Free Banking School

The free banking school is a body of monetary economics that advocates allowing commercial banks to issue their own competing banknotes and manage reserves under ordinary commercial law, with no central bank monopoly on note issue and no special government regulation of banking beyond what applies to other businesses. Historical free banking systems operated in more than sixty countries during the nineteenth and early twentieth centuries, with market forces, rather than a central authority, determining the total quantity of banknotes and deposits that a given stock of reserves could support; the practice declined through the first half of the twentieth century as central banking became the near-universal model. As a self-conscious school of economic thought, free banking was revived from 1976 onward by Friedrich Hayek's proposal to denationalize money and let competing private currencies discipline one another through market competition, a project developed further by economists including George Selgin, Lawrence White and Steven Horwitz. The school argues that competitive note issue, disciplined by noteholders redeeming notes they distrust, controls the money supply more reliably than a government monopoly. This description is adapted from Wikipedia contributors under CC BY-SA 4.0; changes were made. https://creativecommons.org/licenses/by-sa/4.0/