Tidbits, Managing the Money Supply, FOB 2/9/26
- Wright team
- Feb 9
- 6 min read
Managing the Money Supply
With a leadership change coming in May at the Federal Reserve, it is time to revisit a topic we covered several years ago.
In the days before paper currency, there were very few money supply problems. As populations grew and society shifted from agrarian to industrialized economy, the ever-expanding need for more money in the money supply accelerated. Thus, paper money was introduced and it was much more convenient than carrying a pound or two of metal coins.
To get people to accept paper currency as something of value, the governments made paper money redeemable for gold or silver on demand. Within a little more than a generation, paper money was commonly accepted.
After WWI, Germany was destitute. It not only lost the war, Germany had to pay reparations to France and England as Germany tried to rebuild its economy. But the winners deprived Germany of the coal and iron needed to rebuild its economy. The Weimar Republic, formed at the end of the war to manage all government affairs of Germany, decided to stimulate the economy by printing more money without each German deutsche marc backed by gold or silver.
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