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« Austrian Economics for Dummies: Capital Theory Chapter | Main | An Economics of Meaning and Interpretation -- Why Is It So Hard For Everyone to Stay on Task in the Sciences of Man? »


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This is, unfortunately, all a part of the legacy of John Maynard Keynes.

As James Buchanan and Richard Wagner forcefully argued in "Democracy in Deficit" (1977), the Keynesian Revolution, among other things, broke the unwritten "fiscal constitution" under which the United States and a number of other countries had operated in the 19th and early 20th century.

The premise of that unwritten fiscal constitution was that the private sector is the source of prosperity and growth, and while government may have to tax and spend to provide some essential functions, government taxing and spending was a "fiscal drag" on the economic well-being of the society.

Hence, taxes should be low, indirect, and, as much as possible, not impede investment and capital formation.

Spending should be kept within the bounds of what the government took in as revenue; if a fiscal emergency arose (such as war, for which government needed funds outside of and greater than the short-run stream of tax revenues was providing) the govenment might have to run a deficit. But the deficits should stop once the emergency had passed, and the government should then run budget surpluses to pay off the accumulated debt.

Under "normal times," the government was not to increase spending on existing or new programs unless it was demonstrated where the additional funds for these purposes were going to come from. That is, what taxes were going to be raised to cover the costs of this additional spending, or what other government program would be cut back to provide the required funds.

As Buchanan and Wagner argued, Keynes threw this out the window with his notion of balancing the budget not on an annual basis but over the business cycle.

The flood gates were opened to every politician, bureaucrat and special interest group to justify and rationalize increases in government spending, and covered by deficit spending. After all, as Abba Lerner said, "we owe it to ourselves." (Though, in fact, David Hume in the 18th century, found it necessary to argue against what he said was this "new idea" that we owe it to ourselves when government borrows.)

But as a large number of 19th and 20th century free market economists argued, there are limits on the ability of the government to borrow funds. And, invariably, the State turns to the printing press to cover its mounting current expenditures and to meet interest and principle payments that come due and have accumulated from the past.

Debasement of the currency is the means by which the government demonstrates its bankruptcy, repudicates its debt, and siphons off even more of the wealth of its citizen-subjects through a cruel and unjust method of confiscation and financial destruction.

The modern era of paper, fiat, monies makes this all the easier for those in political power, since there are no constraints on their ability to print as much of their currency as they desire.

It is worth recalling, in this instance, the warning given my John Stuart Mill in his "Principles of Political Economy":

"No doctrine in political economy rests on more obvious grounds than the mischief of a paper currency not maintained at the same value with a metallic, either by convertibility, or by some principle of limitation equivalent to it. . .

"All variations in the the value of the circulating medium are mischievous: they disturb existing contracts and expectations, and the liability of such changes renders every pecuniary engagement of long date entirely precarious. . .

Great as this evil would be if it depended on accident [gold production], it is still greater when placed at the arbitrary disposal of an individual or a body of individuals; who may have any kind or degree of interest to be served by an artificial fluctuation in fortunes; and who have at any rate a strong interest in issuing as much [inconvertible paper money] as possible, each issue being itself a source of profit. Not to add, that the issuers have, and in the case of government paper, always have, a direct interest in lowering the value of the currency, because it is the medium in which their own debts are computed. . .

"Such power, in whomsoever vested, is an intolerable evil."

Many such quotes from the classical economists and classical liberals of the 19th century could be offered. Wisedom once gained can, alas, be lost.

Richard Ebeling


Excellent quotation from Mill!

Well, I don't disagree that the bleak fiscal future makes high inflation likely in the long run.

But I think that Sargent takes the monetary auhority off the hook too easily.

Government can limit spending the money they receive in taxes and if they can't refinance their debt, they can explicitly default.

In my view, the goal is to require that government explicity grab the monetary authority, change the current rules, and openly begin using the monetary authority as a revenue source. This might happen, but setting things up so this is occurs through marginal steps in ordinary operations is a mistake.

I think there is something deep in the monetarist mindset, going back to the old Chicago of Mints and Simons that sees money creation as a source of government revenue. I see ties to the "greenbacker" movement. The notion that there is something wrong with the way bankers could profit from borrowing by the issue of zero-interest currency.

One reason why I favor "micro" free banking, private currency and no reserve requirements, is that it breaks the direct tie between money and government revenue. I even favor replacing fixed-valued bank reserves with mutual funds. I don't want the monetary system generating any revenue for the Treasury. Sure, there are "efficiency" arguments that suggest that if there is any government, then getting some revenue from money creation is better than other taxes, but real policy doesn't come from a benevolent despot.

Sadly, even a gold standard combined with purely free banking can be subverted. The Treasury can start issuing legal tender currency. And gold can be devalued to reduce government debt. But these are open and reasonably transparent steps. It isn't the same thing as having the Fed step up its purchases of government debt because the government wants to spend the money.

One reason why I favor a constitutional rule based upon a noninflationary growth path for nominal expedniture is the difficulty in coming up with good excuses for changing the rule to allow for inflationary growth in nominal expenditure. If they can change the system based upon the argument that we need to create money and spend it, not much can stop them.

With gold, the problem _can_ be changes in the gold market. And so, excuses for leaving gold, even when the real reason is fiscal purposes, are going to be more plausible.

I don't see any theoretical reason why this must be so - and hasn't this actually changed a bit in the last couple of decades? Haven't many Western countries moved more toward incessantly raising taxes to pay off some of the debt, rather than depending on printing money (i.e. they print less and raise taxes more than before)?

As one example, there is a lot of discussion in the UK right now about the massive debt just incurred for the British "stimulus" and bailouts -- and the tories are winning popular support for giving the "level headed" policy prescription: taxes must be raised.

"the tories are winning popular support for giving the "level headed" policy prescription: taxes must be raised." -- If it is true that taxes must be raised for government expenditure and debt then it would seem true that by getting popular support for it means that there is no limit to the spending and the debt incurring that government could do. All you need is ever growing popular support. Where is the popular support for less spending so that existing taxes can pay for it? They who want to live off those taxes and debt would simply present their next level of spending as a crisis that needed to be solved by more taxes, until the point where the government provides all spending and the people provide every dime they make in taxes. That has been the goal of king and potentate since the dawn of time, Marx just changed the name of the dear leader, and the Tories now want to be that leader to get more taxes to pay for more spending, just like every political party. But do they propose lowering spending? No, it seems not; none of them really. Why should they? They'll not only have all the money already collected, but now they'll have more because they've convinced people of the "level headed" solution that taxing more is good for the people. The solution is to stop government spending, and to eradicate the idea that a man over there, the government, can spend your money on you better than you can spend your own on yourself. But it is they who dictate and not necessarily as you want. Some mention "necessary government spending" as if somehow mankind will not organize and provide for ourselves without some government minister leading the way and spending our money, aka taxes. Talk all about optimum taxation levels and strategies but leaving out spending means just more taxes, but in new and improved ways. And a marketing campaign to get "popular support."

Bill Woolsey is, of course, correct that the government can find many ways to get around a commodity-based free banking system, if it is determined to follow an inflationary path to, say, fund it expenditures above what it can tax away from the citizenry.

But such a free banking institutional arrangement is meant to serve a purpose sort of like a political constitution -- it makes it difficult for governments to rashly follow politically expedient courses of action.

Now, the old gold standard was undermined and then swiped away, the same way over the decades the traditional constitutional barriers to "big government" have been undermined and overcome.

Why? Because institutions -- including political constitutions, or property rights arrangements -- only prevail for as long as enough of the citizenry believe in what those institutions are there to secure and protect.

Today, and for many decades now, belief in limited government, restrained government, balanced budget government has been weakened more and more until finally there is almost no understanding and belief in what those restraining instituions are supposed to represent and defend.

To restore and improve on what those institutions once stood for will require a change in political-philosophical and ideological thinking if such a change is to be sustainable.

As Ludwig von Mises observed in 1923, when the Great German Inflation was in its final and most destructive year:

"The belief that a sound monetary system can once again be attained without making substantial changes in economic policy is a serious mistake. What is needed first and foremost is to renounce all inflationist fallacies.

"This renunciation cannot last, however, if it is not firmly grounded on a full and complete divorce of ideology from all imperialist, militarist, protectionist, statist, and socialist ideas."

We still have a long way to go before we succeed in bringing about such a change in ideas.

Richard Ebeling

Great comment by Jim Hlavac.

Why is it that I understand everything Richard Ebeling says and so little of what Bill Woolsey says. Do I suddenly stop being smart and become stupid?

As for that old argument about how Mises defined inflation, this from Human Action, P 423.

“What many people today call inflation or deflation is no longer the great increase or decrease in the supply of money, but its inexorable consequences, the general tendency toward a rise or fall in commodity prices and wage rates. This innovation is by no means harmless. It plays an important role in fomenting the popular tendencies toward inflationism.”

If you want to refer back to what he said 37 years earlier, you may do so, but not ignore his much later and more considered opinion.

And, by the way, still waiting for Mr Woolsey to tell us what a "fixed nominal value of gold" is.


A dollar is 1/200 of an ounce of gold equals gold is $200 per ounce. I don't think anyone else had any problem understanding.

Adam Smith observed that, in normal times, governments spend all their revenue and then some. When an emergency happens, typically war, they scramble for new revenue sources. The new taxes don't go away and the process begins anew. All this was clear by the 18th century.

Great powers eventually went into decline for fiscal reasons. The French Revolution and the end of the Ancien Regime is one example. Britain mercifully had no standing army to support and, by implementing free trade in the 19th century, created great prosperity for itself. When its commitment to free trade waned, and it went to war with its industrial rival, it went into decline.

The U.S. Constitution did not envision a standing army and for most of our history we did not have one. Now we have a standing army and protectionism, and must finance a welfare state, too.

New welfare programs are the new national emergency. So perhaps the US will finally sink under the combined weight of the Bush and Obama entitlements.

No one is directly addressing the question that Pete and I posed: why the convergence on policy? Perhaps it is that addressing the fiscal problem units the Chicago School and he Austrians. So, I'll pose new question on that basis.

Was the ascedency of supply-side economics responsible for the current fiscal mess?

"Was the ascedency of supply-side economics responsible for the current fiscal mess?"

No, but it didn't help very much.

Jerry's question is an interesting one. I recall (as I'm sure he does) when supply-side economics began to emerge in the late 1970s and 1980s.

An implicit (and sometimes an explicit) rationale for reducing marginal tax rates (and related tax disincentives) was that it would generate a significant net increase in government revenues (from greater work, savings, and investment)to cover the burden of government without having to cut the spending side of the government's ledger book.

Many conservative thinkers had come to the conclusion that too many of the American people were wedded to the welfare state. It was and would remain "politically impossible" to role back Big Brother.

How, then, would the society survive in the longer-run with a ballooning government taking an ever larger slice of the national economic pie?

The supply-sider's answer was to stimulate greater work, saving, and investment to make the national economic pie grow faster. The hope was that the national economic pie might grow faster than the rate at which government was growing; thus, the relative share of the government's slice of the national economic pie could be reduced, or at least kept from grabbing a bigger and bigger fraction since the pie would be expanding faster than the government's gluttony for eating more and more of it.

At the same time, and equally important, the relative size of government might be reduced (as a percentage of an expanding national economic pie) without have to attempt the futile campaign of reducing the absolute size of government spending in society.

This also reinforced for some on "the right" that deficits did not matter. If, as a result, in the longer-run the faster growing economy generated the additional revenue to make up and cover the growing costs of government (including enough future tax revenues to balance the government's budget and maybe even pay down part of the accumulated debt) it would have been worth the continuing short-run budget short-falls.

In the real world of special interest and power-lusting politics this merely reinforced the Keynesian-argued disregard for budget balancing and spending restraints.

This outcome may not be what supply-siders had in mind, but it surely was among the unintended consequences.

It also suggests that real reform cannot be accomplished through subtrefuge. Those conservative supply-siders would whisper that, of course, government was too big; that spending was out of control; that the welfare state was sucking out the productive life blood of the country.

But, they said, in that hushed voice, the people will never accept our argument. We have to reduce the cost and the growth of the welfare state, but without directly challenging it --"the left" will kill us in the political arena and in the media. Then we'll be in a worse situation than now.

Let's just talk about lowering the voters' taxes and the value of increasing the national economic pie thereby creating the impression of gain with no pain. We will have won. The government will have shrunk as a percentage of a growing economy. It's the best we can hope for. You libertarians and classical liberals are all "pie in the sky." Get with it; this is a winning "second best."

Well, its decades later. The only time we saw the size of government slow down was not from supply-side smoke and mirrors, but from the political incentives of divided government during the Clinton years.

That is probably the best we can hope for from next year's congressional elections.

Richard Ebeling

Regarding the supply siders, in the beginning in 1980-81, some of them (Laffer) were actually publicly predicting that tax cuts would pay for themselves with revenue increases, thereby avoiding deficits. Did not work out in the US, although it did in Russia nearly a decade ago, although simplification played a large part of that outcome.

Regarding Keynes it should be kept in mind that when he wrote on fiscal policy, Britain traditionally ran budget surpluses, so his fiscal stimulus was a reducing of the surplus. During the war he worried very much about paying for it and was not in general a big fan of deficit financing.

I do not think the problem with the idea of "balancing over the business cycle" is bad in principle. The problem is the political reality, the asymmetry between actions to increase deficits versus cutting them. It is hard to cut spending or raise taxes politically.

So, big deficit guys Reagan and Bush, Jr. were reelected. Small deficit guys Bush, Sr. and Clinton were either not reelected or had their party lose control of Congress after a major deficit cutting action.

Now Mr Woolsey tells us just what he meant by a "fixed nominal value of gold."

He meant the price of gold, but still couldn't just come right out and say it. He still had to tap dance all around it.

But where does the "fixed" part of it come in?

He had previously told us,

“But make no mistake, there must be a fixed nominal value.”

In other words, there must be a fixed price of gold.

I'm afraid to ask why.

And thank you to Richard Ebeling for the summary of supply side. I understand it a lot better now.


To the extent that Russian tax cuts "paid for themselves" that was probably because of the recovery in oil prices beginning in early 1999, and the fact that a large fraction of non-OPEC oil production came from Russia. Russian oil production had declined throughout most of the 1990s, but started to rebound after that. The new issue of The Economist says that "Russia's
overall government revenue, which includes oil proceeds, is almost 50% of GDP. Its tax take is closer to 30% ("The State's Take," pp. 78-79).

The article goes on to say that America's tax system is one of the least efficient, thanks to great reliance on the income tax and the narrow tax base. But as Mises would have said, we're a "free" country thanks to tax loopholes.
Right Richard?

Btw, France's percentage of tax to GDP is 50% vs. China's 20%. So who's the real commie?

Thanks to Richard for an excellent summary of supply-side economics and politics. The situation now is worse than in the 1980s. We are confronting record deficits and growth-slowing policies. What prospect is there for economic growth to cause the deficits to decline as a share of GDP?

I'm not sure that even divided government can solve the current problem. Allan Meltzer is talking about a Spending Commission, like the Greenspan Commission on Social Security or the Base Closing Commission. Congress could vote up or down on the recommendation. It would be all or nothing.

An analogy can be drawn to how the Great Inflation ended. Nixon didn't care about inflation because he recognized that presidents lost elections only because of high unemployment. By the end of the decade, Carter faced a changed political reality. The public had come to worry more about inflation and Carter was forced to appoint Volcker. Reagan won on a promise to end inflation.

Have we reached a corresponding tipping point on spending and deficits?


Learn some economics.

Human Action is clearly over your head.

Try something simple.

And then you may be able to get something out of Human Action.

Mr. Woolsey,

You seem to be against a central authority using the enterprise of currency issuance as a means to raise revenue in of itself. Is not dictating that all wealth creation be valuated in a centrally issued currency and subject to tax ostensibly the same thing? Perhaps I read you incorrectly.


Um, no. Putin was not in power in 1999, and his tax reform came in 2001. There was a temporary downward blip in oil prices in 1997-98, but by 99 it was back to its post-1986 average.

The post-communism tax system in Russia was an utter mess. There were multiple taxes laid on by multiple levels of government, which is true in much of the world, but it was off-the-wall there, with official tax rates in certain locales once one added it all up to over 100%. What did this mean? Bribe the local tax authority is what it meant. Putin replaced all that with an across-the-board 20% rate.

Ah ha, you say. See, like China they have low rates compared to those naughty socialistic French! Uh, well, first of all in both countries one is paying massive bribes that one does not pay in France, plus both of them continue to have serious state ownership in major enterprises so as to siphon off profits, with those being in the oil sector in Russia (hack, cough!).

Prof Woolsey,

Just followed your link to your blog, and skimmed through your essay on free banking and the gold standard. Maybe I got it wrong, but it seemed to me that you said, in effect, that the market won't buy a currency directly linked to gold, as a certificate or receipt for a definite amount of gold, but will insist on a currency only indirectly linked to gold through an intermediary monetary unit called a dollar.

What would be the purpose of the intermediary unit, the dollar, other than to break the link between the currency and a definite amount of gold, and free the currency from the restraints of a real gold standard?

You may be right. The market may indeed prefer a currency linked only indirectly to gold. But that isn't the issue. The issue is this: would you outlaw the currency directly linked to gold, as a certificate or receipt for a definite amount of gold?

If not, I would have no quarrel with you. We would both let the market make its choice.

Both Lesvic and Vann appear to think that I favor outlawing the use of alternative units of account. I don't. People should be free to use whatever units of account they want.

I don't think this freedom will make much difference. Unless there is some hyperinflationary disaster, nearly everyone in the U.S. will continue to use dollars. Why? Because that is what nearly everyone else is using.

To me, the relevant issue is reform of the dollar. Defining the dollar as a quantity of gold is one approach. And that is the same thing as fixing the dollar price of gold by defintion.

It would be possible to get rid of the dollar and replace it with the gold ounce. Swtiching units of account is possible. It almost always involves government compulsion, the introduction of a new money denominated in new units, a fixed exchange rate between the old and new money, and then a withdrawal of the old money from circulation. Using that same exchange rate to settle existing contracts with the new money is also normal. How did the Euro replace the Franc and Mark?

To me, the only reason to favor switching to a gold standard with a gold ounce unit of account is to avoid future devaluations and revaluations. Since I don't favor a gold standard at all, switching from the dollar to some other unit of account would be pointless.

But I am all in favor of allowing people to use money denominated however they like and quote prices, make contracts, and keep accounts with whatever units the prefer. I just don't think this will result in lots of different units of account in parellel or, for that matter, in shifts from worse to better monies or units of account unless an existing unit of account is ruined. In other words, hyperinflationary disaster.

Perhaps you all would be able to uderstand better if you asked Ebeling to explain these matters to you. O'Driscoll said he went to a conference focused on reintroducing the gold standard. Perhaps he can explain these things.


I'm glad you used the modifier "utter" to descirbe the mess of Russia's pre-Putin tax system. So Putin's system was merely a mess.

They're all commies.
"Taste's great, less filling...."

I'm not an expert on this, so I may be missing a great deal, but so far as I can see, the main obstacle to a gold standard is legal tender laws, making the dollar, rather than the gold certificate, legal tender for all debts, public and private. That means that you have to accept dollars, whether you like them or not. So, the legal establishment of the dollar effectively outlaws gold. America, at least, is not on a dollar standard out of affection for the dollar nor habit, but legal necessity. Legal tender laws outlaw gold. There may be other legal devices as well that do so. So, to "inlaw" gold you really have to outlaw the law, repeal every law pertaining to the currency.

Again, perhaps I am getting this wrong, but it seems to me that Prof Wolsey sees the necessity for compulsory action by the state, and I suspect that what is at the bottom of it all is the goal of a currency with a stable purchasing power.

Fuggedabout it!

Mises, again.

"With the real universe of action and unceasing change...neither neutrality of money nor stability of purchasing power are compatible. A world of the kind which the necessary requirements of neutral and stable money presuppose would be a world without the frame of...a changing world money is neither neutral nor stable in purchasing power. All plans to render money neutral and stable are contradictory. Money is an element of action and consequently of change."

Inflation happens when the amount of money issued by a government grows faster than the assets (mainly 'taxes receivable') that the government uses to back that money. A government in fiscal trouble has less backing, so its money will inflate. A burst of fiscal responsibility increases backing. Hence Sargent's finding that fiscal reforms end inflations.

Inflation is inflation. If you're inflating the money supply, your inflating it. Period.

Mr. Woolsey,

You said "...appear to think that I favor outlawing the use of alternative units of account."

I hope my message wasn't taken to insinuate that these are your views. I was mostly responding to this quote.

"the goal is to require that government explicity grab the monetary authority, change the current rules, and openly begin using the monetary authority as a revenue source."

What I was trying to ask is whether you thought the government using monetary creation as a means to raise revenue is any different than levying taxes on central issued currency? If it is different, what are the distinct differences and their implications? Do you think taxation is inefficient (maybe that is the clearest way to ask my question)?

Here again, that quote from Mises, above.

“What many people today call inflation or deflation is no longer the great increase or decrease in the supply of money, but its inexorable consequences, the general tendency toward a rise or fall in commodity prices and wage rates. This innovation is by no means harmless. It plays an important role in fomenting the popular tendencies toward inflationism.”

There are many obstacles to using alternative currencies, including legal tender laws and laws against private coinage. There are technical issues in returning to the gold standard, which were examined in a volume put out by AIER.

One idea I've seen floated recently is returning to the National Banking System: gold standard, bank issued money, and no Fed. Treasury note issues would be possible.


It is easy to forget that when he first came to power, many saw Putin as an anti-corruption, pro-market reformer. His tax reform was probably the highwater mark of the latter, and while in more recent years Russian economic growth has been largely tied to higher oil prices, at least in the first couple of years after the tax reform it was seen as at least partly associated with that and a few other positive moves.

Of course, pretty quickly it became clear that his anti-corruption campaign was focused on his political opponents, he ended democratic election of governors, he continued to countenance the assassination of critics, he sharply reduced the freedom of the press, and many other things along such lines, including recently moving to partly rehabilitate Stalin. In many ways Russia has returned to its old ways.

We've been forgetting that the obstacle to gold is not really the law but "legal" lawbreaking, that the supreme law of the land decrees nothing but gold and silver coin as tender in payment in debt, and that all we really need is enforcement of the real law.


I don't favor using money creation as a revenue source at all.

I favor full privatization of currency, the end of reservce requirements, and the use of mutual funds as clearing medium. I think that pretty much wipes out any govenrment revenue from money creation.

IF the government wants to start using money creation as a revenue source, (which I would oppose,) it is a good thing that the government would need to introduce a new currency to spend.

Similarly, if the governments instists on reducing the real value of its debt through reducing the purchasing power of the dollar (which I would oppose,) it should have to make a specific decision to do so. For example, suspending the targeted growth path for nominal expenditure. Or, with a gold standard, raising the official price of gold.

The status quo, which generates some revenue for the government, and which has no explict target for anything but rather vague promises for high employment and stable prices, grabing more revenue from money creation just requires that the Fed buy more government bonds. I think that is a bad thing. Requiring something dramatic like issuing a new currency or suspending an official target is a good thing because it will help deter what I consider abusive monetary policy.

P.S. Of course I think taxation is inefficient. Who doesn't?


National Banking system? You must be kidding!

Government bond collateral for national banknotes? Branch restrictions? High reserve requirements varying according to whether a bank is in NYC or is classified as a city or country bank?

What a nightmare!

Banknotes need to be issued on the same terms as other transactions accounts (at least in terms of regulatory restrictions.) No reserve requirements for anything. No branching restrictions.

The National Banking system was so screwed up. It really did make the Fed look like an improvement. The Canadian banking system of 1900 would be a better model.


I didn't get the impression people wanted to turn the clock on branch banking. In the fact, the clear intent of the National Bank Act was to create nationwide branch banking. It was a tortured interpretation of the Supreme Court that produced the outcome you described.

Were it not for national banks, Texas would never have had any banks. Sam Houston was a follower of Andrew Jackson. The Texas Constituion forbade the creation of banks. But it couldn't stop the chartering of national banks.

This is all very interesting, but what are we getting at?

I recall that, for some, the goal was stability of the purchasing power of money.

Is that still anyone's goal?

I recall the approval of reinflation as a means of counteracting deflation, keeping prices from falling, and the purchasing power of money from rising.

Does anyone still favor that?

I recall the contention that inflation was something more than an inflation of the money supply, that it wasn't inflation until it made prices go up.

Does anyone still contend that?


I didn't know that about Texas.

I'm pretty sure that National Banks were created to create a market for government bonds. The collateral requirements were very similar to the free banking scheme in many states at the time, except rather than bonds approved by state governments, Federal war bonds were used.

I have no problem with the Federal government chartering banks, though I would prefer to allow state chartered banks (say, in Delaware) to be able to operate in all states. In other words, banking as ordinary commerce.



There were multiple purposes for the National Bank Act, but nationwide branching was one of them. I have long argued that full faith and credit should be applied to state bank charters.


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