This file is a single-author, three-part policy-theoretical essay. Schumpeter’s scope is the postwar debate over central-bank policy: Keynes’s plan for managed currency, price-level stabilization, and the return to gold. His thesis is that wartime monetary disorder does not prove the old principles obsolete; the proposed new bank policy is not a technical adjustment but a transfer of economic direction to monetary authorities.
Doch die Grundidee der Reform geht viel weiter und tiefer und ist unabhängig von jedweder besonderen Zielsetzung: die Idee nämlich, die Bankpolitik zu einer allgemeinen Therapie der Volkswirtschaft, zu einem Instrument auszubauen, mit dessen Hilfe die Volkswirtschaft bewußt und nach einem festen Schema reguliert werden kann.
English translation: Yet the fundamental idea of the reform reaches much further and deeper, and is independent of any particular objective: namely, the idea of developing banking policy into a general therapy for the national economy, into an instrument by means of which the economy can be consciously regulated according to a fixed scheme.
Section I therefore distinguishes old and new bank policy by function rather than instruments. Discount policy, open-market operations, reserve rules, and selective credit remain available in both regimes. Under the old policy they protect parity, circulation, and the credit structure; under the new, they become levers for unemployment policy, industrial policy, price policy, and social objectives. Schumpeter is not denying that gold systems were partly managed, nor that gold is theoretically essential to money. His warning is institutional: a central bank freed from gold and exchange constraints becomes a planning organ without clear limits.
Das ist nicht mehr »management« des Geldwesens, das ist »management« der gesamten Volkswirtschaft, ohne daß man irgendwo eine Grenze ziehen könnte.
English translation: This is no longer 'management' of the monetary system; it is 'management' of the entire national economy, without any point at which one could draw a boundary.
Section II attacks the stabilizing ideal at its root. Schumpeter’s crucial move is to treat price movements not simply as defects but as mechanisms of adaptation. Seasonal price changes, productivity-driven secular movements, war inflation, and cyclical movements may all perform allocative functions. Monetary policy can cushion them, but if it suppresses them it must replace the work they do.
Wenn zu allen Zeiten und von allen denkbaren Standpunkten aus Schwankungen in der Kaufkraft der Geldeinheit von den Betroffenen als ein Übel erfahren wurden, dann folgt daraus noch nicht, daß diese Schwankungen ausschließlich als Fehler der kapitalistischen Maschine anzusehen sind und in ihrem Mechanismus keine Funktion ausüben.
English translation: If at all times and from every conceivable standpoint fluctuations in the purchasing power of the monetary unit have been experienced as an evil by those affected, it does not yet follow that these fluctuations are to be regarded solely as defects of the capitalist machine and perform no function within its mechanism.
Against Hawtrey and Keynes, Schumpeter accepts that credit policy immediately affects the price cycle, but rejects the conclusion that the business cycle is therefore a merely monetary disease. The dispute is not over whether banks can influence booms and depressions, but over what these phases are for.
Mit anderen Worten: ich halte nicht die Geldtheorie, wohl aber die Konjunkturtheorie von Keynes für falsch.
English translation: In other words: I do not consider Keynes's monetary theory to be wrong, but I do consider his theory of the business cycle to be wrong.
His alternative is the familiar Schumpeterian theory of development: prosperity is the period in which new combinations, new firms, and new methods force resources out of inherited uses; depression is the painful absorption of these innovations into the normal circular flow. Bank credit is indispensable because the economy cannot finance what has not yet been produced solely out of past receipts. Credit expansion creates purchasing power ahead of goods and so raises prices; contraction later restores proportion and eliminates obsolete structures.
Die Hausseperiode ist also die typische Abweichung der Wirklichkeit vom statischen Bild der Wirtschaftsorganisation, die Depression ist die Verkörperung der Tendenz der Realität, in ein statisches Gleichgewicht zurückzukehren.
English translation: The boom period is thus the typical deviation of reality from the static image of economic organization, while depression is the embodiment of reality's tendency to return to a static equilibrium.
Section III returns to gold. Since price-level fluctuation still performs functions no other social organ can yet assume, Schumpeter sees no sufficient reason to abandon the old principles. He defends gold not as an ideal metal fetish, and not as compulsory deflation, but as an imperfect automatic mechanism for international adjustment. The danger of American gold accumulation is, in his view, overstated; the deeper danger is American protectionism, because trade flows and capital exports would naturally ease the transition.
Freihandelspolitik in Amerika ist das wahre Heilmittel für die heutige Situation.
English translation: A policy of free trade in America is the true remedy for the current situation.
The essay’s relevance lies in its early formulation of a problem still central to monetary theory: whether central banks should stabilize outcomes or preserve the adaptive discipline of markets. Schumpeter’s defense of gold is ultimately a defense of impersonal constraint against discretionary macroeconomic management. He closes by making gold valuable precisely because it can force coordination across nations at a moment of postwar fragility.
Auch wenn der Goldstandard für sich genommen kein Ideal ist, wie kann man ihn gerade in dem Augenblick verwerfen, in dem er dabei ist, der Menschheit einen gewaltigen – vielleicht den letzten – Dienst zu erweisen?
English translation: Even if the gold standard is no ideal in itself, how can one reject it at the very moment when it is about to render mankind a mighty—perhaps the final—service?
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