interview, George Selgin defines free banking as a monetary arrangement where currency is competitively supplied by private commercial banks and, consequently, not monopolized by a central bank.
He sets as
examples the Scottish and Canadian’s free banking systems, which
flourished in the eighteenth and nineteenth centuries; yet, he clarifies
that a completely free banking structure has not existed, since there
has always been some form of government involvement. He discusses the
possibility and feasibility of implementing such system in the present
time, stating, as well, the negative macroeconomic implications that a
central banking system has, especially for a developing country such as
Guatemala, and suggests that more liberty and less government
intervention could be a source of wealth and growth.
concludes by explaining how transaction costs are managed within this
system, in addition to the effectiveness it entails when dealing with
crises, such as bank runs or instability, in the current banking
Universidad Francisco Marroquín
Guatemala, July 31, 2012