Abstract and Keywords
This chapter provides an overview of the issues raised by free banking. A central objective is to set out the core theory of free banking, draw out its predictions, and then compare those predictions against the abundant historical evidence from the many free (or relatively free) banking systems of the past. The evidence is largely supportive of the predictions of free banking theory and, in particular, of its claim that an unregulated banking system would be stable. The evidence also supports the predictions made by free banking theory that government intervention weakens the financial system—often in profound and misunderstood ways—and causes many of the problems it is ostensibly meant to cure.
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