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Central Banks

Mixed aims of a central bank

Central banks tend to have 2 opposing mandates
  1. Keep inflation low
  2. Keep employment high
Keeping inflation low means raising interest rates, keeping employment high means lowering interest rates.

This means in effect it has no mandate, can always point to one or another mandate to justify setting rates anywhere it likes

A central bank destroys value

Inflation is a thief.

If the bank has an inflation target of 2%. That doesn't sound very much, but let’s say the central bank could actually hit its target. If you had £100 in year 1, it would be worth approximately 98 pounds in year 2. 
By year 20, it would have lost a 1/3 of its value at 66 pounds, or put another way, things would cost 
50% more!
It’s an emptying of your wallet to the central bank vaults.

The bank destroys savings culture

You can avoid the banks grasp and theft (by theft we mean inflation) and even benefit from it. The 
answer is simple, don’t save. Bring your spending forward, even better if you borrow, because your 
debt will be eroded away by inflation.
No wonder society doesn't have enough for retirement, abysmal savings rates and a housing bubble.
We are slowly spending ourselves out of prosperity.

The bank makes it hard to plan

Inflation is not inevitable. The problem is how can firms and individuals plan when the central bank is 
messing round with prices. It’s a nightmare for business and investment, resulting in fewer jobs for all.
It also causes endless conflict between employers and employees about how much their pay should 
increase by each year, quite often building resentment and destabilising the workforce.
The reason itself for the inflation target is laughable – it’s price stability, but if they really wanted price 
stability they would set the inflation target to 0, not 2%!
Inflation is not inevitable. 

The bank causes reckless acts

The bank enables government deficits

When the government does not have the courage to raise taxes, it taxes by stealth. The 
favoured method is printing money. This is part of the cause of our current economic woes. 
Government debt is rising at an eye-watering pace. We are slowly spending ourselves out of 
prosperity.

The bank enables bailouts

Bailouts are a transfer from the poor to the rich. The central bank guarantees deposits, so that people 
don’t care how dodgy the organisation they bank with is, leading to moral hazard. Banks also 
know they will be bailed out, meaning they are more likely to engage in risky behaviour. This 
should be obvious to all given recent events.

The central bank is a ponzi scheme, pure and simple.

A ponzi scheme is where those who partake at the beginning benefit at the cost of those who 
partake last. The central bank could never exchange all the pounds for items of similar value. It is a 
form of child abuse.

Interest rates are set at the wrong level.

If you set interest rates too high or low, you will have a mismatch of lenders but no borrowers. 
This stagnates the economy, as those who would have borrowed money and employed others 
will not do so or loans will be harshly rationed.

For a Central bank who cannot even meet their own inflation targets, what hope do they have of ever 
getting the interest rate right?

Morality of Fiat money

Is it any more moral to dilute the money in your wallet than the farmer to dilute the milk with water?
The Central bank is a monopoly mandated by law(legal tender), would people use the money if they were not forced to?

Ron Paul on the Federal Reserve. 

Ron paul on the Federal reserve



 Although boring he lists almost every problem created by the US federal reserve.

House Financial Services Committee


Issues raised
  • No transparency from the fed
  • The fed steals money from the population
  • Inflation hurts those with the least
  • Free markets and free trade are blamed when a currency is in trouble
  • Prosperity is not built on the GDP, but on productive capacity
  • Inflation statistics do not necessarily reflect purchasing power
  • People who get the money first benefit most, and this is not the average Joe
  • No auditing
  • No authority for Fed in the constitution
  • Central banks causes the business cycle
  • Central banks use Fiat money, rather than asset backed money

Ron Paul on a weak currency


  • A sound economy requires a sound currency - Central banks like a weak currency
  • Savers are hurt by a weak currency

Jon Stewart interviews Alan Greenspan

American viewers only sorry
  • Markets move based on expectations
  • Why are we adjusting the interest rates if we live in a free market? Alan Greenspan agrees we do not have a free market.
  • "Excuse for central bank is that the gold standard was ""limiting"" the economy. So the central bank want to control prices and adjusts the interest rates to inflate the economy."
  • Greenspan thinks a sound money system is to keep confidence.

Ron Paul on Mad money

Ron Paul on Mad Money

  • The US central bank is more secret than the CIA
  • There is no punishment for central banks when thye screw up, and they do screw up just like you, me, business and government.

Ron Paul Lecturing Ben Bernanke

Ron Paul Lectures Ben Bernanke

  • Prices are a function of the value of the dollar
  • People mistakenly refer to prices as the problem, not money
  • Inflation comes from the supply of money and credit
  • Governments like to purposely debase currencies
  • This destroys capital and the incentive to save.
  • Destroying the value of money is immoral.

Critique on the monetary system

Most of the interesting stuff on the first half.
  • What is money, the thing we base our employment, education and sometimes relationships
  • Money is a medium of exchange. Unit of measure. A standard of value, Way of storing value.
  • Money can be intrinsic or Fiat.
  • Fiat money has no value in of itself
  • Credit is not money, it is a creation of extra money. I borrow 100 off bank, give to you for your car, you deposit the 100 in the bank. Physical Money supply is constant but now there is 100 credit in the system.
  • Debt = Money , since a dollar is just a promise to pay, an IOU
  • A majority of money is created by fraction reserve banking.
  • If all the bank loans were paid , we could not have a bank deposit.
  • Our money supply is not a free market system, it is debt slavery, due to the above comments
  • "Legislative crime" bill introduced that are criminal

Gold standard


The money masters

Movie is slow and boring and covers somethings better covered in "the evolution of money"  But is a basic timeline with parallels on the creation of money. The last 35 mins is quite good

The central bank determines what your car, and house payments will be, if you have a job, is is the largest Creditor.
18 mins in, it explains how banking and fractional reserves began
The bank of England was allowed to borrow as much as it wanted, secured by the taxpayers taxes
Plutocracy ... rule by the rich
The central bank caused booms and busts, the very thing they are supposed to prevent.
Depressions always occur in conjuction with a contraction in the money supply.


Other

Once extra money has been put in circulation, it is difficult to pull it out.
Subpages (1): Bank of England
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