Portrait of Vera C. Smith

Vera Smith on Central Banking and the Scottish System

Found in: The Rationale of Central Banking and the Free Banking Alternative

Vera Smith, in her 1936 book, The Rationale of Central Banking and the Free Banking Alternative, not only discussed the historical and intellectual evolution of the idea of central banking in the economies of England, USA, France, and Germany, she also explored the alternatives. In her book, she proposes the idea of free banking as an alternative to the increasing centralization in banking in those countries. Furthermore, Smith highlighted the case of the Scottish banking system for good part of the eighteenth and nineteenth centuries (1716-1845) as an actual historical example of free banking:

Money & Banking

The Scottish system developed certain characteristics which early distinguished it from the systems in other countries. There was keen competition between the banks and they kept very strictly to the practice of regularly clearing each other’s notes; exchanges were made twice a week and the balances immediately settled. They adopted branch organisation almost from the beginning, and there was, as compared with other countries, a much more rapid growth of deposit banking and development of loan technique. (FROM: CHAPTER III: The Scottish System) - Vera C. Smith