Page - 564 - in THE FIRST WORLD WAR - and the End of the Habsburg Monarchy, 1914 – 1918

564 How is a War Financed ? the fact that attempts were made to borrow money abroad, they did not achieve a result. There was just one exception : the Danube Monarchy was able to borrow money in Ger- many. In November 1914, 300 million marks (375 million kronen) were borrowed from large Berlin banks, which were secured by treasury notes. And the Germans also con- tinued to lend until, finally, the debts owed by Austria-Hungary to the German Empire from this title in the summer of 1916 alone grew to around three billion and then to over 6.7 billion kronen.1321 Naturally, the expectations in Vienna had been higher, since the borrowed money had to be used not least to pay for the large number of imports from Germany. However, quite clearly, there were doubts as to the creditworthiness of the debtor and, anyway, Germany also faced the problem of not knowing how the money for waging the war should be raised. What had become of the ‘world of security’ ? During the first months of the war, the gold and silver coins had already disappeared. The prohibition on hoarding coined precious metals remained ineffective, regardless of what was written or preached.1322 The central bank attempted to take counter-measures and issued a part of its metal hoard, particularly silver krone coins and old silver gulden. The result was that clusters of people gathered in front of the banks in Vienna and Budapest, so that the police were forced to intervene in order to maintain at least some kind of order. Barely had they been issued, when the silver coins, which had a total value of 100 million kronen, disappeared into the money stockings just as silver coins worth around 400 million kronen had done previously. In order to have at least small sums available for everyday needs, in 1914, bank notes with a value of 1 krone were already issued instead of silver coins ; at the end of 1916, bank notes worth 2 kronen came into circulation. Instead of nickel, the fractional coins with a value of 10 and 20 heller were initially minted in nickel silver, which consisted of a mixture of 50 per cent copper, 40 per cent zinc and 10 per cent nickel. Then, these metals also ran out. The fractional coins that had been minted until then were withdrawn, and from then on, only iron coins were minted. Now, it was mostly paper kronen and iron heller that were in circulation. For the central bank and the other credit institutions, however, the most pressing problem remained how to finance the needs of the military. With the treasury notes, the loans and the borrower’s notes, effective financial operations tended to be con- ducted only for the short term. And ultimately, these were transactions of which the average citizen at least became aware. The army anyway appeared to live according to the maxim that money had to be found, since otherwise, how was war to be waged ? In fact, there was another way of financing the war, by means of which the number of banknotes in circulation could also be reduced : war bonds. Ultimately, these became a type of symbol, not only for the war itself, but also for the fact that it was a total war. Aside from the patriotic collection of metals needed for the war  – ‘I gave gold for iron’  – there was after all nothing comparable that could be used as propaganda