Anatomy of the Bank Run
, by Murray Rothbard
, The Free Market
, Sep 1985
Explains fractional reserve banking, deposit insurance and monetary inflation
"... the depositor who thinks he has $10,000 in a bank is misled; in a proportionate sense, there is only, say, $1,000 or less there. And yet, both the checking depositor and the savings depositor think that they can withdraw their money at any time on demand. Obviously, such a system, which is considered fraud when practiced by other businesses, rests on a confidence trick ..."
Cartels: Economists and Central Bankers
, by Gary North, 11 Jul 2007
Discusses why economics textbooks never delve into the necessity of central banking
"Those few people who understand the inherent moral fraud in all fractional reserve banking find that they are not understood by their peers. They also find that their arguments are not taken seriously by academic economists. They find it difficult to explain why the entire profession has made a monumental methodological error in not applying the theory of monopoly to central banking."
Competing Money Supplies
, by Lawrence H. White, The Concise Encyclopedia of Economics
Discusses the arguments in favorand against free banking, with multiple private banks issuing their own notes, including historical precedents and proposals for the medium for note redemption
"Competition among banks would, history indicates, compel all banks in the system to redeem their deposits and banknotes for a common basic money, such as gold or a standard paper currency issued by the government. ... To attract customers, Citibank would be glad to accept deposits in Chase notes or Chase deposits, which it would then return to Chase for redemption at the clearinghouse. ... The reason is that by agreeing to accept each other's notes and checks at par, both Citibank and Chase would make their own money more useful, and therefore more widely accepted."
Inflation Deflation Red-flation Blue-flation
, by Matthew Beller, Mises Daily
, 24 Jul 2008
Explains what is inflation, what is money, contrasts "bad" vs. "not-bad" inflation and analyses the Federal Reserve's recent and potential actions
"When a depositor places a sum of money in a checking account at a fractional-reserve bank, the bank may loan out 90% of his deposit to another person with the assumption that the depositor will not withdraw all of his funds. When the bank extends such a loan, the depositor has effectively loaned his money to the borrower, but without his knowledge. In fact, both the depositor and the lender will have legal title to the same sum of money at the same time."
Interview with Adam Smith [via Edwin West]
, by E. G. West
, The Region
, Jun 1994
Professor Edwin G. West stands in for Adam Smith and answers questions from the Federal Reserve Bank of Minneapolis banking and policy issues magazine
"I never believed that banking was a strong exception to my free market ideas. I always insisted that the state should assume no supervision over entry into the banking business. It should, in fact, encourage the erection of as many banking enterprises as possible, and it should give monopolies to none."
Related Topics: Central Banking
, Economic Freedom
, Educational Freedom
, Hong Kong
, John Stuart Mill
, Minimum Wage Laws
, Adam Smith
Interview with Gary Becker
, by Gary Becker
, The Region
, Jun 2002
Topics include the economics of crime, economics and law, banking discrimination, economic education, social security, behavioral economics, sociology, career choices and moral hazards
"... you have to ask if the bank gets an application from, say, blacks and whites, is it giving up profits in order to avoid lending to blacks? A profit test would be the crucial test. ... Presumably, black-owned banks do not discriminate against blacks, or not as much as white-owned banks. Are they lending to blacks in greater propensities and making a higher return on their investments? Or what are the policies and profits of female-owned banks? I do not know the answer to those questions, but my belief is that the Boston Fed study greatly overstated the degree of discrimination by banks. That does not mean there's none."
Jean-Baptiste Say: Neglected Champion of Laissez-Faire
, by Larry J. Sechrest
Biographical and bibliographical essay, discussing Say's life, methodology and his writings on money, banking, the law of markets, entrepreneurship, capital, interest, value, utility, taxes and the state
"... 'banks of circulation' ... hold fractional reserves, issue banknotes, and generate an interest income by discounting promissory notes and bills of exchange. ... Say even argues that these fractional-reserve-holding banks ... bestow a benefit upon society because they provide 'the advantage of economizing capital, by reducing the amount of the sum kept in reserve.' And if it happens that such fractional-reserve banknotes also supplant part of the specie that had been in circulation, then 'the functions of the specie, that has been withdrawn, are just as well performed by the paper substituted in its stead.'"
Les Economistes Libertaires
, by Carl Watner, Reason
, Jan 1977
Discusses the French economists of the 19th century and in particular Gustave de Molinari and his thoughts on the provision of security and defense services by private agencies
"Although Molinari made these compromises with the State, he was not so ready to concede any government involvement in monetary matters. As Vera Smith noted, the subject of centralized, 'state controlled banking vs. free banking was one of the most keenly debated of its time in France ...' Molinari thought the money industry should be open to free competition. It was his view, says Gaetan Pirou, that 'banks should be free to offer metal coins or paper money and the public [should be free] to choose whichever served their best interest.'"
Lysander Spooner, Part 1
, by Wendy McElroy
, Future of Freedom
, Oct 2005
Lengthy biographical and bibliographical essay; from Spooner's birth to 1850-1860, examining his writings on economics, money, banking, mail delivery and slavery
"Through the National Banking Act of 1863, Congress guaranteed the notes of authorized bankers and legally protected them from liability for debt. A national tax of 10 percent for all money not authorized by Congress was also established. Through such measures, Spooner believed that Congress held a de facto and unlawful monopoly over the most important industry to the American economy — banking."
Martin Van Buren: The Greatest American President
[PDF], by Jeffrey Rogers Hummel
, The Independent Review
Discusses the Van Buren presidency and why he should be considered "the greatest president in American history"
"Although traditional historians have subjected this era of relatively unregulated banking to trumped-up charges of financial instability, many economists are coming to agree that it was probably the best monetary system the United States has ever had. The alleged excesses of the fraudulent, insolvent, or highly speculative 'wildcat' banks were highly exaggerated. Total losses suffered by banknote holders from 1836 to 1861 in all the states that enacted free-banking laws would not equal the losses for one year from an inflation of 2 percent, if superimposed onto the economy of 1860."
Milton Friedman, 1912-2006
, by Hans Sennholz
, 7 Dec 2006
Memorial essay, but critical of professor Friedman's advocacy of monetary policies which would leave money issuance in hands of the government
"The increasing importance of government obligations as bank assets gives great confidence to monetarists; however, it creates anxiety because government obligations merely are receipts for money spent and savings consumed. ... The growing importance of government obligations in bank portfolios actually signals government consumption of economic substance and wealth. To commercial banks, it means the loss of real property securing the loans, and the addition of yet more government promises to tax, print and pay. A banking system built primarily on government IOUs is in a precarious condition."
Monetary Central Planning and the State, Part 31: Ludwig von Mises on the Case for Gold and a Free Banking System
, by Richard Ebeling
, Future of Freedom
, Jun 1999
Examines Mises' thinking on why the gold standard is needed, why it is necessary for it not be subject to political manipulation, why free banking is needed and the ideological environment required for its success
"The only monetary and banking system that would have the potential capability of minimizing, if not preventing, monetary abuses on the part of governments would be a free banking system. ... Would the establishment of a truly free banking system make a country's monetary system impervious to state control, manipulation, and destruction? Mises admitted that it might not, because ultimately a sound monetary and banking system could be maintained only against the background of an ideology consistent with the classical-liberal ideals of individual freedom, a free-market economy, and free trade."
Monetary Central Planning and the State, Part 33: Murray N. Rothbard and the Case for a 100 Percent Gold Dollar
, by Richard Ebeling
, Future of Freedom
, Sep 1999
Examines the arguments made by Rothbard in his 1962 essay "The Case for a 100 Percent Gold Dollar"
"... these emerging bankers soon came to realize that they could extend additional loans to borrowers in the form of 'notes' that looked exactly like the warehouse receipts issued to their gold and silver depositors. ... This, Rothbard argued, was the beginning of 'fractional-reserve banking.' ... that also meant that the total face value of notes and receipts in circulation now exceeded by some multiple the amount of gold and silver against which they represented a claim."
Money and Banking
, by Lawrence H. White, The Encyclopedia of Libertarianism
, 15 Aug 2008
Discusses some of the issues regarding money, whether state- or privately issued, and banking, including central banks, such as the Federal Reserve, fractional reserve banking and free (fully unregulated) banking
"Perhaps because early banks often operated under exclusive state charters, some classical liberal thinkers ... condemned bank-issued money that rested on fractional reserves as per se illegitimate. They called for a return to 'hard money,' a system that relied only on coins made of precious metals or on certificates fully backed by precious metals. Others ... called for free banking, or the complete separation of banking and the state. In their view, governments should neither shelter banks from market competition nor restrict the sorts of contractual arrangements, including fractional reserves that banks may make with their customers."
Non-Marxist Theories of Imperialism
, by Alan Fairgate, Feb 1976
Examines writings of critics of imperialism that are not based on Marxist analysis
"Hobson's focus on the crucial role of overseas investment outlets naturally brought him to emphasize the strategic position of international bankers ('the central ganglion of international capitalism') in formulating imperialist policies ... Like Hobson, Moon attributed particular importance to the role of bankers: 'The most influential of all business groups, the bankers, may be said not only to have a direct interest in imperialism, through colonial investments, but to represent indirectly all the above-mentioned interests, for banks have financial fingers in every industrial pie' ..."
Related Topics: Latin America
, John Bright
, Richard Cobden
, John T. Flynn
, Foreign Entanglements
, Garet Garrett
, Leonard Liggio
, George Orwell
, Murray Rothbard
, Jean-Baptiste Say
, Joseph Schumpeter
, Adam Smith
, Joseph R. Stromberg
, William Graham Sumner
The Housing-Financial Meltdown Revisited
, by Sheldon Richman
, 11 Oct 2013
Examines the history behind the 1933 Glass-Steagall act, its repeal in 1999, and the causes behind the 2008 financial meltdown
"This is hardly to suggest that all was well with banking before Dodd-Frank. Not by a long shot. The industry was a corporatist monstrosity, a cartelized affair that included government deposit insurance, which protects banks from conscientious depositors who would otherwise scrutinize their lending practices. But the 1999 repeal of one section of Glass-Steagall was not among the problems."
The Many Monopolies
, by Charles W. Johnson, 24 Aug 2011
Describes four ways in which markets are distorted by government interventions, explains Tucker's "Four Monopolies", examines five present-day monopolies and discusses Tucker's libertarian views
"Tucker saw that monetary control not only secured monopoly profits for insulated banks, but also concentrated economic ownership throughout the economy, favoring the large, established businesses that large, established banks preferred to deal with. Tucker identified the Money Monopoly as an economic force in 1888—before the Fed and fiat currency, the FDIC, Fannie, Freddie, the IMF, or trillion-dollar bailouts to banks 'too big to fail.'"
Related Topics: Communications Technology
, Free Market
, Free Trade
, Health Care
, Intellectual Property Laws
, Occupational Licensing
, Benjamin Tucker
The Mystery of Banking
, by Joseph Salerno
, The Mystery of Banking
, Sep 2008
Foreword to the 2008 Mises Institute edition
"Rothbard's presentation of the basic principles of money-and-banking theory in the first eleven chapters of the book guides the reader in unraveling the mystery of how the central bank operates to create money through the fractional-reserve banking system and how this leads to inflation of the money supply and a rise in overall prices in the economy."
The Nightmare of the New Deal, Part 2
, by George Leef
, Future of Freedom
, Jan 2008
Review of The Forgotten Man
(2007) by Amity Shlaes; discusses the Schechter Supreme Court case which caused the National Recovery Administration (NRA) to be declared unconstitutional, the 1940 election and offers some concluding remarks
"Second, I wish that Shlaes had spent a little more time on the causes of the 1929 crash and especially the banking panic in 1930. She leads the reader to understand that the failure of the Bank of the United States had a cataclysmic effect on the banking system but doesn't clearly explain precisely how the bank collapsed and why it had such widespread repercussions. Some discussion of fractional-reserve banking and America's banking laws that prevented interstate branch banking would have clarified a point that's a crucial part of the case that government intervention was the real culprit."
The Organization of Debt into Currency: On the Monetary Thought of Charles Holt Carroll
, by Robert Blumen, Mises Daily
, 27 Apr 2006
Review of the fractional reserve banking and monetary arguments made by Charles Holt Carroll, a 19th century Massachusetts merchant, in a collection of 36 essays re-published in 1964 in Organization of Debt into Currency and Other Papers
"Fractional reserve banking is a term describing the capital structure of a bank that has loaned funds that were placed there on deposit. This is problematic because deposit and loan transactions are fundamentally different. A deposit is a contract for the storage of currency in the bank to be held in safekeeping and returned immediately on demand. The deposited funds must be available at all times should the depositor wish. In contrast, a loan is a transfer of ownership and availability for a definite term."
The Prophet of the Great Depression
, by Frank Shostak, 4 Oct 2006
"We can thus see here that as long as banks facilitate commodity credit, they should be seen as agents of wealth generation. In contrast, whenever banks embark on the lending of circulation credit they in fact become agents of real wealth destruction. As opposed to commodity credit, circulation credit is not supported by any real saving. This type of credit is just an empty claim created by banks."
Will 2016 Be a Good Year for the Corporate State?
, by Sheldon Richman
, 13 Dec 2013
Considers the prospective 2016 U.S. presidential contenders, Hillary Clinton and Chris Christie, and how they line up with the aims of the corporate state, and further comments about South Africa under Mandela
"Clinton recently spoke to a gathering in New York organized by Goldman Sachs, the giant, influential (and bailed-out) investment bank, a gathering that Politico says was attended by 'a few hundred major investors.' .... She got one thing right: The politicians and big bankers 'all got into this mess together.' The financial and housing collapse of 2008 was the fruit of that malign partnership of big government and big business. ... But the big banks are doing fine now, thank you, and there's no reason to think that too-big-to-fail is over. It's regular people who are still hurting. So the bankers liked what they heard."