# Financial Stability Without Central Banks ## Metadata * Author: [George Selgin, Kevin Dowd, and Mathieu Bédard](https://www.amazon.comundefined) * ASIN: B078V8WV6X * Reference: https://www.amazon.com/dp/B078V8WV6X * [Kindle link](kindle://book?action=open&asin=B078V8WV6X) ## Highlights However, regulation and the control and distortion of the banking system by government, especially during and after the Civil War, was disastrous and led to acute instability. — location: [98](kindle://book?action=open&asin=B078V8WV6X&location=98) ^ref-12633 --- Scotland entered into a long period of remarkable monetary stability, during which no other bank again dared to behave as the Ayr Bank had. — location: [153](kindle://book?action=open&asin=B078V8WV6X&location=153) ^ref-32471 Can we relate this to the industrial revolution. --- Now suppose that one bank, the Bank of England, is rewarded a monopoly of currency, and that in response the other banks exchange all their gold for claims against the Bank of England, including its notes. The effective sum of reserves is now no longer just equal to the available gold. It’s equal to the amount of IOUs that the central bank chooses to create. It follows that, by choosing to create more of its own IOUs, the Bank of England can sponsor a general expansion by all the other banks that gain possession of those IOUs. — location: [206](kindle://book?action=open&asin=B078V8WV6X&location=206) ^ref-13113 --- Yet in Lombard Street Bagehot is quite explicit in saying that the ultimate cause of crises in England was the Bank of England’s monopoly privileges, which led to the centralisation of gold in its coffers. — location: [234](kindle://book?action=open&asin=B078V8WV6X&location=234) ^ref-25457 --- The common theme between the American and the British stories is, by the way, that when governments tamper with their monetary systems to achieve fiscal ends, stability goes out the window. — location: [260](kindle://book?action=open&asin=B078V8WV6X&location=260) ^ref-51014 --- Canada didn’t establish a central bank until 1935! Instead, Canada’s currency system was modelled on the Scottish system, with many of Canada’s banks having been set up by Scottish Canadians. Like Scotland, Canada had numerous banks of issue with nationwide branch networks that were subject to very few regulations. — location: [292](kindle://book?action=open&asin=B078V8WV6X&location=292) ^ref-44841 --- it is stability of spending that is really required for macroeconomic stability, not stability of any price index or of the inflation rate. I have argued that a free banking system has a built-in tendency to stabilise spending because of the way the demand for reserves depends on how much spending there is. — location: [378](kindle://book?action=open&asin=B078V8WV6X&location=378) ^ref-61295 --- We must wonder whether we have made a mistake by staking our hopes upon more-and-more centralisation and regulation of our monetary systems, instead of relying on competitive markets, as we have done for most other industries, to supply our financial products. — location: [393](kindle://book?action=open&asin=B078V8WV6X&location=393) ^ref-40764 ---