The present financial crisis shows how central banks can fuel the financial booms that make severe busts possible. Unfortunately, theoretical discussions of central banking badly neglect its role in fostering financial instability, in part because they ignore its history and political origins.

George A. Selgin is Professor Emeritus of Economics at the University of Georgia, Director of the Center for Monetary and Financial Alternatives at the Cato Institute, and former Research Fellow at the Independent Institute.
Banking and FinanceEconomic PolicyEconomyFiscal Policy/DebtGovernment and PoliticsPolitical History
Other Independent Review articles by George A. Selgin
Fall 2013 The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy’s Only Hope
Summer 2011 They Stumble Who Run Fast: Roubini and Mihm’s Crisis Economics
Summer 2000 Should We Let Banks Create Money?