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There is no such thing as free market banking. Prior to 1913, the money supply was fixed to gold. Therefore, the supply was limited based on the amount of gold reserves held by the bank. This is an artificial constraint on supply, not a free market system.

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Oh, it's every bit a free market system. The banks all issue their own currencies. All the government did was equate the dollar to so many oz of gold. The government did not fix the supply of gold. Only the exchange rate.

The supply of gold varied, by quite a bit. See the various gold rushes and the resulting inflation/deflation.

Centrals banks nowadays don't fix the supply of reserves neither. Only the interest rate.

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