Post-Keynesians disagree about whether money is intrinsically endogenous, or whether it has become endogenous over time with the emergence of modern central banking. In this chapter, monetary history and institutional analysis are brought to bear on the issue. The chapter examines two early monetary systems that lacked central banks: metallic money in fifteenth- to seventeenth-century western Europe, and paper money in eighteenth-century Britain and British North America. These systems are found to have been imperfectly endogenous, owing to inadequacies in their mechanics of supply. Furthermore, endogeneity did not evolve in an unremittingly forward path historically, as the literature suggests: in some respects, metallic-money systems were more flexible than paper-money systems.
The First and Second Banks of the US (1791–1811 and 1816–1836 respectively) provide historical examples of quasi central banking institutions that fulfilled purposes beyond and other than monetary stabilization. Both Banks were chartered and organized for the purpose of addressing postwar public finance problems facing a young national government seeking to establish its independence from external powers and its internal integrity as a national entity. Both Banks performed monetary stabilization services as well, as a by-product of their public finance and nation-building roles.
For Basil Moore and post-Keynesians who have followed him in developing the theory of endogenous money, accommodative central-bank behavior is a logical necessity in credit-money economies. Such central banks have no choice but to accommodate the banking system's demand for liquidity. Accommodative central banking evolved through a historical process, as this paper shows for the specific case of the US economy. The road to accommodative central banking was a long one in the US, marked by failed experiments with alternative institutional regimes: the Second Bank of the US of the early national period, the urban clearing-houses of the late nineteenth century, and the early Federal Reserve.