The Portland daily press., 1874-01-26
A Lesson of History.

Those congressman who are so determined
to secure an expansion of our paper money,
cannot have read the history of those govern
ments which have been compelled from stress
of circumstances to resort to an irredeemable
the most inapt Of scholars and SO far as they
are concerned, schools may be abolished. The
current issue of The Nation has timely ar
ticle upon the finincial experience of Austria
which ought to receive the special attention
of a man of the calibre of Senator Morton
who is probably the ablest of the expansion
advocates.
The Austrian government began the issue
of paper legal tenders in 1898 In January of
1899 the notes were quoted at 103 and in De-
cember at 1873. The premium on gold con-
tinued to rise until in 1910 paper stood at
500, and the total circulation was $3.50, $780,
356. During the time there were frequent
rapid fluctuations in the value Of paper, ris-
Ing at one time to ,26O, that is, the gold dol
lar was worth twelve dollars in legal tenders.
The Emperor Francis 1. then attempted to
remedy matters by decree calling in all the
V0tctdAuiuS ChCoidtiOh duu AOACluS 40 GA
change for new notes of one-fiith the face val
ue, thus reducing government liability four
fifths, and leaving the non-interest bearing,
irredeemable circulation ats$106, 079,S71. As
this failed to restore confidence the emperor
issued another decree reducing the interest
and the government difficulties continued
and in 1916 the government was worse off
than ever and again began the manufacture
of paper money. The next year there were
$319, asst 1882 Of legal tender circulation
adoat, and the premium on gold was fright
fnlly high, and futile effort was made to reg
ulate the premium by decree that the prop
er relation3of paper to gold should be $3.50
for 81 and no more.
Still there was no relief, and it was finally
decided that there must be contraction, and
to accomplish this national bank was estab-
lished, the shares being sold for paper money
at the specified rate, and the money thus
received was destroyed, as we'll as all
legal tenders received in exchange for
bank notes, and the bank notes were
made redeemable in coin. In this way the
volume of legal tenders was reduced by 1889
to $8,715, 900, and even then the legal tenders
were at a discount while the bank notes, re-
deemable in coin, were at par. Financial
affairs remained in this condition until the
revolution of 1S4S. The subsequent history
is told as follows by The Nation
The government then set up the printing
press and began the manufacture of paper
money once more; the national bank sus-
pended payment, and its paper also was made
legal tender. Gold. silver, and even copper
disappeared as if by magic, and small change
was made by tearing the form (halfdollar)
BILLS into two and four pieces, until at one
money in circulation. Since the restoration
of peace, vigorous efforts have been made to
reform the finances as well as other things. and
they have been materially aided by the great
improvement in the government and the re-
duction OF expenses. Instead, however, of
issuing more paper, as on Mr.. Morton's the
ory of the cause oil national prosperity they
ought to have done the Austrians went to
work to reduce the amount already in circu-
lation. By a decree of April 81, 1858, all
that remained of notes of 1872 and all the
scrip money made since 1848 were with
drawn, aud there now remains only new is
sues and the bank notes to be dealt with.
In this, as is plain to be seen, they have been
running directly counter to the doctrines of
the Indiana school of economists. A table
of the course of the discount on Aurtrian
bank paper premium on gold) since 184S
given by tue Economists Francois is inter-
esting:-
March, 184s ..-.....1r0s June, $780,. IA
May, 1848 ......-...110 JAM. 1861. ,.... ..152
Aug i849. 27.50 June, 1866. .......14s
Nov, 1850. ........t52 Dec, 1873 ..........110
The circulation now amounts to $188. AL
All in government notes, and $169, 2S6, 225 in
bank bills, or 1857, III, 1856 in all-about the
amount OF ours before the issue of the ere
serve"-fOr population of 81, OOO, 600. But
there has been a total collapse in Austrian
finance and industry since April of last year
the like of which has never been known in
time of peace, and which the government is
as yet vainly endeavoring to cure by sys-
TEN of state loans on the security of land and
some kinds of goods. Instead of clinging to
irredeemable paper, the leading Austrian
statesmen see in it the greatest barrier to
the prosperity of the empire, and are so eager
to get rid of it that they have recently en-
tertained a proposition TO borrow enough
coin from Prussia to enable them to resume
specie payments. Their exertions have been
and will continue to be greatly supported by
the stimulus given to the material gro with
OF tne country by the establishment of con-
stitutlonai government, and the publication
OF the national accounts-a nractica which
was only begun in 1850.