Plenty of monetary policy tools existed before the Fed

[Anarchist420]

There was bimetallism (the government could devalue a gold standard by artificially "fixing" its value to another metal), tariffs and trade regulations without limitations (could manage how much gold went out of the country), and a mint (which could remint foreign coins). For example, James Buchanan signed a law that made only U.S. mint coins legal tender in hopes that it would end the panic of 1857. The Jacksonians were not monetary nationalists, so they didn't care what country the coins came from since only weight and content matter. Van Buren, for example, could've changed the gold to silver ratio and he also could've raised the tariff to keep the gold in the country. Fortunately he did neither, so the panic ended quickly. It would've ended even quicker if some States hadn't promoted fractional reserve banking.

I'm not advocating any of those... but don't they pretty much prove that the Fed isn't necessary if the government already has the same powers? Really, using more than one metal is a substitute for a central bank although neither is desirable.

The lesson is that centralized monetary policy is not good and that the Articles of Confederation was tolerable in terms of monetary policy. It wasn't ideal since the confederal union could print money (i.e., it wasn't limited to collecting its revenues and dispersing them exclusively in gold or exclusively in silver), but at the same time the States could have their own currencies or no monetary system at all.

 

[Ketchup]

I have started wishing we could go back to the gold standard, even though I know that will never happen.