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Government and Private E-Money-Like Systems: Federal Reserve Notes and National Bank Notes

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  • Warren E. Weber

Abstract

The period from 1914 to 1935 in the United States is unique in that it was the only time that both privately-issued bank notes (national bank notes) and central bank-issued bank notes (Federal Reserve notes) were simultaneously in circulation. This paper describes some lessons relevant to e-money from the U.S. experience during this period. It argues that Federal Reserve notes were not issued to be a superior currency to national bank notes. Rather, they were issued to enable the Federal Reserve System to act as a lender of last resort in times of financial stress. It also argues that the reason to eventually eliminate national bank notes was that they were potentially a source of bank reserves. As such, they could have threatened the Federal Reserve System’s control of the reserves of the banking system and thereby the Fed’s control of monetary policy.

Suggested Citation

  • Warren E. Weber, 2015. "Government and Private E-Money-Like Systems: Federal Reserve Notes and National Bank Notes," Staff Working Papers 15-18, Bank of Canada.
    • Handle: RePEc:bca:bocawp:15-18
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    References listed on IDEAS

    as
    1. Ben Fung & Miguel Molico & Gerald Stuber, 2014. "Electronic Money and Payments: Recent Developments and Issues," Discussion Papers 14-2, Bank of Canada.
    2. Warren E. Weber, 2014. "The Efficiency of Private E-Money-Like Systems: The U.S. Experience with State Bank Notes," Staff Working Papers 14-15, Bank of Canada.
    3. repec:ucp:bkecon:9780226519999 is not listed on IDEAS
    4. W. O. Weyforth, 1925. "The Retirement of National Bank Notes," Journal of Political Economy, University of Chicago Press, vol. 33, pages 531-531.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Grodecka-Messi, Anna & Zhang, Xin, 2023. "Private bank money vs central bank money: A historical lesson for CBDC introduction," Journal of Economic Dynamics and Control, Elsevier, vol. 154(C).
    2. James Chapman & Carolyn A. Wilkins, 2019. "Crypto ‘Money’: Perspective of a Couple of Canadian Central Bankers," Discussion Papers 2019-1, Bank of Canada.
    3. Hossein Nabilou, 2020. "Testing the waters of the Rubicon: the European Central Bank and central bank digital currencies," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(4), pages 299-314, December.
    4. Charles M. Kahn & Francisco Rivadeneyra & Tsz-Nga Wong, 2018. "Should the Central Bank Issue E-money?," Staff Working Papers 18-58, Bank of Canada.
    5. Amber Wadsworth, 2018. "The pros and cons of issuing a central bank digital currency," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 81, pages 1-21, June.

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    More about this item

    Keywords

    Bank notes; E-Money; Financial services;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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