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The Ends of Four Big Inflations Thomas J.

Sargent Revised May 1981 Working Paper #158 PACS File #2700

Federal Reserve Bank of Minneapolis and University of Minnesota

The views expressed herein are solely those of the author and do not necessarily represent the views of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. The material contained is of a preliminary nature, is circulated to stimulate discussion, and is not to be quoted without permission of the author. Note: This paper was prepared for a conference on inflation sponsored by the National Bureau of Economic Research. Helpful comments on earlier drafts were made by Preston Miller, John Kennan, Peter Garber, and Gail Makinen. General conversations on the subject with Michael K. Salemi and Neil Wallace have been most helpful. Gail Makinen directed my attention to the unemployment figures for Poland.

Introduction In the last fifteen years, many western economies have experienced

persistent and growing rates of inflation. men have become momentum, measures convinced

Some prominent economists and statesself-sustaining

that this inflation has a stubborn,

and that either it simply is not susceptible of monetary and fiscal restraint, unemployment,

to cure by conventional

or else that in terms of the consethe cost of eradicating high. inflation

quent widespread

and sustained

by monetary and fiscal measures would be prohibitively

It is often claimed

that there is an "underlying rate of inflation" which responds slowly, if at all, to restrictive monetary and fiscal measures.1/ Evidently, this underlying rate

of inflation is the rate of inflation that firms and workers have come to expect will prevail in the future. workers supposedly There is momentum in this process because firms and by extrapolating past rates of infla-

form their expectations

tion into the future.

If this is true, the inflation record of the past fifteen

years has left firms and workers with a legacy of high expected rates of inflation which promise to respond only slowly, if at all, to restrictive monetary and fiscal policy actions. According to this view, restrictive monetary and fiscal in output and employFor

actions in the first instance cause substantial reductions

ment, but have little, if any, effects in reducing the rate of inflation. the economy of the United States, a Widely cited estimate

is that for everyone by restric-

percentage point reduction in the annual inflation rate accomplished tive monetary lost. and fiscal measures, 220 billion dollars economy,

of annual GNP would be zero

For the 2,500 billion dollar U.S.

the cost of achieving

percent inflation is great, indeed, according to those who believe this estimate. An alternative inherent momentum "rational expectations" view denies that there is any On this view, it is

in the present process

of inflation.~1

-2acknowledged that firms and workers have now come to expect high rates of inflabargains in light of these

tion in the future, and that they strike inflationary , 31 expectations.-

However, it is held that people expect high rates of inflation current and prospective monetary Further, the current rate of

in the future precisely because the goverment's and fiscal policies warrant those expectations.

inflation and people's expectations slow to respond to isolated that are viewed as temporary

about future rates of inflation may well seem of restrictive monetary and fiscal policy as a long-term



from what is perceived

government policy involving high average rates of government tary expansion in the future. its own, while it is actually

deficits and moneof

Thus, inflation only seems to have a momentum the long-term government

policy of persistently

running large deficits and creating money at high rates which imparts the momentum to the inflation rate. An implication of this view is that inflation can be of the "momentum view" have indicated,

stopped much more quickly than advocates

and that their estimates of the length of time and the costs of stopping inflation in terms of foregone output (220 billion dollars of GNP for one percentage point in the inflation rate) are erroneous. easy to eradicate inflation. This is not to say that it would be it would require far more than a Instead, it would require

On the contrary,

few temporary restrictive fiscal and monetary actions. a change in the policy regime:

there must be an abrupt change in the continuing

government policy or strategy for setting deficits now and in the future that is sufficiently binding as to be widely believed. Economists do not now possess

reliable, empirically

tried and true models that can enable us to predict prein terms of lost output and employUndoubtedly, how costly such a

cise1y how rapidly and with what disruption

ment such a regime change will work its effects.

move would be in terms of foregone output, and how long it would be in taking effect would depend partly on how resolute and evident the government's ment was. commit-

features. though it shared some common problems with deliberately adopted a relatively restrictive the value of its cur- its four neighbors. surrounded achieved I shall also briefly describe by neighbors experiencing itself. Hunthere are some very important common . events in Czecho- slovakia. many f I shall describe and interpret events in Austria. each of which experienced a dramatic "hyperinflation" after the passage of several months. and Germany. with the avowed aim of maintaining rency. but My reason for studying a stable currency is that they are laboratories for the study of regime changes. Within each of Austria. scale. so that they will fit on a page. Poland. ly. but which seem The idea is to that suc- with the "momentum" model of inflation.-3This paper describes believe to be consistent difficult to reconcile several dramatic historical experiences which I with the "rational expectations" view. data are recorded in a logarithmic all four countries. and German hyperinflations. and to examine the measures cessfully brought drastic inflations under control in several European countries in the 1920s. a country which successfully these episodes hyper inflations . Further. While there are many differences garian. Polish. Hungary. The basic data to be studied are the price indexes in figures 2-4. Czechoslovakia fiscal policy regime. there occurred a dramatic change in the fiscal policy regime. Hungary. stand back from our current predicament. price indexes assumed astronomical tions. proporThese For and Poland. These include the following: in details among the Austrian. spectacular. Gerin which. which in each instance was associated with the end of a hyperinflation. Germany. rather and especially the rise in the price level was The graphs also reveal that in each case inflation stopped abruptthan gradually.

i(.1'" in Austria .. .. • ... ~ 1921 Jun 1921 Dec ...figure 1 \/ho 1esc [e Pr f ces .i 1 '! I .

.figure 2 Yholesole Prices in Hungcry 193.._----r---T"--r----r---...------T--..m 1923 Dec 1924 Jun 1924 Dec ......." 1921 Dec 1922 Jun 1922 Dec 1923 J..

Figure 3 Uholesole Pr ices in Poland Jun 1921 1921 Dec Jun 1922 1923 Dec JlI'\ 1924 .

.! in Germany I i ! I I i.. I - t? I to --! ! i ..~ 1 10"~.~ .. ! c! .rt5 1 il.Figure 4 Yho leso [e Pr ices 'r.r J H~6i r [ .....I i I I I I . f ~ t ! ~ te3~ j t I f - I I p [)ec t 1919 1920 D!c 1921 Dec I 1922 Dec I Dec 1923 ( Dec 1924 1 ... .

800. In the end. Hungary.- the pre-war Austro-Hungarian 6! . the United States was on the gold standard. Before interpreting the historical facts. The government stood ready to convert a dollar into a specified amount of gold To understate things. U.2! This was done on such a scale that it led to depreciation of the currencies of spectacular proportions.400 paper crowns to the pre-war Austro-Hungarian crown. and the Hungarian krone at 14. and about the way the international monetary system worked in the 1920s. Austria. their on demand.-4(i) The nature of the fiscal policy regime in effect during each of the hyperinflations. the Polish mark at 1.000 paper marks to the pre-war gold mark. In practice. Poland. (iii) The immediacy with which the price level and foreign ex- changes suddenly stabilized. I shall assemble and interpret the facts in the light of a view about the forces which give money value. the Austrian crown at 1~.000. The Gold Standard After World War I.000 to the gold zloty. I now turn briefly to describe this view. The governments of these countries resorted to the printing of new unbacked money to finance government deficits. immediately after the World War.000.S.000. currencies were largely "fiatl1 or unbacked.500 paper crowns to crown. Each of the foul"countries persis- tently ran enormous budget deficits on current account.!! (iv) The rapid rise in the "high powered" money supply in the months and years after the rapid inflation had ended. the German mark stabilized at 1. and Germany were not on the gold standard. (ii) The nature of the deliberate and drastic fiscal and monetary measures taken to end the hyper inflations.

For this reason. a government did not hold 100% reserves of gold. what mattered was not the contemporary government deficit. During the 1920s.5This paper focuses on the deliberate changes in policy that each of Hungary. to make good on its pursuit of an the notes were backed by the government's appropriate budget policy. since usually by its holding of gold reserves. but the present value of current and prospective future government deficits. the rule to have a view abou t the fis cal poli cy regime in place. for notes. on demand. surpluses. it is good to keep in mind the nature of the restrictions gold standard imposed on a government. In effect. Presumably. a government debt which it promised to convert into gold i. and the deliberate choice of policy that Czechoslovakia first place. to a first approximation. equal to the a gold and future government So under standard.. e. a government's notes and debts were backed by the commitment of the government to levy taxes in sufficient debt. In order to assign a value to the government's debt. a government must honor its debts and could not engage in inflationary finance. people were willing promise to pay were to hold these claims at full value judged to be good. . given its expenditures. that adherence to the Under the gold standard. and Germany made to end its hyperinflation.. it was necessary tha t is. Austria. issued demand notes and longer-term under certain spec ified conditions. The hyperinflations made to avoid inflation in the or virtually were each ended by restoring restoring convertibility to the dollar or equivalently to gold. amounts. The government's if the government's promise to pay was More important in "backed" only partially practice. The govern- ment was like a firm whose prospective receipts were its future tax collections. John Maynard Keynes emphasized that the size of a government's could successfully maintain gold reserve was not the determinant convertibility of whether it with gold! its fiscal policy was. The value of the government's present value of current debt was. Poland.II On this view.

private One by-product agents usually find it in their best interests to change theirs. expenditures and tax rates for one particular quarter The values of government are examples of actions. selecting government while the rules. implicit or explicit. predictions by assuming that such relationships ought not to be believed. portfolios. for repeatedly expenditures and tax rates as functions of the state of the Recent work in dynamic macroeconomics whenever has economy are examples of strategies. The reason is that private agents' behavior is selfish. will remain constant across regime changes would cost 220 The "1 percent reduction in inflation billion dollars of annual GNpn estimate is one example of such a faulty predic- . it will be ueful to expand a little more generally on the distinction between the effects of isolated actions taken within the context of a given general strategy. or so that when the government switches its strategy. private economic agents can be expected to change their strategies or rules for choosing consumption rates. or rules for strategies The latter choice I refer to as a choice of regime.-6determining the government deficit as a function of the state of the economy now and in the future. discovered the following general principle: there is a change in the government strategy or regime. among alternative general on the one hand. before we turn to the historical facts. and so on.21 However. and the effects of choosing repeatedly taking actions.~/ about the present value of to keep this view the ends It will be worthwhile of the gold standard in mind as we turn to review the events surrounding of four hyperinflations. investment rates. relationships captured in stanacross contemmade to remain constant plated changes in government For this reason. of this principle dard econometric is that most of the empirical models cannot be expected policy regimes. The public's perception of the fiscal regime influenced the value of government debt through private agents' expectations the revenue streams backing that debt.1QJ at least purposeful.

kilometers and 50 million inhabitants~ dissolution left Austria a small country of 80. Having suffered food scarcities during the war that were produced by an effective allied blockade.1l1 they reflect a new set of rules or government All that we have to go on are the recorded actions actually taken. cal econometric considerations confirm the difficulties pretations in general. will change in While the distinction between isolated actions and strategy regimes is clear in principle. Austria At the end of World War I~ the Austro-Hungarian number of successor states. Austrians also faced a large scale unemployment the economy to peaceful activities. Having said this. problem. particular historical it is an admittedly episodes reflect delicate isolated task to interpret actions whether wi thin the same old "rules of the game" or whether strategies. stemming from the need to reconvert and to adjust to . together with the pronouncements and sometimes constitutional provisions. empire dissolved into a After having been the the center of an empire of 625. of public officials~ lawst legislative votes. kilometers and 6. of which Austria was one.-7tion. When an important change in regime occurs.000 sq. the government of Austria reabsorbed a large number of Austrian imperial bureaucrats who were no longer welcome in the other successor states. Further. Austria found herself confronted with new na- tional borders and trade barriers that cut her off from the food sources formerly within her empire.5 million inhabitants. Out of this material we are to fashion a Common sense suggests and techniin making such inter- view about the government strategy being used.000 sq. dynamic macroeconomics among variables would predict that the entire pattern of correlations quantitatively important ways. I believe that the examples described for studying regime ?hanges as below are about as close to being laboratories history has provided.

1919-1922 during (see Table A 1) • over 50 percent As Table A 1 shows. of the As the figures in Table A2 indicate. rates which by any standard were far too low in the rate. and prices were kept relatively low. The government did not collect deficits enough taxes the years was to cover expeno It. This expansion bank notes stemmed mainly from the central bank's policy of discounting bills. it also resulted partly from the central bank's practice making loans and discounts to private agents at nominal interest rates of between 6 and 9 percent per annum. which averaged 10. the Austrian prices rose rapidly (see Tables . 1n Austria~1 between March of the Austroof central treasury of the total note circulation Hungarian bank increased by a factor of 288 times. In addition. The result was a very rapid increase in the volume "high powered" money. 1919 and August 1922.. The government making large expenditures played. However. owed the Reparation If this were not enough.8the new national borders.-actions and what seemed like prospects crown depreciated A3 and A4). defined as the notes and demand deposit obligations central bank (see Table A2). the deficit typically of the total government The government of the of financed these deficits by selling treasury bills to the Austrian section Austro-Hungarian bank.ur-es and so ran very substantial . as a loser of the war. in these years expenditures. of Austria against the assets and revenues responded to these pressing problems by in the form of food relief and payments and monopolies to the unemas taxes the state railroads ran deficits.000 view of the inflation 1921 to August percent per annum from January 131 1922 (Table A3). Austria sums that for a long time were uncertain in Commission amount. held a blanket mortgage Austrian government. but were presumed eventually to be substantial. The Reparation Commisof the Sian. in effect. internationWhile between In response to these government for their indefinite ally and domestic continuation.

l~'/ The "flight from the crown" occurred as people chose to hold less of their wealth in the form of the rapidly depreciating tempting instead to hold foreign currencies point of financing Austria to resist its deficit. there continued no occurred change in currency units or "currency reform. at- or real assets. the retail price index increased by a factor of 110 (see Tables A3 and Aq) so that the real value of the note circulation diminished during the currency depreciation •. Furthermore./ holding Despite large that Austrian citizens amounts of foreign currencies during 1921 and 1922. and other substitutes it is certain for Austrian crowns •. because of the government it had the effect from diminishing the resources that the government could command by printing money.!! at least not for another year and a half. The depreciation intervention of the Austrian crown was suddenly stopped by the binding of the Council of the League of Nations. stabilized in August later. Therefore. was to increase the amount of Austrian crowns held by Austrians..l§/ were .9- January 1921 and August 1922 the note circulation of the central bank increased by a factor of 39. the flight crown. Table A4 reveals that the Austrian crown abruptly 1922. to reorder her fiscal and pleas to the allied govor only partially After her increasingly ernments for international aid had repeatedly been rejected . plished by adopting measures making it difficult or illegal for Austrians to hold foreign currencies these regulations. and the resulting of Austria dramatically desparate commitment of the government monetary strategies. as Table A1 indicates. the government established a system of exchange controls administered The essential function of this agency which it accom- by an agency called the Devisenzentrale.12! From the viewof of it was in the interest the crown. while Table A3 indicates that prices abruptly stabilized a month This occurred despite the fact that the central bank's note Circulation to increase rapidly.rJ.

Yet the rate of exchange was slowly declining. the internal price level following suit three weeks later. This conviction communicated itself first of all to that delicately adjusted mechanism. The third protocol was of her fiscal and Signed by Austria alone. and was described by Pasvo!sky and Austria that reaffirmed of Austria • 1 . there was immediately a widespread conviction that the solution of the problem was at hand. the international exchange market. It is remarkable guided the financial that even before the precise details of the protocols were publicly announced.l2. the foreign exchange rate ceased to soar and began to decline. The crisiS was checked. and sovereignty signed by Great Britain. led to the signing of three protocols on October 2. on August 25.-10 - fulfilled. as follows: "The moment the Council of the League decided to take up in earnest the question of Austrian reconstruction.000. France. Czechoslovakia. The AUstrian government promised to establish a new indepen- dent central bank. The second protocol provided conditions international loan of 650. for monitoring The government of Austria also agreed .000 gold crowns to Austria. to cease running large deficits. Nearly two weeks before Chancellor Seipel officially laid the Austrian question before the Council of the League. the various ministries were still dispersing this new currency through the countries by means of continuing budgetary deficits. the political independence for an deliberations of the Council brought relief to the This can be seen in Tables A3 and A4. 1922 which reconstruction of Austria. who was to be responsible the fulfillment of Austria's commitments. the ap- of Austria agreed to accept in Austria a Commissioner pointed by the Council of the League. General. Further. and laid out a plan for reconstruction monetary affairs. The printing presses in Austria were still grinding out new currency. and to bind itself not to finance deficits with advances government of notes from the central bank. the fact of the serious situation."W The first protocol was a declaration Italy. in late August 1922 the Council of the League of Nations undertook to enter into serious negotiations These negotiations successfully to reconstruct the financial system of Austria.

the bank was obligated to resume convertihility into gold. 1922. and commercial bills. foreign earning assets. The stabilization reform. The results of these measures can be seen by comparing Within two years the government the figures in Table A6 with those in Table A1. was able to balance the budget. thousands of govpromised in govern- Under the reconstruction the government Deficits gradually to discharge a total of 100. the At the end of 1924 there was introduced equal to 10.000. the section of the of the Bank was formed to replace the old Austrian Austro-Hungarian Divesenzentrale. Expenditures were reduced by discharging scheme. In legislation of November 14. The government moved to balance its budget by taking concrete steps in several directions.000 paper crowns.-11 to furnish security to back the reconstruction loan. ment enterprises services. of the Austrian crown was not achieved via a currency a new unit of currency. and it was to take over the assets and functions The new bank began operations on January 1. At the same time. it was understood that the Reparation the resources of the government Commission would give up or modify its claim on of Austria. long after the exchange The introduction rate had been of this new unit of stabilized.-- .000 state employees. once the government~s debt to the bank had been reduced to 30. schilling.000 gold crowns. The bank was also required to cover its note issues with certain minimal proportions of gold. 20/ sure 1y an 1nC1 den t a 1 measure. 1923. and was forbidden from lending to the government except on the security of an equal amount of gold and foreign assets. Further.. were reduced by raising prices of government means of collecting sold goods and tax and custom New taxes and more efficient revenues were instituted. ernment employees. specifically bank. The government of Austria and the League both moved swiftly to execute the plan outlined Austrian National in the protocols. and was currency occurred .

that is. on the one hand. Thus. c~ntral bank liabilities were backed 100% by gold. the central bank became backed by gold. However. the six-fold increase in the liabilities ought not to be regarded bank after the protocols as "inflationary. since treasury bills signified future tax collections. tibility of its liabilities approximation. of the government in The value of the crown was backed by the commitment the conver- to run a fiscal policy compatible with maintaining into dollars. and "backed" or "inside" money. the liabilities of the central bank of the central bank changes substantially.-12 Table A2 reveals that from August 1922. to a first of the central bank did not affect by the bank were suffiof the central The wil- the intermediating activities the value of the crown. they were not backed at all. no commitment to raise revenues through the liabilities of After the execution of the protocols. foreign assets. and commercial paper as notes and the deposits were created through open market operations those assets (see Table A5). with the consequence that the proper of the figures on the total note obligations Before the protocols." . At the margin. the circulating notes of the AUstrian central bank of increased by a factor of over six times. and the nature In particular. were "backed" mainly by government treasury bills. Given such a fiscal regime. when the exchange rate suddenly stabilized to December 1924. price stability in the face of six-fold The phenomenon of the achievement increase of the stock of "high powered as violating the quantity theory of these observations are not at all sharply money" was widely regarded by contemporaries money. paradoxical interpreted in light of a view which distinguishes between "unbacked" or "outside" money. and so it seems when to do. and ul tima tely by the power of the government to collect taxes. and commercial paper. foreign assets. on the other hand. so long as the assets purchased Ciently valuable. the balance sheet of the central bank changed dramatically after the of its open market operations carrying out of the League's intrepretation protocols.

it is true that currency stabilization and with a cost in terms of increased very suddenly.23/ How much of this ~nemployment was due to the achievement of currency stabilizaaffecting the Austrian tion. unemployment and foregone output that was minor when compared with the "1 percentage paint inflation reduction costs 220 billion dollars lost GNP" tradeoff that has figured in contemporary Hungary Like its old partner in the dual Habsburg monarchy. is not surprising since the stabilization of the crown made it a much more desirable asset to hold relative to foreign eXChange.000 by March 1923. kilometers 92.-13 lingness of Austrians to convert hoards of foreign exchange into crowns. Its financial and economic it (down from 21 million to about 8 by the newly erected formerly life was disrupted national borders separating from peoples and economic institutions within the domain of the Habsburg dual monarchy. from World War I as a country much reduced in land. It climbed from a low of 8. and then receded to 76. was achieved in Austria However.000 in December climbed to 167. The number of recipients of state unemployment benefits gradually 1922. population.~. and how much was due to the real dislocations economy cannot be determined.700 in December 1921 to 83. which is reflected in Table A5.000 in November 1923.000) and only 37 percent of its population million). At the end of the war.000 sq.221 The available figures on unemployment by a sUbstantial indicate that the stabilization rate. Hungary emerged and power. It to discussions in the United States. . of the crown was attended increase in the unemployment though unemloyment had begun to climb well before stabilization was achieved (see Table A7). Hungary experienced political turmoil as the In March Habsburg King Charles was replaced by the government of Prince Karolyi. retained only 25 percent of its territory (down from 325.

Hungary. carried out by supporters The "white terror" against leftists of Horthy took even more lives than the "red terror" that had occurred under Bela Kun. notes of the Austro-Hungarian classes of notes. The functions of the section and a Hungarian section of the old bank were assumed in August 1921 by a State Note of Finance. the plates for printing one and two crown Austro-Hungarian them to print more notes. neither the total amount owed nor a schedule of pay- ment of Hungary. In August Institute which was under the control 1921. it for a few weeks. and then withdrew. the Hungarian bank. At the end of the war. The Austro-Hungarian replaced by an Austrian Hungarian bank was liquidated at the end of 1919. "white notes. right wing A new repressive regime under Admiral Horthy then took power.the notes of the Austro-Hungarian reSidents. the currency of Hungary consisted of the Austro-Hungarian bank. Hungary owed reparations of Trainon.-1~ 1919. Germain. bank that were held by their those notes as debts of the respective Before Hungary executed this provision of the Treaty of Trainon. invaded of Bela Kun lasted only four months. including those that had been issued by the Bolshevik As a loser of the war. the Karolyi The regime occupied government was overthrown by the Bolsheviks as Romania under Bela Kun. the successor states to the Austro-Hungarian required to stamp. in exchange and several other regime. and it was section. krone. the for the Bolshevik regime had access to currency situation grew more complicated. By the provisions of the Treaties of the notes of Peace of empire were Trainon and St. in effect." The Bolshevik government banK notes and it used also issued new so-called was honored by the Each of these Bolshevik-issued currencies subsequent government. thereby recognizing new states. according to the Treaty The Reparation Commission had a lien on the resources of the governHowever. the Note Institute for Hungarian stamped of the Minister issued its own notes. .

the Hungarian krone depreciated exchange markets. in view of the rapid rate of price appreciation. Between April 1924. since the unclear reparations resources which backed those debts. In the same period. the price index increased by a factor of 263 times. symptomatic As in the case of Austria.-15 ments was fixed for years after the war. in August 1922 a Hungarian Devisenzentrale ." as residents of krones economize on their holdings more stable currencies. volume that it made to private These loans were made at a very low interest rate. obligations made uncertain the nature of the From 1919 until 1924 the government deficits. and instead to hold assets As in the case of Austria.241 These deficits were sky substantially to understate financed by borrowing from the State Note Institute. The government's of Hungary ran substantial budget budget estimates in Table Hl are reported by Pasvolthe size of the deficits. the total notes and deposit liabilities of the Note Institute increased of the Note by a factor of 85 times. this decrease is of Hungary attempted to dominated in of a "flight from the krone. and domestic prices rose rapidly. rapidly on foreign January 1922 and money in the Hungarian than in the other three hyperinflations As Table H3 shows. from the Note Institute terms. of the Note Institute was the agents (see cau~e of the increase in liabilities of loans and discounts increasing Table H2). the government of Hungary resisted this force by establishing within the State Note Institute. obstacles in terms of achieving This circumstance alone created serious currency and other a stable value for Hungary's debts. These private and to a large extent amounted to simple gifts to those lucky enough to receive loans on such generous loans account for a much larger increase in high powered we shall study. so that the real value of the liabilities Institute decreased substantially. and were a major cause of a rapid increase in the note and deposit liabilities An additional of the State Note Institute.

The League's reconstruction plan was embodied in two protocols. France." the "political Italy. 1924. integrity. As in Austria. arranged for an interna- tional loan that would help finance government expenditures. the League devised a plan which reduced and clarified the' reparations commitmen~ of Hungary. Romania. and committed Hungary to balance its budget and form a central The government was also obligated responsible to the League. fulfillment of its commitment to fiscal A recons true tion loan placed abroad in July 1924. the rise in prices and the of the krone internationally in the face of continued both abruptly halted. of Hungary was accomplishThis pattern parallels what occurred in Austria. the financial reconstruction ed with the intervention of the League of Nations. Hungary.-16 Table depreciation tion occurred H3 indicates that in March 1924. expansion The stabiliza- in the Habili ties of the central bank. Czechoslovakia. which increased by a factor of 3. and has a Together with the Reparation Commission and the government of Hungary. and committed Hun- gary to ~stablish a balanced budget and a central bank legally bound to refuse any government demand for unbacked credit. and guaranteed sovereignty of Hungary. the Reparation Commission agreed to give up its lien on Hungary's resources.000 gold krones was successfully The loan was secured by receipts from customs duties . monitor and supervise and monetary reform.000. of 250 . A variety of western nations also agreed to give up their liens on Hungary so that the new loan could successfully be floated. territorial independence. to accept in Hungary a Commissioner the government's General. to bank truly independent of the Finance Ministry.15 between March 1924 and January 1925 (see Table H2). The second protocol outlined the terms of the recon- struction plan. The and and first was signed by Great Britain. so that these could be used to secure a reconstruction loan. similar explanation. On February 21.

the government Indeed. The bank was also required behind its liabilities. the proceeds of the reconstruction had been antiCipated more slowly than in the reconstruction As Table H2 confirms. and also took over the functions of the Devisenzentrale. But as with regime that occasioned of these figures. National Bank was estabthe assets and The bank assumed of the Institute of Note Issue. By a law of April 26 lished. of the loan was to give the government a concrete means of converting The purpose future tax promises to tax into current resources while avoiding the need to place its debt domestically. 25/ the foreign currency to which Hungary pegged its exchange as a condition for British participation in the reconstruction loan. toward establishing full security of gold or foreign bills. and as the regulations governing the bank required. loan were used appreciably plan. percentages of Hungary also moved a balanced Both by cutting expenditures and raiSing tax collections. reserves of certain specified The government budget. . they represented more or less "backed" claims on Sri tish Sterling. of gold. and it began operations liabilities I 19214. and revenues from the salt and tobacco monopolies. the drastic shift in the fiscal of the krone was accompanied by of the central bank. after the League's intervention the notes and deposits by holdings liabilities of the central bank and "fiat became backed. the Hungarian on June 24. The bank was prohibexcept upon to hold gold the foreign exchange control officeJ ited from making any additional loans or advances to the government. commercial 100% at the margin. represented paper.-17 and sugar taxes. In effect. the central bank's liabilities money" before the League's plan was in placej after that plan was in place. the As policy stabilization also changed the appropriate interpretation Table H2 indicates. was successful in moving quickly to a balanced budget (see figure H4). the stabilization a substantial increase in the total liabilities Austria. foreign exchange.

. to me. later. or with the hypothe- sis that the adverse effect was so long-lasting the time span of the figur'es r-ecor-ded. and unforafter the price stabilization had already occurafter the from these figur~s is that immediately stabilization.17a Figures on unemployment tunately begin only immediately red. All that can be inferred unemployment in Hungary are reported in Table H5. that no recovery occurred within seems more plausible The former hypothesis . was not any higher either than it was one or two years of the absence of much This is consistent with the hypothesis adverse effect of the stabilization process on unemployment.

the initial stabilization was achieved without foreign loans or inter- vention. and Polish marks issued by the Polish State Loan Bank which had been established by Germany to control the currency in the part of Poland occupied by Germany during the war. a costly Poland was devastated war with Soviet Russia being waged until the fall of 1920. the armistice of 1918 did not bring peace. the real value of the note circulation Extensive government decreased as people engaged in a "flight from the mark. formerly belonging to Germany. of Poland ran very large deficits up to 1924 (see from the Polish These deficits were financed by government borrowing an lnsti tution which the new government State Loan Bank. Tables P2 and P3 indicate that the rapid inflation and exchange depreciation both suddenly stopped in January 1924. German marks. crowns of the Austro-Hungarian bank. we have studied. took over from the notes of the Polish OVer the same the dollar As in From January 1922 to December 1923 I the outstanding State Loan Bureau increased by a factor of 523 times (Table P2).397 times (see Tables P3 and P4).-18 - Poland The new nation of Poland came into existence at the end of World War I. period. and was formed from territories and Russia. she possessed a varied consisting of Russian rubles. and by Germany's practice of stripping her machinery and materials during World War I. fiscal and monetary regime changes that accompanied there is . For Poland. currency At the time of her formation. Germans. although later in 1927) after currency depreciation threatened to renew.261 The new government Table Pl). n exchange controls were imposed to resist this force. by the fighting. the other inflations. the price index increased by a factor of 2. Austro-Hungary. a substantial foreign loan was arranged.271 But in terms of the substantial the end of the inflation. Unlike the cases of Austria and Hungary.Q02 times while exchange rate decreased by a factor of 1.

worth 1. relative stability P4). where nearly as bad as would be predicted by application and certainly not anyof the same method of . in late 1924.000 Beyond this rese~ve.2. The eventual goal was to to hold a 30% reserve The bank was required behind its notes. foreign exchange. In January i 924.-19 much simila~ity to the Austrian and Hungarian experiences. This phenomenon matches what occurred in Austria similar explanation.000 paper marks. of the of price level and the exchange rate (see Tables P3 and and Hungary and has a. The available figures on unemployment are summarized in Tabl$ P5. 'NaS A maximum credit to the gover-nnerit of zlotys permitted. and the establishment of an independent central bank that was prohibited tional unsecured Finance was from making addithe Minister of The loans to the government. stabilization of the price level in January 1924 is accompanied in the number of unemployed. the bank's notes had to be secured by exchange and silver. a new currency unit became effective. by The an abrupt rise While the is not an Another rise occurs in July of 1924. As Table P2 reveals. In January 1924. The zloty waS equal in gold content to 19. 1924 Table P2 reveals that from January to December 1924. Minister i~~ediately initiated the establishment of the Bank of Poland. The government also movec swiftly to balance the budget (see Table Pl). ~hich was to assume the ~~nctions of the Polish State Loan Bank. the increased note circulation during this period was effectively backed 100% by gold. the gold zloty. restore convertibility with gold. The two interrelated changes were a dramatic move towa~d a balanced government budget. to consist of gold. private bills of 50.800. in the the note face circulation of the central bank increased by a factor of 3. and private paper.29 cents.000. unemployment figures indicate substantial unemployment order of magnitude worse than before the stabilization. and foreign paper assets or denominated in stable currencies. granted broad powers to effect monetary and fiscal reform.

- 19a - analysis that was used to fabricate the prediction for the contemporary United States that each percentag~ point reduction in inflation would require a reduction of $220 billion in real GNP. government's The threatened renewal of inflation has been attributed to the premature relaxation of exchange controls. At but stabilized in autumn of 1926 at around 72% of its level of January 1924. the same time.-- . and the tendency of the 281 central bank to make private loans at insufficient interest rates. the domestic price level stabilized at about 50$ above its level of January 1924. The Polish zloty depreciated internationally from late 1925 onward.

of military who for a variety and industrial of reasons power of the pre-war They exerted limits on the willingness and capability of the govern- ment to meets its admittedly staggering revenue needs through explicit taxation. making direct payments to striking workers. the budget would not have been badly out of balance except for the massive reparations made. the extent of than it.The table reveals that. which it financed by discounting treasury bills with the Reichsbank. examining the figures in reparations payments actually For one thing. except for 1923. determined to fight the French occupation by a policy of "passive resistance.-. and was a most important force for hyperinflation. This fact dominated Germany's reparations to the allied public finance from 1919 until 1923. For another thing. The disruption caused to Germany's finances by the reparations by payments situation is surely understated made.-20 - Germany After World War I. At the conclusion t. as the figures on wholesale prices and exchange rates The inflation became most severe after the military The German government was II occupation of the Ruhr by the French in January 1923.291 of the war. Germany owed staggering countries. Table G3 reports estimates of the current account budget of Germany 30/ from 1920 to 1923. state's currency and other debt depends on the fiscal . in Tables G1 and G2 reveal. ever was eventually Germany's total obligation time uncertain and the required schedule of payments was for a long From the viewpoint intimately that the value of a policy it and under negotiation. Germany's was the most spectacular. a political revolugovernments reached a republican The early post-war by moderate with centers Socialists. Germany experienced government. hyperinflation Of the four countries that we have studied.Lon and established were dominated accommodations regime. considerably larger sums were initially expected of Germany able to pay.

there occurred a flight from the German mark in which the real value of Reichsmark notes decreased drama tically. while Reichsbank Between January 1922 and August notes 1923. prices increased by by Wholesale increased a factor of 2. . a force came into play we have studied. The figures in Tables G1 indicate that between January 1922 and July 1923. During 1923. from 1921 to 1923. it. the uncertainty ment necessarily about the reparations owed by the German governfor a stable currency. and despite the ef- forts of the government to impose exchange controls. probably partially accounts for the reduced tax revenues collected first nine months of 1923.- Figure G4 reveals the extent to which the Reichsbank circulation was "backed" by discounted bank also began discounting treasury bills. Especially virtually to government far below the rate of inflation. at the end of October 1923. the note circulation dramatically 1923. payments to the recipients transfer of the during the great inflation of 1923. were made at nomi"nal rates of interest amounted loans.-21 intends to run. Given the which was also present in the other hyperinflations method of assessing taxes in nominal terms.038 times. In response The French occupation of the Ruhr also helps explain to the inflationary public finance. especially by of the Reichsbank in the several months before November As pointed out 311 Young [36]. lags between the time when taxes were levied and collected peatedly led to reduced revenues rate as the government of inflation. increased cast a long shadow over her prospects As Table G4 reveals. over 99 percent within the previnote of outstanding Reichsbank notes had been placed in circulation ous 30 days. evidently re- underestimated the prospective and as the rapid This effect during the inflation gave people a large incentive to delay paying their taxes. the ReichsSince these loans they large volumes of commercial bills. a factor of 378 times.

000. and effectively made clear its intent to meet its obligation borrowing within the amount decreed.748. 1. 341 In December 1923. 32/ notes circulatin6.200.000 marks.000 marks. 1923 a declared equivalent to was 1.000. This limitation on the amount of credit that could be extended to the government was announced at a time when the government was fi~ancing virtually 100 percent of its expenditures by means of note issue.000.200. 3. every effort to avoid holding marks. of foreign ex- By October 1923. the management of the Rentenbank was tested by the government. to economize on their holdings of rapidly Germans made Toward the end of the hyperinflation.000.723 times while Reichsbank notes circulating increased by a factor of 5.000. to limit government .-The figures in Tables G1 and 02 show that prices suddenly stopped in late November II rising and the mark stepped depreciating 1923. and the maximum amount which could be issued to the government. The event of stabilization was attended by a "monetary reform.. it has been in Ger- roughly estimated that the real value of foreign currencies Circulating many was at least equal and perhaps several times the real value of Reichshank . it is difficult to attribute any substantial effects to what was in itself only a cosmetic measure.000 paper marks.33/ tive aspect of the decree of October 15 was the establishing take over the note issue functions of the Reichbank. The fact that prices increased proportionately many times more than did the Reic~sbank note circulation is symptomatic of the efforts of Germans depreciating German marks. limits both upon the total volume of Rentenmarks The substan- of a Rentenbank to The decree put binding that could be issued. While great psychological significance has some- times been assigned to this unit change.22 wholesale prices increased by a factor of 25. new currency unit called the Rentenmark in which on October 15. and held large quantities change for purposes of conducting transactions.

. the best explanation the post-inflation Instead.909 of its superfluous force in December. As in the other in the months ~ cases that we have studied.. of the civil servants were to be discharged by January railways. overstaffed as a result of post-war demobilization. its staff by 65. Table hyperinflations: liabilities GlI documents a pattern that we have seen schedule of in the three other the substantial growth of central bank note and demand deposit the currency was stabilized. stopped. and inflation Table G5 shows the dramatic balanced budget that was made in the months after the Rentenbank The government deliberate. and the Dawes plan aSSigned Germany a much more manageable payments. in the German by discounted commercial The nature of the system of promises and claims behind the cental bankts .351 aiding the fiscal situation. discharged 120.000 men. for this is that at the margin by increase in notes was no longer "backed" case.-23 Simultaneously ment borrowing and abruptly three things happened: the government additional govern- from the central bank stopped. the number of government employees charged.000 reduced men during 1923 and 60. budget swung into progress toward a decree. a series of balance. Young reports that "By the personnel decree of October 27J 1923. it was largely backed government debt. all temporary employees were to be disAn additional 1924. as soon as the effects began the discharge of stabilization became manifest. bills. permanent moved to balance the budget by taking actions to raise taxes and eliminate expenditures.000 more during 1924. percent was cut by 25 percent.316 at the close of 1922 to 22. Reparation Germany also obtained resus- Substantially lief from her reparation payments were temporarily pended. at the close of 1923. 10 The all above the age of 65 years were to be retired. the Reichsbank its employees The postal administration itself which had increased the number of from 13. obligations.

terpretation must undergo a very bank notes and deposits the stabilization of the German mark was increases in output and employment and decreases in unemp Loy- ment. 37 / There is little found real overinvestment in many kinds of structure of doubt that the "irrational" capital with which Germany itself after stabilization led to subsequent problems of adjustment in labor and other markets. since the year of spectacular inflation of 1923 was a very bad year for unemployment and physical production. there is ample evidence that the German II inflation was far from IIneutral. By all available measures. AlDis Rasin. Despite the evident absence of a ~Phillips curvetl trade-off between inflation and real output in the figures in Tables G6 and G1.debt were accompanied capital goods. and of the figures assembled shows that 1924 suffers in eomparison with 1922. accompanied by So once again the ir. distinguished was formed out of Under the leadership of a after the war Minister of Finance. Dr." Graham [7) describes and that there we!"e important "r'eal effects. of the poor performance Certainly a la~ge part in 1923 was due to the French occupation of the Ruhr and the policy of passive resistance. than 1923.36/ While i924 was not a good year for German business. In these figures one cannot find much convincing evide~ce of a favorable tradeoff between inflation and output. evidence that the inflation money and and the associated reduction in real rates of retur'n to high-powered by other government . of the time series on central substantial change. when after the Rentenbank decree the central bank no longer offered additional credit for the government. the new nation of Czechoslovakia territories formerly belonging to Austria and Hungary.-24 liabilities changed. immediately . but that 1925 was a good year. Table G6 is representative it was much better by Graham. Czechoslovakia After World War I.

by its As a result. Czechoslovakia Under Rasin serious about t avoided S the hyperinflation Czechoslovakia experienced neighbors. thereby recognizing There was considerable drama associated with this event.. as the National Assembly passed the plans for stamping in secret sessions on February . EVen before required it.' Czechoslovakia neighbors did adopted the conservative only after their fiscal and monetary policies which its had depreciated currencies radically. Czechoslovakia stamped the Austro-Hungarian stamp. notes then circulating them as its· within her border with the Czechoslovakian own debt.24a - . leadership) a stable early on showed that the peace it was treaties attaining currency.

to Table C3 shows the path of exchange rates. Indeed. This law was circulation obeyed.000 retained part of the notes in the form of a crowns were stamped.96 cents. Czechoslovakia which It raised a imposed a progressive amount of about property.000.000. the government forced loan. Czechoslovakia count (see Table Cl). also imposed an "Lncr-ement tax" on the increased wealth individuals had obtained during the war. 1922 to 1923. and how after declining November 1921 the Czechoslovakian crown rapidly gained to about 3 level. this plan was abandoned.s. of the banking office. and forced the government to finance its expenditures by levying taxes.000 crowns by 1925. and the crown was stabilized at about 2. From February 26 to March 9. on government or else issuing debt. which because of the statutory restriction note issues. Table C2 shows the note and deposit liabilities The government's abstention from inflationary finance shows up in these figures. Czechoslovakia moved quickly to limit by statute inflationary government note Circulation. the stamping process. were interpreted as promises to tax in the future. Czechoslovakia to Rasin 1 s ini tial plan had been restore the Czechoslovakia Hungarian crown. 381 About 8.-25 25.000. Following crown to the pre-war gold par value of the old AustroRasin's assassination. ran only modest deficits From 1920 on. Table C4 shows the price actually experienced a deflation. bank. A banking office in the Ministry of Finance took over the affairs of the old Austro-Hungarian the total government finance. Only Austro-Hungarian As part of notes circulating within the country could be presented for stamping. cents.000. and foreign mail service was closed. cumulative 11 . and to prevent A law of April 10.000 crowns. 1919 strictly limited the fiduciary or unbacked note of the 'banking office to about 7. .000. From u. the frontiers of the country were unexpectedly closed. capital levy on on current ac- Among other taxes.000. 1919.

first. the creation of an independent bank that was legally committed unsecured regime). only by government taxation.-- In discussing that the events described this subject with people. once it became widely understood that the government terminated simply and the would not rely on the central bank for its finances. private They had the parties and of binding the government its debt with foreign governments by sufficiently who would value that debt according to whether it was backed large prospective taxes relative to public expenditures. second. continued to grow rapidly Rather. the exchanges stabilized. measures to refuse the government's a simultaneous interrelated to place alteration demand for additional in the fiscal policy were and coordinated. and Poland were. I have encountered the view here are so extreme and bizarre in the contemporary that they do not bear On the contrary. failed precisely they did not change 411 the rules of the ga~e under which fiscal policy had to be conducted. In each case that we have studied.. T. central Austria. Hungary. since ~~ each case the note circulation after the exchange of fiat there rate and price level had been stabilized.he on the subject of inflation it is precisely United States. or backed to retire through it was the growth bills. 401 t set of "rules the exchanges because of the game" or general under Hegedus- Earlier at tempts to stabilize in Hungary and also in Germany. currency which was unbacked .2/ effect credit. We have further seen the inflation that it was not increaSing quantity of central bank notes that caused the hyperinflation. These and. because the events were so extreme that thev are relevant. experiments four incidents we have studied are akin to laboratory in which t~e .26 Conclusion The essential measures in ending hyperinflation in each of Germany. which never was a prospect The changes Which ended the hyperinflations tive actions within a given were not isolated restricpolicy.

less drastic predicament with inflation. if only we interpret them correctly.-27 elemental forces that cause and can be used to stop inflation are easiest to spot. . I believe that these incidents are full of lessons about our own.

1/ There is actually no such thing as a "rational expectations school" in the sense of a collection of economists with an agreed upon model of the economy and view about optimal monetary mists who use the assumption agreement about these matters. "reason. 59. April as shrewd a is probably summary of the rational tence. the so-called tionists.1I evidence summarized in this paper is surely relevant. But pain if only the government makes credible its determination neither history nor reason tempt one to bet their way.Footnotes 1/ "Most economists believe that the underlying gains--now inflation rate--roughly de- fined as wage costs less productivity stands at 9 to 10 percent. As for history. p. among econothere is wide disof the notion of rational expectations What characterizes adherents is their intention to build models by assuming that the dynamic environment in which they operate to this understand as well as do government policymakers. diversity Adherence about leaves ample room for substantial the many other models with details of a model. May 19. expectations view as can be made in a single senas for models the However." 28. In fact.' They are optimistic 'rational expecta- that inflation can be wiped out with little to do so. has aptly summarized the rational expectations view: Paul Samuelson "I should report that there is a new SChool. it is difficult II to agree with the third sentence: coherent and well-reasoned no one denies that logically underly the claims of the "rational expectationists. 1980). For some examples of rational expectations . 1980." 21 Newsweek. of rational expectations pri vate agents approximately notion and fiscal policy. and that only a long period of restraint can reduce that rate significantly. The second sentence of this quote (Newsweek.

-2diverse [34], implications, see Lucas [21], Barro Despite [2], Wallace [35], Townsend

and Sargent and Wallace


their diversity,

it is true policy before

that all of these models impel us to think about optimal government in substantially different ways than were standard in macroeconomics of rational expectations "Whoever studies

the advent of the doctrine

in the early 1970s. history of




the recent economic

Europe is struck by a most surprising

fact: the rapid monetary restoration

of some countries where for several years paper money had continually depreciated. In some cases the stabilization of the exchange was not obtained by

a continuous effort, prolonged show themselves

over a period of years, whose effects would economic and financial restoracases

slowly in the progressive

tion of the country, as occurred before the War in several well-known of monetary depreciation reform. Instead

the passing

from a period

of tempestuous

of the currency to an almost complete stability of the exchange (The Economics of Inflation, p , 33~.) Compare these

was very sudden."

remarks with the opinion of Samuelson

cited in footnote 2. bills which, in those times,


The notes were "backed"




could not be expected to be paid off by levying taxes, but only by printing more notes or treasury bills.


The Course and Control of Inflation, Keynes wrote:

League of Na~ions,

1946, p. 101. of other internal from returning to

"It is not lack of gold but the absence

adjustments which prevents the leading European countries a pre-war gold standard. as soon as the other standard have returned.

Most of them have plenty of gold for the purpose favorable to the restoration Writing of a gold



[11, p. 132].

about Germany in

1923, Keynes said: liThe government in the absence of other revenue, only way by which it can live."

cannot introduce a sound money, because, the printing Keynes of an unsound money is the

(10, p. 67].

8/ This view can be expressed

- 3more precisely by referring I am recommending to the technical that a good first

literature of optimum economic growth.

model of the gold standard or other commodity money is a real equilibrium growth model in which a government collects taxes.
[1) •

issues debt, makes expenditures,



of these models were studied by Arrow and Kurz debt is valued accord ing to the same

In such mode Is, government considerations


that give private debt value, namely the prospecA real equilia formal in private

tive net revenue stream of the institution issuing the debt. brium growth model of this kind can also be used

to provide

rationalization securities,

of my claim below that open market operations

foreign exchange, and gold should have no effect on the price

level, i.e. the value of government demand debt. It is relatively straightforward to produce a variety of workable theoreti-

cal models of a commodity money or gold standard, along the lines of footnote 8. It is considerably more difficult to produce a model of a fiat

money, which is costless to produce, inconvertible, and of no utility except in exchange. Kareken and Wallace [9], Wallace [35], and Townsend [34]

describe some of the ramifications

of this observation.

The workable models

of fiat money that we do have, for Wallace [35], immediately

example, those of Townsend

and held

raise the question of whether


fiat money can continue budget deficits models

to be valued at all in the face of substantial studied in this paper. Such

of the order of magnitude

lead one to assign an important role to government

restrictions, a valued, if

particularly on foreign exchange transactions, in maintaining involuntarily held, fiat money. Keynes [10] and Nichols

[24] also empha-

sized the role of such restrictions.





The sweeping


of this principle

for standard

ways of formuThe

lating and using econometric models were first described by Lucas [19]. principle dynamics.

itself has emerged in a variety of contexts For some examples, see Lucas [20],

involving economic

and Sargent and Wallace [30}.

Sargent and Wallace [31] describe a sense in which it might be difficult to imagine that a regime cbange can occur. As Sargent and Wallace discovered, mo-

thinking about regime changes in the context of rational expectations dels soon leads one to issues of free will.

The Treaty of St. Germain, signed in September of 1919, required the successor states of the Austro-Hungarian empire to stamp their share of the notes

the Austro-Hungarian


The stamp converted

those notes


the old

currency, i.e. Austro-Hungarian

debt, of the new states.

Austrian section of

bank functioned as the central bank of Austria for several

years after the war.


Needless to say, the central bank encountered a strong demand for loans at this rate and had to ration credit.

At the time, some commentators argued that since the real value of currency
had decreased and so in a sense currency was scarce, the increased note Some

issue of the central bank was not the prime cause of the inflation.

even argued that money was "tight," and that the central bank was valiantly struggling to meet the shortage of currency by adding printing presses and employees. nomists. This argument is now widely ~egarded as fallacious by roacroecoDisturbingly, however, one hears the very same argument in the

contemporary U.S. "In Vienna, during the period of collapse, mushroom exchange banks sprang up at every street corner, Where you could change your krone into Zuric~ fra~cs within a few minutes of receiving them, and so avoid the risk of loss during

That a government might want to adopt such measures if it were using inflationary finance was pointed out by Donald Nichols [8J. Phillip Cagan [~] posited the demand schedule for money of the form ! ." (Keynes [10. at least under the gold standard. . p. and that interprets set'vations in terms of a demand fUnction for the total quantity of !lInoney. 115}. Austrian Ninister to the Supreme Council of the allied governments quoted by Pasvolsky [25. Only after March 1925 were restrictions on trading foreign exchange removed. J1. 51]. p. its situation is no different from that In 1922. 20/ It should be noted that for two years the new bank vigorously exercised its authority to control transactions in foreign currency. there was widespread concern within and without Austria (See the desperate note delivered by the that her sovereignty was at risk.-. 16]. A similar protocol was signed at the inception of Hungary's finanCial reconstruction." For instance. Vol. even at the expense of drinking ) it 161 tepid. p. lest the price should rise meanwhile.) The first protocol aimed to clarify the extent to which Austria remained a political and economic entity capable of backing its debts. 116]. criticism It became a reasonable to allege that a prudent man at a cafe ordering a bock of beer should order a second bock at the same time. II. l2! The content of this protocol is highly sensible when it is remembered that the value 6f a state's currency and other debt. of these observations that neglects the the ob- There is an alternative explanation distinction between inside and outside money. of a firm.5the time it would take you to reach your usual bank.! 18/ Pasvo Lsky (25. is determined by its ability to "back" that debt with an appropriate fiscal policy.) See Young [33. In this respect. W 221 This explanation is consistent with the argument advanced by Fama [6). p.

1-a 1=0 a-1 )i EM t t+i where EtMt+i is what at time t people expect the money supply to be at time t+i..ll The money demand schedule or l1portfolio balance" schedule incorporates the idea that people want to hold less wealth in the form of real balances the faster the currency is expected to depreciate.. suppose that the government the money engages in a policy. Mt is the logarithm money supply. First. the inflation rate in figure 1. and then at the rate zero from time T onward. and EtPt+1 is people's expectation period. -_ 1 t . of the log of price next to There is always a problem in defining an empirical counterpart Mt' but it is often taken to be the note and deposit liabilities of the Central Bank or llhigh powered money.C1 I. would follow the path depicted In this case.~) -6- . Consider the following two experiments. .Cl <0 of the where Pt is the logarithm of the price level. which everyone knows in advance. equlibrium (2 ) P Equation (1) can be solved to give an expression for the price level of the form ~ ( . of making supply grow at the constant but high rate V > 0 from time 0 to time T-1.

but that at time T it becomes known that henceforth the money supply will increase at the rate o forever. sudden and permanent drop in the rate of money creation. Inflation path with a previously unexpected decrease in money supply growth from ~ to 0 at tirea T.-7- o Figure 1 Inflation T o Figure 2 T path with an expected decrease in money supply growth from \l to 0 at time T. In this case. In the face of a previously unexthe only pected. decreased In order to stabilize the price level in the face of a the level of the money supply rate of change of money. For the second experiment. This will require a equation (1) that real balances sudden once and for all drop in the price level at T. it follows from must increase at T. Now since the inflation and the expected as shown by the path in figure 2. the inflation rate takes a sudden drop at time T. This second example rate provides of a previously unexpected decrease in the inflation of the money the material for an explanation of the growth supplies after currency stabilization. . must jump upward once and for all. suppose that initially everyone expected the money supply to increase at the constant rate \l forever. way to avoid a sudden drop in the price level would be to accompany the decrease in the rate of money creation with a once and for all increase in the money supply. inflation rate experience a sudden drop at T in this case.

In this case. within the model (1) for all jump. 111]. lags to the portfolio (1) For example. 161].-8What actually occurred in the four countries studied here was not a once and increase with in the money supply over many months. Also see Graham [7. Poland did not owe war reparations. p. I stabilization continued find this explanation but it is a possibility. Hungary. of inflation to hold. these became a claim on gold as Britain returned to the gold standard. that stresses between backed and unbacked See Pasvolsky See Pasvolsky [25. sider replacing (1') (Mt-Pt). [13. 298]. [25. the of real balances at this point upward at the rate of (1-A) is for an explanation money. and Germany. An alternative upward movement adjustment way to reconcile of high-powered the preceding explanation with the gradual is to add con- money after the stabilizations balance schedule (1). 291 See the account in Paxton [26. pp. 146-150]. 271 The Course and Control of Inflation 281 The Course and Control of Inflation 30/ [13. p. 261 Unlike Austria. an abrupt stabilization gradual adjustment My own preference distinction 23/ 24/ 25/ of expected inflation induces only a per period. 108]. Within a year and a half. 40-41]. pp.O<A<1. but a gradual This could be reconciled the observations if people were assumed only gradually and decrease the rate to catch on to the fact of stabilization that they expected as the currency hard to accept. . p. with + A(Mt_1-Pt_1) a(Etpt+1-Pt) a<O. p.

-9- 11. when a government pays its way by inflation. p. nIt Of inflationary finance. Keynes wrote: is common to speak as though. Hilbert remarked 'One cannot solve a problem by changing the name of the independent the stability of conditions was gradually restored. The Treaty of St. were closed to prevent notes from AUstria and Hungary from The frontiers entering the country. I. p. 162-3]. p. p. I. signed September 10. even • the German government or the Russian government. \' government A can li ve for a long by printing time. p. notes. We have seen this is not so.' pp. ernment can live by this means when it can live by no other. Theoretical models of money along the lines proposed by Samuelson [29J fiscal [29] predict that too much capital will be accumulated policy is so profligate and Wallace 38/ when the government See Samuelson that money becomes valueless. Vol. 345]. taxation. Vol." 47} • Keynes See Young [36. variable. See Graham [7. 34/ 35/ 36/ 371 Young Young [36. Germain. paper money A gov[10. I." Reid [27. After reading an earlier draft of this paper. Ch. [35]. John Kennan directed me to the following bert: passage in Constance Reid's biography of the mathematician Hil- nIn 1923 the inflation ended abruptly through Although the creation of a new scepti- unit of currency called the Rentenmark. XII]. 421]. [36. 1919. cally. Vol. 422]. the people of the country avoid printing notes is What a What is raised by just as much taken from the public as is beer-duty or an income-tax. .1 Keynes wrote. ~021 and Bresciani-Turroni [3. provided that the successor states should stamp the Austro-Hungarian signifying their assumption of the debt.

304-307]. government ered deficit. There is no such thing as an uncov- But in some countries it seems possible to please and content the public.. for a time at least.10 - spends the public pay for. . more complicated would have to be described in a This more considerably more involved and "state contingentlf way than the simple reI believe that the data of this paper could be complicate the gimes we have described. in this paragraph can be constructed [30]. in return for the taxes they pay. . The in- come tax receipts. described using this view. On this interpreta- tion. who argue that for a single of a rational expectations model in ill A deep objection to the interpretation along the lines of Sargent and Wallace economy it is impossible to conceive which there can occur a change in regime. in Germany they call them bank-notes and put them into their pocketbooks. pp. Keynes [25. what we have interpreted as changes in the regime were really only the realization regime. but that it would substantially language and require extensive qualifications. up in the family safe. finely engraved acknowledgments on water-marked paper. by giving them. 68-69]. the substantial with to and fiscal policy associated the ends of the four inflations studied here can themselves be considered have been caused by the economic events preceding them.1I 40/ See Pasvolsky in France they are termed Rentes and are locked [10. without altering the main practical implications.. of events and human responses complicated regime under a single. pp. which we in England receive from the surveyor. changes in ways of formulating monetary In particular. we throw into the wastepaper basket.

1946. No. London: P. van Walre. report presented to the Council of the League of Nations. J. of Austria: General Survey of Hungary: General Survey Banks. John Maynard. Memorandum on Currency and Central on Public Finance (1922-1926). The Course and Control of Inflation. Ltd. 13. pp. January 1980: pp. Prices." pp. 321timore and London. Geneva 1926... No.cs . . T. Public In'/estment. The Austrian Crown. 11. New York: Russell & Russell. References 1. H. Fama . 1926. 1930. and Mordecai Kur-z.S. Allen and Unwin Ltd. and Neil Wallace. 9. W. League The Financial Reconstruction and PrinCipal Documents. 1980. and Production m~~YI 1920-23. 1926. The Economic Situation of Austria.6. Arrow.. Geneva. ed. 16. The Financial Reconstruction and Principal Documents. J. August 19. Vol.. Vol. 1956. 1924. 5. Frank D. liThe United Parke Young. n in Milton Friedman. in Hyperinflation: Economics. Chicago: Unive~sity of Chicago Press. the Rate of Returnl and Optimal Fiscal Policy." Journal of l'!onetarl. 1095-1118. 131-133 and Finance. 1927. League of Nations. League of Nations. European Currency States and Gold. Monetary Reform. Studies in the Quantity of Money. The Economics of Inflation. Federal Wallace. 82. It Geneva. Geneva. Constantino. 1970. Keynes.'. Company. Exchange. John Hopkins Press.. 17. King and Son.1. 2.. 1913-1925. League of Nations. in John 12. Ger- Kareken. Barro. Bresciani-T'Jrroni. New York: Harcourt. Brace. 6. de Bordes. 3. 8. 6. League of Nations. Kar eken . Econcmf. Geneva. and Keynes. Cagan. Models of Monetary Reserve Bank of Minneapolis. 1925. "Introduction" to Models of Moneta!""] Econo 10. John H. Vol. Kenneth J. London: George Phillip. 1924. "The Monetary Dynamics of Hyperinflation. of Nations. 4. Robert J. 14. 39-58. 7. Memorandum Vol. Layton. 15. I. and Charles Rist. November/December 1974. "Are Government Bonds Net Wealth?U Journal of Political Economy. Eugene F. and Neil ~ {8]. 1937. John Maynard. "Banking in the Theory of Finance. Graham.

"Econometric Testing of the Natural Rate Hypothesis." omy. League of Nations. D. April 1976. and the Optimal Money Supply Rule. Sargent. 19-46. 1976. Jr. 23. of the Danubian States. 1. Vol. Thomas J. Inc. April 1975. Pasvo Lsky .2. "Equilibrium Monetary Lucas. thesi s I University of Minnesota. Salemi." Federal Reserve Bank of Minneapolis. 32. Lucas. Model of Interest of Political With or Econ- 30. n Journal of Monetary Economics. Robert E. Exchange Depreciation." Federal Rese~ve Bank of Minneapolis." unpubl ished Ph. Sa~gent. 82. Journal 29. and Thomas J. Paul A.. 28. ~~rch/April 197~. Sargent. Memorandum on Currency and Central 1925. Lucas. forthcoming. and Neil Wallace. Vol. pp. Constance. "Rational Expectations and the Reconstruct ion of MacroeconomiCS. Robert E. I. . Brunner and A. Geneva.. Meltzer. New York. Summer 1980. 66. 21. Number 2. !'After Keynesian Economics. E. 22. Donald.. Michael K. eds. 423- 2~. Thomas J. University of Minnesota Press. Vol. 1976. Thomas J. Lucas. H. Jovanovich. 1979. Decembe~ 1958. Robert E. 19. Jr. n in }1odels of E. and Neil Wallace. and Thomas J. Hilbert..1I in ~ Phillips Curve and Labor Markets. Lucas. Vol. Vol. "Rational Expectations and the Theory of EconomiC Policy. Millan. Quarterly Review. No. Nichols.-218. n the Opti:nal Journal of 31. Amsterdam: North Holland. Sargent. Sargent. pp. 20. Europe in the Twentieth Century. Quarterlv ReView. I. Banks 1913-1924. Jr. "Ratio~al Expectations and Econometric Practice 1 II introductory essay to He tional Expecta tions and Econometric Practice." Journal of Political Economy. Spring 1979. Robert E. "Some Principles of Inflationary Finance. Vol. In The Econometrics of Price Determination Conference.. Federal Reserve System. Sargent. 27. Jr. 1975. Leo. and the Demand for Money in Past World War I Germany. in a Pure Currency Economy.. Jr. R. Springdr-Verlag. eas. Lucas.. 467-82. Instrument. and T. 83. IIEconometric Policy Evaluation: A Critique.. Robert O. K.. No. pp..Robert Economics [8]. Reid.. 2.2. Eckstein. Samuelson. edited by Otto Washington: Board of Governors. Carnegie-Rochester Conference Series on Public Policy.. Economic Nationalism 1928. Monetary Political "Ba tional Expecta tions. "An Exact Consumption-Loan Without the Social Contrivance of Money. 25. UHyperinflation. 1972. J. 26. Part I. 430. Economy.. New York: MacNew York: Harcourt Brace Paxton.

Serial 9. "Models of Money With Spatially Separated Agents. Young.C." in Models of Monetary Economics [B}. European Currency and Finance (Commission of Gold and Silver Inquiry. 36.S. D. Senate. 34. Robert M. 1924/25. "The Overlapping Generations Model of Fiat Money. Wallace. John Parke. Neil. U. Townsend. Washington." in Models of Monetary Economics [8]. Statisticles Jahrbuch fur das Deutsche Reich. 35." -3- 33. . I and II. Vols.: Government Printing Office).

30. 1920 30. p.763 70.601 347.118 137. Table Al Austrian Budgets. 1920--June 30.339 61295 Expenditures Deficit 4. 1921 31.533 41..873 2. 1922 Receipts 1. 1919.578 67 63 58 40 29. 1919--June July 1.483 209.704 10.nuary I--June July 1.770 January I--December Source: Pasvolsky [25. 102] • .043 16.. 1919-1922 (In millions of paper crowns) Percentage of Expenditures Covered by New Issues of Paper Money Period Ja.

634 38.495 20.776 397.552.081 5.798 7.367 6.216 4.194 49.190 6.144.525.140 54.313 549.036.299 30.632 Source: Young.607 3.902.692 8.832 15.474 13.080.551.685.837.000 7.003.786.nuary February March April May June 4.607.207.647.957.805 16.January February March April 2.970.271.138 304.000 5.225.991.577.H9 15.894.958.809 15.353.687.242. 2921 .960.878 4.050.382.352.829.225.312 5.620.397.January February March April May June July August September October November December 1920.658 34.281 58.931.577.000 7.387.916.642 346.217. II. 5.000 7.364.6T7.177 . 90j_ .000 8!213.DOD June 41.686 25.786.405 9.793.766 70.403.241.Total Table A2 Note Circulation of Austrian (thousands of crowns) Crowns 1919.792.998. [36.Ja.723 45.063.616.385 28.310 11.441.721.722 4.774.133.OO{) 7.000 7.110.839.391.120.266.000 July August 786.781.015.238 4.003 February March April May July August September October November December 1925.135 9.341 7.670 12.925 45.498 4.134.684.107.117.976.819.523.105 6.459.352 6.897.432.755.601 1. Vol.894.344 18.112 September October November December 1923.767.577'.678 227.333 4.000 7.645.533.109.471.331 June July August September October November December 1924.367 7.457.000 7.OOO 8. .135.738 2.915.056 5. p.292.697.281 22.417.971.648 June July August September 1922-January February March April May June 259.January February March April May July August September October November December 1921-January February March April May 10.'735.786.000 7.021.995.420.619.583. 000 7.042.000 3.721 5.

361 23.336 23.851 June July August September October November 19.336 23.090 18.797 24.293] 22.941 23.205 19.511 December 1924-January February April March May June Source: Young [36.166 21.428 20.046 December 1923-January February April May March 20.409 17. II. p. 1921-1924 Month Retail price index.028 June July August September October November 11.457 1. vo1.428 1.619 3.567 17.450 20.681 17.849 18.368 20.482 17.830 2.Table A3 AUstria-Retail prices.526 18. 52 com modities 100 114 1921-Jaunary February March April May June 122 116 121 July August September 150 143 October November December 1922.431 4.267 .955 21.142 1.January February March April May 215 333 566 167 942 1.479 21.

00 5.50 722.294] • .00 1.00 70. Austrian crowns per U..00 70.760. dollar in New York ma.00 604.760.00 70.00 70.S. II.900.50 130.00 71.00 74.00 720.50 2.355.03 24.760.24 99.00 70. vol.760.760.00 71.275.760.00 7.760.00 6.00 71. " Table A4 Austria-Exchange rates.00 661.66 659.00 8.00 1923 71.00 237.09 20.00 155.760.00 4.00 70.00 957.00 70. p.375.00 70.487.00 70.00 18.00 165.00 676..00 42.760.50 11.00 1924 70.00 70.85 26.081.00 155.00 73.937.160.800.00 70.63 37.00 70.50 206.83 145.400.00 70.40 250.00 70.33 493.00 1922 7.66 200.00 70.760.00 Source: Young [36.800.00 April May June July August September October November December 17.150.00 70.350.925.72 25.rket 1919 January February March 1920 271.850.760.00 358.100.760.500.00 70.760.43 1921 654.550.350.00 77.760.00 70.00 42.50 68.50 7.00 70.760.760.520.300.00 70.75 29.14 255.

Source: Young {33.428 2.177 1.616 7.217 7.109 279.471 2.538.547 2.719 1.527 2.548 1.336.491 2.092 178.800 752.684.700 1.876 3.294.545.339 362.551 4.848 2.356.274 105.391 73.735.151 2.599 3.534.777 7.420 438. . in millionsof crowns] Foreign exchange Month Gold currency and Loans and discounts Tr eaasury bills Notes in circulation Deposits 1923 January· February March April June May July August September October November December 1924 January February March April 49.550.178.579 484." Table AS Austrian National Ba.117 83.434 2.688 2.498 236.256 108.999 1.342 108.339 3.737.109 7.947.945.032 3.202.593 2.178.539.647 8.477 3.379.607.509 8.485 4.210.021 8.902.314 111.550.334 1.125.802 3.449 3.131.848 658.770.209 2.046 728.719 2.134 1.121 413.882 617.142 7.391 73.949 2.550.094.226.II.881.390 315.554.317 1.355 4.029.897.312.150.109 6. 291} .159 2.794 2.207.295 1.059.470 3.724.982 558.577.253.333 3.148 2.643 110.474.059 107.535.921.620 7.439.750 533.958 7.315.316 2.672 1.966 647.619 5.532.232 3.050.134 5.752 226.682.202.661 2.107.536 106.141 641.992 4.185 6.532.310.950 109.340 1.001 741.382 4.058.069 2.669.682 2.159 2.325.254.890 3 ~811.092.852.786 6.814 696.453.660.132 731.273 343.901 7.327 110.219.438 86.159 2.173 2.196.677 890.577.047.304.976.379 2.649 112.380 2.085 3.088.244 1.998.400 896.391 73.126.337 3.285.839 2.620 1.387.916 535.097 73.663 107.117 4.762 108.397 741.385 1.383 373.110.177 3.106 2.936 863.652 3.536.321 649.032 997.nk Balance Sheet [End of month.733.995.767 536.181 2.391 73.594 3.884 821.172.604 2.032.304 83.547.627 1.002.942 730.673 414.552.391 62.533.117 62.042 5.242 7.441 7.537 502.771 295.158 1.911 3.755 329.556.777 2.443 107.337.471 7.872 3.957 p.474 111.837.459 2.894.110 1.27073.432.839 6.459.832.216 3.003 8.400 2.344.450 111.962 2.364.168 3.072.858 875.212 2.537.237.069.957.504.953.213.49Q 4.144.774. Vol.424 May June July August September October November December 1925 January February April March 91.792 7.

000 paper crowns.0 1925 Closed Accounts 908.6 -13. 1923-25 (In millions of schillings~1 1923 Item Closed Accounts 697.6 810.5 741.6 1924 Closed Accounts 900.6 +76.4 +167.2 ~/ 1 schilling Source: = 10.6 103.1 90.0 -158.Table AS The Austrian Budget.4 779. Pasvolsky 125. 127] • . p.2 76.0 +90.5 Total re venue Current expenditures Deficit (-) or Surplus (+) Capital expenditures Total balance -82.

. p. 87]. [14.Table A7 Austria Number of Unemployed in Receipt of Relief (in thousands) Beginning of 1922 17 1923 117 153 93 79 1924 98 107 64 78 1925 154 176 118 1926 208 202 151 148 January April July October 42 33 38 119 Source: The Financial Reconstruction of Austria.

653 1.307.0 26.210 9. p.099 2.468 40.764 193.4 .690 6.802 20. 299] 34. 1920-1924 (In millions of paper crowns) Percentage of Year Revenue Expenditures Deficit Expenditures Covered by Issues of Paper Money 1920-21 • 1921-22 • 1922-23 1923-24 .168.9 24.Table H1 Hungary Budget Estimates.1 21.455 3.1381959 47.520 20. Source: 10.296 152.140 Pasvolsky [25.

1U 5.719 1.013 1) !fogm.'.OOO l.507 t. tOO4C over til.110 25."3 ••'U.091 Sapte_ Oet_ Nov.101 IIS.'SI.&31 1..98Q ~.54' 1.a1Z.713 31. NatiOllAl BanI! U.111 U.4U :1.285 15'.100 143.5SC1 U.4411..3nl 13._u..nad BWI Nat.415 $03.Mud\ April Mey J\8l& Aucuat 1. of P8Pa' CJ'O)WIII.262 2.577 1.917 213.481.113 n.S" 1.*.411 'D2. "..813.U9 10.900 7.248 80."0 1.Z24 2.45$ 1.000 401.481 2.40a FcbnWy M_h May .mlMr IGU January p~ .3~' 1.850 4.H$ 5.t41 "1."'. l.531 5..tlO.154 2.11' 74.080 4.WG 20.'31 41.ttl Kramm 10.-y .r 3.mber O~.24.04' 935 1.92' ~..4~.ILy AUCQSt Soeptambet' ()I)ttJbe.4110 I.141 1.182 3.Tlt 2.542. 58'.ptember .091.'.952 :5...454 I. tbill dat.911 931.ot 1M S~t.883 51.\{011'011 Fetwu.111 21.109 1.llf11 9. GMnps 0 the opentnr0C tn..' U U 23 U 22 %2 n n. n.431 17 .:J73 l.935 308.301 13.105 310.1U 1.U'I' 1.3ff t.Iel 2.158 l.aft.113 1.511 U.05.51'.961 '.600 a.925 4.401 sa.200 1.I."'.'''. TIl) 1..761 54..125._ o. 000.600 31.187 11.000 900 1.JUI . illstUut.700 19.1111\.'''''..101 ..UI '..3U 1..930 33.400 1. Hqer..T$I.000 199.5111 1.431 1.005 12.$11 741.512 2.131 L2.c<:owna ~\U Current en" January MlIHh April 1121 FebfUant .000 11'.due~ Kr_ Kr_ -cncy '-leD ~\" ~on ~\i.01& 1~.8". Decemller 1924 ISJIU8l'Y I'~ IIfar12h April 111.534 12.tlonel Bulle in Jun .4U 5.850 U$ Kronel\ 112 IdO 110 111 101 101 1.13D 1.111 '".1UI ~.200 59.lillie . 19Z4..000 944.111 46.374 L2.3Sf 46. 5.248 8.92!1. alao mada In the pr_RtetiDII 1.271.aT 1.881 6.354 Z. 1. t.300 1.314 1.93& 253.'u Kranm 3.lfZ 1925 SOI.wIl.4~1 2.326 n.130 1.jan&llU)' Me.802 S.321 30.I14 1..1"1 3.158 21.115.117 1..14$ 23.QQt 4. _ m.llG..202 12.11$ 1.850 13.3'11 1.102 24.101 1.509 n..514 !eptembfr> Octobe!' Nov. l~. :SU_coirl v. '1<11.<:embft lin .~1' 5411.tU.110 "4.'41 11.N2 11..000 1.000 .193 10.420.000 47. July A(IrU u 13 11 l! 13 U U U 14 H1$ 14 23 t :4.100 5. ICP_ A4Ya_to h_utJ Kroneft No~ In eIrouIa\lon . $0.$AS 1. Y<IIII'IIl: 1311.183 2.600 ll.135.!U.558 1.118 11. tMf.'" II.117 4.121 521.shOw" ill t_.ry April 1Ane.135. 1hl Bank Of S~t.356 l.142 25. Month Gold coin aM tIW..137 1.883. ~OI.t'5 :. no.111.SOl $11. TIM Hqanu .00\_ l((IIIelll_ Dfl:efnber U 23 \4 23 U It 14 «l.1" 20.53' 1.Ian Kron .211 12.GOO 31.5%1.016 900 1.189 1.U6 11.155 1.511' 1.ns.118 1. Z51 $32.l3t .DU 15.951.IlI9 5. 25.441 13.78.lOO Jl..411.101 118.011 .d).13' 1.014.148 $91.353 2.71.'00 3.500 16.'43 1'.ea3 1.465.382.2TO.13'.911 221.114 1.000 ommltt.'''.UII 1.'7$.IU Jun •• 1924.974.2.n4 2.3U U.1$1 5.1ST 4.$5$ 1.341 13.s. 12.110 1.000 521.880.513 11.13~.:40 %. .111ft.334 '.314 4. 10. 2.T~HI HUHQAAY ~ (Prlc. .791 105.11' 1.129 end sUftr IIolcltnp U.'n Z.'" 81.11«.994 21.1I1 13.5411 1.1'4 1.114 1).215 2."0 l.. attaJn of .S00 8.900 12.m 120..llS 1.511 15.578 a.112.000 243.'91 «.504 1.1~4 13. 4.000 306.001 2.454 U4.815 2.$10 31.~70.591 12. INtit~ta. tliu'a SII.U'f.:31 ~.20$ 15.468 AIIIU:lt 4 $ U U 12 1 1 1 1 1 1 1 1 1 1 1 1 1 I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 t.m.416..970 84.137.G6&.915 2.'81 DC. t af C .801.IU 13.000 4.'" .1'1.81&.3:t 24. . !'Iote nUtate.Ut 1.105 100..GU I.29$ UI ••• .403 23..1111 ~3.311.000 1. June1 JlIly AlllUSt s.481 1114.911 '.".cold If.000 15.'" 1.72' I.219 3.Ug.S" 2.13S IU.5" U.000 12.53.000 219.'13.337 15..

323] .0013 .500 94.1079 .500 2.346. II.0014 .236.0011 April May June July August September October November January February March Source: December 1925 .0217 .839.500 2.0014 p.0015 .0402 .700 2.000 144.0013 .900 32.300 8.0595 .750 1922 8.J.0014 .0052 .1078 .700 2.500 286.0054 .500 554. vol.400 6. 0.100 8.500 9.600 2.2629 .0054 .Table H3 Hungarian Price and Exchange Rate Month Hungarian index of prices cents per crown in New York 1 nr'll" .1944 .400 26.100 2.0413 .0012 .0392 .900 17.285.250 6.294.000 462.600 32.000 635. July August September October November December January February March April May June 4.0013 .0097 .000 12.0430 .0056 .000 1.1256 .0191 '.0055 .500 41.218.0760 .1432 .500 2.000 1.207. July August September October November December January February March April May June July August September October November December January February March 1923 1924 .0395 .1525 .3323 .l.600 2.'H.0033 .600 2.076.1497 .200 2.1512 .250 8.0289 .0013 .309.0140 .600 2.117.000 587.800 66.0423 .134.600 33.000 83.307.0039 .000 714.0014 .400 21.1258 .0012 .026.1261 .900 lOf75O 38.800 2.200 5.0013 .800 Young [36.000 2.

.322] .3 207.0 186.5 .1 +28.9 + 2.9 -100. -June 1925 Fiscal Year 1924-25 Source: 208.0 245.1 422.8 -+30. 1924-25 (In millions of gold crowns) Preliminary Treasury Accounts Period Surplus (-+)or Deficit Reconstruction Scheme Surplus (+) or Deficit eeipts Re- Expen- ditures Re- Expen- (-) ceipts ditures H July-Dec.9 216.57.42. 1924 Jan.3 293.8 393.6 .2 143.1 205.8 150.' Table H4 Hungarian Budget.1 Pasvolsky [25. p.6 453.

50]. p.. .' • Table H5 Number of Unemployed in Hungary (Figures relate only to members of Union of Socialist in thousands of workers) End of January February March April May Workers 1926 28 29 1924 1925 37 37 37 29 26 22 23 25 31 30 20 30 31 36 30 28 26 June July August September October November December 34 32 27 25 23 26 27 33 Source: Financial Reconstruction of Hungary. [15.

97 marks.49 marks. 691. First quarter 1922. 183J • . 1.981. p.310 145.52 marks.263 115.629.852 535.003 1.343 45.933.593 880. second quarter.2 222 345z311 467.313 348.119..979 14.830. Vol.231 106.' Table PI Poland-Receipts and expenditures [Converted from marks to zloty on following basis: 1921.' . II. third quarter.676 11.556 47 893 5302428 4262°°0 1.024.019 1.000 74.413 7.491. 1. 1 zloty=303.000 1.800 692.589 734.000 251 1.885 Source: Young [36. and fourth quarter.541 879.743 133. 1 zloty=513.530 1z703l000 1z9812884 356 611 Administration State Enterprises Monopolies Total Deficit Surplus 765.87 marks. (in thousands of zlotys)) 1921 RECEIPTS Administra tion State Enterprises Monopolies Total EXPENDITURES 1922 1923 1924 1925 261.75 marks.

4 33.9 111.4 45.8 3.l (lneludinc Month GQLcll SIl_l Adv_ coW Muka baa su.115.023.0 42.4 685.l ill! lenuary 6.6 ill! JIIIIUrY Marah April V*'-1:.n~. 3411 • 13.5 30.741.0 140.Ttl.O 314.125.s 31.1 .0at.184.2 6T .S 250.9 33.145.32 •• 4 870.811.' i 40..1 711.3".0 1&.0 4.3 .0 811.348.1 1.s.1 3.814.D p. 2 10.' 3l. 236.&00.1 221.9 11.olII P2 8aIaMe SlIm ot Bukof p~.' 1.1 !!!! January I'ebrutry Maron ~ 3.0 278.S 205.y aU) II!nci of motllhl 000.1 24.32'1.428.5 n.Ul.G 9.5 4.8 S.~37 .1.n~.1 1.0."1 May June July Sept.223.1 14.9 UI.0 nt.8 1.1 &61.S 44.400.1 Jun.231.0"'.625.4 .3 115.6 2.7 lilly AUCUSI: s.9 l.1 21.2 3. 580 •• 28.625.143.n 2'1.B 4n.T 25 .~ 793..IS.9 25.1180.891. UI.3 133.4 88.871.9 8.S .054.3 tl.5 l.3 1.' ~1.t 25.984.SlIO ..000.5 2.2 243.1 2T8.1 34.eembtP A\ICUS\ 11.5 1.0 1.215.49i.0 31'.% 19.1 21.0 3II..0 •• 825.201.a 13.O .4S8.4 3.5 SSI.0 11.Ul.1 41.~ 7~..Q40.000.mOe!' O_ber U.8 8.4 218.882.0 51.715.0 285.8 Octoblr Nov.0 e•• 180. Soutee.3 T.1 1.20i.s 18.5 ~83.1 894.1 "'.375.925.l 133.4 3S.242.1 24.625.1 318.8 102.' 471.9 191.02~ .0 n.l B.& 4.5 515.3 lO.' 303.1189.001.300.1 1.s 25.5 -U. 706.4 2'.4 44. L.15 •• 4 1.9 22.919.93~. 1.8 S •• B.8 1U.3 15.n !lank prior to M.5 1.888 •• 3".3 40.073.0 220. ~.130.093.0 4.0 901.000.1 I.l 811.0 H.S00.4 4.0 ~29.119. II.% '.0 '.9U •• 19.UO.3 141.029.81$. July Sept.904.3 '.8 Mula 880.0 921.2 41.5 '''.0011 oftlitted.0 48.' :5.5 62.~87.0 400.08T.5 10.1 U1.~ln"1"5 <Polllh SUIt.0 5.1> n5.1 335.300.4 21.' 12.S 1.0 239. Vo1.2 '.734.1 300.7 Zl.' silver coin at raN "ellM.0 3.2 1I\.5 2.4 45.239.6 8.3 '5.8 43.0 In.U5.1 12.2 ~3.8 3118.mbel' October N_mllel' Dftembft' D~tmber 8.9 315.S60.8 Ue.5 42.4 1'.825.6U.0 lU.314.310.551.7 BO.7"1.0 1I.O t".11$..ra •• lft.0 519.0 115.mbV Oct_ NOO'ember DecemlMr lGo1d-.4 37.. TOT.1 585.0 8.0 ~.375.211.5 12•• IT.0 93.7 t.' n.548.0 231.3 1.755.9 8.2 11. i '4.7 411.1 41.I t1l3..9 I.$ 1.% 130.9114." 21.1 685.5 211.4 3.o.7 80.3 3&1.ptanlber Jun.5 21.3 19.625.518.a M.5 tIO.1 185.IIU.3 '.115.315.' 101.0 1.T.1 2!1.s 3•• 311.9 242.S 111.1 2'.«6.7 198.s 45.9 ..0 4'.111.1 Aucust 6.771.0 342.1 34.0 106.' 20.9 It.5 31.9 415 •• 333.2 3.203.4 Uf.5 24.B8~.9 43.a M.000.311$.8 5.8 91.7 4.3 29.B ••• 5..0 453. ClreulaGov_ent t10n ill! October tlO'fenlbeP OeeenIber M.1 n.9 9.211.~1.wiUl benQ '-len Diaeow1tf MWII:I CommereJel Marb Not.1 13.3 111.2 38.521'.100.s lt~.S31.375.O 183.4 21'0.o 111.7 '.1l 1.1 n.5%1. .2 22.mDer Oetober NmembtP o.017 .8 ~44.3 11. l'~ [n.0 48.O U.500.2 2." 12.311. 73.l iS5.4 45.9 25.B February Mueh .8 1113.3 20.0 $19.521.7 3.0 T.l n.a 9.2 a..1 13.1 20.O91.1 1.101.1 47.130.6 2.451.3SI.D87 .' 11.000.1 $.1 IU.4 801.301.7 25.0 5.3 48.0 111.0 1.972.1 11..0 2.0 280.100.t ~I 31.0 232.OOO.9 14.0 51.4 13.098.5 Jwe July AUi\I01It ~\.tay 28.T B.4 3.0 575.0 23.1 207.1 320.125.468.4 20.000.9 10T.U5.1 41.5 ill! January FebrIIaty Mueh April May U.238.0 59.0 21.1 1& 3.2 1.' 209.375.U5.100.0 151.0 14.9 2.000. '.575.1 30 .8 385.: 5.3 94.' .781.2 S6..0 130.5 10.1 '.0 33.6:5.381.0 230.0 1.7&2.825. May 3.UI..9 2.019.747.5 U.8 9.' U.8 33.0 1925.211.' 1.' 32S.7 3..t 44.999.1 12.504.316.!OO.5 1.615.1 13.S 41.

1 n.418.2 113.150.519.945 567.1 340.588.550.:"5.0 6.ry March April MAY AlIglISt September Oclober November December 41.000.3 J.'IU.210.b 34.285 21.'101.8 198.000.830.906 138.630 553.521.9 n.1 3.9 46.691 2 2&4.1102.568.794.3'll.770 5113.826.3 310.499.000.829.500.8 34.405.1911.8$0.597 28.46B.00O.143 166.0 I .200.430 298.7 390.610 9.000 Z'l .5 Alter COJlye~.3 91.0 Sl.950.258 2116.6 8.383.41l .1 JallUtU'y ·July June lIebr.265.0 313.506.4 54.8 1.725.9QO. 102.6 156.862.080.9 19.S40.972.902 218.n Bank ""ior Milly lau) '0 Montb Goldl Marks Silveri (lpcludlng bue coin) Muks Advances wltb 100eign blinks Balances Oilicounts Marka Commercial Merka Government Merits Nole Clreulalion Marks M.390.354.6(6.999 256.S 43.5 11.473.2 41.138 126.898 266.'1 277.037.O 2.930 25.914 293.533.034.713.500.8 January Marcb February April 66.288.6&3 8.934.085.396.836.4 211.171. Vol. ~illl(!r coin lit face value 2(:old nnlJ silvCf Source: YOlll1E136.8Tl 242.2 S4. 508 U.1 44.826.Table P2 (CorItinued) IJank 01 Poland.4 851.2 53.7 596.) 54.638 27.500.3111.9 2.4 41.178.2 51.510.709.nt.1 3.871.8 32.467.1 19.162.000.l 2(1.998.332.801.2lia 107.M.HZ.423.522.358. May July Augl&!lt Sq)lember O~lober Hovember Ueecillber 1 zloty = 19.0 528.0 111.071.737.683.211.862.GilT 27.615 286.U4.7 50.032.8S'I.I81.263.410 550.:160.5GO.954.815.IU.4 114.9'17.913. p.562.n7.0 2.700.583 233.461.0 2:18.7 20.249.I 44.828 103.883.0 48.197.8 304.898.O 2.171.(18.:112.1170 2'1.7 28.960 June 211.956.3 384.300.868.UO.880 549.830 100ld lit par.3:14 99.342 12.3 cents) 1.2 670.0 6.1 44.141. II.194.1125.311.137.0 909.0 ::t9J.216.045 460.340.621 2'10.l 19.018 334.469 11I9.084.InS IOO.191.6 lU.610.4119.735 116.8 23.988.'178.5 fiO.180 306.5 81.ry March April 1&4..336 256.9!il.On.114.0 55.2 39.268.386 272.B29 28.3 6.180.984 249.500.85:t JllllUary t·ebl'u.500..Si3.320 259.2 44.900. l4tlJ • .8U.6 570.8 20.5 51.8 t'l4.231.l6l.977.0 291.9 n.a49 .7 68.9111.'lB1.494.420 563.911 8.188.'121.684.2U -C03.696 29~.8 11.8 19.9 28. 632.t28 .825 lit .166 23.100.858.8 799.791.3 54.177 245.0 10.730 394.854.000.914 269 .136 233.019.OOO.1 219.8'13.712. 1918-1825 (Polish Stale Lo.0 291.2 66.859.000.t45.5 758.'1 U8.5 19.2H9.6 1.339.l 83'1.830 49'1.OOO.0115.1 4.3 1.2401.0 1.5 1.897.166 244.224.582 247.31'1.236.314.4 ttl.71C.9li 5.080.Ut 16.697.229.9 3.6 111.241.841.1109.50 430.OU .262.000.963 283.362.440.149.065.0 42.8 2:10.205.354 35.9 41."9 28.392.844 11I.658. 81.8 2.1 43.'100.851.8114.8 21l.0 4.1 216.150 12.402.1 H. Z l'lZ .033.631.222.jj.IU.7 621.955.on of StllllI Loan Pank Into Bank or Poland I Flglres In gold zloty&> no ciphers omitted.0 1.5(3.1100.619.392.7 41.[.

Vol II. .445 73.167.700 7. 1921-1925 Year 1921-- Month January February March April May June July August September October November December January February March Wholesale price index 25.786 152.203 65.277. 3491.321.106 78.634 87.Poland Poland--Index numbers of wholesale prices.200 1922-- 1924-- April May June July August September October November December 1923-January February January February March April May June July August September October November December January February March April May 242.587 135.690 859.058.800 1925-- Source Young [36.300.326 275.710 32.392 45.647 346.539 58.900 242.139 31..110 Year 1923-- Month March April May June July August September October November December Wholesale price index 988.639 35.600 245.881.465 75.700 142.046 59.410 3.700 248.380.827 32.970 5.680 67.882 31.302.583 57.350 1.920 1.654 53.294t680 27.125.069.Table P3 Sta tis ti cal Tables .500 1.100 60.429.231 63.694 101..353 544.943.365 201. p.

0237 .0000116 .19 3.0135 .0286 .0256 .0290 .145 . Vol.0127 .0057 .0025 .59 . 350}.0185 1925-- January February March April May June Source: Young [36.0262 .0043 .29 19.19 19.21 19.132 .60 .p.18 19. 1919-1925 Year 1919-- Month July August September October November December January February March April May cents per Polish mark 6.51 . IT.18 19.0000114 Cents per zloty 10..0007 .67 .68 .18 19.0000113 .0000109 .0516 .130 .082 .47 .20 19.25 19.18 19.0023 .61 . .37 .0065 .26 .0212 .45 .0001113 .00035 .16 . Table P4 European Currency and Finance Poland-> Exchange Rates.0313 1923-- 3.0249 .88 1.0000502 .0024 .0000234 .124 .0021 .0489 .08 1.0004 .88 5.0095 .0236 .88 1920-- June July August September October November December 1921-January February March April May June July August September October November December 1924-- 1922-- January February March April May June July .29 .22 19.22 19.130 ..0327 .0013 .70 .63 Year 1922-- Month August September October November December January February March April May June July August September October November December January February March April May June July August September October November December Cents per Polish mark 0.23 19.

916 98.240 69.576 112. 1924/25.000 120.180 159.000 115.000 January February March April May June July August September October November December 81J184 1()6J729 114.060 Source: Statistiches Jahrbuch fur das Deutsche Reich..()()0 88.563 56.731 76.442 170.000 78.515 67.000 75.000 62.870 149.581 85.000 173.581 1924 221.000 61.000 January Februa.000 130.000 84.ry March April May June July August September October November December 100.000 65.1 Table P5 Poland Number of Unemployed 1921 Ja.820 155.nuary February March April May June July August September October November December 1922 January February March April May June July August September October November December 1923 74.444 206.692 68.065 150. .125 148.000 90.000 95.583 109.000 70.625 128.755 93.397 64.097 159.000 97.245 147.580 llOJ737 112.000 80.

460 1.440 1.300 709.460.45G 1.260 1.570.380 1.200 115.420 3.160 19.340 1.Table G1 .070 2.500 1.100 5.600 6.670.330 1.500 7.030 10.000.460 3.000.OOO. 1914-1924 price index Year Month July August September October November December January February Man:h April May June July AUgust September October November December January price index 1914-- 96 96 96 95 97 1919-- 111 116 109 99 99 1920-- 339 422 493 562 678 803 1. 5301.500 488.510 1.000.000 72.478.570 1. (1 reichsmarl<--l.700 94.404.000.000.QOO. 1.920 2.200 817.050.110.800 521. .394. Vol.OOO.380 1.000 1.000.000 IUS 56.480. p.100 147.OOO former rnarks.370 1.938.000.440 1.510 1.430 1.690 1.700 115.100 2.430 6.000.900.000 122.000 126.360 1.370 1.000.000 124.470 1.480 218.000 117.670 4.) sources Young [36.889.000.' Year Month January February I\Iarch April May June July August September October November December January February March April May June July August Se~tember October November December February March April May Germany.320.000.000.000 1915-~ 123 125 126 133 139 142 139 139 ISO 1918-- January 146 145 147 147 148 151 US 1921-- February March April May ISO 149 151 152 161 159 154 153 151 151 158 159 163 163 165 172 'lOa 156 June June 1917-- 1918-- July August September OctOber November December January February March Apdl May June July August September October November December Janue.500 588. Wnolesal.e Prices.ry February March April May June July August September October November December January February March April May 1922-- 1923-- 199 201 203 July August September October November December January February March Apr\! May June July August September October November December January February March May June April 203 'lO( 198 198 204 203 209 208 235 230 234 245 262 270 274 286 234 July 1924-- August September October November December January February March April May June July August September October November December 1919·- 1120 1127 1131 1129 • June 291 :l08 1131 1 On basis of priCes in terms of reichsmarks.490 3.000.310 1.000 120.

One rentenmarl< is equivalent to one reichSmark or 1.068 .68 .64 1. Year Month January February March April May June July August September Octrober November December January February March April May JW18 July August 1914-1915 Cents Per Mark 1920-- LOS 1.000.01 .0 2'1.20 .005 .033.4 23.000.53 2.8 23.34 .19 1922-- 1923- 19241-- 1 1925 -- September October &ovember December January February March April May June July AUiUSt September Octobel' November December January February March April May June July August September October Novemb«' December January February March April May June JUly August September OetOber November December January .63 1.6 21.48 .OGl.37 1.10 .0 22.10 1.000.39 .000.72 1.8 22.7 22.S lCents ~er rentenmarl<.022.32 . Source: Young (36.96 .07 . and (atter October.000.53 .32 1.26 1.3 .000.' Table G2 Germany--Exehange Rates.000.000. 5321 • .002 .OOO.8 23.01 . 1924) per reiehsmark.82 cents.oeT 23. Vol.61 2.004 .36 . I.S8 .60 1. The reichsmark Is the equivalent of the gold mark worth 23.001 .000.69 1.30 l..000.60 1.57 1.8 23.9 .56 2. p.44 1.03 .3 .8 23.52 .19 19'1l·- 2.8 23.000.48 1.9 23.004 .000 tormer paper marla.0001043 .35 .

235.725.496.4 13.5 6.114.738.6 11.110.0 811.963.4 180.5 3.1 5.0 5.600.0 Source: Young {36.9 51.Table G3 Germany-vfteal Revenues and Expenditures--Calculated the Basis of the Cost-of-Living Index (In millions of gold marks) on Revenue Deficit covered by loan tions 1920-21 1921-22 1922-23 1923-24 (first 9 months) Expenditures Repayment Total Taxes dries Sun- transac- of floating debt 821.5 6.6 9.2 11.6 344.513.6 7.5 11.4 1. II.254.265.627.963.6 3. 393] .041.836.384.7 Interest on floating debt Subsidies to railroads Execution of Versailles Treaty dries Sun- Total 1. .7 3.090.8 5.2 81. p.0 1.6 11.1 4. Vol.1 132.965.0 4.4 11.4 931.965.5 13.039.685. 9 100.513.0 1.4 9.265.529.

I)).JM ))0.!160 .)I IIJ.lhe linane.'1) ••nl. we. ..."'.t01 IU. I'll . I'~.IM..'" 2aJ..JaI 21•• .'" ·Ut..110.'" ". •• 11 ·]41.171 '.010.011 » ••n )1 2.. 1.. ..'" ~..IU )).7 I..._.OK lu.UI..909 ·UO.."'.106.. .l91 "1.. 1".'U.02).. 1 ...a.'11 '''1.70) ·Ut.I'.Z7'. bill. 10 cloer" 01 No .Il'..0.. equI.U2.") '12."'. ".U'.')". "0 ~.)lJ. F.2t1 1O..1tJ.000 100.ln.1". to ••• ood I... ·'. .D" 12. 11.000 100..0.~. '1. d> 1'. p..' .J29...».OOO I0Il..._. U.'"" ..10' 11..192 "'.•. _ oe. 271.111. 1'1) ~mIMr No_ U7.. Ono . 1'."1..."'...'"..0...7.._ IOCI..JU '..U2 "'..9".nt '1..0112.127..~._ I.ok it I'" equi ._ One .10' .".tln COf1IIIMId . 111 -J9 t Jl'. <ekiltm ..'" "..111..'" Ul. ...U7 11.''7 lu.."'1.19O I... l.''I(.102.I<)') "9.004 ..1lOO 100. " "'._'..460.....U'.U9.2" }...219 ID.'U ".2'' 1O.1)) ·11'..'" 1.Jd. d> Ma.m&(k Of • ..1J1 "....162 1.."7.292 ~..7U 2.tO& ')0'.''' '17.. __' .70.U' I..OU 21.2U '''.~' " ••llS 2"..7)1 2.000. ~o.1" ".l» 2'0.912 104.'" 101. (i' ~...Gl7 '.~2 20'.-1 211.•• olll"t "M_I 01'_B""lnd ~eld>-' _.'" .'" 10.'''..7" "'.. IDMkhu.'" "'.''1 WO. I.Jt.I11.1a X..Gl)..UI 7'.II. .10J 697.mIIe< NovemlNlr W..71'.1"..O}Z 12.212 2. ~. temporarll.0" ).IOI U'.(164.. ". Xl..'" 7".UI 2O.".. e<l"ivolent of "'" &otd ".201 nG.1 '1 ••".'.0n.0)1.11J..U4. dIooNRlI<I&<>1 ."'. OOllS p 01 dlSCOU'II.'22 '.G'2I..J.'~2 I.tH..)6). UI ·U." .'" ~22.11'. 12'. .n· September The I W."2. A.2" 7!I. )0') )4I..~I 62.'".B6.z.'XI'.)11..._ ..l.'''."' •• 1I.0.i" ·)t~..200 'n.. .90' 1.ln.OO4.'to..000 _I lied..'" no.1G2. y bIIh by 1. ..'" '''.lU 7."0 ~''''.'7) 'u.. 1..'U..•11 '.701..9".267 .J91.'J2.._y 1oI. '" 2.1" •Ja) ". II..It'.000 100..".<lS2 '....".ShteI ..'" 1. .6U." •• 1".lH 21..072 n.J1•.142."'.n7 In.5U....2)2 . ..101...Q)Q_ ')1..403..92'1 In.19. '.I1I' .7U.1l'.OOI '24. 0<:1oDcr ~.119.'" lJl...'10 1.....7 1." 6U.'''.J9l 2'...G6' lII1.00 "' •.192..066 I.lO6 U .10)..._ 1.U..'1O ......11'..n1 2...").U'.III'.. ' . '''.72O '.169.421."J.IIJ.'XII."'..)(1) 'lIl.62' 1.'" Tot..959 1.. at lho ct..9n '.'II.1111 9I.611.t WmI". 201 20..211 '...'II '20.ou."1.1l coni s..)96.~I'.zu •• " IOI.."Iift.JJ'.2..~.u~..'.J09 200.7n ".nJ <'2.UZ 118...JIl.~ .1M '''. _ .)11 IlO.'~1 Ul.'" I....0'1'.".'10 1..6n 21..01' 90. ~ Wy ))._ "n...'0 ·'..OQ) '''. liiiUw.OOO Pom_ .. ~ • . "l.6 •• )).1" 11*. •• ". 1t .70.116 W ·121.IOI.91 04.)1I).1" SqllOcooloor "."'.. Ie"."J.10' 12 2) )JJ 10.~' U.~ • .~)....UZ n .16..276 172.~ 2.000.'J' ".1J2 "91.7. .1" U.m 211..'1."" )0.'" ."..'" Z.602. is:! "Qtl .'''..ou 20."..".')II. "'..'16.U...0'1.U) IJ..IN n. ..2OI.'" ". 127 '.'100 0 • .IOI.ftl '.UII.0)'."0.'41 246.n' !l4._ )1..n."1 . •• 70 '11..'''. 'Qt.n..~..''' Z.17Z U)..ok .IW.1".. '.011 l... 9 1.e. U.U' Z.JIII •• In.122..216 -'.~ ~'."..ISJ.912 J •• .'" n.s!na ""'n ..l79 2.)411 1. n. tenll'l_" i...''1 7n.))O ·J...121 2."..'" J.2Q9~9U ]11.4Jl'.Wl..10'I 1.r Ap'ij lu>e ••»1 U'. ".6n IIl.1" It.'" "..111.JOt '".".'.7" UI."' .026 '.oC foo>d . '....~.6l1l '..9114 ·lU.IU.O}l. PuI>Ilc Otller bil" ""P""ill *"'U..U) t..OU.010 .. Na .1J6.'20.n .141. Ul.211.1.62' \) .'U 2. Tho .7'J... b .. needed &CC ". .. ks.GU la.n.n'.j AdvOflUO C"".»~ In."'."2.699 '_'."J.10'..10.'..U) 1.~. ' II1II.tD" 491.n'.tU.''' by l•• ~ ltotn the I _ .'" ·"'...211 IO.016.77' '.:116.."1 2".11').I".~20.000 ~.. ')2 'n.166 I..191.U6.. . ItfI. ". .I14.J9I.110 1.&2.011 I.. J.710.7H JO.o. . at .I70."1..116' t20.In ".o.."O 11. S11 2.7iO.000 I0Il.2U ".'" " .2 ..014. "".941. '..&l cent .lU 201.~ ... ""-192' (EM oC -10. 'Accord.No.'.ooaIOOll~OQQ.-. .'" 111..94'.. Int """II 101..19t.»1 11.912 l ._ to .U h"..Jl2 JI.esm ~Ir.......'" u.000 larm .rs .. JH 1.*. 1 0I .I16" 'JI.2U 1..lto...111 ItO."".It} nl."' t._U 1.1"._ ... Ian IS..O)1 UI..UO.14).... '12.'" IJ.012."'.0I6....9.UZ 21. 111."7..m 1.21' ·U.."".ln.1U "00.k.~ U)..910.079 "7. orlll n.110 1.0lI0 IOG.U_.J01 •• n..IU.."..OJ2.."'bonk I'" liiiiior..UI n2..414 1.llll AP'iI lu>e 1.*.1lO '»1.-d> u.U' ".'''.IO'.0&'. 1ed bill...~.2)). lZ...1U.". 1'.901 U..01.nO..Ul I~."1 )O.016 'UI..1Of 11.111.."J.JU ")....'.q>pIi" ""vinJ reached lho m. aSi"" ...."0 ". O••"'.. lJ4 "..'119 n. II"" hown In 1-.....2n.'..o4iIl.'" 1.t11 t.1U.291 lI.u'...~'.Jn.2U. 91.lI6 119. 11>0. '26..']0 '..OU. II.U.......n'.Ut.211.. I&<:.<1".~l 1...)O 1.tu 1..000.-o J"n..nO.OU.HZ 1'".111 n."'.'.21(1.'" 1).") '114.]O..117.*.10' 2<I.'.IU '. lhe Aei<:h&Nnlc .J60 """.ok '" 1.260.'''.'" )17.211... 6 10 fol<c ..aO)..'" '.2111 "..)O Dec.211 )0..2. n.'" '.Ul..n...QII~."". lenI ".l!IO. ·20'.016 ·)J)..]» 1..*.nl 1<Il..''''.906. "l.~' 11...211 )9.11'.101 ..I .."7 10'..0).''''."1 .1"..U6••n ..1'6 Doco:_ r-Miir.11O '.Z24 . 1'1.11".'" In..210.'11 1.... 1oI.. l-.5OI.CU U.)eO 'l. n.~..1" ". Nat.ln."".'" ".ltl1.'tI 2n. 1) •• ~.000.2)'. ~1I..I60 llt\.)(I2 "".)" ..'."".216.:KI.JU.02O.16'.210.'H De<:e_ inttea..:191 . '''.01.6n "".~ "'...fU.e oC boor ..1.. 11'-.J16.l9O H1. l' .10' '..'" 2. •• U2..200 '"."7.1iO..."S. ~ U"e "..".J22 lO.allon 10 one ..1"..ltt 1".JJI.. .0Jl.'I'.U2.. '''...l<&uenI.MJ .'" 211..U " .lU 11.'79 100.n.HI.Tobl.1..f.I2J.2)2 I~."'1 1. 192)..'" IQt.' 2U.'" 61."2 •• " 1..I" 1.1'1. .111..... I...)U ~'. k. '1211. O<:".011.9" 1.911 nl..11).JJI .'''.1 .'U. 2O..1 1. J60 '. fO _ roichom.:I91 .." .1)0 "J ..SJI. 11>0 ou.."_.1U U'.'" 1(14.1I7. 110..eid>1l". .." J... 10 ".ao.IIU.19) '..••... 10 .UJ.* 1.0"..OIIO 1M.)10 I..'''' .. ~. _I _milled '000.''' 116..1)).I)o ••U '.x....".OI' 1)).n 116.I"._ U. " " "'.)01.096 ".90.Jll.t Se< . ."'0 1I1."..U.I •• 19O. In. 111•• . I :iejll"_ n9 .411. .»1 "0.Ul...."" ·'''. "'. I!. ....'1..)" 11.. d> AprU I'll ~1 Hoft_ ". dI"' 1< i fl_ e<>.11I U'.J02 loI~r lu>e ~y A..161. n •.OlO In.JO'J 1.110.'" )111.Ul "'..916 51.. of .'la '''..'.."..1241 '. Sept . * I' ". oC relll_nark.119..1OJ... M.U6 n.."2 a.0".....'11 2.'u ..."." "'...711.U7.171 2".IU....'29 1.19J 1.)''.U' Pealma. _ Tho r... 1J.1911.16' 101.

0 632. I.3 Source: Young [376 Vol.2 686.8 49B.3 503.0 +107.3 523.2 312.6 693.7 472.7 622.7 396. by months.1 592.6 +25.5 June July August September October 566.0 595. issued by the Statistisches Reichsamt] [In millions of gold marks] Ordinary revenue Of which taxes yielded Ordinary exp-endtitures Excess of revenue (+) or expenditure (-) Total 1923 November December 1924 January February March 68.Table G5 Ordinary revenues and expenditures of the Federal Government.0 609.1 597.6 +84. November 1923-0ctober 1924 (Source: Wirtschift and Statistik.9 63.8 518.4 579.5 535. p.8 April May 520.5 459. .7 529.6 445.3 668. 422] • .1 504.3 583.6 714.8 133.2 665.5 462.2 +86.0 +21.5 418.9 +20.S 523.1 333.0 +124.6 581.7 -334.1 -17.2 618.8 +56.

p. .Table G6 Index of Physical Volume of Production Per Capita in Germany Year Index of Production 1920 1921 1922 1924 1925 1926 1927 61 77 86 54 1923 77 111 90 86 Source: Graham [7. 287].

p.' Table Cl Czechoslovakia--Receipts and Expenditures.336 929 930 1923 Estimated Revenue: Ordinary Extraordinary Total Ordinary: Ordinary Extraordinary Total Deficit Surplus 17.. (Exclusive of expenditures for capital improvements 1919 Estimated Revenue: Ordinary Extraordinary Total Expenditure: Ordinary Extraordinary Total Deficit Surplus Actual Estimated 7.291 1.703 15!974 272 16:540 876 162993 603 Source: .610 6z005 82615 4. 71] • ..905 13.096 3z710 2.289 6z524 15! 278 4.376 13z455 1919-1925 covered by loans) 1922 Actual Estimated 17.175 8z103 7z450 17 z 299 10.950 1920 Actual Estimated 15.200 15z702 4.961 851 Actual Estimated 1924 Actual Estimated 1925 Actual 15. Vol.Young [36.931 476 18:026 727 18:558 19%813 18z663 3.593 21 z 894 18z884 17z733 1922 Actual 2.923 1.987 404 181812 13.614 1.477 10z427 7. II.672 71354 2.851 13.605 5 773 191378 565 15:664 16z391 12.

228 10.268.942 8.574.658 8.997 1.820. pp.921.443.999 9.438 7.081.881 12.280..475 9.525.462.928.874 9.512 10.914.064.717.871. .867 7.920.988 9.216.946.550 10.049 9.303 5.947.405 4.090~O34 9.792 8.167.205 9.567.585.467 9~O78.438 8.196.323. Vol.390 8.991 9.383 10.448.573 11.250.369 9.216.688 9.159 12.086 9. Month May June July August September October November December January February March April May June July August September October November December January February March April May June July August September October November December January February March Month 1919 April 1920 1921 1922 May June July August September October November December January February March April May June July August September October November December January February March April May June July August September October November December January February March April 161.199 3.106 8.653 8.434 8.647 10.378 9.288.310.512.903 8.688 6.570 2.598.750 9.500.513.814.175 11. II.851.514 10.540 7.267.Table C2 CZECHOSLOVAKIA Note Issue of Banking Office of Czechoslovakia.676 9.319 10.403 11.171 .230.065 10.888..375.157.093 8.218.723. 305-306] • .729.455.743.916.570.198. (in thousands of Czech crowns) State Notes in Circulation 1919-1924 State Notes in Circulation '.506.757 11.920 10.327.956 10.357 7.680.838.106 664.222.934 Source: Young [36.366 9.880 7.515 11.327.996.077 10.311.958 10.233 9.786 1923 1924 9.653 11.327 11.134.825 10.847 8.278.880 10.916.810.418 1925 April 8.129.560 10.727.695 9.

732 1.989 3.898 2.420 1.856 2.981 2.906 2.953 2.245 1.January February March 19226.225 1.96 2.902 2.997 2.995 2.January February March April May June July August September October November December 1921. 307] .810 2.939 2.936 2.979 2.~'.460 1.925 2.049 1.978 1.160 1.950 1. 312 1.957 2.285 3.January February March April May June July August September October November December 1922.335 2.993 2.307 1.January February March April May June July August September October November December January February March April May June July August September October November December January February March April May June 1. II.902 3.921 1. p.275 April May June July August September October November December 1923.979 2.249 1.96 2.290 1.960 1.January February March April May June July August September October November December 1920.975 1.958 2.96 Source: Young [36~ vol.425 .00 2.575 4.530 2.185 2.365 2.733 1925- 2.625 4.97 2.038 1.097 2.165 1.902 2.971 1924- 1. " Table C3 Rates.176 3.195 1. Czechoslovakia-Exchange Month Cents per crown 1919-1924 Month Cents per crown 1919.135 5.900 1.924 2.535 1.190 1.934 2.969 2.96 2.993 2.100 1.855 1.575 3.018 3.195 1.231 3.300 1.

p. 307} ~.lay Source: Young .Table Czeeboslcvakia-Avbolesale C4 prices.Q52 1.003 1.15:) 1. vol. 1922-192-\ .001 968 958 95i 973 965 984 9'('4 1.vlonth v-v-holesale price index 1922.006 [36.028 1.015 August 981 953 September October November December 1925. Il.January February March April 986 982 999 1.January February March April May June July July August September October November December 1.386 OCtober November December 1923-January February March 1.030 June April May 1924. a 13 1.017 1.491 11-171 July August Septernoer It4':'1 l.515 1.520 1.552 1.019 1.021 1.045 1.031 1.-l6-i 1.048 1.008 999 1.019 999 1.024 1.Januarv February March April vlay June 1.034 1.