1 gulden Austrian currency, January 1, 1858, issued December 21, 1858
1 krone Association coin,
1858, Vienna,
Francis Joseph I (1848 to 1916)
Slide rule for coins, developed for the conversion of Convention coin gulden into Austrian currency gulden at a rate of 1 to 1.05. Additionally, it indicated the silver premium on the copper kreuzer. Specifically made for use by the officers (paymasters) of the imperial army.
4 gulden Austrian currency, 1875, Kremnitz (Kormoczbanya), Francis Joseph I (1848 to 1916), worth 10 francs
Reestablishing monetary stability after the events of 1848–49 was difficult for a number of reasons. Monetary policy was affected by the cost of maintaining Austria’s position as a major power in the Crimean war (1855–1856) and in the Italian war (1859), which thwarted the efforts to consolidate the national budget, as well as by the development of world market prices for precious metals. The high premium on silver in the wake of the gold rushes in California and Australia triggered heavy outflows of European silver coins, above all to eastern Asia and America. For many European countries, the switch to a gold standard appeared attractive.
Austria, however, decided to keep its silver currency and sought to join the German Zollverein, a customs union established in 1834. The member states of the Zollverein had already embarked on a unification of currency systems with the agreement of Munich in 1837. Twenty years later, Austria relinquished its Convention monetary standard in the Vienna monetary agreement of 1857 and adjusted its gulden to the north German thaler. 1.5 Austrian gulden were equal to a Convention thaler. The coin weight unit was the “pound” of 500 grams, with 30 Convention thalers (45 Austrian gulden) being struck from 1 pound of fine silver. Under the decimal system that was obligatory for the Zollverein currency, the Austrian gulden was subdivided into 100 kreuzer.
After Prussia defeated Austria at the battle of Königgrätz in 1866, Austria pulled out of the Zollverein and in 1867 oriented its coinage on the bimetallic standard of the Latin Monetary Union founded by France, Belgium, Switzerland and Italy in 1865. In a nod to the Latin Monetary Union, Austria minted gold coins of a value of 8 and 4 gulden, which was the equivalent of 20 and 10 francs. However, Austria never actually joined, a step it had planned for 1870, because its monetary system remained in disarray.
The provisions of the coinage agreements did not apply to paper money, even though paper money had been legal tender since the suspension of convertibility in 1848. Next to the silver gulden, Austria had the paper gulden, which was exchangeable for silver coins at a discount. All efforts to eliminate the discrepancy between the paper currency and silver coin, which would have necessitated a devaluation of the paper currency, were unsuccessful because the state’s financing needs remained so high. At the beginning of the 1860s the premium on silver coins versus paper currency had augmented to more than 40%, prompting the government to issue a new central bank act, the Plener Act, named for the minister of finance. Its purpose was to bind the issue of paper money to the size of the currency reserves. While this move succeeded in reducing the silver premium compared to paper money, the contraction of the money supply acted as a damper on business.
In 1867 Hungary was recognized as an autonomous part of the Empire, a fact reflected by the use of Hungarian legends on the coins circulating in Hungary. The currencies of the Austro-Hungarian Empire, however, were not changed by this “Ausgleich,” or partial autonomy. In 1878 the Privilegirte Oesterreichische National-Bank became the Austro-Hungarian Bank, and the banknotes of the dual monarchy were issued with German and Hungarian legends.
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Austro-Hungarian Bank stock
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1 gulden, 1869, Kremnitz (Kormoczbanya), Francis Joseph I (1848 to 1916), with inscription in Hungarian and Hungarian coat of arms
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1 gulden, 1869, Kremnitz (Kormoczbanya), Francis Joseph I (1848 to 1916), with inscription in Latin and Austrian coat of arms
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100 gulden Austrian currency, 1880, issued October 31, 1881, obverse in Hungarian
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100 gulden Austrian currency, 1880, issued October 31, 1881, obverse in German
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The collapse of bimetallism and the price of silver had the greatest impact on the development of Austrian coinage and the monetary system in the last third of the 19th century. The sharp contraction of the value of silver against gold from the mid-19th century was in fact accelerated by the move to gold of Germany and Scandinavia at the beginning of the 1870s. In Austria, which was still on a silver standard, this development led to a shrinking premium of silver against paper currency from 1872 that turned into a steadily growing discount from 1878. Thus silver coins were no longer suited to use as a standard. Paper currency became the standard, and silver only served as the precious metal cover for the banknotes. The importance of coins diminished as the volume of cashless payment transactions surged.
At the end of the 1870s nearly all European countries and the U.S.A. had adopted a gold standard. Austria remained on a silver standard, which entailed steadily growing losses. Finally, Austria adopted a gold standard with the introduction of the krone in 1892, satisfying an urgent need for monetary reform. The Austrian gulden was valued at 2 kronen, with 1 krone subdivided into 100 hellers. Banknotes entitled “Österreichische Währung” (Austrian currency) remained legal tender until 1900, when the krone was declared sole legal tender.
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Thank-you letter to the Secretary General of the Austro-Hungarian Bank, Emil von Mecenseffý, with representation of banknote production
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1 krone, 1892, Vienna, Francis Joseph I (1848 to 1916)
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1 heller, 1892, Vienna, Francis Joseph I (1848 to 1916)
Poster for the 7th war loan, 1917, designed by Alfred Roller (1864 to 1935)
100 krone Austrian war loan, graphic design by C. O. Czeschka, Wiener Werkstätte
1 krone banknote, 1916, imprint DEUTSCHÖSTERREICH
Marked 50 krone banknotes in the printing works of the Austro-Hungarian Bank, Austrian management
The krone currency began to deteriorate as a consequence of WWI. The war was financed only to a small degree by taxes; most of the funds were raised through war bonds – and government debts incurred with the central bank. The money supply exploded from 3.4 billion kronen to 42.6 billion kronen, and consumer prices rose sixteenfold during the war. Austria did not hesitate to set in motion the money printing presses, nor did it institute strict price controls, so that inflation was more rampant than in the other warring nations.
After WWI, monetary conditions in the Republic of Austria – the tiny state that remained after the demise of the monarchy – were precarious. The initial hope that the krone could be maintained in a monetary association with the successor states quickly evaporated. Yugoslavia was the first country to stamp the banknotes of the Austro-Hungarian Bank as their own in January 1919, and Czechoslovakia followed suit in February. From March 12, Austria stamped the banknotes circulating on its territory with the mark “DEUTSCHÖSTERREICH.”
Coins had been in short supply already during the war. First the gold and silver coins disappeared from circulation, then even the copper and nickel divisional coins vanished and were replaced by iron coins. A drastic emergency measure used to produce small denominations was to halve or quarter krone banknotes. At the end of November 1918, coins were in such short supply that the ministry of finance even issued a recommendation to public authorities and institutions to issue tokens.
50,000 krone banknote, issued January 28, 1922
Container with 4 billion krone worth of banknotes, printing works of the Austro-Hungarian Bank, Austrian management
100,000 krone banknote, issued August 2, 1922
Along with Germany and Hungary, Austria was one of the countries which did not succeed in stabilizing its currency after WWI. The decline in industrial production and poor harvests had further devastated the economy. Moreover, Austria, which had been used to a large economy under the monarchy, now had to struggle with the structural problems of a smaller economy: It was compelled to import energy, raw materials and food. This imposed a burden on the budget, which already had to cope with war debts. Food subsidies became the largest expenditure item next to the inflated civil service, the railroad administration and unemployment benefits.
Plans to redeem the war debt by imposing a tax on assets failed. The growing deficit was covered by direct credits taken out from the central bank. The money supply burgeoned from 12 billion kronen to 30 billion kronen in 1920, rising to roughly 147 billion kronen by the end of 1921. While the devaluation eased the debt burden and made it easier to pay civil servants, the expenditure for food subsidies jumped, too. Food subsidies, a quarter of state expenditure in the financial year 1919/1920, expanded to nearly 60% of total outlays in 1920/1921.
From the summer of 1921, the devaluation was out of control. Initially, it had helped jumpstart the economy – Austria’s industry benefited from the export revenue, cheaply priced assets attracted foreign investors and tourism received a boost – but soon monthly price increases of 60% and more had, in the words of Gustav Stolper, “evolved into a hurricane that knocked the wind out of the population.” In August 1922, the cost of living was 14,000 times as high as before the war. There was no more currency to pay for food, coal and raw material imports. Austria’s very existence as a state appeared to be in jeopardy.
The height of inflation is symbolized by a banknote at a denomination of 500,000 kronen issued in 1922. The currency had lost its value, and people had lost their trust in it – hardly anyone was willing to accept kronen tendered in payment. Merchants or traders who did accept kronen had the power to arbitrarily fix the price of their goods. Prices were raised by the day, even by the hour. Wages rose in nominal terms, but their purchasing power diminished. A metallworker’s minimum wage, 11,041 kronen in December 1921, climbed to 184,896 kronen in September 1922 – but was worth only three-quarters of the December 1921 wage in real terms. People on fixed salaries or pensions suffered even greater income losses.
People carried the banknotes around in knapsacks or huge baskets and were intent on spending money as fast as it came in. Whoever held banknotes quickly added to the panicked rush on physical goods. Many people were forced to sell their assets at a pittance and were at the mercy of profiteers and speculators. The monetary crisis had social repercussions: A scapegoat for the economic misery was sought, which contributed to the rise of anti-Semitic and xenophobic feelings.
At the end of 1918 the central bank had issued cash certificates, as the paper and coal shortages thwarted efforts to supply a sufficient amount of krone banknotes. Moreover, a number of towns had been given permission to issue emergency money (notgeld). Other municipalities circumvented the central bank and soon followed suit. They saw the issue of notgeld, frequently produced simply as a collector’s item, as a source of funds. Some 1,300 municipalities and institutions put out sometimes quite sophisticated and attractive notgeld.
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500,000 krone banknote, issued September 26, 1922
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Money transport from the printing works to the counters of the Austro-Hungarian Bank, Austrian management. One basket contained 2.5 billion krone worth of currency.
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Emergency money (Notgeld) of the provincial and local governments, samples
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Emergency money (Notgeld) of the provincial and local governments, samples
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9,9 Heller, Emergency money (notgeld) of the local governments, 1920
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