!!!Inflation

Inflation: increase in prices and inordinate increase in the supply of 
money in circulation as compared to the supply of goods and services; 
positive for debtors, negative for creditors, savers, and persons on 
fixed income.

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1) ''Muenz-Inflation (coin inflation):'' During the reign of 
Friedrich III, so-called "Schinderlinge", coins with 
very low or no precious metal content, were minted (1458-1462). 
Because up to the 19%%sup th/%  century the value of coins was 
calculated according to their silver content, these coins were 
considered inferior. The 2%%sup nd/%  major coin inflation took place 
as the intensification of a latent inflation from the late 
16%%sup th/%  century ("Kipper und Wipper" inflation). 
At the time it was interpreted as being the result of the machinations 
either of a coin consortium (A. von Wallenstein, J. Bassevi, H. 
de Witte, K. Liechtenstein, and others), who had been given the rights 
to the Bohemian and Lower Austrian coinage on lease for a year or of 
various persons responsible for coinage in inner Austria, but it was 
in fact a means of financing the first phase of the 30 Years' 
War. In 1623 the situation was stabilised and the bad coins were 
exchanged at about 10% of their nominal value. As the acquisition of 
property confiscated from the aristocracy, particularly in Bohemia, 
had been carried out in part through the use of the valueless coins, 
demands for proper payment were made by the Aerar, or state treasury, 
to those who had benefited from the Kipper und Wipper inflation, 
particularly the Liechtensteins, for decades afterwards.

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2) ''Papiergeld-Inflation (paper money inflation):'' From 1762, 
"Bancozettel" (bank notes) at the nominal value of 
5-100 florins were issued in Austria by the Wiener Stadtbanco, 
whose value remained at par for a long time. In order to finance the 
Napoleonic Wars, the issue was increased considerably, which caused 
its value to drop. From 1800 Bancozettel valued at 1 and 2 Gulden were 
also issued, which led to the disappearance of the coins with these 
denominations. The value of the Bancozettel then dropped more and more 
rapidly; while in 1800, 115 florins in Bancozettel were worth 
100 florins in standard coin ("Conventionsmuenze", 
C. M.), 10 years later 489 florins in Bancozettel had this value. 
The unsuccessful war of 1809 led ultimately to galloping inflation. On 
February 20, 1811, 1,060,000,000 florins worth of 
Bancozettel were devalued to a fifth of their nominal value and 
exchanged for redemption notes valued at 212 million florins 
("national bankruptcy"). This currency was followed, from 
1813, by so-called "Anticipationsscheine" 
("anticipation notes"), which were successively withdrawn 
and replaced from 1816 on (establishment of the Austrian National 
Bank, currency stabilisation). From then on the new paper money, known 
as Viennese currency ("Wiener Waehrung"), remained in a 
fixed ratio to standard coin of 250 : 100, until in 1860 it 
was replaced by the uniform "Oesterreichische Waehrung" 
(Austrian currency").

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Although currency stabilisation was successful in the 2%%sup nd/% 
 half of the 19%%sup th/%  century and in 1900 the 
transition to the krone brought a stable gold standard, a new wave of 
accelerated inflation began when World War I broke out. The war 
was financed through bonds. The available amount of goods did not 
correspond to the increase in the amount of currency, and the shortage 
in almost all sectors swiftly led to inflation; by the end of the war 
the price level was 15 times as high as in 1914. Enormous budget 
deficits, even after the war had ended (partly as the result of food 
subsidies) and anti-krone speculations forced inflation even higher. 
Measures aimed at the absorption of excess purchasing power remained 
largely ineffective. By August 1922 the value of the paper krone had 
fallen so far that one gold krone was worth 14,400 paper 
kronen: 1. The economic reconstruction effected by the Geneva 
Protocols of October 1922 (Federal Chancellor I.  Seipel) and the 
resulting budget stabilisation stabilised the value of the krone. In 
1924 the new schilling currency was introduced (10,000 paper kronen = 
1 schilling).

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The Second World War also led to signs of inflation, which, however, 
remained hidden until the end of the war. The stabilisation measures 
then undertaken were: the reintroduction of the schilling in a new 
form ("Schillinggesetz") in November 1945, the currency 
protection law ("Waehrungsschutzgesetz") of 1947, which 
abolished the blocked accounts of the Nazi regime, 5 price-and-wage 
agreements among the social partners in 1947-1950, an industrial 
price-lowering campaign and the limitation of the budget deficit in 
1951/1952, and the deceleration of the increase in supply of money 
instituted by Finance Minister R.  Kamitz. Post-war inflation (caused, 
among other things, by the costs of the Occupation and the general 
depletion of goods) ended in 1951. Since then inflation in Austria has 
corresponded to the general situation in European countries, although 
the large increases in the budget deficit resulting from measures to 
fight economic stagnation after 1975 and after 1991 created above 
average inflation rates. As a result of Austria´s accession to 
the EU and the introduction of the  Euro the inflation rate declined 
to under 1% until 1999 (1999: 0.6%), reaching its lowest level since 
1952 and 1953. ( Consumer Price Index).

!Literature
A. Beer, Die Finanzen Oesterreichs im 
19. Jahrhundert, 1876 (reprinted in 1973); K. Bachinger and H. 
Matis, Der oesterreichische Schilling, 1974; F. Butschek, Die 
oesterreichische Wirtschaft im 20. Jahrhundert, 1985.


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