Friday, June 20, 2014

George Selgin Headed to Cato Shrugged

George Selgin has announced at his blog:

Cato is establishing a new center for monetary studies (the formal name has yet to be determined), and I'm going to direct it.
Yes, this, this, this and this, George Selgin.

(ht Bionic Mosquito)


  1. From Mises' Human Action, page 443 of the edition if front of me, fourth edition:

    "But even if the 100 percent reserve plan were to be adopted on the basis of the unadulterated gold standard, it would not entirely remove the drawbacks inherent in every kind of government interference with banking. What is needed to prevent any further credit expansion is to place the banking business under the general rules of commercial and civil laws compelling every individual and firm to fulfill all obligations in full compliance with the terms of the contract.

    And on the same page:

    Free banking is the only method available for the prevention of the dangers inherent in credit expansion. It would, it is true, not hinder a slow credit expansion, kept within very narrow limits, on the part of cautious banks which provide the public with all the information required about their financial status. But under free banking it would be impossible for credit expansion with all its inevitable consequences to have developed into a regular -- one is tempted to say normal -- feature of the economic system. Only free banking would have rendered the market economy secure against crises and depressions."

    Obviously, the first quoted sentence means that Mises considered a 100% reserve requirement to be a form of government interference with the free market. He does not elaborate on the potential "drawbacks."

    Contrary-wise, Rothbard is said to have considered 100% reserves required by law in a natural order. My view, from discussions with Rothbard, is that this overstates his actual position (at least his most of the time position). His main case centered on his historical observation that bankers and their banks were typically frauds, that they falsely labeled their short-term liabilities as "deposits" when they were not; that time and time again, bankers used the state to bail themselves out and to filch from their depositors. He had no problem with modern money market funds or check-writing out of mutual fund operations, none of which hold gold coin in a vault with which to redeem their call or semi-demand obligations. It's all spelled out in the contract (which is reduced to writing and agreed to by the "investors").

    Can't we all just get along on this matter?


    1. Don't distort and try to limit the problems with Selgin. They go way beyond his view on reserve requirements, as Salerno points out he talks the new Keynesian talk, including "demand shocks." He also likes to call Rothbardians loony.

    2. I don't believe I wrote anything about Selgin, who, like Rothbard, can certainly be a tad crusty toward his critics. Can you please cite Salerno's comment on Selgin's "new Keynesian talk"? I may or may not have seen it and cannot recall it. Thanks in advance. Best regards,

    3. Okay, let me get this straight. The post is about Selgin, you address views on fractional reserve banking, which is a position that Selgin has written about, including in the links to the post and you aren't writing about Selgin? Got it.

      Second, you say you don't recall ever seeing Salerno's comment on Selgin's "new Keynesian talk", well it is in the links to the post.

      Which means you are blowing serious smoke, and not even properly studying the post.

    4. Jack: Read my comment. I was discussing the views of Mises and Rothbard on the issue of free banking; I was not addressing the arguments of Selgin or, for that matter, Salerno. And may I point out that your unfriendly remarks are somewhat indicative of the problem I was addressing: the participants in the current debate, including Selgin, tend to talk past one another.

      Lastly, I did not claim to be "studying the post' and, if I had clinked on the link to Saleno, I obviously would not have asked you for the cite. After all, Salerno's approach is a modest example of what I see to be the problem with these snippy back and forths, even if, in his case, it is understandable. Kapish?

  2. Selgin is an "amazing speaker" at the Objectivist Summer Conference later this month in Las Vegas. His incredible talk is about Free Banking and the Fed.