Ben Bernanke and the Gold Standard

What You Don't Know Can Hurt You: Knowledge Problems in Monetary Policy

“…Critics of free banking often give undue consideration to historical U.S. banking arrangements, both during the antebellum period and the National Banking System that immediately preceded the Federal Reserve System. Owing to specific legal restrictions, these banking arrangements lacked many elements essential to a free banking system (Aguiar‐Hicks, Hogan, and Smith ). Both before and after the Civil War, the legal restrictions that were particularly harmful to macroeconomic stability were the requirements that banks purchase public debt as collateral in order to obtain a bank charter and issue banknotes.…”

“…For instance, the operation of the pre‐Civil War independent treasury offers one possible structure for how a treasury can have “some monetary initiative similar to that exercised by a central bank” (Timberlake , 74). Aguiar‐Hicks, Hogan, and Smith () note several examples of the federal government pursuing macroeconomic goals prior to the establishment of the Fed, which challenges the assumption that fiscal policy in absence of a central bank is impractical . Another example would be the contracting out of government banking services to private banks, such as in Canada (White , 85).…”