Karl Schlesinger · Year unverified
Schlesinger’s article traces the monetary dissolution of the Habsburg Empire through early 1920, connecting successor-state currency policies with the redistribution of wealth and the liquidation provisions of the Austrian Peace Treaty. Political fragmentation made monetary separation urgent without supplying an equitable division of liabilities or effective control over circulating notes.
THE collapse of the Austro-Hungarian Monarchy amid violence and anarchy, in November, 1918, was necessarily followed after the shortest possible interval by the disintegration of the joint currency.
The opening establishes the political cause of disintegration. Schlesinger’s economic argument explains why its timing mattered: separating currencies while money was moving between territories could make temporary redistributive effects permanent. Recognising only notes physically present within each new state would fix claims to wealth according to their location at separation, rather than an agreed allocation of inherited responsibilities.
The successor governments faced a common contradiction. Each feared accepting notes issued to finance another government’s expenditure, but each also depended on monetary financing.
On the other hand, each of the States had a deficit in its own Budget, which could only be met by the issuing of new paper money.
Austria and Hungary sought to distribute inherited liabilities according to economic capacity, resisting a settlement determined simply by where notes and deposits happened to be. Other successor states rejected responsibility for corresponding shares of the old states’ debts. Monetary sovereignty thus involved a struggle over who would bear the costs of wartime obligations and postwar deficits.
The national cases test separation against administrative and economic constraints. Jugo-Slavia began stamping notes in February 1919, but the procedure failed to create a secure boundary around its currency.
The preparations had been hurried, and the stamping was consequently so badly executed that forgery was rendered very easy.
Fraudulent stamping undermined restrictions on imported notes. Yet Schlesinger identifies a fiscal paradox: those imports also helped supply domestic credit to a government lacking its own note press. Insulation from the former monetary union conflicted with the need to sustain expenditure and exchange.
Czecho-Slovakia provides the fullest examination of attempted monetary contraction. Raschin combined stamping with the retention of half the submitted notes, replacing them with non-negotiable bonds and gathering financial information for a capital levy. Schlesinger distinguishes the fiscal purpose from the attempt to strengthen the currency. He doubts that contraction through these methods, or a capital levy, could appreciably alter prices or exchange rates. Apparent success was difficult to separate from Czecho-Slovakia’s stronger economic position, speculation, and exchange-market manoeuvres.
Domestic prices did not promptly adjust to reduced circulation. Currency scarcity instead required a moratorium and the return of withheld notes. Meanwhile, the premium on Czech currency encouraged fraudulent stamping, eventually forcing the government to accept forged notes for exchange. Nationalisation could therefore stimulate the very inflow it sought to prevent.
The other cases qualify any uniform account of separation. Austria’s weaker currency reduced incentives to counterfeit its stamp, although later issues enlarged circulation. Italy’s favourable conversion into lire benefited annexed territories; Roumania stamped notes, while Poland unsuccessfully prohibited their import. Hungary’s interrupted separation exposed the importance of confidence: peasants rejected Soviet imitation notes and initially discounted subsequent Post Office Savings Bank issues. Hoarding, insecurity, and shortages increased demand for trusted money. Schlesinger considers several possible explanations for the premium on unstamped notes.
The final section scrutinises Paragraph 206 of the Peace Treaty. Schlesinger distinguishes eight categories of notes by issue date, location, and movement across borders, questioning their claims on bank assets and the fairness of treating circulating notes differently on these grounds. His decisive objection is practical: the geographical history required to classify individual notes could not be established. The Reparation Commission would need substantially revised provisions.
Schlesinger closes with a tentative hope for an economic Danube Federation and common currency. The article links monetary disintegration to fiscal responsibility, confidence, and enforceability: legal boundaries could divide currencies more readily than they could disentangle the economic relationships and liabilities inherited from the empire.
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