The Gold Standard is Not Without its Costs

News from the department of “life is bigger than art:” A few days ago I posted a fictitious account of a future Wells Fargo Bank operating on a revived gold standard. Turns out the real Wells Fargo, now a regular large commercial bank with its roots in the California gold rush, has a branch in … Continue reading The Gold Standard is Not Without its Costs

A Tale of Free Banking

Herewith we visit an imaginary future where free banking prevails. Government regulation of banks is a thing of the past. Banks have the freedom and the responsibility that they lacked under government regulation. In particular, private banks are free to print money, either literally, in the form of paper banknotes for the shrinking number of … Continue reading A Tale of Free Banking

Tamny on Fractional-Reserve Banking: Right Conclusion, Faulty Analysis

John Tamny has posted a long and thought-provoking piece entitled “The Closing of the Austrian School’s Economic Mind.” He begins with a cogent critique of the anti-fractional-reserve stance of certain Austrian economists at the Mises Institute. Unfortunately, he follows that with a discussion of fractional reserves, the money multiplier, and other issues in which he … Continue reading Tamny on Fractional-Reserve Banking: Right Conclusion, Faulty Analysis

Gold and Money, II

Last [blog post], we examined some propositions about gold as money, drawing from theory and history. [In] this [blog post] we ask whether and how gold might once again serve a monetary function. Money of any sort, commodity-based or not, derives its value in large part from what economists call a “network effect.” Like a fax … Continue reading Gold and Money, II

Gold and Money

Nothing seems to arouse passions—pro and con—quite like suggestions that gold should once again play a role in our money. “Only gold is money,” says one side. “It’s a barbarous relic,” says the other. Let’s turn down the heat a bit and look into some propositions about gold. That should lead us to some reasonable … Continue reading Gold and Money

Federal Deposit Insurance: A Banking System Built on Sand

Federal deposit insurance grew out of a turbulent time in American history: the Great Depression. During two waves of bank failures in the 1930s an astonishing 9,000 banks closed and millions of depositors lost some or all of their savings. The Federal Deposit Insurance Corporation (FDIC) began operations in 1934, insuring deposit accounts up to … Continue reading Federal Deposit Insurance: A Banking System Built on Sand

The Volcker Rule

Paul Volcker is a man of considerable stature, and not just because he’s six feet, seven inches tall. He gained a reputation for courage and plain talk as chairman of the Federal Reserve System under Presidents Carter and Reagan because he broke the back of the 1970s inflation. He did so by (mostly) sticking to … Continue reading The Volcker Rule