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Government and Private E-Money-Like Systems: Federal Reserve Notes and National Bank Notes

Warren Weber

Staff Working Papers from Bank of Canada

Abstract: The period from 1914 to 1935 in the United States is unique in that it was the only time that both privately-issued bank notes (national bank notes) and central bank-issued bank notes (Federal Reserve notes) were simultaneously in circulation. This paper describes some lessons relevant to e-money from the U.S. experience during this period. It argues that Federal Reserve notes were not issued to be a superior currency to national bank notes. Rather, they were issued to enable the Federal Reserve System to act as a lender of last resort in times of financial stress. It also argues that the reason to eventually eliminate national bank notes was that they were potentially a source of bank reserves. As such, they could have threatened the Federal Reserve System’s control of the reserves of the banking system and thereby the Fed’s control of monetary policy.

Keywords: Bank notes; E-Money; Financial services (search for similar items in EconPapers)
JEL-codes: E E4 E41 E42 E5 E58 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015
New Economics Papers: this item is included in nep-his, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:15-18

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