign-exchange operations even without the private gold-export mechanism presupposed by a literal upper gold point.

The closing section returns to Federn’s claim that Vienna’s exchange rates exceeded the upper gold point in 1907 and 1911. For Mises, that objection misconstrues his terminology and diverts attention from the mechanism his argument actually concerns:

Es lenkt nur die Aufmerksamkeit von der These ab, die den Kern meiner Ausführungen bildet, daß es nämlich für die Österreichisch-Ungarische Bank kein anderes Mittel gibt, das Steigen der Devisenkurse über einen gewissen Preis hinaus zu verhindern, als das, zu diesem Preise Devisen unbeschränkt abzugeben.

English translation: It only diverts attention from the thesis which forms the core of my argument, namely that for the Austro-Hungarian Bank there is no other means of preventing a rise of the rates of foreign exchange beyond a certain price than that of supplying foreign exchange without limit at that price.

Mises ends by reiterating his appeal to the monetary literature and denying that Knapp’s account supports Federn’s position: Knapp does not describe the Bank as intermittently refusing foreign exchange. The reply’s significance lies in its separation of legal arrangements, feasible market transactions, and the operational requirements of exchange-rate stabilization. Its terminological dispute serves a concrete claim about what a central bank must do to maintain an exchange-rate ceiling.