Wouldn 100% gold standard banking be better than free banking?
Fractional gold reserve banking arose spontaneously. 100% gold reserve banking has not. It’s basically a theoretical construct. This should at least make one suspicious, but by no means dismissive. A 100% gold standard or any other full reserve standard is when the bank is not allowed to create more exchange media (e.g., paper money) than it can back by reserves at every moment. This might seem like a good thing, but, in essence, it’s deflationary. Why? It would keep money below the amount people actually wanted to use. Since the purpose of money is mostly for exchange on the market, anything that attacks this role is generally bad for money and the economy. This does not mean that government needs to step in to enforce this role. Rather, the market itself will sweep away banks that go against it because more stable and profitable banks will benefit from more and better ways of facilitating that role. Less stable banks and less profitable ones will either change their policies (in ligh
