Free Banking: Theory, History and a Laissez-Faire Model (Larry J. Sechrest)

Free Banking: Theory, History and a Laissez-Faire Model (Larry J. Sechrest)
- Highlight Loc. 1308-12  | Added on Friday, October 28, 2011, 03:05 PM

As both Selgin (1988a, 54–55) and Horwitz (1990, 4–6) argue, the demand for inside money represents voluntary (not forced) savings on the part of consumers. Consumers let their cash balances rise by choosing to refrain from acts of consumption. This is unavoidable as long as consumers must give up real goods in order to acquire money. In particular, by not redeeming the deposit accounts or banknotes they hold, consumers leave more specie reserves in the hands of banks, “which is equivalent to a very short term act of savings” (Horwitz 1990, 4).