BANKING IN PRUSSIA.
A REMARKABLE movement in Political finance is going on just now in Prussia; interesting to a commercial nation like England, not only because it has a direct bearing on trade, but also because it is instructive as a living illustration of questions that ought never to be lost might of. The efforts of King Frederick William to relieve the pressure felt by the leading portion of his subjects from the prevailing scarcity of money are unremitting and so far praiseworthy. It was pro- bably the success that attended the establishment of the Vienna Bank after the French war, that has led to the attempt to extend the operations of the national law at Berlin. The long experi- ence of Austria, however, tells the same tale that the few weeks' initiatory practice of the Prussian financiers has proclaimed at Berlin. A circulating medium that has no intrinsic value cannot be created "de par le roi" if the basis of all transactions on credit be overlooked.
The Austrians were after the war reduced to the lowest state of financial distress. Notes issued on emergencies, like the French assignats, without calculation and without limit, had fallen to a course of about 30 per cent ; a circumstance which, by placing all contracts in jeopardy, threatened totally to demoralize society. At this juncture, the establishment of the bank at Vienna under the auspices of the Crown, with a new issue of notes convertible into silver on demand, was hailed with pleasure by the nation. The old notes were exchanged for new at a fixed rate, at which the Government chose to value them. The Crown declared itself bankrupt ; but was able to give some guarantee for honesty as to the time to come, by establishing a tolerable equality be- tween its revenue and expenditure. Its credit has hitherto been kept up by a scrupulous adherence to its promise of redeeming periodically portions both of the old and new debt. This punc- tuality saved the Austrians from the necessity of tying them- selves down by promises not to contract loans. The liberty of dealing as they pleased with the money market was willingly al- lowed to men who had used this power with discretion.
Prussia undoubtedly assumed a higher stand on the same occa- sion. The Government undertook more and demanded a greater exertion on the part of the people. The paper issues of Prussia during the war were not so extensive as those of Austria had been. Moreover, Prussia had spared to itself the fearful exhaustion that Austria had incurred by its grand exertion against the French invader in 1809. The rising of 1813 was a levy "en masse," and those who went to the seat of war lived at free quarter upon both friends and foes. Prussia was consequently able to avoid that fearful visitation which a discredited currency entails upon a country. But it could only accomplish this great object by the aid of the people, to whom the King in his emergency appealed. A Commission of men whose names inspired a confidence which the conduct of some of them has lately justified, was established to report to the King openly on the state of the National Debt. Its extent was unreservedly proclaimed, and a solemn covenant was entered into by the King and the members of the Commis- sion to the purport that no addition should be made to its amount without an appeal to a national Representative Assembly. The political development and the commercial prosperity of the nation were in the manner placed in the Royal hand by a confiding people. The value of the paper that remained current depended of course upon the confidence thus reposed in the good faith of the Crown and in the character borne by the members of the Commission for the National Debt.
In various changes that took place in the paper issues, (which in Prussia as in Austria are exchequer bills of small amount, but having no interest,) the original amount, then supposed to be about thirty millions of dollars, was not exceeded. The general prosperity augmented, and with it confidence in the Go- vernment securities. The market price of stock was further in- creased through the privilege enjoyed by capital so invested of being exempt from taxation. In consequence of this circumstance, perhaps far the largest portion both of the Austrian and Prussian debts is held by natives of the respective countries, or at least by Continental capitalists. It must be clear to all who take the trouble to examine into those things, that both the restoration of public credit in Austria, and its preservation in Prussia, were effected by inspiring the people of those countries and the public at large with confidence. To shake that confidence was tanta- mount to threatening. the existence of the two Governments. Hence the intimate alliance that has so long united the two rival crowns. Hence, too, the peaceful, although repressive policy that has so long served to keep up the appearance of stability. Hence, finally, the submission of the two countries no less deeply interest- ed in the preservation of public credit than their rulers, to a subjec- tion that for years has been scarcely tolerable for enlightened men. The case is parallel, although the circumstances are different, to the patriotic declaration of the British merchants on the suspen- sion of cash-payments by the Bank of England ; a declaration which made the suspension both possible and useful. Without the support of the people the British Crown would then have been as little able to avail itself of the disposable resources of the nation to continue the Revolutionary war, as those of Austria and Prussia would have found themselves to consolidate their power and the advantages of peace. In each of these cases the importance of a paper currency ju- diciously organized is apparent. In each, the necessity of awaken- mg confidence by wise precautions is shown to be indispensable. Each country has tested the utility that may be drawn from issues based upon credit on emergencies. But no one will be so bold as to pretend that the mere Government sanction lent to the issues so made the value that they maintained. Had the issues origin- ally been, as n Austria, beyond what public opinion esteemed it practicable for the state to redeem, they could enjoy no confidence until they were reduced within that limit; and in 1811, Austria
- annulled the value of a large portion of its circulating medium, on account of its depreciation in the market. Prussia, which since the war has injured the national credit by unlimited issues, was last year compelled to adopt the same measure.
The promise made in the solemn manner that has been men- tioned, has been fulfilled in Prussia during the last reign and the commencement of the present. Its spirit has, however, more than once been infringed. Nevertheless, the Prussian funds are at this moment higher than the Austrian. Prussian Three-and-a-Half per Cents are quoted at 931 ; Austrian Five per Cents are at 110f. Some of the causes of this difference, as well as the manner in which the spirit of the compact appears to have been infringed in Prussia, we propose to explain in a subsequent article. The importance of the subject at the present moment will justify our returning to it.
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