Ludwig von Mises, Einstellung der Notenvermehrung oder Devisenverordnungen (1919)

Ludwig von Mises’s journal discussion reply to Finanzrat Dr. Franz Bartsch concerns the depreciation of the crown and the choice between stopping monetary expansion and attempting to restrain foreign-exchange prices through administrative controls. Its structure is polemical: Mises states his monetary explanation, answers particular objections concerning imports and exports, distinguishes defects of policy from defects of administration, and considers whether emergency food provision makes inflation unavoidable. Throughout, he redirects attention from exchange-market symptoms to their monetary cause.

Ich behaupte, daß die Entwertung der Krone durch die Inflation hervorgerufen ist, und daß man daher, wenn man der weiteren Steigerung der Devisenkurse Einhalt gebieten will, auf die Fortsetzung der Inflation verzichten muß.

English translation: I maintain that the depreciation of the crown is caused by inflation, and that therefore, if one wishes to halt the further rise in foreign-exchange rates, one must cease continuing inflation.

Mises explicitly presents this position as established doctrine rather than a discovery of his own. He contrasts it with the explanation, which he describes as particularly prevalent among German and Austrian writers, that attributes worsening exchange rates to an unfavorable balance of payments. Bartsch ostensibly seeks a middle position, but Mises reads his substantive arguments as an endorsement of the latter theory. For Mises, these rival explanations admit no mediating standpoint. This theoretical disagreement matters because an erroneous diagnosis sustains policies that leave continued note creation untouched.

The first substantive rejoinder turns Bartsch’s evidence against him. Bartsch describes importers accepting exchange losses because they expect to recover them through domestic sales. Mises argues that this confirms his account: rising domestic commodity prices make imports possible despite the increased crown cost of foreign currency. He thus treats the importer’s conduct as evidence of the relationship between internal prices and exchange rates, rather than as an independent explanation of currency depreciation. His reply does not deny the transactions Bartsch observes; it disputes what they establish.

The export argument concerns compulsory surrender of foreign-currency proceeds to the exchange authority at a rate below the current market rate. Mises treats this requirement as an export duty. Against Bartsch’s claim that it encourages exporters to demand higher foreign prices, he invokes the price exporters already have reason to seek:

Der Exporteur verkauft dem Auslande zu dem höchsten Preis, den er erzielen kann; er bedarf dazu wirklich nicht erst des Anstoßes durch eine Regierungsmaßnahme.

English translation: The exporter sells abroad at the highest price he can obtain; he really does not first need the impetus of a government measure to do so.

The distinction is between an incentive to seek a higher price and the ability to obtain one. Mises allows that an export duty can be shifted to foreign purchasers where the exporting country possesses a monopoly over the goods concerned. Otherwise, it falls on exporters, reduces their profits, and diminishes exports. Continued export activity does not refute this objection: his claim is that more goods could be exported without the levy, not that the levy makes every export impossible.

Mises similarly refuses to attribute the failure of exchange controls to their administration. He rejects Bartsch’s criticism of the exchange authority’s practice and locates the problem in the governing policy:

Nicht die Durchführung der Devisenverordnung ist schlecht, sondern das System, das die Folgen der Inflation durch Verordnungen bekämpfen will.

English translation: It is not the implementation of the foreign-exchange regulation that is bad, but the system that seeks to combat the consequences of inflation through regulations.

Bartsch’s appeal for a “modern” administrative spirit therefore misses the point. Mises associates the regulations themselves with seventeenth-century mercantilism. He also briefly corrects Bartsch’s reading of an earlier example involving cheese and watches: the predicted adjustment concerns declining watch imports and increasing cheese imports, not the conversion of a watch dealer into a cheese dealer. He declines to reconstruct that example fully, leaving this passage as a limited clarification rather than a developed argument.

The reply then broadens from exchange regulation to emergency public finance. Mises rejects the contention that the state must print notes to prevent starvation. Additional notes do not increase the domestic stock of goods. To import food and sell it below cost to poorer people, the state must obtain external resources through foreign borrowing or exports of goods and securities; domestic fiscal coverage must be sought through taxation. Inflation supplies an alternative means of distributing the burden, not an additional supply of food.

Was die einen durch die Notenausgabe gewinnen, das müssen irgendwelche andere Kreise der Bevölkerung verlieren. Die Inflation kann nur die Einkommens- und Vermögensverhältnisse der Inländer untereinander verschieben.

English translation: What some gain through the issue of notes must be lost by some other groups within the population. Inflation can only shift the relative income and wealth positions of domestic residents.

Calling inflation a kind of tax exposes its distributive character. Mises nevertheless leaves room for a political justification of choosing note creation over taxation or loans. His demand is that this choice be acknowledged openly rather than defended by concealing the connection between inflation and rising prices.

The conclusion joins observed policy failure to an urgent warning: foreign-currency rates have continued rising despite the apparatus established to restrain them, and will continue rising while inflation persists. Mises regards the opposing doctrine as one reason monetary expansion continues.

Wer die Sanierung unserer desolaten Währungsverhältnisse ernstlich will, muß damit beginnen, diese Lehre zu bekämpfen.

English translation: Anyone who seriously wants to rehabilitate our deplorable monetary conditions must begin by combating this doctrine.

The reply’s significance lies in connecting monetary causation, the incidence of exchange restrictions, and the redistribution concealed by inflationary finance. Currency stabilization requires both ending note expansion and abandoning the explanation that makes administrative controls appear an adequate substitute.