Some Things a Central Bank’s Banker Doesn’t Know About Monetary History

BIS chief Agustin Carstens has been speaking against the cryptocurrencies.

Larry White says the central bank’s banker should learn some lessons on mon history.

While it is true, as Carstens notes, that banknotes did not circulate a par nationwide in the United States during the antebellum period, the reason was not fraud but government interference in the form of legal restrictions against interstate branching. Nationwide par circulation was the norm where banks were free to branch, as in Canada and Scotland. When Carstens (p. 7) refers to “the unhappy experience with private forms of money” he ignores the facts. When he suggests that “the experience with currency debasement that has peppered history” should warn us against “the proliferation of such private monies,” he inverts the facts. Currency debasements have been symptomatic of government monopoly in currency, not of private competition. A central bank with a monopoly on currency issue can debase the currency. A single bank in a multi-issuer system cannot, neither legally nor practically. As Adam Smith noted, the greater the proliferation of private note-issuers, the lesser the consequence to the public of the failure of any one of them. The system is robust. A central bank monopoly, by contrast, is a fragile single point of failure.

Well. not just BIS but applies to other central bankers too..

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