Tuesday, August 2, 2016

Future Schacht, X: The Forgotten Hyperinflation in Austria


As in the Second Reich, the lid had been kept on inflation in Austria during World War I through strict rationing and price controls.  As soon as the war was over and the government abolished by the Allies, the situation quickly adapted to the removal of controls, and began to act in accordance with the laws of supply and demand.  This was not helped by the imposition of a blockade that continued for several months after the official end of hostilities.
Hungarian 100,000,000,000,000 Pengo note (small change).
The collapse of the Central European currencies connected to the Austro-Hungarian Empire went along the same lines as that of the German Reichsmark, although, in many cases (except for that of Hungary), not nearly as drastic.  The Austrian Corona collapsed from the same causes and had similar results.  On September 1, 1919, for example, the Corona was worth about 2½ cents.  This was substantially down from the pre-war valuation of approximately twenty cents, but still bearable.
By December 31, 1922, however, it took over 70 thousand Corona to equal one U.S. Dollar.  This had serious repercussions throughout the country.  All the phenomena observed in Germany were felt in Austria, if on a somewhat smaller scale.
The Joyless Street, Garbo and von Walther to the left.
The working and the middle classes became completely impoverished, vested incomes were confiscated, and the portable wealth of the country, such as art treasures, were snapped up by foreigners with hard currency to spend.  Society was completely disrupted and general morale reached rock bottom.
A “snapshot” of conditions can be seen in one of Greta Garbo’s early films, The Joyless Street (1927).  A man falls victim to a stock market swindle in an effort to get more money to keep ahead of inflation, losing everything and getting deep in debt.  His wife is murdered, his youngest daughter steals food from the American soldiers billeted on them, his older daughter (Garbo) is forced into prostitution to pay her father’s debts, and so on.  It does not end well.
A less-depressing Garbo (she wants to be alone).
(For film buffs, there was for years a rumor that Marlene Dietrich had a bit part in the film.  It wasn’t her — she was at home nursing her three month old baby during the filming.  The woman mistaken for Dietrich in a brief scene where starving people are standing in line outside a butcher shop was German actress Hertha von Walther, who originally had a somewhat larger part.)
Austria was more fortunate than Germany, however.  When the Corona had reached approximately 71 thousand to the U.S. Dollar, the League of Nations stepped in to stabilize the currency.  A sizable international loan was made, and the finances of the country were reorganized.  This was in line with a general reorganization of finances and currencies throughout the world as the survivors of both sides struggled to restore some kind of regularity to society.
#30#

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