Even if the proposition that monetary policy can prevent money itself from being a major source of economic disturbance were a wholly
negative proposition, it would be none the less important for that. As it
happens, however, it is not a wholly negative proposition. The monetary
machine has gotten out of order even when there has been no central
authority with anything like the power now possessed by the Fed.
In the United States, the 1907 episode and earlier banking panics are
examples of how the monetary machine can get out of order largely on
its own. There is therefore a positive and important task for the monetary
authority-to suggest improvements in the machine that will reduce
the chances that it will get out of order, and to use its own powers
so as to keep the machine in good working order.