Abstract: Illinois Free Banks, 1851-1865
Free banking had been consigned to oblivion until Friedrich Hayek proposed the concept of "denationalized currency." Study of free banks, therefore, helps to render a full understanding of American financial history. This essay, by melding economic issues with overall historical trends, seeks to investigate free banks' historical background and their influence on Illinois. Employing tools from economics and history, this paper analyzes the accounting statements of Illinois free banks and examines related indices such as discounts on banks notes, prices of exchanges, and banks' life span to assess their performance. The development of free banking, furthermore, was intertwined with the confrontation between the Whig-Republican and Democratic parties, economic changes in the nineteenth century, and the rise of corporations, as well as the transportation revolution. On the whole, investigating Illinois free banks helps to assess the performance of the free banking system, allowing us to get a glimpse of nineteenth-century Illinois history from the perspective of its free banking experience.