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What's a good source for refuting the following about the "chaotic" free market in banking and currency?

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Doug Morris

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Does anyone know a good source for refuting the following?  I checked Greenspan's article on the gold standard in CTUI and it didn't seem to address this particular point.  This is from a 10/19 Mensa brainwave article by Mensa member Pascal Su.

In antebellum America, a network of about 8,000 loosely regulated, mostly state-chartered banks flooded the economy with more than 10,000 different types of unique and legal bank notes, which made any economic transactions exceedingly difficult.

Banks could choose how much money to issue based on their holdings, and notes were often traded at discounts to their face values due to individual bank default risks. Counterfeiting and fraud were rampant, and banks that issued worthless currency backed by questionable security (commonly known as wildcat banks) became a symbol of this chaotic time. This free banking wild west period was brought to an end by the National Bank Act of 1863, and a single national currency backed by the federal government brought financial stability to the system. Transaction costs became lower as people no longer needed to assess the financial strengths of individual issuing banks, and values were easily determined by referencing a single standard.

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“Genuine free banking, as we have noted, exists where entry into the banking business is totally free, where banks are neither subsidized nor controlled, and where at the first sign of failure to redeem in specie, the bank is forced to declare insolvency and close its doors.”

Doug, it looks like Murray Rothbard's book The Mystery of Banking is a good resource on this controversy, including the historical record. The book is available online. Pages 197-234 of the book (220-257 in the PDF pagination) look to be exactly the pertinent material, though it is challenging and probably requires some portions earlier in the book to understand it well.


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