“The far less regulated Scottish and Canadian free banking systems had much better performance under similar economic conditions. Most free banking systems experienced no peacetime system-wide panics, and even heavily regulated free banking systems devel- oped arrangements that provided liquidity without a lender of last resort.”… Tim Bouma Mar 15, 2024, 11:46 AM
“Because free banking was inherently a regime of convertibility into gold or silver (or copper, in China), long-run price stability was greater than it has been under central banking, which has often begun as a regime of con- vertibility but has always become one of fiat money.”… Tim Bouma Mar 15, 2024, 11:44 AM
“Fiat money nowhere permanently supplanted convertible currency as the voluntarily preferred medium of exchange, and sometimes, as in the case of the California ‘gold banks’ of the 1860s and 1870s, people successfully defied government attempts to impose fiat money on them” Dowd, Free Banking… Tim Bouma Mar 15, 2024, 11:34 AM
The short of it is that central banks have been put in charge of managing a trilemma, where two of three objectives compromise the third. The trilemma in the case is managing: 1) price stability (inflation), 2) financial stability (banks) and 3) productivity (investment). Optimizing for any two, compromises the… Tim Bouma Mar 15, 2024, 11:26 AM
“Free banking systems maintained exchange-rate stability by giving people the right to convert banknotes and deposits into gold or silver at a fixed rate. Free banks issued notes denominated in the main currency of the region where they hoped the notes would circulate. There was not a proliferation of… Tim Bouma Mar 15, 2024, 11:19 AM
“In Canada, the Quebec Bank regarded its home city as a private preserve, and tried to persuade the legislature to close the Bank of Montreal’s branch there.” Dowd, Free Banking… Tim Bouma Mar 15, 2024, 11:16 AM
“In Europe, credit-clearing arrangements preceded note-issue banking. The trade fairs of Champagne became the centre of clearing for bills of exchange by the 1300s” Dowd, Free Banking… Tim Bouma Mar 15, 2024, 11:14 AM
