CIRJE-J-53. Omori, Takuma, "Historical Experiment and Significance of Suffolk Banking System", May 2001.

This paper is a detailed historical survey of Suffolk Banking System. The System is a voluntary and private bank note clearing system in New England at the dawn of American capitalism, and continued for about 40 years (1819-1858). Managing this System by the Suffolk Bank in Boston, cash reserves of New England Banks were fixed on the Suffolk Bank. Besides every bank note value, issued by New England Banks, was not depreciated but defended perfectly. So currency and credit order in New England was more stabilized than other districts in the then United States. Therefore, this historical experiment has been successfully evaluated as "Laissez- Faire efficient payment system", and has given strong support to Hayekian free-banking theory.

However, that evaluation is open to question. In this survey, it is clarified the historical-limited dynamic structure of Suffolk Banking System in connection with business cycle, the Suffolk Bank's business performance (analyzing the Bank's balance sheet), public state government's ratification, and inter-bank strained corresponding network. So it is demonstrated that the System surged unstably because was tossed about the business cycle and the discordance between the Suffolk Bank and participating banks, not always as "Laissez- Faire efficient payment system." And it's argued about the institutional inheritance from Suffolk Banking System to National Banking System and Federal Reserve System.