Introduction

The principal purpose of this book is to explore financial and monetary laissez-faire. In so doing, I also hope to provide some insight into real-world financial and monetary problems, and, in particular, into the issue of the appropriate role of the state. The issue of financial laissez-faire — or free banking — is of course highly controversial, and there is little doubt that free banking is still a minority view.1 Nonetheless, I believe that free banking is both feasible and desirable, and that the main criticisms levelled against it are essentially unsound. My main theme, therefore, is that free trade is just as desirable in the financial sector of the economy as it is in any other sector. However, financial free trade in its broadest sense means much more than just, say, the deregulated banking on a given monetary standard (e.g., a gold standard) on which much of the free banking literature has hitherto focused. To examine financial laissez-faire in the context of a given monetary standard is useful, but limited, and we really need to go further and examine laissez-faire in a broader framework in which the monetary standard itself — that is, the set of rules governing the issue of currency, which indirectly determine the price level and other nominal variables — is endogenised. Financial laissez-faire in its broadest sense therefore includes the various monetary issues related to the determination and operation of the monetary standard, as well as the financial issues on which free bankers have hitherto tended to focus.