T he EXPERIENCE of - FREE BANKING - SECOND EDITION

There is the phrase that the ‘public are free to accept or reject bank cur- rency as they choose’ – the freedom of the public to reject a bank’s currency underpins the competitiveness of the market in which the bank operates. [...] Then there is the term ‘central bank’, which I interpret to be a bank that has monopoly privileges over the supply of currency, holds the reserves of the banking system, and is a lender of last resort for the other banks and maybe their regulator too. [...] Of particular significance is the effort in 1917 by the dominant regional Chinese government, the regime of the warlord Zhang Zuolin, to introduce a new version of the official currency of Fengtian Prov- ince, a silver-denominated currency known as the ‘Fengtian dollar’ ( feng piao) to bring stability and order to the region’s financial markets. [...] There is not enough space to prove all my conclusions exhaus- tively, but, the examples I give, the table of cases of free banking at the end of the chapter, the works listed in the bibliography, and the other chapters in this book will enable sceptics to consider all the evidence and to judge for themselves the claims I make. [...] In Scotland, eleven years elapsed between the expiration of the Bank of Scot- land’s monopoly and the founding of the first competitor, the Royal Bank of Scotland, in 1727.