I am new to Austrian Economics and this may be an obvious question or one that gets asked a lot, and if it is I am sorry. I looked up the history of recessions in the United States before and after 1913, and it seems as if there are less and shorter recessions after the Fed was created. I am wondering the reason for this. Was there some other form of Central Bank before the Fed that spurred these recessions, or do we have less now simply because we have a stronger and stablier economy. I am very confused any response from someone knowledgable in Austrian Economics would be greatly appreciated.
The Fed wasn't our first central bank, it was our third. Secondly banking has been under the federal government's thumb since 1863 or so. Even before that the individual states had a system of charters that was in large part due to Jackson's economic policies.
I don't know the history, so I can't comment on this part. However, re: "stronger and stabler economy"---I'd say "strong and stable" have much to do with the extent to which an economy is free markets vs. regulated markets (and any other artificial interferences by government).
As for the question of "strong and stable" relative to an economy's size, I have no idea. For example, if "government interference" could be quantified somehow, and one is comparing the "strength and stability" of two different economies...
(1) economy A:
(a) "government interference" = 45%;
(b) output = 5 trillion
(2) economy B:
(a) "government interference" = 65%;
(b) output = 10 trillion
Which economy is more stable, ceteris paribus? I'm not sure.
Lots of recessions of the 19th century are classified as such because they experienced deflation, and as every mainstream economist knows, deflation means the end of the world. The 1870's experienced the so called "Long Depression" that started in 1873 and supposedly ended 6 years later. In his book "A History of Money and Banking in the United States" Murray Rothbard dispels of the idea that there really was a "Long Depression" (http://mises.org/books/historyofmoney.pdf pg 154-155). Industrial Production during that decade was done for a good number of years, but was higher at the end of the decade than at the beginning (I want to say the index numbers were 29 and 42 for the beginning and end of the decade respectively, but I don't remember off the top of my head).
The 1880's arguably saw the largest rise in real wages in the country's history.
Also Both the 1st and 2nd Bank of the US were around in the 19th century. After the civil war the national banking system was enacted which, although wasn't central banking per se, was centralized banking. Even when there was so called "free banking" many state governments would allow banks to suspend specie payments which set up moral hazards for the next crises.
In addition to the remarks above, wars of this era were very disruptive to the economy. The federal government would often abandon any ties to the gold standard that it had which of course led to periods of high inflation.
So in the united states have we never really had free banking?
We did after the Bank of North America was abolished and until 1791 then from 1811-1816.
Also, there were recessions during the state chartered banking era and the National Banking era because of fractional reserve banking.
What depression in the 19th century was longer than the Great Depression that lasted about 16 years?
"So in the united states have we never really had free banking?"
Pretty much, someone else mentioned that between the first two bank charters by the Feds we had free banking, but other charters by the state during wartime kind of dismisses that notion. Rothbard probably talked about it in more detail in The Panic of 1819, I don't really remember.