Central Banking is a complete con.
That’s quite a claim you might say. And I would have to agree. It’s certainly a bold statement and it’s probably a controversial one also. But let me see if I can’t back up this claim with some sound reasoning.
First, let’s look at the business of government. What is it that governments should be doing? I shall try and outline this as best I can. I’m going to speak in general terms. This is not country specific, but can be broadly applied to the different countries of the world, making adjustments where necessary.
Governments are supposed to work on behalf of the populace making sure that the economy is doing well. Managing the economic side of things is one of their main tasks. And it’s a very important task at that. Because if they don’t manage the nation’s economy properly, then all other things go awry. Sound familiar? Anyway, let’s not get side-tracked.
They also manage other things such as defence, welfare, the health care systems, infrastructure, policing etc.
One a regular basis, all this activity is costed and put forward in budget proposals.
But the big question is, how do they pay for all these things? Well, in certain respects, it could be argued that they don’t. The costs are passed on - from the government to the ordinary person. Basically, the people pay for it in the form of taxation. In this operation, the burden of cost is successfully transferred from governments the people. There are obvious ramifications of this such as responsibility and accountability which I won’t go into here. That is perhaps a topic for another discussion.
This taxation operation might be more obvious by looking at what happened in bygone days. If the king of a country wanted to go to war, he would have to raise an army. But first, he would have to raise some money, because armies are expensive. So, in order to pay for the army, he would get the money by means of taxation. More often than not, taxes would be raised. And I dare say to the disgruntlement of the common folk of the country. Not only did they have to fight in the kings’ wars, they had to pay for them as well. This perhaps should also be a good topic for a discourse.
Something similar still happens nowadays. If the governments want to pay for a particular project, they put forward a proposal and then the government pledges to fund the project via taxation. All well and good so far, you might say. Nothing untoward as yet.
Where does the Central Bank come in to all this, you might ask.
Knowing this is how governments operate, Central Banks spied a way of making money. What the Central Banks did was to cleverly interpose themselves as a third party in this transaction. They made sure that the governments borrow from them. So, rather than the government borrowing money from the future and raising funds that way, the Central Bank lends them the money. And they charged them interest to boot for the pleasure of this service.
I don’t know if I have explain
