The Symbiosis between Free Banking and Individual Liberty
11 Pages Posted: 19 Jun 2012
Date Written: June 19, 2012
Abstract
In its simplest form, Hayek’s 1937 criticism of national central banking contends that there are two practicable banking system arrangements: free or internationally centralized. At the time, Hayek preferred an international centralized arrangement because he thought a free-banking arrangement would be unable to guarantee liquidity. Forty years later, Hayek realized liquidity constraints were purely institutional constructs, and abandoned a centralized model in favor of a market-place of competing currencies. Yet, Hayek’s ideological evolution intensified his condemnation of national central banking, as it had become clear to him that monetary nationalism was the major source of global economic instability. Based on the philosophical principles underlying individualism, Hayek had rejected an international centralized arrangement as well, and decisively favored of free banking.
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