Bank of Italy – General Elections -The Passing of the Communist Peril
«The Economist», 16 aprile 1921, pp. 779-780
Turin, April 10
Signor Stringher has read to the shareholders of the Bank of Italy his usual annual report, full of figures and of interesting remarks upon economic and financial conditions in 1920. A point considered more fully than in past years is the policy of the official Bank rate. The rate was, at the beginning of 1920, 5 per cent., was raised to 5 1/2 per cent, at April 6th, and finally to 6 per cent, on May 11th, following the example of the Bank of France, which maintained, after April 8, 1920, the rate of 6 per cent., rather than that of the Bank of England, whose rate was put up to 7 per cent, at April 15, 1920. Two reasons are given by Signor Stringher to explain the disinclination of the Bank of Italy to more drastic rises in the Bank rate. 1) In countries with superabundant paper money highly depreciated, a rise in Bank rate is bound to react much less effectively on foreign exchanges, and on the demand for discounts, than in countries with paper money circulating at a parity with gold, or at a little discount to gold. 2) While the quantity of the paper issue would not have undergone any relevant decrease, the rise in the Bank rate would have seriously increased the interest paid by the State, other public bodies, industrial companies, and all debtors in general upon the new debt created after the rise in the Bank rate. The State alone would have suffered a serious loss, for the huge deficit in his budget which, until 1921, was not less than 14 billions lire, has been covered in the first half of 1920 by 5 per cent. Consols and in the second half by the issue of Exchequer bills and bonds. A differente of 1 per cent, would have meant to the taxpayers an additional burden of 140 millions a year.
On the course of foreign exchanges, which up to a month ago was highly unfavourable to Italy, rising gradually from 51.90 lire to the £ in January, 1920, to 102.28 at December 31, ending in a stabilisation about 106-107 in the first two and a half months of 1921, Signor Stringher has more weighty admissions. While in previous reports he enlarged upon the influence of the unfavourable balance of commerce, this year he observes that the excess of imports over exports was reduced from 10 1/2 in 1919 to 8 billions in 1920, which excess is partly covered by the money sent by Italian emigrants, by foreigners travelling and spending in Italy, and by the credits privately opened to Italian importers by foreign banks and exporters. The increase of 3 1/2 billion lire from January 1st to December 31, 1920, in the note issue affords, therefore, a fairly clear explanation in the rise of foreign exchanges and of prices, while the subsequent decrease in the note issue which took place from the highwater mark of 19.718 million lire touched in December 31st – exclusive of 5 and 10 lire State notes – is not the least important cause of the recent betterment in the foreign exchanges, when the price of the pound sterling was reduced under the 90 lire level. The social and political atmosphere is clearing, and while much merit is attributed by his followers to the skilful handling of the old chief, Signor Giolitti, all impartial observers are bound to admit that the excesses and vulgarity of Communist and Socialist politicians, the tyranny exercised by petty local chiefs on the masses, could not fail to excite a rapid reaction in a people so quick as Italian are. When the worst happened, in September last, and the occupation of factories by armed workers and the institution of Soviets in factories seemed to point to an imminent Communist revolution in Italy, and the Government declared its impotence to use the armed force for the enforcement of the law, a sudden revolution took place. Youths of the middle class, returned men and officers, in indignation grouped themselves into “fasci”. In recent months, and even today, newspapers are full of reports of encounters and fights between “fascists” and “communists”. The communists are everywhere defeated; public opinion is rising against the idols of November, 1919. Premier Giolitti, described as the staunchest opponent of the war, has written a letter to the King proposing the dissolution of the unworkable Chamber elected at the general election of November, 1919, and hopes that the next elections will disclose a united Italy for the first time since the fall of the Roman Empire. This renewed feeling of hope in the future of our country is not the least important cause of the better tone in foreign exchanges. A while ago Italy seemed likely to be the first country to fall a prey to Moscovite communism and barbarism; today the nightmare is gone and gone for ever.