In fact, the factors of contraction of gold reserves were accentuating (excess of imports, reduction of active freight rates, tourism, remittances, high expenses for the passage of the Suez Canal, etc.), while the circulation of tickets necessarily increased and as early as July 1935, in order to avoid credit deflation, it had been necessary to suspend the obligation of the issuing institution to hold a reserve in gold and gold currencies equal to 40% of its sight commitments. (It is true that there were offers of gold to the country in November 1935, but this exceptional influx did not increase the Bank’s reserves, remaining instead at the disposal of the state for extraordinary needs). The control of circulation and prices was then naturally strengthened when, following the breakup of the gold block, the Italy decided (October 5, 1936) to align its currency by reducing its gold content from 0.07919 to 0.04677 (i.e. by 40.94%). This return to the 1927 equilibrium positions with regard to both the value ratio between the lira and the other currencies, and that between the national and world level of prices, naturally had to eliminate the disadvantage of exporters and inflate some active items in the balance of payments, but he put in the foreground the problem of price surveillance in order to slow down and graduate the inevitable adjustment; to make it more efficient, this supervision, which since October 1935 was exercised by the party, through the Central Committee and provincial inter-union committees, on April 28, 1937 it was instead attributed to the Central Corporate Committee and the Provincial Councils of corporations and in the meantime the blocking of rents and other important items of the family budget was ordered, the ad valorem gold duty was abolished and other specific duties; overall, the increases in wholesale and retail prices and in the cost of living were less than the devaluation (25.3%, 19.6%, 17.6% at the end of 1937 compared with September 1936). And all this while the issuing institute managed to contain the increase in circulation within narrow limits and the exchange rates of the lira remained more or less stable on the new parity. On the other hand, despite a certain resumption of trade after the end of the sanctions, species of purchases for the reconstruction of stocks and to face poor harvests, on the whole, in 1936 and 1937, the Italian economy accentuated its “national” character, and gradually adjusted its equipment in view of the prefixed autarky. State control has been strengthened both in the industrial sector, through the increased powers of corporate bodies and the establishment of new large bodies financed by the state through IRI (such as Finmare and Finsider, which include the main maritime and steel companies), and in that of credit, with the completion of the reform of 1936 and the insertion of the banking organization in the corporate system (r. decr. law 17 July 1937, no. 1400 and r. decr. 1 July 1937, no. 1818);
Not to mention the achievements in agriculture, the increase in activity which took place overall in the last two years can be considered significant and the industrial employment index in 1937 exceeded the average of 1929 for the first time after the crisis; deposits have increased overall in the last two years by 12.4 billion and the financial market, especially with regard to equities, was naturally active. It should also be remembered how, to limit the extra-profits deriving from the exceptional situation, he essentially aimed at limiting the dividends of commercial companies to 6% (September 1935), later replaced by a progressive tax on the same dividends, and how to favor the securities of The new tax on the profits of non-state bearer bonds was partly tended (September 1935).
According to Travelationary, this brief review cannot be concluded without rapidly examining how the state has succeeded, leveraging exclusively on internal resources, and obtaining the financial means to face the enormous extraordinary expenses connected with military operations and the enhancement of the Empire, as well as with the growing intervention in the economy. While, through the gradual strengthening of recurring and normal taxes (see taxes and fees, XVIII, p. 928 ff., And App.), Also favored by the economic recovery, the ordinary budget has been started towards the stabilized goal of 25 billion annually; in the sector of the extraordinary budget, kept separate from the first, the focus was on the loan and on the extraordinary tax, mobilizing approximately 36 billion in national savings from July 1934 to March 1938. The most important items of this mobilization concern the conversion in September 1935 of the redeemable 3.50% into a consolidated 5% which, in addition to exempting from the heavy amortization, provided the state with 6,8 billion in cash; the redeemable loan (connected with the extraordinary real estate tax of 5 October 1936 which ensures its service) which yielded 7 billion; the issuance of treasury bills for approximately 9 billion; and the increase of over 6, 5 billion in current account balances with the Cassa Depositi e Prestiti. And here are the figures on the trend of the normal budget (in billions of lire):
which shows how the increase in actual revenues, following both the economic recovery and the action of the financial administration, made it possible to reach balance again in 1936-37. In the meantime, the internal public debt has naturally risen, while there has been no increase in the foreign one.
As of December 31, 1937, banknotes in circulation were 17.5 milliards and gold and foreign exchange reserves (the capital gains of which following the alignment were attributed to the state) amounted to 4 milliards. The metallic circulation, rearranged with r. decr. 23 December 1937, n. 2200, is about 3 billion. With decr. min. January 10, 1938, the authorized circulation of government notes was raised to 2.5 milliards.
