Just to follow up my earlier post about the difference between central banking and central planning, I would just like to post the following quotation from Hayek’s The Road to Serfdom pp.121-22.
There is, finally, the supremely important problem of combating general fluctuations of economic activity and the recurrent waves of large-scale unemployment which accompany them. This is, of course, one of the gravest and most pressing problems of our time. But, though its solution will require much planning (my emphasis) in the good sense, it does not — or at least need not — require that special kind of planning which according to its advocates is to replace the market (my emphasis). Many economists hope, indeed, that the ultimate remedy may be found in the field of monetary policy, which would involve nothing incompatible even with nineteenth-century liberalism (my emphasis). Others, it is true, believe that real success can be expected only from the skillful timing of public works undertaken on a very large scale. This might (my emphasis) lead to much more serious restrictions of the competitive sphere, and, in experimenting in this direction, we shall have to carefully watch our step if we are to avoid making all economic activity progressively more dependent on the direction and volume of government expenditure. But his is neither the only nor, in my opinion, the most promising way of meeting the gravest threat to economic security. In any case, the very necessary effort to secure protection against these fluctuations do not lead to the kind of planning which constitutes such a threat to our freedom (my emphasis).
For good measure, here is Hayek in The Constitution of Liberty (pp. 324-25)
The experience of the last fifty years has taught most people the importance of a stable monetary system. Compared with the preceding century, this period has been one of great monetary disturbances. Governments have assumed a much more active part in controlling money, and this has been as much a cause as a consequence of instability. It is only natural, therefore, that some people should feel it would be better if governments were deprived of their control over monetary policy. Why, it is sometimes asked, should we not rely on the spontaneous forces of the market to supply whatever is needed for a satisfactory medium of exchange as we do in most other respects?
It is important to be clear at the outset that this is not only politically impracticable today but would probably be undesirable if it were possible. Perhaps, if governments had never interfered, a kind of monetary arrangement might have evolved which would not have required deliberate control; in particular, if men had not come extensively to use credit instruments as money or close substitutes for money, we might have been able to rely on a self-regulating mechanism. This choice, however, is now closed to us. We know of no substantially different alternatives to the credit institutions on which the organization of modern business has come largely to rely; and historical developments have created conditions in which the existence of these institut9ions makes necessary some degree of deliberate control of the interacting money and credit systems (my emphasis). Moreover, other circumstances which we certainly could not hope to change by merely altering our monetary arrangements make it, for the time being, inevitable that this control should be largely exercised by governments.