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Cambiar vista de pantalla: Lawrence H. White June 24, 2009 | Universidad Francisco Marroquín | Duración:..
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About this video
About the author
The current banking system has a reputation for being somewhat corrupt and unable to manage the money deposited in its banks. A poorly functioning banking system invariably affects the entire economic system of a country. In this conference, Lawrence H. White explains how the free banking system works: what the role of banks is and how the public’s money is managed profitably. In other words, how freedom enables institutions to succeed. White explains that banks maintain reserves in their vaults to create confidence in their users. He also describes what happens when financial institutions fail to have sufficient reserves to liquidate the notes they have issued. Two contrasting views are presented to explain this scenario: free banking and central banking. Finally, White comments on the principal arguments against free banking. He explains the risks of bank runs, explaining why they occur and what banks can do to avoid them.
Versión en español La banca libre
Créditos
Free banking
Lawrence H. White
Business School Building, EN-601
Universidad Francisco Marroquín
Guatemala, June 24, 2009
A New Media - UFM production. Guatemala, June 2009
Camera: Manuel Alvarez, Jorge Samayoa; digital editing: Luis Barrueto; index and synopsis: Sergio Bustamante; content revisers: Daphne Ortiz, Jennifer Keller; publication: Mario Pivaral / Carlos Petz
 This work is licensed under a Creative Commons 3.0 License
Este trabajo ha sido registrado con una licencia Creative Commons 3.0
Lawrence H. White is an expert in banking and monetary policy. He is professor of economics at George Mason University and the F. A. Hayek Professor of Economic History in the department of economics at University of Missouri – St. Louis. His teaching and research areas include economic history, monetary theory, money and banking, and history of economic thought. White holds a PhD and a MA in economics from University of California at Los Angeles; he also received his AB in the same area from Harvard University. He is visiting professor and holds an honorary doctorate degree in social sciences from Universidad Francisco Marroquín.
Source: www.umsl.edu
Last update: 30/11/2011
  Content
 | Initial credits |
| Introduction |
 | Money issued by the banks in the monetary system
|
| Money multiplier |
| Required reserve ratio |
| Money issued and bank reserves |
| Free banking versus central banking
|
| Inside money is redeemable for some basic reserve money |
| Banks have no monopoly power in the markets |
| Banks practice par acceptance |
| Purchasing power money (ppm) in a small banking system |
| Bank balance sheet
|
| Assets |
| Risk-return tradeoff in reserve holding |
| Liabilities and equity
|
| Notes in circulation |
| Deposits |
| Neil Wallace |
| Keeping notes in circulation |
| Balance sheet constraint |
| Bank profit function |
| Expected liquidity cost
|
| Choices |
| Distribution of reserve gains and losses |
| Profit maximization
|
| Marginal benefits to lending equals holding reserves |
| Marginal benefits to lending equals marginal cost of financing
|
| Via note-issue |
| Via deposits |
| Managing a bank of issue |
| Holding a bank's currency
|
| Attracting more depositors |
| Anti-counterfeiting measures |
| Non-price competition |
| Correcting overissue
|
| Overissue defined |
| Public's reaction |
| Interbank clearing system
|
| Reserve gains and losses |
| Reserve losses and adverse clearings |
| Competition versus a single monopoly issuer |
| Bank-issued money and nominal income stability |
| Leading argument against free banking
|
| Bank runs and panics |
| Lender of last resort |
| Legal restrictions on banks |
| Positive aspects of bank runs
|
| Insolvent banks |
| Threats of runs
|
| Offshore banking market |
| Solvent banks |
| Runs on insolvent banks
|
| Forbearance |
| Run-prone banking
|
| "Fire sale" problem |
| "Me first" problem |
| "Sunspot" or "bubble" theory
|
| A good theory of bank runs? |
| Weak banking systems |
| "Bad news" theory |
| What makes a bank contract run-prone?
|
| Fragile contracts |
| Contracts that are not run-prone
|
| Equity claims |
| Conditional redeemability |
| Solvency assurances
|
| Adequate capital |
| Safer portfolios |
| Certification by a bank clearing house |
| Extended liability |
| Historical evidence on inherent fragility |
| Question and answer period
|
| Why isn’t counterfeiting a big problem in a free banking system? Similarly, the Internet can be used to provoke a run on a solvent bank. |
| Should conditions of entry for new issuers be regulated? |
| Would you comment on the incentives in a free banking system for banks to act responsibly. |
| What is the purpose of intermediary institutions and banking supervision? |
| Final words |
| Final credits |
|
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