Page - 566 - in THE FIRST WORLD WAR - and the End of the Habsburg Monarchy, 1914 – 1918

566 How is a War Financed ? billion. However, calculations of this nature were left until after the war. For a short period of time, the dual purpose of the bonds, namely to finance the war while at the same time quickly siphoning off the additional money brought into circulation by the money printing press, appeared to have been achieved. In November 1915, the value of the banknotes in circulation decreased by 150 billion kronen. However, the curve subsequently soared upwards again. The Kingdom of Hungary also chose the bonds option, taking out 17 in all. Of these, 13 were issued for public subscription, while four were placed with the banks of the Danube Monarchy. Unlike in Austria, the money magnates of the Hungarian half of the Empire, led by the Rothschild banking house, were for a long time unconvinced by the advisability of bond transactions. They were particularly doubtful as to whether the war bonds would be accepted. Their scepticism would turn out to be unfounded. The first Hungarian war bond raised subscriptions of 1.15 billion kronen. There had been problems, however. Due to the fact that the war bonds paid a higher level of interest than the savings books and other securities, which offered interest of first 3, then 4 per cent, there was a run on the banks and savings banks, with investors taking out their money and immediately investing it in war bonds. While this was not a problem for the large banking houses, the smaller institutions were suddenly faced with difficulties in paying out the savings balances, since their funding ratio was insufficient in order to satisfy all the demands for cash. For this reason, the Hungarian Finance Minister, with the agreement of the entire Cabinet, permitted those credit institutions that were at risk to use state deposits, and the crisis was overcome. Half a year later, the second war bond was also issued in Hungary, and now the negative prognoses appeared to be coming true : the total amount subscribed remained far below expectations. Quite clearly, people had spent everything they had, and had no more savings that they could use to subscribe to a war bond. The tone of the advertisements for the bond had also been muted, perhaps because it had been expected that a kind of automatic subscrip- tion-happiness would ensue. Again, the banks were forced to step in so that at least a respectable sum could be raised. However, it subsequently became clear that the Hun- garian half of the Empire was having difficulties achieving a comparable result to that of Cisleithania. The 18 billion kronen that were finally raised from all the bonds emit- ted in Hungary remained around a billion kronen below what was commonly regarded as being the Hungarian quota, which was 36.4 per cent for outgoings and income. It was a decent sum, however, and, as was the case in Austria, left many owners of the bond millions impoverished after the war. After all, at the end of the day, they had invested in a loser. When it came to subscribing to war bonds, the differences between the two halves of the Empire were not the only ones to emerge. Far more noticeable was what was happening within these individual halves, and how again in this case, parts of the finan-