Eugen Peter Schwiedland: Review of C. J. Damiris, Le système monétaire grec et le change (1921)

Schwiedland’s review of Damiris’s three-volume study traces the stabilization and subsequent destabilization of the Greek drachma. Its chronological exposition supports a qualified case for restoring the monetary arrangements introduced in 1910: foreign-exchange backing could sustain an elastic note circulation at a stable exchange rate, but its effectiveness depended on the availability, value, and accessibility of foreign assets.

The review begins with the drachma’s recovery from its severe depreciation in 1895 to parity with the French franc in 1909. Schwiedland attributes this recovery to international financial supervision, a favorable balance of payments, reduced note circulation, and expanding world gold reserves. The March 1910 banking reform then sought to prevent excessive appreciation by allowing additional notes against gold or gold-denominated foreign exchange. Purchases at parity and sales at a small premium accommodated seasonal monetary demand without disturbing the exchange rate.

Ihren Goldschatz ersetzten so zum Teil Forderungen ans Ausland.

English translation: Their gold reserve was thus in part replaced by claims on foreign countries.

This substitution is the conceptual hinge of the review. Foreign claims provided a flexible reserve, but also exposed the currency to external conditions. A lasting deterioration in Greece’s balance of payments could exhaust those claims, while compulsory currency arrangements in a debtor country could undermine their monetary basis. Stability during the Balkan War therefore demonstrated the system’s practical effectiveness without removing its vulnerabilities.

The World War brought those vulnerabilities into focus. As European currencies weakened, the bank shifted toward dollar assets, initially supported by shipping profits. Yet Allied credits were denominated in depreciating francs and pounds and were unavailable to Greece until six months after peace. Capital-export restrictions and disrupted shipping reduced domestic demand for foreign balances, preventing additional notes from returning to the bank and allowing them instead to drive up commodity prices. Schwiedland thus presents inflation through the interaction of monetary expansion, blocked circulation, and impaired external assets, rather than through note quantities alone.

Postwar military obligations, depleted goods supplies, a worsening trade balance, and Greek banks’ financing of purchases for other territories further reduced dollar backing. The resulting dependence on British and French government credits preceded fundamental alterations to the 1910 law and renewed exchange instability.

Auf Grund dieser Ereignisse befürwortet Verfasser die Rückkehr zu einer verbesserten Form des 1910 er Systems.

English translation: On the basis of these events the author advocates a return to an improved form of the 1910 system.

The recommendation belongs to Damiris, whose argument Schwiedland reconstructs approvingly. Restoration would require additional backing in actual gold for notes issued against foreign claims. Damiris also doubts whether the Greek arrangement could serve as the basis for an international note system. The review’s relevance lies in this distinction between a workable national exchange mechanism and its uncertain international extension: reserve quality and accessibility matter as much as nominal coverage. Schwiedland closes by praising the study’s thoroughness and judgment as a valuable contribution to monetary literature.