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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: maceng2 who wrote (612)	7/24/2001 8:38:28 PM
From: craig crawford	Read Replies (1) \| Respond to of 1643

speaking of the fed, canada, and global currencies... (article is a little old) We Need a Global Fed? It just Ain't So! fee.org Garten begins with a summary of U.S. financial history that would make any economic historian blush. From the Civil War to the 1930s, Garten writes, the American economy "was an uncontrollable Darwinian process" marked by frequent booms and busts and "countless bank failures." Then, to every right-thinking citizen's vast relief, the federal government stepped in, creating the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and "most important, the Federal Reserve." The "harsh, invisible hand of Adam Smith" was thus moderated, and the business cycle brought under control. So America's financial system was unregulated before 1930? It just ain't so! In truth, Civil War legislation nearly wiped out the antebellum state banking industry, setting up new national banks that were forced to back their notes with government bonds. Eligible bond collateral became increasingly scarce during the last quarter of the nineteenth century. Over the course of any year, such banks were prevented from meeting seasonal peaks in currency demands. The result was an inelastic stock of national bank currency, which gave rise to serious "currency shortages" in 1884, 1893, and 1907. Government regulation thus played a key role in the "destructive business cycles" that Mr. Garten so unhesitatingly blames on the invisible hand. In addition to setting unnatural limits to the stock of currency, the government also prohibited national banks from setting up branch networks. This resulted in the proliferation of thousands of under-diversified and failureprone banks. In Canada, where chartered banks were free to issue notes and to branch nationwide, bank failures were few and far between, and not a single bank failed during the Great Depression. In the United States, by contrast, several thousand banks failed during the 1930s alone, and almost all of them were "unit" banks lacking any branches.