Why have a Central Bank?

[Jon_Irenicus]

Churchill was, no offense, full of shit. The statement is all the more wrong when taken with regard to the Fed. Really? Central banking is the best we’ve ever tried? Relative to what? In terms of what? Oh right. “Stability” and “liquidity”. There is only one correct answer wrt money: let the market decide. We’ve had enough of idiotic blowhards and their econometric models.

-Jon

[liberty_student]

PhCrawford,

Your post has a lot of inaccuracies. I recommend you research banking threads here, and get acclimated to the where the conversation is at. A lot of your post could end up being very misleading to Ron in his quest for understanding.

[Juan]

@PhCrawford

A banking system - any banking system - creates money in the form of checking accounts. This money arises from debt.

Only fractional reserve banking does that. And it’s debatable whether such ‘money’ really deserves to be called money.

A 100% reserve system would not permit banks to lend out any money at all from deposits;

False. As a matter of fact, the only way a bank can properly work is by lending ‘real’ money that it borrows from some of its clients. In a full reserve system timed deposits would be a different kind of contract from deposits available on demand.

It is not at all clear that this would be a better system,

Well if property rights, sound money and no business cycle are bad things then full reserve banking is probably a bad idea…

all loans would have to be funded by money raised in capital markets.

All loans would certainly have to be funded by real wealth, not by funny papers. This funding loans through real savings is a key feature of capitalism, you know.

Using gold for the 100% percent reserve would create its own problems, since the supply of gold rarely matches the growth in the economy.

Why should the supply of gold ‘match’ the growth of the economy ? Oh wait, we can’t have ‘deflation’ can we ?

[billott1]

It isn’t a smoke screen for inflation, central banking is the cause. The reason for central banking is too fold:

1. The friends of the central bank get the benefits of Seniorage-Money created from thin air whose value comes from reducing the value of the current money outstanding.

2. The central bank steals money from the current money holders (Wage Earners) by reducing the value of their money holdings.

[Bostwick]

@Ron

Hi Jon,

Thanks for responding. If the Fed is part of the government why is it owned and controlled by major private financial instutions and why does the Fed purchase government securities. It makes no sense to me for the government to borrow from itself money created out of thin air when it has the power to create money the same way without becoming indebted.

These are all formalities.

The Fed may have nominal “private owners” but do not control it. The federal government does.

The Fed is valuable to the banksters because it administers the nationalized banking system.