[eru]

For comparison, https://www.alt-m.org/2015/04/28/what-you-should-know-about-... :

> Australia. Operating with few restrictions, Australian banks were large, widely branched, and competitive, and they practiced mutual par acceptance, making the system resemble Scotland’s. The Australian episode is of special interest for suffering the worst financial crisis known under a free-banking system. After a decade-long real estate boom came to an end in 1891, some building societies and land banks failed, after which 13 of 26 trading banks suspended payments in early 1893. George Selgin (1992a) finds that the banks’ reserve ratios do not indicate any overexpansion of bank liabilities during the boom, though some banks clearly made bad loans. The boom was rather financed by British capital inflows, which suddenly stopped after the Baring crisis of 1890. Kevin Dowd (1992) adds that the banks were not undercapitalized. He argues that “misguided government intervention” in the first failed institutions “needlessly undermined public confidence” in other banks, while other interventions boosted the number of suspensions (all but one of the suspended banks soon reopened) by providing favorable reorganization terms for banks in suspension. (For a different view, see Turner and Hickson (2002).

I don't understand your second paragraph. You can have free banking in a gold standard or in a fiat regime. The historic free banking episodes regularly cited were in a gold standard setting. (But perhaps the confusion comes from 'Internet-Austrians' common insistence on 100% reserve banking as a mandatory feature of what they'd call a gold standard?)

(Bitcoin in its current parameters is more or less trying to imitate a gold standard.)

[notahacker]

You seemed to understand my second paragraph pretty well tbh.

Internet Austrians and Bitcoiners believe that what is used as money should be a commodity with highly constrained supply, hence full reserve requirements for the former and a unified ledger and no credit-creation mechanism for the latter. Free bankers (and some altcoiners, and the economic mainstream) believe that what is used as money should be a promise from a financial institution with a flexible supply based on credit creation (disagreeing with each other on whether it's best backstopped by convertibility to a [quasi]commodity or central bank reserves under stricter regulations)

Free banking fanatics' arguments that Australian free banking practices were fundamentally sound and systematic collapse happened only because the government saved some of the worst ones should be taken with the same pinch of salt as anarchists' claims that people are fundamentally non-violent with crime occuring mainly as a reaction to police brutality.

[eru]

Sure, it's good to be wary. Though even blaming any crises at the end of free banking episodes, still seems to leave a pretty good track record overall.

As an aside:

Reading about how free banking can automatically can adjust the amount of bank money created over eg a fixed amount of gold to keep nominal GDP stable even in the face of eg increased demands for holding money from the general population, made me much more sympathetic to bitcoin's fixed supply than I'd been before. Since some kind of inflation, price level or nGDP targeting seemed like a good idea for a currency regime, and I could only assume that bitcoin was bound to fail before.

Of course, the mechanism George Selgin describes don't necessarily have to work that way. But at least it's something that looks plausible.