May be, it is not new question, but please help me: why there was crisis before central banks?
Of course, there was FRB, but competition had to eliminate banks, which used FRB?
How was it possible on a free market to create busts?
what ‘crisis’ are you thinking of?
There was no free market before the Fed. If not a central bank, there was always some other privilege. The best book on this matter for beginners is “The Mystery of Banking” by Murray Rothbard. Look for it here in pdf.
Name your crisis or panic and do a search of it on this forum or the main site, and you’ll pretty much find discussion on it.
Yes, there are always bust and boom cycles where banks use a fractional reserve process on demand deposits.
The “free market” does not create busts. Busts are the result of suppliers alligning their productive capacity to consumer demand. The distortions are cause by Fractional Reserve Banking which is the process of taking a deposit and keeping a fraction on reserve then loaning the rest. The loaned money is new money that consumers use it to purchase things that they would not have been given credit to purchase had there not been this new money. So you have a two pronged bust building as consumers loan more and more money until they can not afford to pay it back all the while suppliers rush to satisfy demand created by consumers with the money. Once defaults start and consumer demand declines, the suppliers must reallign their production as they face declining prices.
You can have recessions without central banks and FRB, but you can’t have recurring boom-bust cycles. There are others who believe you can eliminate business cycles without eliminating FRB.
The Bank of England was set up in the 17th century as the first central bank with the purpose of expanding fractional reserve banking. Since England was the center of global trade (much like Wall Street was in the 20th century), then every country suffered depressions triggered by the Bank of England, even if they did engage in credit expansion themselves. Much the same way today, countries with trade ties with the USA are suffering from a depression.
Business cycles are the result of differences between the market rate of interest and the natural rate. So while its theoretically possible for a boom to be created on the free market, it isn’t really plausible. Every historic case can be rooted in some form of privilege or interference from the government distorting the inter-temporal market for present goods versus future goods.