Topic: Free banking

Quotes

James William Gilbart, “The Currency: Banking” (1841)

• When a few more theories have been tried – a few more ”pressures” have been experienced – a few millions more of opulent families have been reduced to beggary, and our Union work-houses are thronged with starving artisans, then we may discover that all our attempts to regulate the currency have been productive of mischief, and we shall be willing to let the currency regulate itself.#Quoted in Lawrence White, Free Banking in Britain (1995)

Lawrence White, Free Banking in Britain (1995)

• A monopoly supplier of currency must of necessity resort to ‘arbitrary assumptions and empirical expedients’, as ‘the elements necessary for the precise determination’ of its proper balance-sheet composition ‘are within no man’s reach’. #
• Free banking as a monetary regime thus comprises two conceptually distinct elements: (1) unregulated issue of transferable bank liabilities, and (2) unmanipulated supply of base money or basic cash.#
• It is hardly appropriate to use the supposed need for a lender of last resort as an argument for central banking if it is the legislation fostering central banking that creates the need.#
• In an unregulated system one bank would choose to hold another’s notes as reserves in place of specie, assuming zero interest yield on both assets, only in the event that such extensive economies of scale characterised the issue of bank notes that the market for notes supported fewer firms than the market for deposits. #
• Free banking thought has little in common with the sort of argument for a pseudo-gold standard that depicts stabilisation of the exchange rate between a distinct national currency and gold as the optimal rule for central bank policy. #

Peter King, Thoughts on the Restriction of Payments in Specie (1804)

• When we consider the nature of the banking system, of all other branches of trade the most complex and delicate and deriving its very essence and existence from the confidence of the public, it will appear that there is no subject upon which legislative interference would be more improper or more pernicious.#Quoted in Lawrence White, Free Banking in Britain (1995)

Steven Horwitz, Microfoundations and Macroeconomics (2000)

• Fundamentally, the advantage of free banking over central banking in maintaining monetary equilibrium is that free banking is not dependent on the centralization of information in order to generate the appropriate supply of money.#