Suppose for a moment that Republican Congressman and presidential candidate, Ron Paul's fondest wish came true, and the Federal Reserve Bank was not only audited but closed down.
As far-fetched as such a notion may seem, it would not be the first time in our nation's history that a central bank has been shuttered.
For all the Fed's imposing grandeur, Ben Bernanke is running our third (albeit longest-running) try at a central bank. This country has lived without a central bank before and, if given the chance, could do so again. Most every American (led by Paul Krugman), though, would be horrified at the thought.
There are certain functions that, due to their nature, many would argue can only be provided by the political authorities — police and fire protection are the prime examples that come to mind. To the majority of modern men, central banking is without any doubt another.
Yet, history tells us that it need not be a government-run affair — private individuals acting outside the bounds of political control have proven entirely capable of providing much the same functions as a central bank, and at a far lower cost, no less.
Such was the case with the Suffolk banking system, operated out of Boston from 1824 to 1858. (source)
Read about the Suffolk Banking system here.
In a research piece published by the Federal Reserve Bank of Minneapolis in 2000, the authors ended with the question, "Is there a need for a government-sponsored central bank?"
Considering the fact the Suffolk system "grew up without any act of the legislature" we have our answer: "not at all.”