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George Selgin Profile picture
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20 Jan, 4 tweets, 2 min read
I have no idea who James Thomas Kesterton, Jr. is or was, but this is yet another bit of fractional-reserve banking mythology, for which there's not the slightest factual foundation. 1/n
From Collins and Walsh (jstor.org/stable/4407999…): "we can find little evidence of large and destabilizing asset bubbles in the Roman world...credit created by the fractional reserve banks...was not used generally for such speculative purposes." 2/n
As for financial crises, they occurred in 49-47BC and in 33AD. But had political triggers; sources say nothing about banks' involvement, though its probable that many suffered. The '33 crisis was deflationary rather than inflationary. 3/n
Later on, currency debasement did contribute to Rome's fall, according to many authorities. But Roman banks played absolutely no part in that debasement. (See warwick.ac.uk/fac/arts/class…).

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More from @GeorgeSelgin

George Selgin Profile picture
20 Jan
Thread: As many may be interested, I'm answering this with a new tweet.
The roots of the "Austrian" claim that fractional reserve banking (FRB) involves fraud or theft trace to the Austrian business cycle theory. According to some versions of that FRB inevitably leads to booms and busts.
In fact that believe is itself wrong, as I first tried to show in The Theory of Free Banking. See also here: alt-m.org/2018/08/16/fra…
Read 14 tweets
George Selgin Profile picture
17 Dec 20
Thread: This brief @PilkingtonPhil note on Gunnar Myrdal's _Monetary Equilibrium_ is indeed very good. That work (which helped earn Myrdal the Nobel he shared w/ Hayek) Some follow-up remarks here.
As Phil notes, Myrdal was a member of the Stockholm School, whose contributions to monetary theory built upon the work of Knut Wicksell, the school's founder. In By 1931, when _Monetary Equilibrium_ appeared, a (polite) rift had separated the school in two.
The rift began with a debate between Wicksell and David Davidson concerning the sort of price stability implied by a policy of keeping interest rates at their "natural" levels. Wicksell of course claimed that this would result in stable _output_ prices.
Read 14 tweets
George Selgin Profile picture
9 Dec 20
"At the start of 2020, the dollar’s run had endured 100 years. That would have been reason to question how much longer it could continue." This crude instance of the gambler's fallacy is one of many reasons why I find Ruchir Sharma's FT piece unconvincing: ft.com/content/ea33b6…
Another is his suggestion that, although "When the pandemic hit, the US dollar was as mighty as ever," the pandemic has changed that. To paraphrase Mark Twain, rumors of the end of the dollar's "exorbitant privilege" are much exaggerated.
In fact the demand for dollars rose to exceptional levels early in the crisis; if it has declined somewhat since, it is only from that unusual peak: globalbankingandfinance.com/does-the-pande…
Read 14 tweets
George Selgin Profile picture
7 Dec 20
States have been monopolizing currency of all sorts since ancient times, and they have been claiming for just as long that their monopolies are necessary to preserve the integrity of their nations' currency stocks. So necessary that threats to them were typically capital crimes.
The claims were first made w.r.t. coinage. They were never valid. Coins are standardized metal discs, and there is no reason at all why they couldn't be privately and competitively supplied, just like many other standardized products.
What's more, we know it, not just from theory, but from evidence taken from those rare instances in which govt's have tolerated private coinage. Here's a brief summary of U.S. experience w/ private gold coins: fee.org/articles/priva…
Read 15 tweets
George Selgin Profile picture
7 Dec 20
Thread: Why is currency monopoly so important to these gov't representatives? And what sort of dissembling are they up in claiming that they want "to make sure the currency monopoly remains in the hands of states”?
Do they suppose that the only alternative to "states" possessing such monopolies is some sort of private currency monopoly? What about competition? Do they think it impossible? If so, on what grounds?
Not history: until the 20th century, state currency monopolies were the exception, not the rule. Many commercial banks issuer circulating notes, denominated and redeemable in what where then typically gold or silver standard money units.
Read 12 tweets
George Selgin Profile picture
7 Dec 20
Like @MoneyIllusion, I believe the Fed's calls for a larger fiscal response are calls for relief rather than stimulus. Generally Fed officials are reluctant to chime in on fiscal policy. themoneyillusion.com/does-the-fed-f… 1/n
But complaints about limited uptake some of the Fed's 13(3) facilities, and of its MSLF and MLF especially, have egged them on this time. Those complaining have often suggested that the Fed's lending terms have been too strict.
Some wonder why the Fed can't take bigger risks, or make its loans forgivable, like the SBA. But the Fed's 13(3) lending rules aren't so flexible, even with Treasury backstops. So Fed officials have called for more fiscal action to relieve the Fed of such pressure.
Read 4 tweets

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