Free banking refers to a monetary arrangement in which banks are subject to no special regulations beyond those applicable to most enterprises, and in which they also are free to issue their own paper currency (banknotes). In a free banking system, market forces control the supply of total quantity of banknotes and deposits that can be supported by any given stock of cash reserves, where such reserves consist either of a scarce commodity (such as gold) or of an artificially limited stock of "fiat" money issued by a central bank. In the strictest versions of free banking, however, there either is no role at all for a central bank, or the supply of central bank money is supposed to be permanently "frozen." There is, therefore, no agency capable of serving as a "lender of last resort" in the usually understood sense of the term. Nor is there any government insurance of banknotes or bank deposit accounts.
Supporters include Fred Foldvary, David D. Friedman, Friedrich Hayek, George Selgin, Lawrence H. White. Steven Horwitz, and Richard Timberlake.
Read more about Free Banking: Institutions, History
Famous quotes containing the words free and/or banking:
“Actually we are a vulgar, pushing mob whose passions are easily mobilized by demagogues, newspaper men, religious quacks, agitators and such like. To call this a society of free peoples is blasphemous. What have we to offer the world besides the superabundant loot which we recklessly plunder from the earth under the maniacal delusion that this insane activity represents progress and enlightenment?”
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