When we think about the potential of America and its role or destiny it is not too far of a stretch to think that one anthem that everyone will be singing when we rid ourselves of the shackles of the indoctrination of the unConstitutional coup will be:

“Free banking, sound money, and private enterprise!”

Pierre,

Of course free banking does mean that fraud may occur (but it occurs at tremendously higher levels when there is the corruption of intervention) but quickly it is remedied in a free banking world. Those who realize that a bank is acting fraudulently will quickly stop doing business with them. Trustworthy (banks) businesses will make sure that their competitors are acting trustworthy since they are in very real competition with each other.

Those businesses (and banks) that lack the virtue of trustworthiness will fail and those that practice trustworthiness will succeed, provided they are also producing goods and/or services desired by enough people.

By the way, I do not consider myself a libertarian unless what you really mean is a classical liberal, one that is apolitical.

Carlos, I am not an expert on this topic, but I belief you are historically mistaken. The freeest banking we have ever seen, for example once upon a time in Scotland, had quite small reserve ratios and was really stable.

Jeff Hummel had an interesting talk about fractional reserve banking up at FEE, http://www.fee.org/Audio/YSC/FINAL%20YSC%20-%20Jeffrey%20Rogers%20Hummel%20-%20Why%20Fractional%20Reserve%20Banking%20Is%20more%20Libertarian%20than%20the%20Gold%20Standard.mp3

Daniel

The history of banking is one where the contracts (including the small letters) implicit in the issuing of receipts/notes (or registering the deposit in a account) against deposits of coins was never a really clear and honest contract.

So, the “free banking” argument relies on the assumption that a note with 100% reserve and a note with 20% reserve have the same monetary value.

Comparing two note/deposit type of contracts by Bank A (100% reserve) and B (till 20% reserve):

Bank A note/deposit: “This receipt certifies that 10 coins of gold are really deposit”

Bank B note/deposit: “this receipt is a claim on 10 coins of gold taken that this Bank policy only keeps till 20% of the coins and till the other 80% are backed by credit granted by the issuing of similars receipts”.

1. If you had 10 coins of gold would you deposit in Bank A or Bank B?

2. If you sold something for 10 coins of gold would you equally ask as a price: 1 note/deposit form Bank A or 1 note/deposit form Bank B?

In a free market with clear and honest contracts and full support of the law , good money drives out bad money.

I really enjoyed this interview, and it makes me interested in Mr. Selgin’s “Good Money”. I am thinking of getting it for a particular coin-collecting friend of mine for Christmas, but I wonder: is the book more libertarian or more numismatic? Of course, if it is numismatic enough to interest him and libertarian enough to convince him, then I think I have a winner? Has anyone read this book and if so, would it be good for strictly coin-collecting types?

Myths die hard: the articles Newson refers to make numerous incorrect claims about the Scottish system, all of which were subsequently addressed in detail in White’s “Banking Without a Central Bank: Scotland Before 1844 as a ‘Free Banking’ System,” in Forest Capie and Geoffrey Wood, eds., Unregulated Banking: Chaos or Order? (London: Macmillan, 1991): 37-62. Of course no country has experienced free banking in a pristine form. But Scotland came reasonably close, and White shows that the differences do not in any way suggest that more complete freedom would have been at all disadvantageous.