Free Banking in Sweden 1830–1903: Experience and Debate

Lakomaa, Erik

doi:10.1007/s12113-007-9012-4

Cited by 9 publications

(5 citation statements)

References 4 publications

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“…Instead, their funding was based on deposits. Up until 1864, interest rates were regulated by law, but from this year, banks could decide on lending as well as deposit interest rates (Lakomaa, 2007). This changed in 1903 when note issuance was centralised to the central bank, the Riksbank, and all other banks had to fund their business from other sources.…”

Section: Theoretical Take Off and Methodological Considerationsmentioning

confidence: 99%

Can regulations prevent financial crises? Uses of the past in the evolution of regulatory reforms in Sweden

Rognes

Larsson

2023

JFRC

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Purpose The purpose of this study is to examine whether regulations can prevent financial crises based on the case of Sweden in the 20th century. The evolution of banking regulation relies heavily on learning across borders as well as responding to recent and remembered crises. Sweden went from being an open economy with a highly protected national banking system with several banking crises under the Classical regime, through the Statist regime with no crises followed by abrupt liberalisation in the 1980s as the country changed to a more market-based regime. This study examines the regulatory responses to crises in each of these periods to assess how, and whether, an often backward-looking regulatory framework can address forward-looking risks. Design/methodology/approach This study is a qualitative study using a historical method. The authors use archival material, official publications and statistical data as well as secondary literature to succinctly analyse crises and regulatory responses in different regulatory regimes in the 20th century. The theoretical framework builds on three macro- and microeconomic policy regimes, the Classical, the Statist and the Market regime. Findings The authors find that regulations can play a decisive role in alleviating a banking crisis, but the relationship between regulations and economic development is complex, and regulations alone cannot prevent a crisis. Originality/value To the best of the authors’ knowledge, this is the first longitudinal study of banking regulations in Sweden and how these change in response to crises with the aim of improving the role of banks in financial intermediation and financial stability. This study contributes to a body of literature on financial crises with a long-term perspective and an assessment of regulations as a policy response.

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Section: Theoretical Take Off and Methodological Considerationsmentioning

confidence: 99%

Can regulations prevent financial crises? Uses of the past in the evolution of regulatory reforms in Sweden

Rognes

Larsson

2023

JFRC

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“…The shadow banking system accounts for 25 to 30 percent of the overall financial system, according to the Financial Stability Board (FSB), the regulatory working group for the Group of 20 leading economies (G20) 83 .…”

Section: Shadow Bankingmentioning

confidence: 99%

“…Business News, https://www.reuters.com/article/us-g20-regulation-shadowbanking-idUSKBN1GH1NJ. 83 85 Michael Lewis, The Big Short: Inside the Doomsday Machine (London: Allen Lane, 2010). 86 Michelle Martin, «Q&A -What Is Shadow Banking and Why Does It Matter?»…”

Section: Shadow Bankingmentioning

confidence: 99%

SECTION 8. Stablecoins & CBDCs as private & public money: confront or co-exist?

Hrytsai

2023

Human Rights and Public Governance in Modern Conditions

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Note that fiat money should not be confused with representational money. Representative money has an intrinsic value because it is backed by and can be converted into precious metal or other commodities. External fiat money can be similar to representational money, for example, it can be in paper form. However, fiat money is not backed by a security, while representative money is a claim on a commodity 12 .The use of commodity money can be traced back to the Bronze Age cultures from 3300 BC, the most popular were: bronze, silver, gold 13 . In Europe and the Middle East in the Bronze Age, unofficial pieces of metal (silver and bronze) served as circulating money long before coins were minted. The «silver bars» that served as currency were irregularly shaped and unminted pieces of silver cut into pieces of standard weight 14 .Charles Arthur Conant pointed to a passage in the Old Testament (Genesis 23:16) where the King James Version states that Abraham paid Ephron «four hundred shekels of silver, the current money of a merchant.» Charles Arthur Conant has noted that this language «shows that it was the merchant community, not the government, that set the standard» (p. 128) 15 . The shekel was a unit of weight, not a coin or bullion.Classical antiquity was the high point for the state monopoly on money production. Ancient rulers from the Greek city-states to the Roman Empire, looking for a source of profit to exploit, granted themselves a legal monopoly on this business by banning private coinage. With the decentralization and weakening of political power after the decline of the Western Roman Empire, private coinage returned to Western Europe. Babelon (Ernest Charles François Babelon, 1897, pp. 124, 127) comments on the period of the Merovingian dynasty (476-750): «Whoever had gold in his possession arrogated to himself the right to turn it into money, ... substituting his own name for that of the emperor as a guarantee for the public.» In medieval India, silver coins with perforations were also «minted by private institutions» (Mukherjee 2012, p. 215). The strengthening of nation-states brought back state coinage monopolies.Gold was the preferred form of money because of its rarity, durability, divisibility, fungibility, and ease of identification, often in combination with silver. Silver was usually the main medium of circulation, and gold was the cash reserve. Commodity money was anonymous 16 .

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“…The concept of free banking has a long history. Countries in which it has been applied include Scotland (1716Scotland ( -1845, Switzerland (1851Switzerland ( -1906, Sweden (1830Sweden ( -1860Sweden ( , and 1860Sweden ( -1902 and the USA (1837-1863) (Rolnick and Weber, 1983;Gorton, 1985;Lakomaa, 2007). Its characteristics are that there is no central bank that acts as a lender of last resort, banks competitively issue their own currencies and there are no additional banking laws to augment those applicable to companies.…”

Section: Introductionmentioning

confidence: 99%

Free banking theory: literature review and relevance to the regulation of cryptocurrencies debate

Norton

2024

JFRC

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Purpose Free banking theory, as developed in Adam Smith’s 1776 treatise, “The Wealth of Nations” is a useful tool in determining the extent to which the “invisible hand of the market” should prevail in regulatory policy. The purpose of this study is to provide a timely review of the literature, evaluating the theory’s relevance to regulation of financial technology generally and cryptocurrencies (cryptos) specifically. Design/methodology/approach The methodology is qualitative, applying free banking theory as developed in the literature to technology-defined environments. Recent legislative developments in the regulation of cryptocurrencies in the UK, European Union and the USA, are drawn upon. Findings Participants in volatile cryptocurrency markets should bear the consequences of inadvisable investments in accordance with free banking theory. The decentralised nature of cryptocurrencies and the exchanges on which these are traded militate against coordinated oversight by central banks, supporting a qualified free banking approach. Differences regarding statutory definitions of cryptos as units of exchange, tokens or investment securities and the propensity of these to transition between categories across the business cycle render attempts at concerted classification at the international level problematic. Prevention of criminality through extension of Suspicious Activity Reporting to exchanges and intermediaries should be the principal objective of policymakers, rather than definitions of evolving products that risk stifling technological innovation. Originality/value The study proposes that instead of a traditional regulatory approach to cryptos, which emphasises holders’ safety and compensation, a free banking approach combined with a focus on criminality would be a more effective and pragmatic way forward.

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Free Banking in Sweden 1830–1903: Experience and Debate

Cited by 9 publications

References 4 publications

Can regulations prevent financial crises? Uses of the past in the evolution of regulatory reforms in Sweden

Can regulations prevent financial crises? Uses of the past in the evolution of regulatory reforms in Sweden

SECTION 8. Stablecoins & CBDCs as private & public money: confront or co-exist?

Free banking theory: literature review and relevance to the regulation of cryptocurrencies debate

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