Financial Stability Without Central Banks

George Selgin argues that private banks without a central bank can bring about financial stability through self-regulation. He draws on evidence from the era of free banking in Scotland and Canada, which enjoyed greater stability than the English system with its central bank and the US model with its faulty government regulation.

Format: Paperback / softback
Length: 88 pages
Publication date: 04 January 2018
Publisher: Institute of Economic Affairs

George Selgin is a renowned monetary historian who has written a book that explores the potential for financial stability through a system of private banks without a central bank. In his 2016 Hayek Memorial Lecture, he demonstrates how a self-regulating system can prevent one bank from extending too much credit, leading to a systemic collapse. The banks have a strong incentive to ensure an orderly resolution if a particular institution faces insolvency or illiquidity.

Selgin draws on evidence from the era of free banking in Scotland and Canada, which enjoyed greater financial stability compared to the English system with its central bank and the US model with its faulty government regulation. The creation of the Federal Reserve, on the other hand, is believed to have increased the frequency of financial crises.

The book also includes commentaries by Kevin Dowd and Mathieu Bedard. Dowd questions whether free-banking systems should be underpinned by a gold standard, considering it a key factor in their success. Bedard challenges the assumption that the banking sector is inherently unstable and argues that increased government control has made the system more prone to crisis.

Overall, Selgin's book provides valuable insights into the history and potential of private banking systems, challenging the conventional wisdom on central banking and government regulation. It is a must-read for anyone interested in monetary policy and financial stability.

Weight: 108g
Dimension: 131 x 199 x 14 (mm)
ISBN-13: 9780255367523