million on July 23, 1914, just before the outbreak of the war. During the war the note circulation increased enormously, while the stock of gold and silver gradually dwindled to one-fifth of the amount held at the beginning of the war. The Austrian as well as the Hungarian Government borrowed freely from the Bank, until the presses could no longer keep pace with the demand for notes, and other institutions began to issue notes, with the consent of the Bank in Vienna, without its consent in Prague. At the end of 1914 the circulation reached 5,200 million crowns; a year later it stood at 7,200 million; at the end of 1916, it was 10,890 million, and at the end of 1917, was reported at 18,440 million. At the present time it is estimated at 34,000 million crowns, or about 680 crowns per head of population, if the number of inhabitants of the former Monarchy be taken at fifty million. The war had destroyed the Monarchy and broken it up into its component parts; there was no longer any Austria-Hungary, but the Austro-Hungarian Bank continued to issue notes in denominations as high as 10,000 crowns as if nothing had happened.
At the end of 1913 the bank held 261,545,000 crowns in silver and 1,240,973,000 in United States currency. When the war broke out, the stock of gold and silver was $311,963,000, representing 63.4 per cent. of the combined total of deposits and notes in circulation. During the war the metallic reserve diminished rapidly, as large amounts of the precious metals had to be exported to Germany and the neutral countries in payment for imports. By the end of 1917 the reserve had dwindled down to $64,657,000, representing only 1.6 per cent. of the combined liability for deposits and notes in circulation. The gold holdings were only 265 million crowns, and the bank held commercial paper to the amount of only 22 million crowns. The metallic reserve has probably wholly disappeared since that time—such is the opinion of the Vienna correspondent of the Berliner Boersen-Zeitung of December 3, 1918—and the only assets now held by the bank are Government obligations and treasury bonds, issued to it directly by the Governments of Austria and Hungary or pledged with it as collateral by private parties. The bank would loan 75 per cent. of the nominal value on war bonds, but as many of the borrowers would give fictitious names, such loans really were sales of the securities at a 25 per cent. discount.
It is estimated that notes to the amount of 24 billion crowns are in circulation in former Austria and 10 billion in Hungary. It would be more correct, however, to say that those amounts of notes are outstanding rather than in circulation. For it is a fact that, notwithstanding the enormous amount of notes printed, there is a shortage of currency in Austria-Hungary. The people are hoarding the notes! The presses are still working, the supply of notes is overabundant, and yet there is a scarcity of notes in circulation. It is rather difficult to explain this apparent paradox. It has been suggested that the people are afraid of bank robberies in these unsettled times; that they hope to escape taxation by hoarding; or that they see no opportunities for safe investments. The last explanation seems to be the true one, for the first loan issued by the new Czechoslovak Republic at 4 per cent. at par, was largely oversubscribed. It is to be remembered also that while the prospects of redemption are no better for the notes than for the war bonds of the old Governments, the notes have the advantage of being the only circulating medium available. They will remain in circulation for at least a year, and this certainly gives them a fictitious value irrespective of the uncertainty of redemption.
At home, the excessive issues of bank notes naturally aggravated the evil of high prices; abroad they accelerated the fall of Austro-Hungarian exchange, due primarily to an adverse economic balance. With the exception of Russia and Turkey, the Danubian Monarchy shows greater increases in the prices of necessities during the war than any other country, belligerent or neutral. The increase in prices for the period July–December, 1917, as compared with the prices prevailing in July, 1914, has been estimated at 273 per cent. for Vienna, as against 119 per cent. for Germany, 122 per cent. for Norway, 103 for Great Britain, 95 for Switzerland, 92 for France, 91 for Sweden, 70 for Italy, 60 for Canada, and 50 for the United States. Later data are not available for Austria, but it is well known that in all other countries the prices have since been increasing, until November, 1918, when the increase in Great Britain reached 133 per cent.
