In support of private banking

Don Boudreaux posts a letter to the editor of his on the Cafe Hayek blog today in support of private banking.  He notes an objection to this sort of thing which says that the Fed could, in theory, competantly regulate the money supply because it is a “centralized, top-down [activity] that [does] not require much administrative capacity.” Answering this, he writes:

Regulating the money supply is a centralized, top-down activity only because government has monopolized money-supply issue.  Government bureaucrats with monopoly control over the supply of money can no more be expected to adjust that supply to optimally meet consumers’ nuanced and changing demands for money than could, say, government bureaucrats with monopoly control over the supply of bread be expected to adjust that supply to optimally meet consumers’ nuanced and changing demands for bread.

Only competitive, private note issue will end the system-wide distortions created by inevitably bad monetary policy determined by a government committee.

Read the rest here.

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