d63edbdf_brary_of_Economics_and_Liberty__ast_Highlights_HIDE_HIGHLIGHTS
[Time] 57:12
Political economy: government likes having control over the money supply. One argument is that we need the government's hand on the tiller to stabilize things. Doesn't look so good in practice, but could justify it by things that are outside the monetary authority's control. Some monetary institutions are looking less attractive than they once did. Governments want to move in the direction of insurance guarantee and no risk, which can't be done. Or is there something more sinister going on? private benefits from controlling the money supply? Lack of faith or public choice issues? Most people believe you have to have control of the monetary system or all hell would break loose. Many interests at stake which would suffer from a move toward free banking. Central banking creates interest groups that lobby for or against inflation or deflation or stabilizing policies. Pressure to inflate from certain groups including debtors the value of whose debts would decline. Latest book, Good Money--historical episode. No longer talking about banks. Bank of England existed in late 18th century. Money in those days consisted of coins, silver or copper, for all but the well-to-do. Also have the Industrial Revolution happening, rapidly increasing the need for these coins for retail and wage payments. Supply: Royal Mint, agency charged with creating those coins, was producing no silver coins and practically no copper coins. Result was change shortage, money shortage, which became extremely severe, threatening to undo a big part of the process of the Industrial Revolution. Merchants had trouble to pay their workers or make change to accomplish sales. Necessity is the mother of invention: a couple of entrepreneurs who had interests in copper mining tried to persuade the government to do something about the coinage by commissioning more which they offered to do by minting coins. Proposals fell on deaf ears. Thomas Williams, one of the entrepreneurs, set up a mint and minted coins bearing his mark. Later, John Wilkinson put his own bust on the coins. The coins' makers didn't run into the problems the Royal Mint had run into, such as counterfeiting and distribution problems. Coins initially were actually heavier than Royal Mint; beautifully engraved, redeemable on demand. In all respects superior money than Royal Mint. Solved the shortage. Why did it come to an end? First ended after 1797 when in a reaction to the suspension of the Bank of England the government finally supplied more coins. New coins didn't solve the problem though because the lack of competition caused these coins to not satisfy demand. New shortages, another outbreak of private coinage after 1810. That episode included silver coins, because Bank of England had been doing that; and then finally someone issued private gold coins. That was viewed as a threat to the Bank of England's sovereignty.
Selgin on Free Banking | EconTalk | Library of Economics and Liberty