FreeP "LS" on Cspan's "BookTV"

Thank you LS for taking the time to reply. I admit I haven’t given much thought to competitive money markets. Would it work like the monetary system in Europe before the advent of the Euro?

I recently purchased something from Amazon.de (Deutschland) and paid the Euro difference. Would it work the same way in the states with Amazon having to weight the value of money from each state or competitive market? There was a reason after all why Europe went for the idea of a commonly held unit of money. I’m sure the idea sounded good at the time.

Could competitive money markets work in this day and age as opposed to the days of 1840 when most commerce presumably was done intra-state ? In which one of your books do you tackle this subject?

Finally, why the lack of interest in being a European tourist?

Thank you again for a captivating and thought-provoking three hours on C-span.

Yes, exactly like the franc vs. pound vs. mark prior to the EU. I don't have any book that specifically lays out competitive money. My "Banking in the American South" discusses the situation in the south from 1830-1861 and notes the favorable situation there. Mostly I got stuff from articles in the Journal of Ec History or Amer Ec Review. A lot of articles (cited in my notes) deal with "free banking."

I see NO reason why competitive money couldn't work today.

My one trip to Europe was not pleasant, even though I had first class accomodations: bed too small, tv yucky, was not fond of the food (even though I had my only 9-course meal there). Just nothing I can't see on the internet.

Alas, the renowned LS reveals himself to be a non-romantic. Not for him are castles, cathedrals, cobblestones, konditoreis, palaces, quaint medieval shops and taverns, the Matterhorn, and lederhosen ( even stranger considering his surname ) lol

Not to mention the two things the country of America unfathomably cannot produce - real beer and real bread.

I regard myself fortunate to have USA-German dual citizenship. Enables me to keep jumping from pan to fire and vice versa.

Am honored to have had this repartee with you LS, and I will be researching competitive money. Danke Schoen.

Ok, worked like this: pre-1863, banks had to get "charters" from the state legislatures. That charter authorized the bank to print its own notes. Those banknotes had to be convertible into gold or silver ("specie") on demand. But the concept of "Fractional Reserve Banking" meant that at any given time only a very small % of people would come in to convert their paper into metal. So banks traditionally kept about a 6-10% specie reserve and loaned out 90% more via bank notes.

Every bank, and a few railroad and insurance companies, printed these notes. They all competed against each other in the free market. If a bank couldn't "convert" into specie, word got around and people would quickly come in to unload their notes. Moreover, if you failed to convert (in theory) the legislature would yank your charter.

Businesses and other banks knew the value of these notes through a publication called "Dillistin's Bank Note Reporter." Everyone had a copy, updated annually. So unless a note was very new, or from a bank that no one had heard of, you could tell instantly at what value the bank notes were trading.

Anything less than 99% (i.e., a dollar of the Exchange Bank of St. Louis would get you 99 cents) was not very reputable. All notes traded at a VERY slight discount because at the end of the day, the Liberty Bank of Dayton, OH would have to send back all its Exchange Bank of St. Louis notes to St. Louis, and vice versa. So there was a shipping "charge". Otherwise, the notes were literally as good as gold, or as good as people believed you had gold in your vault to back them with.

From 1840-1860, we had no Bank of the United States---no federal "regulator" as it were. The private banks did just fine. VERY few failed, and those that did failed in the Panic of 1857, which was caused by the Dred Scott case (as I show in my "Seven Events" book. It was the most stable period of money we have ever had.

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