Central banks weren't really invented to prevent catastrophes. They don't really help with that.
Banks (and especially their customers) are perfectly capable of regulating themselves.
The Fed was [1]. And it empirically does.
> Banks (and especially their customers) are perfectly capable of regulating themselves
Free banking, and more recently crypto, prove the opposite.
Yes, they used that specific panic as an excuse for starting the Fed. But that's a bit like saying WWI was caused by some specific crisis (like the assassination of Franz Ferdinand). Those happened all the time, but typically didn't lead to a war.
Btw, that panic was long over by the time the Fed was established.
In any case, empirically the US had more and worse recessions and crises after the Fed was created than before. See https://www.cato.org/sites/cato.org/files/serials/files/cato... and https://www.fte.org/wp-content/uploads/WhiteSelginLastrapesF... and
Because J.P. Morgan personally bailed out the banks.
> empirically the US had more and worse recessions and crises after the Fed was created than before
FFS, Cato didn't scale their data. (Selgin also blames the S&L crisis on the Fed and FDIC, which doesn't make sense.)
Why not?
Except the Federal Reserve wasn't even the first central bank of the US:
* https://en.wikipedia.org/wiki/First_Bank_of_the_United_State...
* https://en.wikipedia.org/wiki/Second_Bank_of_the_United_Stat...
The Fed is primarily a clearing house and lender of last resort, which is needed because having individuals like JP Morgan rescue the financial system when it goes haywire stopped being possible long ago.
* https://en.wikipedia.org/wiki/Panic_of_1907#J._P._Morgan
> In any case, empirically the US had more and worse recessions and crises after the Fed was created than before.
Count how many times the word "panic" occurs before the Fed was formed (1913) versus after:
* https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
* https://en.wikipedia.org/wiki/List_of_economic_crises#18th_c...
I cannot fathom how someone can think the US has had it worse economically post-WW1 (and especially post-WW2) than pre-WW1.
The Canadians never had such crises, and neither did they have a central bank. The American banking system was uniquely fragile, thanks to its widespread bans on branch banking: if most or all of your banks only have a single office in a single city, they are bound to be more fragile.
> Count how many times the word "panic" occurs before the Fed was formed (1913) versus after:
Language evolves?
Recessions were deeper after the Fed was established.
Btw, have a look at this https://www.econlib.org/archives/2011/12/why_no_mini-rec.htm...
It should be pretty telling that the duration between recessions is growing.
In the 20th century it got even worse, with (effectively government backed) deposit insurance becoming popular: it removed most of the incentives customers had for regulating the safety of their banks.