In the 1920s, however, even the Fed had an additional restraint that we don't have now, namely, it was supposed to keep the paper money supply at some relatively fixed ratio to government gold. By the late 20s, however, many of the major nations abandoned the gold standard; and this placed additional pressure on those nations remaining on gold. It was reverse "gresham's law," in that if France was not on gold, you could buy dollars with francs, exchange dollars for gold, but we could not get gold for francs. So there was a net outflow of gold, which was seriously undermining the whole economy. If ALL had gone off gold, it wouldn't have been a problem. But by 1932, ONLY the U.S. was on the gold standard, and it was rapidly causing the collapse of the U.S. monetary structure, as the gold was just flowing out.
FDR's prohibition against owning gold privately and taking the government off gold are often berated by conservatives, but that action (and no other that he took, really) saved the banking system, which, after two years, was finally on an even playing field with the rest of the world.