Not true. ONLY National banks could print money after 1863, and then only by purchasing US government bonds as a backing kept by the comptroller, but convertible into gold.
True “free banking” disappeared with the National Bank and Currency Acts of 1863-64.
Absolutely untrue that the currencies were counterfeited a lot. In fact, of all my studies of antebellum banks and reading dozens of ledgers, bank books, diaries of bankers, NOT ONE ever complained about his bank’s money being counterfeited.
True that there was never a gold dollar backing every paper dollar. So what? There didn’t need to be. There only needed to be convertability, which there was. Solid banks only had to keep a very, very low ratio of gold on hand (6%), while banks with worse reputations had to keep upwards of 10 even 20%. You might want to look at my studies: “Banking in the American South from the Age of Jackson to Reconstruction,” “Banking in the American West from the Gold Rush to Deregulation,” and THE best book on bank failures out there, Charles Calomiris, “Fragile by Design”
“Not true. ONLY National banks could print money after 1863, and then only by purchasing US government bonds as a backing kept by the comptroller, but convertible into gold.”
..which I’m familiar with but has absolutely nothing to do with what I posted.
There was a banking regulation that made printing currency preferable to ledger entry checking accounts, so banks printed their own currency to make loans.
And those currencies were not valued equally in the marketplace.
A dollar from the august firm of JP Morgan would trade at par, whereas a dollar issued by some non-money center bank either wouldn’t be accepted or would be taken at a discount to face value.
James Grant named his “Interest Rate Observer” after a daily sheet from that time, the Banknote Observer, that published the market value of various bank currencies.
“NOT ONE ever complained about his banks money being counterfeited.”
It was hardly in the interest of those bankers to complain that their currency was subject to counterfeiting. And counterfeiting was easier in an era where there were competing currencies in circulation. Banks run on confidence and the quickest way to kill that is to let it be known that your currency has a good chance of being fake.
It is no different than today with corporations that have major problems with information security. You won’t know that from reading their statements. But you can find out from security professionals who clean up the mess.