Ludwig von Mises Institute - Don't Blame the Federal Reserve
This opinion piece doesn't so much critique central banking as propose a positive account of the outcomes when eliminating it and letting the free market of loan demand be the money supply. After railing against regulatory reformers and those who propose an alternate system, the author goes on to offer an alternate system. The first charge is that the central bank can't stop the boom/bust cycle through its instruments, and further that regulation is ineffective since regulators are captured by the industry they regulate. The second argument is that regulation "dulls the conscience" since market players would abide only by the letter of the law, not the spirit.
The positive account claims that money, just like most other commodities, doesn't need to be created "top-down" by central banks, but instead be supplied "bottom-up" by its demand within the market. The primary harm the author identifies from central bank operations is currency devaluation through allowing inflation. Eliminating the central bank would (most likely) return the money to being based on some sort of commodity, like gold. Author believes this would stabilize it against other currencies and against inflation. The second upshot of eliminating central banking would be that commercial banks couldn't use fractional reserve banking, meaning that they loan out more money than they take in. Therefore, banks wouldn't take on additional risk, but of course the money supply would contract significantly. Author believes that the shadow banking system would then take its place, with private equity, bond issuance, and other non-banking investments supplying for loan demand. This would greatly reduce systemic risk to the credit system. In essence, this is a call to separate "money from credit creation".
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