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.
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 19th century the value of coins was
calculated according to their silver content, these coins were
considered inferior. The 2nd major coin inflation took place
as the intensification of a latent inflation from the late
16th 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.
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").
Although currency stabilisation was successful in the 2nd
half of the 19th 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).
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.