The Case Against the Fed

Mises Institute has republished David Gordon's excellent review of Murray Rothbard's The Case Against the Fed -- a must-read for anyone wishing to understand the Federal Reserve System.

But is not this practice [of fractional-reserve banking] a blatant instance of fraud? So it would appear, and so Rothbard firmly avers that it is. Unfortunately, several nineteenth century British legal decisions held otherwise, and these verdicts were adopted by the American courts as well.

How serious were these decisions? In Rothbard's view they have been primarily responsible for "the disastrous inflations of the past two centuries." [Mystery of Banking, p. 93]

A system of free banking would serve to counter the tendency of banks to inflate through fractional reserve banking. "Free banking," Rothbard concludes, "far from leading to inflationary chaos, will insure almost as hard and noninflationary a money as 100 percent reserve banking itself." [ibid., p. 117]