Published in Bank-Archiv in 1912, Somary’s article addresses recurrent German money-market strains through reforms of bank reserves, public cash administration, and banknote circulation. Responding to Reichsbank director von Lumm, it shifts emphasis from restricting credit toward reorganizing the availability of monetary resources. Its governing question is how existing gold and cash balances can better support the credit system.
Somary disputes the adequacy of a persistently higher discount rate. Besides widening the gap between official and private rates and encouraging dependence on short-term foreign capital, dearer credit would distribute burdens unevenly:
Zudem würden durch weitere Verteuerung des Diskonts nicht so sehr die Industrien, welche im Vordergrund der Konjunktur in Deutschland zu stehen pflegen, sondern jene, welche den relativ meisten Betriebskredit benötigen, getroffen werden.
English translation: Moreover, a further raising of the cost of discount would strike not so much those industries which are wont to stand in the foreground of the boom in Germany, as those which require relatively the most operating credit.
The distinction between industries driving the boom and those requiring substantial working credit undermines the precision of discount restriction as a corrective. Cheques and transfers, although useful, have likewise failed to eliminate recurrent tightness. Somary therefore seeks institutional remedies rather than relying exclusively on interest rates or cashless payments.
Larger bank reserves provide a promising but contested starting point:
Die Forderung nach erhöhten Kassereserven ist von Adolph Wagner und Heiligenstadt wiederholt ausgesprochen, von Vertretern der Banken namentlich in der Enquete entschieden abgelehnt worden.
English translation: The demand for increased cash reserves has been repeatedly voiced by Adolph Wagner and Heiligenstadt, and decidedly rejected by representatives of the banks, notably in the inquiry.
Somary treats this controversy comparatively. Continental banks depend on their central bank for liquidity, whereas English cash holdings reflect different branch networks, payment functions, and rediscounting practices. The central banks also face different pressures:
Die Bank von England muss ihre Rate wegen der Ansprüche des Ausserverkehrs sehr oft ändern, die Reichsbank ihren Satz wegen des starken innern Kreditbedarfs durch lange Zeiträume hochhalten.
English translation: The Bank of England must alter its rate very often on account of the demands of external transactions, the Reichsbank must keep its rate high over long periods on account of the strong internal need for credit.
English arrangements consequently cannot supply an unqualified standard for German reform. Somary favors increased commercial-bank balances at the Reichsbank over larger separate gold holdings, which would fragment reserves. Individual agreements could establish such balances, assessed through annual averages so that funds remain available at quarter-end. He also cautions that falling cash ratios may result from the expansion of transfers: deposits can arrive without currency while wage payments still require it. A lower ratio does not itself demonstrate deteriorating banking practice.
The argument extends to savings banks and state credit institutions. Savings-bank withdrawals may become private hoards rather than deposits elsewhere, making immediately available resources especially important; securities and collateralized borrowing are insufficient substitutes. State institutions should likewise hold balances proportionate to their obligations instead of intensifying seasonal demands on the Reichsbank.
Public finance is itself a source of monetary disturbance. Reich and state treasuries borrow when commercial demand is high, maintain numerous separate cash offices, and require cash where transfers would suffice. Without consolidated daily information, receipts and obligations cannot be coordinated. Drawing on Austria’s example, Somary recommends transferring payment services to the postal cheque system and the Reichsbank. Treasury reform thus belongs within monetary policy.
The concluding reform concerns small-denomination notes. Somary rejects the inference that a large note circulation necessarily weakens a money market, contrasting Germany with France. His comparative evidence stresses Germany’s substantial gold circulation relative to the Reichsbank’s gold holdings. The problem is not simply how much gold exists, but where it is held and how effectively it supports the monetary system.
Small notes could replace gold in wages and retail payments resistant to cashless methods. Somary acknowledges the risks of centralization: wartime capture, easier gold exports, speculative expansion, and dependence on the Reichsbank. His answer is partial concentration, cautious discount policy, and continued availability of gold, rather than its complete withdrawal from circulation. Familiarity with notes could also moderate wartime redemption demands.
Removing the 300-million-mark ceiling on small notes would, he argues, draw several hundred million marks of circulating gold into the Reichsbank. Combined with larger institutional balances and centralized public cash management, this offers a rapid means of strengthening reserves without making general credit restriction the principal remedy. The article connects payment habits, treasury organization, and reserve concentration within a single program of monetary coordination.
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