The Dream of Economists in the 1920s Was to Stabilize the Buying Power of the Monetary Units Using “Managed Currencies”

In the decades after the First World War, the goals assigned to monetary central planning changed, but the instrument for their application remained the same — central bank management of the money supply. As we have seen, Yale University economist Irving Fisher advocated the stabilization of the price level. As Fisher stated in The Money Illusion (1928),

To stabilize the buying power of the monetary units has long been the dream of economists. . . . And since the volume of circulating credit is controllable and controlled [through the Federal Reserve central bank], we have already a managed currency in spite of ourselves. If we insure scientific management in place of hit-and-miss management we shall thereby attain stabilization.

John Maynard Keynes argued in his Tract on Monetary Reform (1923), “The war has affected a great change. Gold itself has become a ‘managed’ currency. . . . All of us from the Governor of the Bank of England downwards are now primarily interested in preserving the stability of business, prices and employment.” The goal of monetary central planning, in Keynes’s view, as he articulated it in the 1930s, was for monetary policy to support and facilitate government “aggregate demand management” for manipulating the economy-wide levels of employment and output.

—Richard M. Ebeling, “The Gold Standard as Government-Managed Money,” in Monetary Central Planning and the State (Fairfax, VA: Future of Freedom Foundation, 2015), Kindle e-book.