Our friend at the Acton Institute Samuel Gregg writing for the Public Discourse:

In his famous critique of the Treaty of Versailles, The Economic Consequences of the Peace (1919), John Maynard Keynes observed: “Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency.” History, however, illustrates that the greatest debauchers of money have not been Communist revolutionaries or even run-of-the-mill counterfeiters. The primary culprits have been entirely legitimate governments.

... [Th ere is] an on-going problem with governments’ management of the supply of money. Sometimes this has devastating consequences. Few today, for example, would question the contributions of flawed monetary policy to the Great Depression. Many remember the debilitating stagflation of the 1970s that owed much to the neo-Keynesian monetary policies pursued by governments after World War II. Today scholars such as the historian of the Federal Reserve Allan Meltzer suggest that the Federal Reserve’s present strategy for preventing future inflation is seriously flawed and setting us up for significant problems in the future.

It is not as if alternatives have not been considered. The now-common model of relative central bank independence arose partly from a desire to dilute the ability of politicians with short-term horizons to influence monetary policy. Likewise, one of the chief attractions of the gold standard which functioned in increasingly diluted forms until President Nixon terminated the dollar’s direct convertibility into gold in 1971 was its ability to constrain governments’ ability to succumb to demands for cheap money.

Along these lines, suggestions have been made to remove government from the business of money-supply altogether. [Read more.]