Neue Freie Presse
- The Newest Currency: The Belga.
- Discount Rate Cut in Czechoslovakia.
- The Shattered.
The Vienna paper's financial page of 27 October 1926 led with an editorial welcoming the belga, Belgium's new monetary unit, which had appeared on the exchange lists of the great financial centers the day before. The editorial argued that the backing of ten gold-standard central banks, standing as godparents, gave the new money an international guarantee that it need fear no danger. A short report from Prague said the Czechoslovak National Bank had cut its discount rate by half a point to 5½ percent and listed its holdings of 188 million, 130 million of them in bills. Below, a feuilleton by Rudolf Jeremias Kreuß described how businesses collapsed in a world that traded gold for iron, iron for paper and paper for gold, leaving an army of officers, officials and merchants laid off and ruined.
Translation
The Newest Currency: The Belga.
A new currency has been christened under special circumstances. Since yesterday the price lists of many great financial centers have carried a name hitherto unknown: in place of the Belgian franc, the belga appears as the newest monetary unit. The ten central banks of the most important gold-standard countries stand as godparents, and by this fact alone the new Belgian money receives, as a christening gift, the strongest international guarantee that it need fear no danger, since in a sense the whole world is taking an active part in its fate.
Discount Rate Cut in Czechoslovakia.
At its meeting held today, the Bank Council of the Czechoslovak National Bank decided to lower by half a percent the discount rate that has been in force since January 12 of this year. The bill discount rate thus stands at 5½ percent and the Lombard rate at 7 and 6½ percent respectively. The total capital investment of the bank of issue currently amounts to 188 million, of which 130 million is in bills.
The Shattered.
But then the businesses broke apart, shrank, or vanished entirely in a world that first gave gold for iron, then iron for paper, and finally paper for gold. An army of officers, officials and merchants ran idle. Laid off. Ruined.
Context
Why Belgium stabilized the franc in October 1926
The belga that the editorial welcomed was the end point of a long Belgian currency crisis. On 26 October 1926 Brussels stabilized the Belgian franc at 175 to the pound sterling, ending a monetary crisis that had lasted for years. The government faced the repayment of no less than 8 billion francs in Treasury bonds before 1 January 1927, and its first attempt at a deflationary policy did not stop the slide: the franc sank to a low of 217 to the pound on 13 July 1926. Three days later, with the spectre of German inflation before its eyes, parliament gave the government full powers to carry out the reorganization plan of Finance Minister Émile Francqui. The core of that plan was the consolidation of the floating debt, which obliged holders of Treasury certificates to convert 4 billion francs of their paper into 6 percent preference shares of the newly founded national railway company, the SNCB/NMBS. The new name on the exchange lists of the great financial centers thus marked the visible result of a domestic rescue carried out under emergency powers.
What the belga was, and how it fared
The belga was a new unit of account created inside the stabilization program that the Jaspar government, and especially Minister Francqui, drew up in October 1926. That program cut the franc to one seventh of its former gold parity, and in 1926 one belga was worth 5 gold francs. The new name served a clear purpose: from then on all exchange operations were to be carried out in belgas, so as to distinguish the Belgian currency plainly from the French franc. Belgium had left the Latin Monetary Union in 1925, which already meant a clear monetary break with France. The editorial treated the ten central banks standing as godparents as a guarantee of the belga's future; that is the paper's own account of the international backing. The name itself did not take hold. The belga was never widely accepted, not even on the exchange markets, and it disappeared inconspicuously in 1946.
The new Czechoslovak National Bank behind the Prague rate cut
The Prague decision came from a central bank founded that same year. The National Bank of Czechoslovakia was established in 1926, succeeding the Austro-Hungarian Bank after a six-year interval during which the finance ministry had carried out central-banking functions directly. Its first governor, Vilém Pospíšil, held office from January 1926 to February 1934. The bank began work after a period of tight money: the Czechoslovak economy had suffered a major downturn between 1921 and 1923, and in response Finance Minister Alois Rašín pursued strong deflationary policies to prevent further hyperinflation. The paper's report shows the new institution easing slightly, lowering its discount rate by half a point so that the bill rate stood at 5½ percent. The cut came at the start of years in which Czechoslovakia enjoyed economic prosperity, including in manufacturing activity, currency strength and general economic growth.
Austria's austerity and the 'laid off' in Kreuß's feuilleton
Kreuß's single word 'Abgebaut', laid off, had a concrete meaning in the Austria of 1926. Under the Geneva Protocols of 1922 Austria was obliged to introduce an austerity programme, implemented by Federal Chancellor Seipel. Its consequences included cuts in public expenditure, the dismissal or retirement of 84,000 civil servants, 36 percent of the total, and a drastic increase in taxation. The programme ended the inflation and stabilized the currency but failed to improve the economic situation, and unemployment rose. The inflation itself had peaked in August 1922 at a rate of 129 percent and had devalued all savings and other money-denominated assets; it was stopped only by the Geneva reorganization and the introduction of the schilling in 1924, exchanged at 10,000 crowns to one schilling. Read against this history, the closing step of Kreuß's world, giving paper for gold, points to the return to a stable currency, and his idle army of officers, officials and merchants describes the people that stabilization left without a place.
Original
Die jüngste Währung: Der Belga.
Eine neue Währung ist unter besonderen Umständen aus der Taufe gehoben worden. Die Kursblätter vieler großer Finanzzentren enthalten seit gestern einen bisher unbekannten Namen, an die Stelle des belgischen Francs tritt als jüngste Münzeinheit der Belga. Als Paten erscheinen die zehn Notenbanken der wichtigsten Goldwährungsländer, und als Taufgeschenk wird durch diese Tatsache allein dem neuen belgischen Geld die stärkste internationale Gewähr dafür gegeben, daß es keine Gefährdung zu befürchten braucht, da gewissermaßen die ganze Welt tätigen Anteil an seinem Schicksal nimmt.
Diskontherabsetzung in der Czechoslowakei.
Der Bankrat der Czechoslowakischen Nationalbank hat in seiner heute abgehaltenen Sitzung beschlossen, den seit 12. Januar dieses Jahres in Geltung stehenden Diskontsatz um ein halbes Prozent zu ermäßigen. Der Wechseldiskont beträgt somit 5½ Prozent und der Lombardsatz 7, beziehungsweise 6½ Prozent Die gesamte Kapitalsanlage der Notenbank beträgt derzeit 188 Millionen, davon 130 Millionen Wechsel.
Zerspellte.
Doch da zerbrachen die Betriebe, schrumpften ein, oder verschwanden völlig in einer Welt, die erst Gold für Eisen, dann Eisen für Papier und endlich Papier für Gold hingab. Eine Armee von Offizieren, Beamten, Kaufleuten lief leer. Abgebaut. Zugrundegegangen.