PRICES AND PRODUCTION, Hayek
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It is just because with every increase in the volume of money, whether it is made available first for consumption or first for production,the relative size of the demand for those means of production that already exists or which has been directly enlarged by an increase in money must eventually contract in relation to the demand for consumption goods,that a more or less severe reaction will follow.This frantic game of now enlarging,now contracting the productive apparatus through increases in the volume of money injected,now on the production,now on the consumption side,is always going on under the present organization of currency. Both effects follow each other uninterruptedly and thus an extension or contraction of the productive process is brought about, according to whether credit creation for productive purposes is accelerated or retarded.So long as the volume of money in circulation is continually changing,we cannot get rid of industrial fluctuations.In particular,every monetary policy that aims at stabilizing the value of money and involves,therefore,an increase of its supply with every increase of production,must bring about those very fluctuations that it is trying to prevent
