The Mystery Of Banking
Page 29
problem under barter, 4
business cycle, fractional reserve banking behind, 103, 114, 120–22, 203, 209
C
Cantillon effect, xvii, 49–51
cash
balances, average, 60–63
demand for, 32–35
as contractionary pressure on banking system, 141–48
determinants of, 147
central banking. See banking
Cernuschi, Henri, 124, 279n, 280
certificates of deposit (CDs), 255
Chase, Salmon P, 220, 222–23
checking deposits. See demand deposits
Checkland, Sydney, 271, 273, 274, 275
China
deposit banking in, 91
government paper money in, 56
cigarettes, as money, 7
Civil War, American, 219–20
claim transaction, deposit as, 87
Clapham, John, 180–81
clearing systems
element of demand for money, 63–65
in the United States, 216–18
Cobbett, William, 284n
Cobden, Richard, 281–83
coincidence of wants
money as solution to, 5
problem under barter, 4 See also fractional reserve banking
confidence
element of demand for money, xvii, 65–66
fractional reserve banking and, 103
free banking and, 112–14
Constitution of the United States, 193
Continentals, depreciation of, 55
Cooke, Henry, 223–24
Cooke, Jay, 220–21, 223, 228–30
counterfeiting
fractional reserve banking as, 98–101
free banking and, 185n
gold standard and 48–51
government involvement in, 51–55
warehouse receipts, 89
“crack-up boom,” 72
credit cards, effect on demand for money, 64
credit expansion
checks on, 111–24
end result of, xvii
international limits on, 120
needs of trade doctrine of, 287, 288
credit transaction, loan as, 87
currency blocs, 249, 250
Currency School, 186–88, 277–83
D
Dallas, Alexander J., 201
debasement, of money, 11–13, 43
deflation. See money supply, contraction of
deflationary expectations. See inflationary and deflationary expectations
demand and supply. See supply and demand
demand curves
downward sloping, 16–18, 19
for money, 32 shape of, 17n
demand deposits. See deposits
demand
changes in, 24–26
law of, 16–18
criteria for money commodity, 6
money supply’s effect on, 27–28
schedule, 16
Democratic Party, 207, 214
Democratic-Republicans, factions within, 194–95
deposits
bailments and, 87
demand, 2
bank notes vs., 106
British Currency School on, 188, 280
fractional reserve banking and, 104–10
fungibility of, 89
general vs. special, 93–94
dinar, debasement of, 12
discount loans (rediscounts), 149–53
penalty levels, 153
window, 151–53
divisibility, criteria for money commodity, 6–7
dollars
definition of, 10, 262
history of term, 9, 9n
durability, criteria for money commodity, 7
E
Economics textbook, xvii, xix
economists, intellectual shift of, 232
Ellis, Richard E., 195n
embezzlement, 88–89
deposit banking and, 90–94
England
banking system compared with that of Scotland, 184–86, 269–70
central banking in, 177–83, 186–90
deposit banking in, 88
equity capital, 77
exchange rates, gold standard and, 9, 10
F
Federal Deposit Insurance Corporation (FDIC), 147, 248, 264
federal funds market, 151–52
Federal Reserve Credit, 259–60
Federal Reserve System, xv, xix, 235–46
forecasting its actions, 1
image of, xv–xvi, xx xxi
liquidation of, 263
Notes of, 238
origins, xx
reserves determined by, 141–60
Federalists, 193
Fetter, Frank W., 275, 282, 285
fiat money standard
Bank of England and, 182, 288
origin of, 54
post-Civil War, 219
First Bank of the United States, 193–95
Fourth National Bank of New York, 228
fractional reserve banking. See banking
free banking. See banking
free price system, role in clearing markets, 20, 21
frequency of payment, element of demand for money, 60–63
Fullarton, John, 289
G
Gage, Lyman J., 233
Germany, hyperinflation (1923), 68, 72, 73
Gilbart, James William, 286–88
Girard, Stephen, 201
gold
demand for, effect on money supply, 148–49
denationalized, 262–63
inflows of, 249
market, 251
supply of
counterfeiting and, 47–51
on the free market, 47–48
gold and silver, dominant as moneys, 8
gold certificates, 86, 238
gold exchange standard, 244, 249–50
of Great Britain, 244–45
gold standard
America taken off the, 248
central banking and, 126, 132
classical, 122
inflationary check, 54
plans, 267
return to, 261–66
goldsmiths, safekeeping of gold, 88n, 90
Gouge, William M., 187, 204
government
debt, 172–76, 212, 220–23, 225
deficits
central banking and, 170–76
crowding out effect of, 171
paper money
gold circulating alongside, 55–56
origins of, 51–55, 55–58
Treasury cash, 171
securities, object of open market operations, 157
Great Britain
gold exchange standard of, 244–45 See also England; Scotland
Great Depression, xx, 248
greenbacks, 55, 219
Greenspan, Alan, xv
H
Hamilton, Alexander, 193
Hammond, Bray, 216
Harley, Robert, 181
Harrison, George L., 241
Havenstein, Rudolf, 72–73
Hayek, F.A., 267
Hilton, Boyd, 288n
Holdsworth, John Thom, 196n
Hoover, Herbert, 248
Hübner, Otto, 279
Hull, Cordell, 249, 250
hyperinflation, 68, 72
I
Independent Treasury System, 214
indirect exchange, money as instrument of, 5
indivisibilities
money as solution to, 5
problem under barter, 4
inflation
counterfeiting as, 49
exporting, 250 See also price inflation
inflationary and deflationary expectations, element of demand for money, 66–74
international trade
check on credit expansion, 120–22
disrupted, 249
interventionism, dynamics of, 222
investment banking. See banking
investment, safekeeping vs., 93
J
Jackson, Andrew, 208
Jevons, William Stanley, 94
K
Kirkland, Edward, 221
Klein, Benjamin, 185n
Klein, John, 229
Knox, John Jay, 218n
L
Laffer, Arthur, 267
legal tender laws, 53, 179, 183, 194, 26
Lehrman, Lewis, 267
liabilities, 77
life insurance cash surrender values, 257
loan banking. See banking
loans
advance, 149–53
by central bank, 149–53
short term, 151
M
Manchester School, 281–82
maravedi, debasement of, 12
Massachusetts, government paper money in, 56–57
mercantilism, 191, 193
Mexico, 210
microeconomics, price theory and, 15
minting, competitive, 264
Mises, Ludwig von
on credit and claim transactions, 99n
on credit expansion, xvii
on the definition of gold, 262
on free banking, 124, 278, 279n
on the inflationary process, 68, 281n
on the optimal money supply, 45
regression theorem of, 3
on the specie flow price mechanism, 122
Theory of Money and Credit,xviii
value and price theory, xviii
Modeste, Victor, 280
monetarists, 252, 258
monetary base, 258
Monetary Control Act (1980), 157
monetizing the debt, 172–75, 216
directly from the Federal Reserve, 174–76
money
certification of, 10
circulation of foreign, 10n
commodities used as, 6
commodity, xix
debasement of, 11–13
demand curve for, 32
demand for
changes in, 39–40
elements of, 59–74
fiat, xix
as final payment, 64, 256
importance of, 1–2
medium of exchange, 5
origin of, 3–6
price level and, 29–41
purchasing power of money (PPM), 30–35
changes in, 35–41
effect of frequency of payments on, 62
equilibrium, 31–35
qualities of, 6–8
return to sound, 261–68
shortage of, 34–35, 71
surplus of, 33
money market
equilibrium in, 35–41
funds, 255–56
money supply, 43–58
“Angel Gabriel” model of, 45–46
attention to, 1
changes in, 36–38
contraction of, 128, 141–45, 203–04, 212
data on, 257–59
definition of, 2, 252–57
effect of money warehouses on, 86
elasticity of, 230–31
elements of, 57–58, 132
expansion of, 131, 145–46
optimal, 44–47
population growth and, 47
redistribution and, xvii, 46–47
reserves and, 141–60
sum of cash balances, 12–13 See also pyramiding
monetary theory, xviii
money unit, 8–13
as name, 11–13
unit of weight, 10
money warehouse receipts, 85–89
bank notes and deposits, 104–10
as gold certificates, 86
Mongols, paper money of, 65
morality, banking and, xvii
Morgan, House of, 242–43, 246
Morris, Robert, 191–93
Mushet, Robert, 284
N
National Banking Acts, 222–23
National Banking System, 219–34
Nationalists, 191–93
newspapers, alliance with Cooke brothers, 223–24
Norman, Montagu, 245–46
Northern Pacific Railroad, 229
Nussbaum, Arthur, 94n
O
open market operations, 153–60
P
Panic of 1819, 204–06
Panic of 1873, 229, 230
Panic of 1907, 230, 233
paper money. See government paper money
parallel standards, 9n
Parnell, Henry Brooke, 284
Paterson, William, 178–79
Peel, Robert, 186, 287–88
Peel’s Act (1844), 186–89, 286, 290
Peel’s Act (1845), 189–90, 286, 290
Phillips, C.A., 237, 240
portability, criteria for money commodity, 7
pound sterling
debasement of, 11–12
definition of, 8
PPM. See purchasing power of money
price inflation, 209–10, 242, 287
causes of, 28, 56, 158
price level. See purchasing power of money
price-fixing, charge against gold standard, 10
prices
changes in, 22–28
definition of, 8
determinants of, 15–41
dollar/gold, 262–63
equilibrium, 21–22
falling, 211–12, 213
money, 6
as purchasing power, 29
rationing function of, 23
sticky, 213n
profit-loss motive, role in clearing markets, 20–21
public works, 216
purchasing power of money. See money
purchasing power, 29
pyramiding
under the Bank of the United States, 194, 197, 208–10
under Bretton Woods system, 250
under the Federal Reserve, 236, 260–61
under the National Banking System, 225–26, 228, 229 See also money supply, expansion of
Q
Quebec, government paper money in, 56n
R
Raguet, Condy, 3, 276n
Randolph, John, of Roanoke, 200–01
rationing, prices and, 23
Raymond, Daniel, 187
recession, 213
gold inflow during, 121–22
inflationary, 249
redeemability
of deposits, 254–55
of dollars, 261
redistribution
central banking and, xvii
fractional reserve banking and, 101
money supply and, 46–47, 49–51, 53
Reichsbank, 72–74
Rentenmark, 73–74
reserve ratio, 128
reserve requirements, 134, 137–38, 227, 238
reserves
central banking and, 141–60
definition of, 95
total bank, 258–59
Ricardo, David, 276n
Richardson & Snyder, xvi
Richardson & Steirman, xvi
Rockoff, Hugh, 215
Roosevelt, Franklin Delano, 248
S
savings bonds, 256–57
savings deposits, 238–41, 253–54
Scotland, free banking in, 183–86, 189–90, 269–91
Scott, Walter, 283n
scriveners, 84
Scrope, George Poulett, 284–86
Second Bank of the United States, 198–206
disestablishment, 208
inflationary record, 208–10
seigniorage, 11n
Sherman, John, 222
shortages, 20–21
of money, 34–35
silver
inflow of, 210 See also gold and silver
Sinclair, John, 284–85
Smith, John Benjamin, 281–82
Smith, Vera C., 188–89, 215, 277, 279
Smithsonian Agreement, 251–52
South Sea Bubble, 181
South Sea Company, 181
&n
bsp; Spahr, Walter E., 99