Question

What was so historic about free banking and strict security-backed banknotes?

Answer 1

1. During the free bank, the banks were short-lived compared to today’s commercial banks, with an average lifespan of five years. Half of the banks failed, and about a third of which went out of business because they could not redeem their notes.

During the free banks era, local banks took over the functions of a central bank. In New York, the New York Safety provided deposits insurance for member banks.

Security backed bank notes promised to provide abundant circulation: and could collect interest from the securities that they had deposited as well as from lending their notes.