MONEY AND PRICES
There is no monetary policy in the Western sense to be discovered in Czechoslovakia; under central planning, the internal balance is supposed to be maintained by fixing consumers' prices and incomes rather than by a systematic effort to avoid inflationary or deflationary pressure. An excess of liquid assets which may result from a rigid system of wages and consumers' prices--under which demand and supply are not always equated by pricing on the domestic market--may become very detrimental to sound development. Such a situation did arise, in fact, during the first industrialization drive prior to 1953, and in June of that year a second postwar currency reform was carried out. A few comments on the postwar currency reforms in Czechoslovakia are necessary for an understanding of subsequent economic developments.
In the autumn of 1945, the government of the National Front took steps to cure the wartime money inflation by blocking all cash and money deposits in special accounts, by introducing a general levy on property and a much higher and much more progressive levy on increase of property during the war, and by setting up the "Fund for National Reconstruction." Through selling confiscated German property--obtained as reparations for losses suffered under the occupation--the Fund was supposed to acquire enough money in new currency to cover what remained on blocked accounts after deducting levies from property and property increase.
Prewar money in circulation amounted to about 8 million prewar koruny. Immediately after the 1945 currency reforms, price ceilings set by the Price Control Office were increased threefold in order to bring the official prices--which remained almost at the prewar level in view of wartime control--and the black-market prices, supply and demand, closer together. In view of the higher ceiling, the official estimate of sound money in circulation was also three times higher than prewar--24 billion postwar Kčs. But free exchange of old currency for new brought circulation to 28.2 billion Kčs by the end of 1945. This was done for the benefit of the Allied occupation armies, of political parties, and of nationalized indus-