This article originally appeared at The Hill. Click here to read the full story.
By Ike Brannon
The government monopoly on money is a relatively recent phenomenon. Until the creation of the Federal Reserve just over 100 years ago, private banks could issue notes backed by gold that functioned akin to money.
The era of government money has not been without some growing pains: The Fed’s reluctance to extend credit to cash-strapped banks in the aftermath of the stock market crash of 1929 was the proximate cause of the great recession, despite the fact that preventing such a thing was the main motivation for creating the Fed in the first place. The 1970s stagflation, as well as the severe recession of the early 1980s that ended the inflationary spiral of the previous decade, was also a direct result of the Fed’s actions.