The financial crisis of not long ago has not surprisingly generated a great deal of anguish within the electorate. Americans were and continue to be a skeptical lot when it comes to the competence of the various federal bureaucracies which dot the Washington, DC landscape. Despite their skepticism about the competence of regulators, they were still disappointed when those empowered to oversee our financial system were seemingly caught unware by a banking collapse central banking has been neither necessary nor sufficient for the development of a modern economy and financial system.
It’s primary function is to defraud the population for the benefit of the government, and the government’s pet favourites, such as the military/industrial complex, the bankers themselves and whoever the government thinks it can bribe for votes. It’s literally that corrupt. The reason it can go on under our very noses is because most people don’t understand it. What a central bank does is inflate the supply of money or money substitutes, in other words, it dilutes the existing stock of money by printing more pieces of paper and calling it money.
This causes a number of serious negative side-effects. The first one is that it causes a drop in the value of money. Your money is worth less. That’s why the dollar has lost 94 percent of its value since the Federal Reserve was started in 1913. Considering one of the main purposes of the federal reserve is to stabilise prices, we must conclude that it has been a complete failure, compared to the absence of a central bank.
The second negative effect is that inflation is government’s main means of funding wars which apart from being supremely immoral, are also extremely destructive of wealth. The USA has become a nation of perpetual war in case you haven’t noticed. The third negative effect is that all the central bank is doing is re-distributing wealth. It’s not creating wealth – if it was, we would have found a way to create wealth by stamping pieces of paper. We haven’t.
All it does is take property from people who own it, and give it entire industries who live at the expense of the productive classes. Basically the central bank enables governments to loot the savings of the entire population without having to bother rifling their pockets to do it. The fourth negative effect is that the newly printed money creates a bubble in the sector where it enters the economy. That’s why there was a bubble in the housing sector – because that’s where government was injecting the money.
The bubble draws capital away from actual productive activity, such as growing food, or making medicine, and channels it into wasteful activity like making condominiums with gold faucets and five bathrooms. This is because the bubble makes activity appear profitable that, absent the manipulation of the money supply, would be seen to be loss-making (think, for example, investing in real estate during the bubble. The profits made by the speculators and financiers come from skimming the wages of millions of people too poor to own their own house, all courtesy of the central bank).
The fifth negative effect is it distorts the capital structure, in other words, it causes massive dislocation between where people *are* and where people would be productively employed. The boom collapses into the bust with its bankruptcies, unemployment, homelessness, family breakdown, suicide, hardship, depression and ruined lives – all while the privileged continue slurping at the trough. The sixth negative effect is moral. The policy of credit expansion corrupts the entire value system of society. It punishes work, savings, individual responsibility and building a future.
It rewards debt, consumption, instant grat, speculation and political favouritism. The declared purpose of the Fed is full employment. In the time since the Fed has been on the job, we have had the two biggest depressions and highest unemployment in the history of the world. The justifications given for the central bank – that it is necessary for government to “manage” the economy, presupposes that government has a competence to manage the economy in the first place. There is neither evidence nor reason to support this supposition.
The reason economists have the gall to try to justify this institutionalised fraud is because most of them rely, directly or indirectly, on the Federal Reserve or the federal government for their privileged existence. They are like the high priests of old preaching to the masses that Pharaoh can do no wrong even while he and his acolytes live at their expense -Central bank as a lender of last resort: Nobody likes runs on the bank, and if a bank is practicing fractional reserve lending it’s a possibility. But why can’t we have a network of private lenders of last resort instead of a central bank?
-Setting interest rates: How can the central bank know what interest rates should be any better than the free market? I understand the Keynesian approach and that low interest rates can spur spending and investment, but can’t this alternatively be done by the government by cutting taxes/increasing spending? -Controlling creation of new currency, quantitative easing, etc… : This is the part I’m most confused about. Maybe related to the last point, but why does there need to be a central bank to tell the treasury when to turn the dollar bill machine on? .