XV. Central Banking in the United States III: The National Banking System
1. THE CIVIL WAR AND THE NATIONAL BANKING SYSTEM
The Civil War wrought an even more momentous change in the nation’s banking system than had the War of 1812. The early years of the war were financed by printing paper money—greenbacks—and the massive printing of money by the Treasury led to a universal suspension of specie payments by the Treasury itself and by the nation’s banks, at the end of December 1861. For the next two decades, the United States was once again on a depreciating inconvertible fiat standard.
XIV. Central Banking in the United States II: The 1820s to the Civil War
1. THE JACKSONIAN MOVEMENT AND THE BANK WAR
XIII. Central Banking in the United States I: The Origins
1. THE BANK OF NORTH AMERICA AND THE FIRST BANK OF THE UNITED STATES
XII. The Origins of Central Banking
1. THE BANK OF ENGLAND
How did this momentous and fateful institution of central banking appear and take hold in the modern world? Fittingly, the institution began in late seventeenth century England, as a crooked deal between a near-bankrupt government and a corrupt clique of financial promoters.
X. Central Banking: Determining Total Reserves
The crucial question then is what determines the level of total bank reserves at any given time. There are several important determinants, which can be grouped into two classes: those controlled by actions of the public, or the market; and those controlled by the Central Bank.
1. THE DEMAND FOR CASH
XI. Central Banking: The Process of Bank Credit Expansion
1. EXPANSION FROM BANK TO BANK
IX. Central Banking: Removing the Limits
Free banking, then, will inevitably be a regime of hard money and virtually no inflation. In contrast, the essential purpose of central banking is to use government privilege to remove the limitations placed by free banking on monetary and bank credit inflation. The Central Bank is either government-owned and operated, or else especially privileged by the central government.
VIII. Free Banking and the Limits on Bank Credit Inflation
Let us assume now that banks are not required to act as genuine money warehouses, and are unfortunately allowed to act as debtors to their depositors and noteholders rather than as bailees retaining someone else’s property for safekeeping. Let us also define a system of free banking as one where banks are treated like any other business on the free market. Hence, they are not subjected to any government control or regulation, and entry into the banking business is completely free.
Editor’s Note: Greece is looking at defaulting on its debts yet again, the EMU remains in crisis mode. In this article from 2001, Philipp Bagus, author of The Tragedy of the Euro, suggests that such crises are inevitable:
A comparison between CEOs and the average worker seems like a perfect manifestation of the old cliché, “the rich get richer and the poor get poorer.” During the recent financial crisis, stories were commonplace of CEOs paying themselves millions as they drove their firms into the ground. Not only that, we constantly read that CEOs are out-earning the average worker by a sickening amount — and that this gap is on the rise. And of course those reporting on these alleged trends do so to further a specific agenda: shameless greed and salary disparity.
