The gold standard played a central role in US. monetary policy during this time from "summary" of A Monetary History of the United States, 1867-1960 by Milton Friedman,Anna Jacobson Schwartz
The gold standard was a cornerstone of US monetary policy during the period covered in the book. It was a system in which the value of a country's currency was directly linked to a specific amount of gold. This meant that the US dollar was convertible into gold at a fixed rate. The gold standard provided stability to the monetary system by limiting the ability of governments to print money at will. Under the gold standard, the supply of money was tied to the amount of gold held by the government. This meant that the money supply could only increase in line with the growth of the gold reserves. As a result, inflation was kept in check and the value of the currency remained relatively stable. The gold standard also played a central role in shaping the behavior of central banks. Central banks were responsible for maintaining the gold reserves and ensuring that the currency remained convertible into gold. This required them to carefully manage the money supply to prevent runs on the gold reserves. However, the gold standard was not without its drawbacks. One of the main criticisms of the gold standard was that it limited the ability of governments to respond to economic downturns. Since the money supply was tied to the gold reserves, central banks had little room to maneuver in times of crisis. This often exacerbated economic downturns and made recovery more difficult. Despite these limitations, the gold standard remained a key feature of US monetary policy during this time. It provided a sense of stability and predictability to the monetary system, which was valued by policymakers and the public alike. The gold standard was eventually abandoned in the early 20th century, but its impact on US monetary policy during this period was significant.
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