- 1 - Romanian Stabilization in the 20s and the missing gold reserves Silviu CERNA The Faculty of Economics and Business Administration The West University, Timişoara 1. Introduction Despite ending the First World War as a member of the winning countries and, as a consequence, having doubled its territory and population and reaching its political goal, i.e. the union of the territories with the majority of the Romanian population in the form of a national state, the Greater Romania was, economically, severely affected by the war. According to certain estimates, the war has caused ROL 31 billion worth damages 1 . In addition, the war triggered the disruption of the economic activity, trade deficits in relations with foreign markets, financial chaos and inflation. As with other belligerent European countries, inflation was triggered by the renounciation of the self-regulatory mechanisms of the gold standard monetary system (banknotes’ convertibility, gold points) as well as by the dramatic increase of paper money issue having pegged exchanged rate for the purpose of financing war expenses. In Romania, the convertibility of the leu in gold was de facto abolished immediately after the outbreak of the war, and abolished de jure in July 1917. On the other hand, the volume of loans granted to the state by the National Bank during the war increased greatly reaching 93, 5% of the total. 2 Inflationary pressures had begun to emerge since war neutrality (1914-1916), but intensified during the two years of war. The phenomenon was fueled by the repeated issues of non-convertible banknotes, of requisition bonds, of treasury bills and of other means of payment, enforced by the Romanian authorities who fled to Moldova. 3 To these general reasons, specific for Romania, two other aggravating factors were added. The first was represented by the loss of the gold reserves - about. 105 tons of gold, estimated at 315 million lei – sent to Moscow when Romania joined the war (1916) and appropriated by the authorities of the new Soviet state, subsequent to the Bolshevik Revolution. 4 The second aggravating factor was the massive issue of a currency also called “leu” by the authorities of the German occupation. This “ war leu” was issued through a German-based bank established in Bucharest (the General Bank) and was used to pay for goods requisitioned or bought by the occupation army. Obviously, the “war leu” issued by the General Bank came in addition to the “common leu” issued by the National Bank, which was relocated in Iasi, which boosted inflation. 5 1 -Apud Murgescu B., România şi Europa. Acumularea decalajelor economice (1500-2010), Polirom, Bucureşti, 2010, p. 222: Axenciuc V., Introducere în istoria economică a României. Epoca modernă, Editura Fundaţiei ''România Mare'', Bucureşti, 1997, p. 222. 2 -Kiriţescu C., Sistemul bănesc al leului şi precursorii lui, Editura Enciclopedică, Bucureşti, 1997, vol. II, p. 118. 3 -Idem p. 89-118. 4 -V. Isărescu M., Păunescu C., Marian C., Tezaurul Băncii Naţionale a Romaniei la Moscova: documente, Editura Oscar Print, Bucureşti, 2011. 5 - Kiriţescu C., op. cit., p. 118-131; Murgescu B., op. cit., p.223.