86-2 17-37.Pdf

Total Page:16

File Type:pdf, Size:1020Kb

86-2 17-37.Pdf Opinions expressedil'lthe/ nomic Review do not necessarily reflect the vie management of the Federal Reserve BankofSan Francisco, or of the Board of Governors the Feder~1 Reserve System. The FedetaIReserve Bank ofSari Fraricisco's Economic Review is published quarterly by the Bank's Research and Public Information Department under the supervision of John L. Scadding, SeniorVice Presidentand Director of Research. The publication is edited by Gregory 1. Tong, with the assistance of Karen Rusk (editorial) and William Rosenthal (graphics). For free <copies ofthis and otherFederal Reserve. publications, write or phone the Public InfofIllation Department, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco, California 94120. Phone (415) 974-3234. 2 Ramon Moreno· The traditional critique of the "real bills" doctrine argues that the price level may be unstable in a monetary regime without a central bank and a market-determined money supply. Hong Kong's experience sug­ gests this problem may not arise in a small open economy. In our century, it is generally assumed that mone­ proposed that the money supply and inflation could tary control exerted by central banks is necessary to successfully be controlled by the market, without prevent excessive money creation and to achieve central bank control ofthe monetary base, as long as price stability. More recently, in the 1970s, this banks limited their credit to "satisfy the needs of assumption is evident in policymakers' concern that trade". financial innovations have eroded monetary con­ The real bills doctrine was severely criticized on trols. In particular, the proliferation of market­ the beliefthat it could lead to instability in the price created substitutes for money not directly under the level. However, a number of leading economists control of monetary authorities has led Phillip such as Fama (1980) and Sargent and Wallace Cagan (1979) to argue for regulatory reform: (1982, 1983) have recently argued in favor of re­ gimes where the money supply is market-deter­ New financial developments may make the mined. past degree of monetary control increasingly In this respect, Hong Kong provides an interest­ more difficult to maintain. Yet pursuit of ing example ofan economy where there is no central national policies to restrain inflation and sta­ bank, and where, to the extent possible, central bilize economic activity appears impossible banking functions are minimized. Thus, it provides without effective monetary controls. The a unique opportunity for ascertaining whether a creation ofa regulatory environment in which market-determined money supply is consistent with the erosion of monetary controls is kept to a overall macroeconomic stability, particularly sta­ minimum is particularly important in the bility in the price level. present period of rampant inflation. Section I reviews the real bills doctrine and dis­ cusses how it may be feasible in a small open While this statement reflects the mainstream view economy even if it may lead to price instability in a today, it has not always been obvious that the closed economy. The discussion identifies certain government, rather than the market, should deter­ testable features that distinguish a stable monetary mine the money supply. A market-determined regime from an unstable one. These features form money supply is traditionally associated with the the basis for an empirical test on the stability of long discredited "real bills" doctrine. This doctrine Hong Kong's monetary system in a later section. Section II discusses three key features of Hong * Economist, Federal Reserve Bank of San Fran­ Kong's monetary sector typically believed to influ­ cisco. Thanks to Mark Thomas for excellent ence money creation and monetary control: (I) the research assistance. note issuance mechanism under fixed and floating 17 exchange rates, (2) the interest-setting agreement of Q!tiy may be consistent with price level stability the Hong Kong Association of Banks, and (3) li­ tlnder either fixed or floating exchange rates, and quidity ratios. Section HI reviews Hong Kong's that monetary authorities under such conditions macroeconomic performance and includes an may relax their control over monetary aggregates. empirical test ofthe stability ofHong Kong's mone­ Furthermore, such a prescription may be most tary system under floating exchange rates as well as appropriate under a fixed exchange rate regime a discussion of exchange rate sta15ility. since,underfloating rates, Hong Kong was unable The paper concludes that allowing the market to to counteract destabilizing speculation against the determine the money supply in a small open econ- value of its currency. I. The Real Bills Doctrine and the Price Level The Closed Economy bills doctrine, as well as the presentation adopted For over two centuries, there was a widespread here, do not restrict loan supply to short-term com­ belief that price stability could be achieved as long mercial paper. as banks extended only short-term self-liquidating The previous discussion also suggests two possi­ loans for business needs. Known as the "real bills ble models of the real bills doctrine. In one model, doctrine" , this viewpoint was once so influential it the real loan demand is defined in such a manner was a premise underlying the creation of the Federal that borrowers are assumed always to repay their Reserve Systeml . loans. In such a case, lenders could seek to accom­ While John Law first proposed the real bills modate any real loan demand by borrowers3 , and doctrine in 1705, the classic statement on this the real money supply thus passively accommodates subject was provided by Adam Smith (1776). Smith real money demand. Most presentations of the real suggested that an appropriate rule for money crea­ bills doctrine4 implicitly make this assumption, tion is for each bank to "discount(s) to a merchant a which is equivalent to a monetary regime where a real bill ofexchange drawn by a real creditor upon a central bank targets interest rates. real debtor, and which as soon as it is due, is really The real bills doctrine may also be modelled by paid by that debtor." In other words, Smith advo­ assuming that banks limit loan supply according to cated that banks only finance short-term commer­ their perception of default risk. Real loan supply at cial paper arising from real transactions in goods any given interest rate therefore will not necessarily and services. coincide with real loan demand because banks may The original version of the real bills doctrine ration credit rather than passively accommodate real appears to have emphasized short-term commercial credit demand. The result would be a loan and paper linked to real economic activity to ensure that money supply function that is upward sloping (over banks indeed financed only those loans that would a certain range) in relation to the rate of interest. A be repaid. By so doing, the doctrine also limited the money supply function that is upward sloping in quantity of those loans. However, it may not be relation to interest rates also results if one assumes necessary to restrict loans to certain types of that .bank operations are characterized by rising activities2 and to short maturities to guarantee marginal costs. This is the supply function postu­ repayment. Instead, banks may be allowed to lated by Patinkin (1965). As shown in the appendix, finance any type of activity as long as they can the macroeconomic equilibrium of a real bills re­ correctly assess credit risk. This last criterion will gime depends significantly on the loan and money still •satisfy the essential requirements of the real supply process assumed. bills doctrine: that loans respond to the requirements Most ofits early proponents believed that the real ofthe market, that they be selected in such a manner bills doctrine would suffice to prevent an overissu­ that they will be repaid, and that the volume ofloans anceof notes and to maintain a stable price level be limited. Thus, modem interpretations of the real because, under the doctrine, real loan supply would 18 be limited by real loan demand in the economy. 5 rates,banks may determine the volume ofloans and (Alternatively, loan supply may be limited by the deposits created on the condition that their liabilities perceived capacity to repay). Loan supply would in be fully convertible to gold at a fixed rate. This tum limit money creation, since banks concerned condition is sufficient to guarantee that banks will aboutthevalueoftheir monetary liabilities would have to limit the amount of money they create seek to ensure that these are not excessive in relation according to the availability ofgold in the domestic to the loan assets backing them. The flaw in this economy. 9 reasoning is that ifthe nominal value of bank assets In an open economy, convertibility to gold rises with inflation, then banks may also increase implies that the external sector will regulate the the nominal value of their liabilities, and. create supply ofmoney and the price level. The adjustment more money, without penalty. process in such cases is traditionally described by Critics of the real bills doctrine have emphasized the classical price specie flow mechanism. An that while the market limits real loan supply and excess supply of money would tend to raise domes­ real money creation, this does not mean that the tic prices and reduce international competitiveness. market will successfully limit nominal money sup­ This, in tum, would tend to produce a gold outflow ply or the price level. The mistake of the original that would eliminate the excess supply of money exponents ofthe real bills doctrine was to confuse an and lower domestic prices until a trade balance is equilibrium in real terms with an equilibrium in restored. nominal terms. The appendix shows that in a closed In a modem economy, a system analogous to a economy, an endogenous or market-determined gold standard would be one that requires convert­ money supply may be inconsistent with price level ibility with some internationally traded asset at a stability.
Recommended publications
  • Market Design in the Presence of Repugnancy: a Market for Children
    Shane Olaleye Market Design in the Presence of Repugnancy: A Market for Children Shane Olaleye Abstract A market-like mechanism for the allocation of children in both the primary market (market for babies) and the secondary market (adoption market) will result in greater social welfare, and hence be more efficient, than the current allocation methods used in practice, even in the face of repugnancy. Since a market for children falls under the realm of repugnant transactions, it is necessary to design a market with enough safeguards to bypass repugnancy while avoiding the excessive regulations that unnecessarily distort the supply and demand pressures of a competitive market. The goal of designing a market for children herein is two-fold: 1) By creating a feasible market for children, a set of generalizable rules and principles can be realized for designing functioning and efficient markets in the face of repugnancy and 2) The presence of a potential, credible and efficient market in the presence of this repugnancy will stimulate debate into the need for such markets in other similar areas, especially in cases creating a tradable market for organs for transplantation, wherein the absence of the transaction is often a death sentence for those who wish to, but are prevented from, participating in the market. Introduction What is a Repugnant Transaction? Why Care About It? Classical economics posits that when the marginal benefit of an action outweighs its marginal cost, a market mechanism can be implemented wherein an appropriate price emerges that balances the marginal benefit and marginal cost of the action through a suitable transaction between counterparties.
    [Show full text]
  • Monetary Policy in a World of Cryptocurrencies∗
    Monetary Policy in a World of Cryptocurrencies Pierpaolo Benigno University of Bern March 17, 2021 Abstract Can currency competition affect central banks’control of interest rates and prices? Yes, it can. In a two-currency world with competing cash (material or digital), the growth rate of the cryptocurrency sets an upper bound on the nominal interest rate and the attainable inflation rate, if the government cur- rency is to retain its role as medium of exchange. In any case, the government has full control of the inflation rate. With an interest-bearing digital currency, equilibria in which government currency loses medium-of-exchange property are ruled out. This benefit comes at the cost of relinquishing control over the inflation rate. I am grateful to Giorgio Primiceri for useful comments, Marco Bassetto for insightful discussion at the NBER Monetary Economics Meeting and Roger Meservey for professional editing. In recent years cryptocurrencies have attracted the attention of consumers, media and policymakers.1 Cryptocurrencies are digital currencies, not physically minted. Monetary history offers other examples of uncoined money. For centuries, since Charlemagne, an “imaginary” money existed but served only as unit of account and never as, unlike today’s cryptocurrencies, medium of exchange.2 Nor is the coexistence of multiple currencies within the borders of the same nation a recent phe- nomenon. Medieval Europe was characterized by the presence of multiple media of exchange of different metallic content.3 More recently, some nations contended with dollarization or eurization.4 However, the landscape in which digital currencies are now emerging is quite peculiar: they have appeared within nations dominated by a single fiat currency just as central banks have succeeded in controlling the value of their currencies and taming inflation.
    [Show full text]
  • Market Mechanisms and Central Economic Planning
    The Thomas JeffersonCenter Foundation Market Mechanisms and Central EconomicPlanning YVfiltonPriedman The C. Warren Nutter Lectures in Political Economy The C Warren Nutter Lectures in Political Economy The G. Warren Nutter Lectures in Political Economy have been insti­ tuted to honor the memory of the late Professor Nutter, to encourage scholarly interest in the range of topics to which he devoted his career, and to provide his students and associates an additional con­ tact with each other and with the rising generation of scholars. At the time of his death in January 1979, G. Warren Nutter was director of the Thomas Jefferson Center Foundation, adjunct scholar of the American Enterprise Institute, director of AEI's James Madison Center, a member of advisory groups at both the Hoover Institution and The Citadel, and Paul Goodloe Mcintire Professor of Economics at the University of Virginia. Professor Nutter made notable contributions to price theory, the assessment of monopoly and competition, the study of the Soviet economy, and the economics of defense and foreign policy. He earned his Ph.D. degree at the University of Chicago. In 1957 he joined with James M. Buchanan to establish the Thomas Jefferson Center for Studies in Political Economy at the University of Virginia. In 1967 he established the Thomas Jefferson Center Foundation as a separate entity but with similar objectives of supporting scholarly work and graduate study in political economy and holding confer­ ences of economists from the United States and both Western and Eastern Europe. He served during the 1960s as director of the Thomas Jefferson Center and chairman of the Department of Economics at the University of Virginia and, from 1969 to 1973, as assistant secre­ tary of defense for international security affairs.
    [Show full text]
  • Brazilian Economic Development in Historical Perspective
    GOVERNMENT, MARKET AND DEVELOPMENT: BRAZILIAN ECONOMIC DEVELOPMENT IN HISTORICAL PERSPECTIVE FABIANO ABRANCHES SILVA DALTO Thesis submitted in partial fulfilment of the requirements of the University of Hertfordshire for the degree of Doctor of Philosophy The programme of research has been carried out in the Department of Statistics, Economics, Accounting & Management Science, Business School, University of Hertfordshire November 2007 1 2 Abstract In the last 30 years the World has been swept by neoliberal doctrine. Under neoliberal conceptions, freedom of the market mechanism has precedence in the process of development. Neoliberalism has had a major impact on the mindset of policymakers, on government strategies for development and on economic performance. This thesis is about the economic consequences of neoliberalism in Brazil. It approaches the problem from a historical perspective. By examining government economic strategies in Brazil from the 1930s through the 1970s it undermines a central neoliberal argument that government interventions in the economy are either inimical or irrelevant to economic development. While government failures did occur indeed, in the Brazilian case it is shown that the government performed a crucial role in this period in building key institutions that guided market forces towards industrial transformation. Since the mid-1970s, Brazil has been a laboratory for neoliberal economic policymaking. Restrictive macroeconomic policies alongside liberalised markets have been the cornerstones of policymaking. The second line of argument developed here is that neoliberalism has since constrained economic development in Brazil. During this period the country has been through several financial crises and has experienced low economic growth and unprecedented unemployment. Compared with the previous period of government-led development, neoliberal policies and institutions fall far behind in terms of overall economic performance.
    [Show full text]
  • Money Creation in the Modern Economy
    14 Quarterly Bulletin 2014 Q1 Money creation in the modern economy By Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate.(1) This article explains how the majority of money in the modern economy is created by commercial banks making loans. Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits. The amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or ‘quantitative easing’. Overview In the modern economy, most money takes the form of bank low and stable inflation. In normal times, the Bank of deposits. But how those bank deposits are created is often England implements monetary policy by setting the interest misunderstood: the principal way is through commercial rate on central bank reserves. This then influences a range of banks making loans. Whenever a bank makes a loan, it interest rates in the economy, including those on bank loans. simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money. In exceptional circumstances, when interest rates are at their effective lower bound, money creation and spending in the The reality of how money is created today differs from the economy may still be too low to be consistent with the description found in some economics textbooks: central bank’s monetary policy objectives.
    [Show full text]
  • Money Creation and the Shadow Banking System∗
    Money Creation and the Shadow Banking System Adi Sunderam Harvard Business School [email protected] June 2012 Abstract Many explanations for the rapid growth of the shadow banking system in the mid- 2000s focus on money demand. This paper asks whether the short-term liabilities of the shadow banking system behave like money. We first present a simple model where households demand money services, which are supplied by three types of claims: de- posits, Treasury bills, and asset-backed commercial paper (ABCP). The model provides predictions for the price and quantity dynamics of these claims, as well as the behavior of the banking system (in terms of issuance) and the monetary authority (in terms of open market operations). Consistent with the model, the empirical evidence suggests that the shadow banking system does respond to money demand. An extrapolation of our estimates would suggest that heightened money demand could explain up to approximately 1/2 of the growth of ABCP in the mid-2000s. I thank Sergey Chernenko, Darrell Duffi e, Robin Greenwood, Sam Hanson, Morgan Ricks, David Scharf- stein, Andrei Shleifer, Jeremy Stein, and participants at the Federal Reserve Board Shadow Banking work- shop for helpful comments and suggestions. 1 Introduction Many explanations for the rapid growth of the shadow banking system in the years before the financial crisis focus on money demand.1 These explanations argue that the shadow banking system grew in order to meet rising demand for “money like”claims —safe, liquid, short-term investments — from institutional investors and nonfinancial firms. In doing so, they build on the long literature, starting with Diamond and Dybvig (1983) and Gorton and Pennacchi (1990), arguing that providing liquidity services through demandable deposits is a key function of banks.
    [Show full text]
  • A Primer on Modern Monetary Theory
    2021 A Primer on Modern Monetary Theory Steven Globerman fraserinstitute.org Contents Executive Summary / i 1. Introducing Modern Monetary Theory / 1 2. Implementing MMT / 4 3. Has Canada Adopted MMT? / 10 4. Proposed Economic and Social Justifications for MMT / 17 5. MMT and Inflation / 23 Concluding Comments / 27 References / 29 About the author / 33 Acknowledgments / 33 Publishing information / 34 Supporting the Fraser Institute / 35 Purpose, funding, and independence / 35 About the Fraser Institute / 36 Editorial Advisory Board / 37 fraserinstitute.org fraserinstitute.org Executive Summary Modern Monetary Theory (MMT) is a policy model for funding govern- ment spending. While MMT is not new, it has recently received wide- spread attention, particularly as government spending has increased dramatically in response to the ongoing COVID-19 crisis and concerns grow about how to pay for this increased spending. The essential message of MMT is that there is no financial constraint on government spending as long as a country is a sovereign issuer of cur- rency and does not tie the value of its currency to another currency. Both Canada and the US are examples of countries that are sovereign issuers of currency. In principle, being a sovereign issuer of currency endows the government with the ability to borrow money from the country’s cen- tral bank. The central bank can effectively credit the government’s bank account at the central bank for an unlimited amount of money without either charging the government interest or, indeed, demanding repayment of the government bonds the central bank has acquired. In 2020, the cen- tral banks in both Canada and the US bought a disproportionately large share of government bonds compared to previous years, which has led some observers to argue that the governments of Canada and the United States are practicing MMT.
    [Show full text]
  • Modern Monetary Theory: Cautionary Tales from Latin America
    Modern Monetary Theory: Cautionary Tales from Latin America Sebastian Edwards* Economics Working Paper 19106 HOOVER INSTITUTION 434 GALVEZ MALL STANFORD UNIVERSITY STANFORD, CA 94305-6010 April 25, 2019 According to Modern Monetary Theory (MMT) it is possible to use expansive monetary policy – money creation by the central bank (i.e. the Federal Reserve) – to finance large fiscal deficits that will ensure full employment and good jobs for everyone, through a “jobs guarantee” program. In this paper I analyze some of Latin America’s historical episodes with MMT-type policies (Chile, Peru. Argentina, and Venezuela). The analysis uses the framework developed by Dornbusch and Edwards (1990, 1991) for studying macroeconomic populism. The four experiments studied in this paper ended up badly, with runaway inflation, huge currency devaluations, and precipitous real wage declines. These experiences offer a cautionary tale for MMT enthusiasts.† JEL Nos: E12, E42, E61, F31 Keywords: Modern Monetary Theory, central bank, inflation, Latin America, hyperinflation The Hoover Institution Economics Working Paper Series allows authors to distribute research for discussion and comment among other researchers. Working papers reflect the views of the author and not the views of the Hoover Institution. * Henry Ford II Distinguished Professor, Anderson Graduate School of Management, UCLA † I have benefited from discussions with Ed Leamer, José De Gregorio, Scott Sumner, and Alejandra Cox. I thank Doug Irwin and John Taylor for their support. 1 1. Introduction During the last few years an apparently new and revolutionary idea has emerged in economic policy circles in the United States: Modern Monetary Theory (MMT). The central tenet of this view is that it is possible to use expansive monetary policy – money creation by the central bank (i.e.
    [Show full text]
  • Modern Monetary Theory: a Marxist Critique
    Class, Race and Corporate Power Volume 7 Issue 1 Article 1 2019 Modern Monetary Theory: A Marxist Critique Michael Roberts [email protected] Follow this and additional works at: https://digitalcommons.fiu.edu/classracecorporatepower Part of the Economics Commons Recommended Citation Roberts, Michael (2019) "Modern Monetary Theory: A Marxist Critique," Class, Race and Corporate Power: Vol. 7 : Iss. 1 , Article 1. DOI: 10.25148/CRCP.7.1.008316 Available at: https://digitalcommons.fiu.edu/classracecorporatepower/vol7/iss1/1 This work is brought to you for free and open access by the College of Arts, Sciences & Education at FIU Digital Commons. It has been accepted for inclusion in Class, Race and Corporate Power by an authorized administrator of FIU Digital Commons. For more information, please contact [email protected]. Modern Monetary Theory: A Marxist Critique Abstract Compiled from a series of blog posts which can be found at "The Next Recession." Modern monetary theory (MMT) has become flavor of the time among many leftist economic views in recent years. MMT has some traction in the left as it appears to offer theoretical support for policies of fiscal spending funded yb central bank money and running up budget deficits and public debt without earf of crises – and thus backing policies of government spending on infrastructure projects, job creation and industry in direct contrast to neoliberal mainstream policies of austerity and minimal government intervention. Here I will offer my view on the worth of MMT and its policy implications for the labor movement. First, I’ll try and give broad outline to bring out the similarities and difference with Marx’s monetary theory.
    [Show full text]
  • US Monetary Policy 1914-1951
    Volatile Times and Persistent Conceptual Errors: U.S. Monetary Policy 1914-1951 Charles W. Calomiris * November 2010 Abstract This paper describes the motives that gave rise to the creation of the Federal Reserve System , summarizes the history of Fed monetary policy from its origins in 1914 through the Treasury-Fed Accord of 1951, and reviews several of the principal controversies that surround that history. The persistence of conceptual errors in Fed monetary policy – particularly adherence to the “real bills doctrine” – is a central puzzle in monetary history, particularly in light of the enormous costs of Fed failures during the Great Depression. The institutional, structural, and economic volatility of the period 1914-1951 probably contributed to the slow learning process of policy. Ironically, the Fed's great success – in managing seasonal volatility of interest rates by limiting seasonal liquidity risk – likely contributed to its slow learning about cyclical policy. Keywords: monetary policy, Great Depression, real bills doctrine, bank panics JEL: E58, N12, N22 * This paper was presented November 3, 2010 at a conference sponsored by the Atlanta Fed at Jekyll Island, Georgia. It will appear in a 100th anniversary volume devoted to the history of the Federal Reserve System. I thank my discussant, Allan Meltzer, and Michael Bordo and David Wheelock, for helpful comments on earlier drafts. 0 “If stupidity got us into this mess, then why can’t it get us out?” – Will Rogers1 I. Introduction This chapter reviews the history of the early (1914-1951) period of “monetary policy” under the Federal Reserve System (FRS), defined as policies designed to control the overall supply of liquidity in the financial system, as distinct from lender-of-last-resort policies directed toward the liquidity needs of particular financial institutions (which is treated by Bordo and Wheelock 2010 in another chapter of this volume).
    [Show full text]
  • The Real Bills Views of the Founders of the Fed
    Economic Quarterly— Volume 100, Number 2— Second Quarter 2014— Pages 159–181 The Real Bills Views of the Founders of the Fed Robert L. Hetzel ilton Friedman (1982, 103) wrote: “In our book on U.S. mon- etary history, Anna Schwartz and I found it possible to use M one sentence to describe the central principle followed by the Federal Reserve System from the time it began operations in 1914 to 1952. That principle, to quote from our book, is: ‘Ifthe ‘money market’ is properly managed so as to avoid the unproductive use of credit and to assure the availability of credit for productive use, then the money stock will take care of itself.’” For Friedman, the reference to “the money stock”was synonymous with “the price level.”1 How did American monetary experience and debate in the 19th century give rise to these “real bills” views as a guide to Fed policy in the pre-World War II period? As distilled in the real bills doctrine, the founders of the Fed under- stood the Federal Reserve System as a decentralized system of reserve depositories that would allow the expansion and contraction of currency and credit based on discounting member-bank paper that originated out of productive activity. By discounting these “real bills,”the short- term loans that …nanced trade and goods in the process of production, policymakers ful…lled their responsibilities as they understood them. That is, they would provide the reserves required to accommodate the “legitimate,” nonspeculative, demands for credit.2 In so doing, they The author acknowledges helpful comments from Huberto Ennis, Motoo Haruta, Gary Richardson, Robert Sharp, Kurt Schuler, Ellis Tallman, and Alexander Wolman.
    [Show full text]
  • Parallel Journeys: Adam Smith and Milton Friedman on the Regulation of Banking
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Rockoff, Hugh Working Paper Parallel journeys: Adam Smith and Milton Friedman on the regulation of banking Working Paper, No. 2010-04 Provided in Cooperation with: Department of Economics, Rutgers University Suggested Citation: Rockoff, Hugh (2010) : Parallel journeys: Adam Smith and Milton Friedman on the regulation of banking, Working Paper, No. 2010-04, Rutgers University, Department of Economics, New Brunswick, NJ This Version is available at: http://hdl.handle.net/10419/59460 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu February, 2010 Parallel Journeys: Adam Smith and Milton Friedman on the Regulation of Banking Hugh Rockoff Rutgers University and NBER Department of Economics 75 Hamilton Street New Brunswick NJ 08901 [email protected] 1 Abstract Adam Smith and Milton Friedman are famous for championing Laissez Faire, yet both supported government regulation of the banking system.
    [Show full text]