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2014 | OriginalPaper | Buchkapitel

A Pre-history of the Federal Reserve

verfasst von : David Howden

Erschienen in: The Fed at One Hundred

Verlag: Springer International Publishing

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Abstract

While economists have generally quite favorable views of market-oriented solutions to the provisions of goods and services, there is one common exception: money (Rothbard 1991: 2; Huerta de Soto 2012: xxx). This seeming paradox brings with it three unfortunate results. First, since the supply of money is assumed to be produced optimally by a central bank, monetary economics commonly treats it as an exogenous variable. Second, and as a consequence of this point, is that any change to central bank controlled monetary policy is seen as a panacea for economic disequilibria. Finally, since the central bank is in control of the panacea it is raised to the lofty position of “doctor” of the economy, a highly respected and necessary role to correct for imbalances caused by entrepreneurs and investors.

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Vorheriges Kapitel Introduction

Nächstes Kapitel Does U.S. History Vindicate Central Banking?

Although not the only clearing house relevant to this paper, I will focus almost exclusively on the role of the New York Clearing House Association for simplicity and also because of its continuous operations throughout all of the present study. Almost everything concerning the NYCH also applies to other major clearing houses of the time, such as the Suffolk Bank of Boston.

There was one benefit to the illegality of issuing clearing house certificates to the general public. The risk of legal penalties ensured that this option would only be undertaken during extreme circumstances, and thus led to their use being less than would otherwise be the case (Horwitz 1990: 647).

Note that the suspension of payments was not only a feature of the American free banking period. Checkland (1975: 185) observed that “[t]he Scottish [free-banking] system was one of continuous partial suspension of payments.”

The importance granted to Ohio Life may be overstated (Calomiris and Schweikart 1991: 809). Its failure was caused by inappropriate (or possibly fraudulent) actions by its management, which had only a trivial effect on other banks liabilities. Its demise preceded suspensions at other banks by about 1 month. Finally, those banks most directly linked with Ohio Life—its correspondent banks in Ohio—were reimbursed upon its failure with no loss. Only one bank subsequently failed in Ohio during the Panic.

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Titel: A Pre-history of the Federal Reserve
verfasst von: David Howden
Verlag: Springer International Publishing
Buch: The Fed at One Hundred
Print ISBN: 978-3-319-06214-3

Electronic ISBN: 978-3-319-06215-0

Copyright-Jahr: 2014
DOI: https://doi.org/10.1007/978-3-319-06215-0_2