Central banking before floating currencies

[EZstar]

Hello ET forums

I've been having a discussion with a friend about the federal reserve. I'll spare you the details, but in the end he's just a fan of hard currency for fairly legitimate reasons that I disagree with. We were both wondering how central banks manipulated the money supply before the move away from the gold standard, or any time when a fixed currency is used. I can think of a few ways: debasing currency by replacing precious metals in coins, or simply just changing the amount of precious metal behind the paper bills issued. I'm not sure if either of these were used in America before the Fed, or even if direct manipulation of the money supply for the same reasons was practiced though. So I thought I'd ask you all

 

[trefoil]

Read Paul Einzig:

1. The History of Foreign Exchange
2. A Dynamic Theory of Forward Exchange, which has some long, excellent sections on crises throughout the twentieth century.

Also, there was Charlemagne's solution, which occurred to a few others (see the Populists at the end of the nineteenth century): use silver instead of gold. See Henri Pirenne's (in)famous Mohammed and Charlemagne for the details on this.
With multiple metals available, you could mix 'em up to achieve your goal.