I was hoping someone might clarify something for me…this is more of a historical question pertaining to a commodity backed banking system. Does a central bank issue fiduciary media on top of the reserves of its member banks? For example, say a banking system had a total of 1 million monetary units, which, with the creation of a central bank, a large portion of is kept at the central bank’s storehouse. Member banks (w a 10% reserve requirement) can inflate to a maximum of 10 million mu. Now, does the central bank also inflate on top of its member bank’s reserves?
I haven’t been able to find much literature devoted to this topic…Rothbard mentions it briefly in passing in America’s Great Depression (30), and cites a book Banking and the Business Cycle (24-28) (which is thankfully at Mises.org).
I am doing reserch on Britain’s banking system during the early industrial period and am just trying to get my head around how the mere existence of the Bank of England provided the wherewithal to inflate beyond what normal fractional resere banking could. Any help is greatly appreciated. Thanks!