Freedom to issue notes is important too. When banks can’t issue their own notes, well, they need a lender of last resort to supply them with notes. If we told companies that manufacture shoes that henceforth they could only make shoes for left feet, lo and behold, there would be a need for an “emergency” source of shoes for right feet, which could be created by establishing a new government agency for the purpose. Eventually people would say, “Thank goodness for the Government Shoe Agency. How would anyone be able to walk otherwise?”
By the way, I have the privledge of working with George on my dissertation, which involves using laboratory methods to explore the macro and business cycle implications of free banking versus central banking.
(HT to Tyler Cowen and Arnold Kling)
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