The best way to spur ethical conduct by banks—trading value for value with their customers—is to deregulate banking.
Instead of endeavoring to influence a market-determined federal funds rate by reducing or increasing the supply of bank reserves, the Fed now adjusts a pair of rates determined solely by its own administrative decrees, while conducting open-market operations without any particular reference to these rate adjustments.
A stable inflation rate is no guarantee of overall economic stability.
Free banking money guru George Selgin opines.
The war on cash is a sign that central banks may see a dangerously deteriorating situation, one that has led to a feeling of desperation by governments and a wish to control the wealth of citizens.
This talk examines the development, operation and performance of monetary systems in the absence of government intervention.
How currency monopolies promote booms and busts, and having a lender of last resort leads to moral hazard and financial instability.
“Monetary control” refers to the various procedures and devices the Fed and other central banks employ in their attempts to regulate the overall availability of liquid assets, and through it the general course of spending, prices, and employment, in the economies they oversee.
I regard any need for last-resort lending as reflecting, not the inherent shortcomings of private financial markets, but the debilitating effects of misguided regulatory interference with the free development of those markets.
The sad reality is that the battle for monetary freedom has for some time now taken the form of a rearguard action, aimed at resisting as much as possible ever-increasing government incursions into an ever-shrinking realm of financial choice.
Financial systems, like economies generally, are organic entities. They must be allowed to flourish in a natural way.
The multiplier’s significance to monetary policy is, or used to be, straightforward: it indicated the quantity of additional bank deposits that monetary authorities could expect to see banks produce in response to any increment of new bank reserves supplied them by means of either open-market operations or direct central bank loans.
There is, after all, at least one impulse among humans that’s more deep-seated than their “propensity to truck, barter, and exchange.” I mean, of course, their propensity to let themselves be thoroughly bamboozled.
Government has been the cause of monetary disorder in our society. A free market in money and banking would be the solution to our “age of inflation.” Government central-planning of money has been tried and it has failed. It is now time for monetary freedom to be given a chance.