Episode 295: Must Government Control Money?
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The Federal Reserve System and the Financial Panics of the 19th Century
The problem with financial panics before the Fed was due to legal restrictions on the banking system under the National Banking Acts. The Federal Reserve Act, which was like a patchwork trying to provide a more elastic currency, allowed banks to issue more bank notes in seasons of high demand and provide more reserves when they're losing reserves because of seasonal demands. It's a story of an interventionist dynamic where some restrictions led to later restrictions rather than being rolled back to fix the problem they created.
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