Mon, 28 September 2009
In this episode of Two Beers With Steve I speak one on one with Prof. George Selgin, Professor of Economics at the University of Georgia's Terry School of Business.
We begin our discussion with definitions of what is money and what constitutes money before we begin exploring George Selgin's theory of Free Banking. Free Banking, in a quick one sentence description, is a completely deregulated banking system, free of a central bank and the FDIC, where private banks make loans and issue their own money.
In this interview Prof. Selgin describes the problems of our current system and offers a possible solution, the Free Banking system. It is becoming increasingly obvious to me, Steve, that the Federal Reserve is not the answer to the problem, but that it is the problem.
Good Money Book by George Selgin. Good Money tells the fascinating story of British manufacturers' challenge to the Crown's monopoly on coinage
Direct download: Episode_22_-_Free_Banking_with_George_Selgin.mp3
Category:general -- posted at: 4:28 PM
Selgin is a bit wonky, but he provides good food for thought. It seems like there are four main options for banking: 1. the current central bank (e.g. Federal Reserve) system 2. the \"free banking\" system 3. the state banking model, where each state runs a bank and can use the profits from the interest to supplant tax revenue 4. Credit unions -- which are essentially co-op banks I think we all agree #1 has gotten out of control (concentrated power means exponentially increased risk). Free banking reduces the systemic risk, but the question is whether the efficiencies of the private market are enough that we should allow the owners of the banks to control the profits from money creation. State-run banks are not likely to be as efficiently run, but it\'s quite an appealing thought that we could pay far less in taxes under such a model (because the profits from money creation would go into the state treasury). I admit to having a rather poor understanding of credit unions---even though I have an account in one!---but I do like the idea that the members benefit from the banking profits. There\'s a REASON my credit union\'s money market rate always beats the big banks! All of these models, though, are still using a debt-based money systems requiring never-ending expansion of debt and, thus, never-ending growth. I personally do not think never-ending growth is possible on a finite planet, so at best #2 and #3 offer interim solutions. The form of banking is one question; the form of money is another. If the US dollar fails, we will all be talking quite a bit about the latter! Mark