It Was the Political Inability to Make That Choice That Led to the Debacle of the 1930s

The return of a universal gold standard would once again place money beyond the control of individual central banks. At that point, central bankers would once again have to choose between domestic monetary policy and the stability of the foreign exchange rate. It was the political inability to make that choice that led to the debacle of the 1930s. In his article “The Fate of the Gold Standard”, which appears as chapter 3, this volume, Hayek accused Keynes of the primary responsibility for the belief that the choice could be evaded. However, it was not only Keynes, but the whole of the economic literature devoted to the concept of the trade cycle that encouraged the belief that somehow or other the cycle could be minimized through monetary policy.

—Stephen Kresge, ed., editor’s introduction to The Collected Works of F. A. Hayek, vol. 5, Good Money, Part I: The New World, by F. A. Hayek (Indianapolis: Liberty Fund, 1999), 14.