International or National Money?

G. R. Steele

Chapter 10 in The Economics of Friedrich Hayek, 2007, pp 176-189 from Palgrave Macmillan

Abstract: Abstract Hayek draws no policy guidelines from the theoretical analysis that shows a causal linkage between bank credit creation and business fluctuations. Rather, bankers must judge the relative advantages and disadvantages of meeting new demands for bank credit. Varying opportunities emanating from the real economy cause changes in the demand for bank credit; but there should be no attempt to stabilise the volume of bank deposits, because ‘[t]he stability of the economic system would be obtained at the price of curbing economic progress’ (Hayek, 1933a, p. 191). Although it might incur forced saving, with the consequence of an unjust redistribution of income, economic progress should not be sacrificed. Although Hayek was confident that developments in monetary theory would shed light upon the problem of the trade-off between that injustice and economic progress, that confidence was undermined by a rival and influential analysis that originates in Keynes’s General Theory.

Keywords: Central Bank; Monetary Authority; Bank Credit; Domestic Currency; Flexible Exchange Rate (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-80148-6_10

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DOI: 10.1057/9780230801486_10

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