Principles of Policy for the Future: Domestic

Abstract

At the opening of this book it was suggested that the centre-piece of monetary policy should be the maintenance of a stable value for money. It seems right in principle that the ‘ measuring rod’ should itself have absolute constancy of value. Historically, over many generations, it was held that the best approximation we could get to this was to give our unit of account a constant value in terms of some fairly reliable commodity, like gold. And the primary method for attaining this was to establish a two- way convertibility between bars of gold and the bank-notes and bank deposits that were in active circulation. Of course it was recognised that this was not a perfect system, because gold itself does not have perfect stability of value.