Banking notes Free Markets: A Plan of Action A. We are now moving from privatization to the full deregulation and privatization of banking. Unless otherwise stated in , a free market combined with a privatized monetary base in is assumed. B. All possible bases are inelastic, so the elasticity of the base currency is often overlooked. 1. Gold 2. Frozen fiat dollar stocks C. The label "Free Banking" has been applied to many historical banking systems, many of which are strictly regulated. To clarify Discussion, "free trade" as defined in this Discussion includes the following four elements: D. Feature 1: Freedom to deposit. Bank can have assets, not just checks (think travelers checks that don't need anyone's approval of ). In the historical banking system of, private banknotes that were once in wide circulation generally only disappeared when they were tax discriminatory or banned. E. Feature #2: Unregulated Reserves. Individual banks decide what their rates are regardless of account type. F. Feature #3: Unregulated Portfolios. Only banks can decide which assets they want to use in their portfolios. Feature 4: Uninsured banks. The government will not bail out or otherwise insure banks that fail to pay their depositors. Bankruptcy banks are subject to the general rules of bankruptcy money, so depositors will lose their business principal. Advantages of Free Market A. The central bank knows the problem - even if you want to stabilize the MV, do you know how to do it? Unlike free banks, CBs must rely on aggregated information rather than trading characters, however: 1. Information is decentralized and dispersed (cited by Hayek). 2. Long delay and variable delay. 3. Useless and unsuccessful tests. B. Automatic MV stabilization.
C. Automatic conversion of currency/deposit ratio without seasonal change of base currency. D. Running, fear, and insurance (see Money Week 7 Note for more details). E. Hybrid Systems: Combining Fiat Performance with Free Finance