in the value of currency than those to which the standard itself is subject, and, at the same time, to carry on the circulation with a medium the least expensive … ”. he also noted that : “ experience, however, shews, that neither a state nor a bank ever had the unrestricted power of issuing paper money, without abusing that power : in all states, therefore, the issue of paper money ought to be under some check and controul ; and none seems so proper for that purpose, as that of subjecting the issuers of paper money to the obligation of paying their notes, either in gold coin or bullion. ” the same concepts are to be found some hundred years later in irving fisher. the success of the gold standard was due, among other things, to the broad consensus on metallism and the classical model ; one of the latter ’ s key features is the self - adjusting ability of the economy. the restoration rule, which required the gold parity to be re - established after a period of suspension due to exceptional circumstances, was an essential part of the gold standard. short suspensions of convertibility made it possible to overcome temporary difficulties. the system allowed discretion to be exercised only within very rigid limits. gold acted as an anchor both for the monetary system and for the economic system by making maintenance of the parity a constraint on economic policy. a commodity standard, however, is not without its weaknesses, owing to the impossibility of controlling the money stock in the face of exogenous fluctuations in the quantity of metal. given the short - run non - neutrality of money, countries suffered substantial welfare costs in deflationary periods, as in the closing decades of the 19th century. during the heyday of the gold standard several proposals were put forward to overcome this difficulty : jevons ’ s revival of the tabular standard, marshall ’ s symmetallism and fisher ’ s compensated dollar. wicksell even suggested cutting the link with precious metals altogether, thus anticipating by a quarter of a century keynes ’ s radical approach in the tract on monetary reform ( 1923 ). england ’ s ephemeral return to gold in the first half of the 1920s and, just a few years later, the terrible impact of the great depression greatly affected economic and political thinking. the discussion on monetary reform ceased to be confined to the purely academic domain. the advocates of reform ( including, albeit with different approaches, economists such as keynes, fisher,

this context price stability is ensured in the leading countries ; to some extent their behaviour then influences that of the world economy. economic theory has taught us, rigorously ( consider, for example, the analysis put forward by patinkin ), that even with fiat money the price level can be determinate when the central bank exercises control over the nominal quantity of money. the creation of important monetary areas - that of the euro alongside those of the dollar and the yen contributes to the stability of the world economy, even though many countries remain outside these areas. the expansion of credit at the international level is closely connected with the operation and stability of banking systems and capital markets. important steps are being taken to subject countries outside the main monetary areas to standards of banking supervision that help to ensure the orderly expansion of credit and money. 4. in the absence of rigorous control over the quantity of money at world level, the last two decades have seen crises that, despite their occurring in just a part of the globe, have triggered a combination of inflation and deflation, with the destruction of some of the savings accumulated in banking systems and slowdowns in the growth of economies. the crises have become more frequent in the last five years and their effects more far - reaching as a consequence of contagion. the enormous advances made in data processing and telecommunications have fostered a growth in international monetary flows and total financial assets that has far exceeded the expansion of the world economy. this has undoubtedly contributed to the growth in productive investment at the global level in a period marked by low inflation, attributable in part to the increased competition in trade in goods and services and especially raw materials. the last five years have been marked by very rapid growth in the stock of financial assets made up of public and private - sector securities and bank deposits. the expansion began in 1995 at the time of the decision to carry out massive interventions in the foreign exchange markets in order to correct the pricing distortions between the dollar and other weak currencies on the one hand and the yen and other strong currencies on the other. on that occasion sales of yen against dollars amounting to several tens of billions of dollars were made ; at the same time, a policy was adopted aimed at reducing yen interest rates until they were close to zero. the expansion of yen - denominated liquidity enabled the dollar and other weak currencies, including the lira, the peseta and sterling, to strengthen. the global market saw