• Tag Archives Central Banking
  • How Central Banking Increased Inequality

    Although today high levels of inequality in the United States remain a pressing concern for a large swath of the population, monetary policy and credit expansion are rarely mentioned as a likely source of rising wealth and income inequality. Focusing almost exclusively on consumer price inflation, many economists have overlooked the redistributive effects of money creation through other channels. One of these channels is asset price inflation and the growth of the financial sector.
    The rise in income inequality over the past 30 years has to a significant extent been the product of monetary policies fueling a series of asset price bubbles. Whenever the market booms, the share of income going to those at the very top increases. When the boom goes bust, that share drops somewhat, but then it comes roaring back even higher with the next asset bubble.
    The Cantillon Effect The redistributive effects of money creation were called Cantillon effects by Mark Blaug after the Franco-Irish economist Richard Cantillon who experienced the effect of inflation under the paper money system of John Law at the beginning of the 18th century.1 Cantillon explained that the first ones to receive the newly created money see their incomes rise whereas the last ones to receive the newly created money see their purchasing power decline as consumer price inflation comes about.
    Following Cantillon and contrary to Fisher and other monetary theorists of his time, Ludwig von Mises was the first to emphasized these Cantillon effects in terms of marginal utility analysis. With an increase in the stock of money, the cash balances of the early receivers of the newly created money increase. Correspondingly, the marginal utility they give to money decreases and the individuals in question buy either investment or consumption goods, thus bidding up the prices of those goods and increasing the cash balances of their sellers. With this step by step process, the price of goods will increase only progressively and affect both the distribution of income and wealth as well as the different price ratios.

    This post was published at Ludwig von Mises Institute on August 16, 2017.


  • Self Ownership in the Age of Authoritarianism: Jeff Berwick on Open Your Mind Radio Ireland

    The following video was published by The Dollar Vigilante on Jul 31, 2017
    Jeff is interviewed by Alan James and Steven George for Open Your Mind Radio Ireland, topics include: Jeff’s intriguing upcoming travel plans, the financial system and cryptocurrencies, interest rate madness, socialism and central banking, getting rid of governments, self ownership, we don’t have capitalism, control of the internet, increasing authoritarianism, the Shemitah, jubilee and market cycles, the dumbing down and drugging of the US population, EBT cards, preparing for a major crash, hyperinflation, diet and growing your own food, self sufficiency, self improvement


  • The Globalist One World Currency Will Look A Lot Like Bitcoin

    This week the International Monetary Fund shocked some economic analysts with an announcement that America was “no longer first in the world” as a major economic growth engine. This stinging assertion falls exactly in line with the narrative out of the latest G20 summit; that the U. S. is fading away leaving the door open for countries like Germany and China to join forces and fill the power void. I wrote about this rising relationship between these two nations as well as the ongoing controlled demolition of America’s economy in my article ‘The New World Order Will Begin With Germany And China’.
    I find it interesting that the IMF is once again taking the lead on perpetuating the image of a failing U. S., just as they often push for the concept of a single global currency system to replace the dollar as the world reserve. The most common faulty counter-argument I run into when outlining the globalist agenda to supplant the dollar with the Special Drawing Rights basket system is that “the IMF is a U. S. government controlled organization that would never undermine U. S. authority.” Obviously, the people who make this argument have been thoroughly duped.
    The IMF is constantly and actively undermining America’s economic position, because the IMF is NOT an American controlled organization; its loyalty is to globalism as an ideology as well as the international financiers that dominate central banking. America’s supposed “veto power” within the IMF is incidental and meaningless – it has not stopped the IMF from chasing the replacement of the the dollar structure and forming the fiscal ties that stand as the root of what they sometimes call the “global economic reset.”

    This post was published at Alt-Market on Thursday, 27 July 2017.


  • Against Irredeemable Paper – Precious Metals Supply and Demand

    The Antidote
    Something needs to be said. We are against the existence of irredeemable paper currency, central banking and central planning, cronyism, socialized losses and privatized gains, counterfeit credit, wealth transfers and bailouts, and welfare both corporate and personal.
    When we write to debunk the conspiracy theories that say manipulation is keeping gold from hitting $5,000 (one speaker here at Freedom Fest claimed gold will go to $65,000), we are not trying to defend the Fed. When we discuss the flaws in predicting that kind of price, and the error in expecting to profit from it, we are not expressing a pro irredeemable dollar view.
    We are saying there are good arguments against the regime of irredeemable paper currency – but this is not one of them. Irredeemable currency has two fatal flaws. One is the interest rate is unhinged.
    It can skyrocket as it did from the end of WWII through 1980, or collapse as it has been doing since then. Two is there is no extinguisher of debt. Debt grows – must necessarily grow – exponentially. As it has been doing for many decades.

    This post was published at Acting-Man on July 25, 2017.


  • What To Do With Your Cash?

    Have you moved a material percentage of your financial portfolio to cash? Have you become so concerned about the meteoric ramp upwards in asset prices that you find it wiser instead to move to the sidelines, build “dry powder”, and wait to re-enter the markets at saner valuations?
    If so, you have my sympathies.
    The past 5+ years have been brutal for savers pursuing this strategy. I know this well, as I’m one of those folks, too.
    The Mother Of All Financial Bubbles As we’ve chronicled for years here at PeakProsperity.com, the global central banking cartel started flooding the world with liquidity (aka, money printed from thin air) in response to the arrival of the Great Financial Crisis in late 2008. And they never stopped.

    This post was published at PeakProsperity on Saturday, July 22, 2017.


  • Doug Noland: New Age Mandate

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    A journalist’s question during Mario Draghi’s ECB post-meeting press conference: ‘… There was a sharp reaction from financial markets to your Sintra speech. You must have looked at the Fed experience of 2013. Is there any concern in the Governing Council that the so-called tantrum or a similar reaction can happen in the eurozone when you start discussing changes in your stance?’
    Draghi: ‘I won’t comment on market reactions, but let me give you the bottom line of our exchanges: basically, inflation is not where we want it to be, and where it should be. We are still confident that it will gradually get there, but it isn’t there yet, and that’s why the Governing Council reiterated the forward guidance, the asset purchase programme, the interest rates and all this package of monetary accommodation; and reiterated that the present very substantial monetary accommodation is still necessary. Let me read the introductory statement: ‘Therefore a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up and support headline inflation developments in the medium term.’
    Draghi continued: ‘But let me just make clear one thing: after a long time, we are finally experiencing a robust recovery, where we only have to wait for wages and prices to move towards our objective. Now, the last thing that the Governing Council may want is actually an unwanted tightening of the financing conditions that either slows down this process or may even jeopardise it; and that’s why we retain the second bias, or let’s call it, reaction function. ‘If the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, we stand ready to increase our asset purchase programme in terms of size and/or duration.’ And I think the Governing Council has given enough evidence that when flexibility is needed to achieve its objectives, it has been very able to find all that was needed. So that’s why we keep this bias.’
    This exchange gets to the heart of a momentous issue. Recall the swift market reaction to ‘hawkish’ Draghi’s comments from Sintra (June 26-28 ECB Forum on Central Banking) and, soon after, ECB officials expressing that markets had misinterpreted his remarks. Markets this week were awaiting ‘dovish’ clarification. Draghi soundly beat expectations.

    This post was published at Wall Street Examiner on July 22, 2017.


  • ‘A Stock Market Crash is Coming!’

    Conventional ‘Wisdom:’ Markets move up and down, but the stock market always comes back. The DOW is frothy and needs a correction, but the stock markets are healthy and big gains lie ahead.
    Pessimistic version: Jim Rogers said, ‘the next crash will ‘the biggest in my lifetime.” [Coming soon …]
    Question: Given the craziness in politics, the Middle-East, Central Banking, and global debt levels … do you own enough gold bullion?
    Conventional thinking: ‘Trump will save the markets, reduce taxes, and boost stock prices even higher.’ [Don’t plan on it.]
    ‘Gold pays no interest and has gone down for six years.’ [True but irrelevant.]
    ‘The Yellen Fed can’t let market bubbles pop so they will create more QE, more bond monetization, ‘printing,’ and Fed support. In short, the ‘Yellen Put’ is alive and will protect investors.’ [Maybe not…]
    ‘The market got hurt in 1987, 2000, and 2008. It rallied back each time and went higher. This time will be no different. Stocks may correct but they are a good long term investment.’ Read ‘The Bull Case: S&P is heading to 3,000.’ [How big a loss before the rally?]

    This post was published at GoldStockBull on July 20th, 2017.


  • How Trump’s Nominee for the Fed Could Turn Central Banking on Its Head

    Jay L. Zagorsky, The Ohio State University
    President Donald Trump on July 10 nominated Randal Quarles to be one of the seven governors of the Federal Reserve System, the central bank of the United States.
    Before I get to Quarles and his qualifications, it’s important to understand the Fed and what it does. Its decisions are vital to every person on the planet who borrows or lends money (pretty much everybody) since it has enormous influence over global interest rates. Its board of governors also influences most other aspects of the global financial system, from regulating banks to how money is wired around the world.
    Quarles, for his part, is clearly qualified for a job at the pinnacle of financial regulation. He has held numerous positions in the US Treasury Department, including undersecretary for domestic finance under George W. Bush, and was the US executive director at the International Monetary Fund (IMF). He has also worked on Wall Street for The Carlyle Group and founded his own investment company, The Cynosure Group. He also has a law degree from Yale.
    The issue that I believe deserves careful scrutiny, however, does not involve his qualifications. Rather it’s a view of his that, if allowed to permeate the Fed, would represent a seismic shock to how the central bank operates and could potentially have severe consequences if – or when – we stumble into another financial crisis like the one we endured only a decade ago.

    This post was published at FinancialSense on 07/12/2017.


  • There’s One Big Problem With the Fed’s Latest Stress Test

    This is a syndicated repost courtesy of The Daily Reckoning. To view original, click here. Reposted with permission.
    The Federal Reserve released its latest stress test report in June and buried within the findings were details that an alarming number of banks would lose tens of billions within the financial system yet again.
    Nearly a decade since the global financial crisis that saw countless jobs, homes and savings ruined – signs show that the system is still considerably at risk.
    By mandate the Fed is to be a central banking institution that encourages and sets conditions for secure banking and financial systems to exist. At its core, the central bank is meant to stabilize and grow the economy through measures such as supervising what it has labeled as banking holding companies (BHCs).
    After the Dodd-Frank Act was passed in 2010, the Fed took on the responsibility to conduct stress test reports on financial firms, the select BHC’s, that maintained $50 billion plus in consolidated assets. The purpose was to see if those firms had enough money saved and whether they would be able to meet required financial levels in order to survive massive losses during stressful economic conditions.

    This post was published at Wall Street Examiner by Craig Wilson ‘ July 5, 2017.


  • “The Fed Is Preparing To Make The Rich Poorer”: BofA

    Remember when – for years and years after the grand, global QE experiment started – any suggestion that central bankers are the primary cause behind global wealth inequality, and thus directly responsible for such political outcomes as Brexit and Trump – was branded as a conspiracy theory by bloggers living in their parents’ basement? We do, because we were accused over and over of just that (our position on the Fed and other central banks should be familiar to all by now).
    Well, as of this morning, none other than the chief investment strategist at BofA, Michael Hartnett, is a basement dwelling, tinfoil hatter because in his latest Flow Show report, writes that “central banks have exacerbated inequality via Wall St inflation & Main St deflation.”

    Of course we knew that, you knew that, and pretty much everyone else knew that, but those whose jobs depended on not admitting it, kept their mouths shut terrified of pointing out that the central banking emperor is not only naked, but an idiot. Well, the seal has been broken, and even the biggest cowards from within the financial establishment, most of whom can be found on financial twitter for some inexplicable reason, can speak up now.

    This post was published at Zero Hedge on Jun 30, 2017.


  • Bill Blain: “What A Fascinating Week This Is Shaping Up To Be”

    By Bill Blain of Mint Partners, Blain’s Morning Porridge – June 29th 2017
    What a difference a day makes
    ‘And a new day will dawn for those who stand long, and the forests will echo with laughter.’
    What a fascinating week this is shaping up to be – on Monday I speculated it was going to be about Central Bankers re-thinking where we are. I guess I guessed right. One of my colleagues from BGC, Ara Levonian, summed it up nicely in his daily comment this morning:
    ‘What a difference a day makes as the ECB pumped out a story that the whole market misinterpreted Draghi despite him speaking in English and most of us having English as out first language. Carney changed his mind from last week, which has become the norm, and said there could be need to remove some stimulus. [They] have realised the marginal utility of QE is almost non-existent now, if not negative and are SERIOUSLY WORRIED ABOUT ASSET PRICE INFLATION. (My emphasis!)
    Draghi might take a tip from Alan Greenspan, who provides the most famous Central Banking quote: ‘Since becoming a central banker I have learned to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said.’ It’s often shortened to ‘If I have made myself clear, I’ve misspoken.’

    This post was published at Zero Hedge on Jun 29, 2017.


  • One Fed President Says The Rate Hike Decision Was A Choice “Between Faith And Data”

    Over the years many have accused central banking of being the world’s latest (and most profitable) religion, with central bankers the only modern day priests left that still matter (to the tune of $75 trillion, the market cap of all stocks in the world).
    Today, in a blog post from Minneapolis Fed president Neel Kashkari explaining why he dissented from the latest Fed rate hike decision, he admits as much when he says “for me, deciding whether to raise rates or hold steady came down to a tension between faith and data. On one hand, intuitively, I am inclined to believe in the logic of the Phillips curve: A tight labor market should lead to competition for workers, which should lead to higher wages. Eventually, firms will have to pass some of those costs on to their customers, which should lead to higher inflation. That makes intuitive sense. That’s the faith part.”
    In a surprisingly honest assessment, he then says that “unfortunately, the data aren’t supporting this story, with the FOMC coming up short on its inflation target for many years in a row, and now with core inflation actually falling even as the labor market is tightening. If we base our outlook for inflation on these actual data, we shouldn’t have raised rates this week. Instead, we should have waited to see if the recent drop in inflation is transitory to ensure that we are fulfilling our inflation mandate.”
    Which inductively suggests that the rest of the FOMC is still driven by, well, faith alone. Unfortunately, this time the faith has consequences, and as Citi’s Matt King explained earlier, the Fed’s decision to not only hike rates but also to begin a $450 billion annual reduction in its balance sheet, will have “significant adjustment in valuations.”

    This post was published at Zero Hedge on Jun 16, 2017.


  • Economic Consequences of More Europe

    A resurgence in the euro after recent elections in Europe could leave it top dog in global currency markets. Understanding what that means for the U. S dollar will be pivotal for investors that operate in greenbacks.
    Bloomberg’s recent headline ‘This Could be the Euro’s Best Year in a Decade’ shows signs that all eyes are watching Europe.
    Currently, the Euro has smashed to a six-month high with aggressive talk coming from the central banking crowd on the European continent.
    German Finance Minister Wolfgang Schaeuble, arguably one of the most influential voices in Europe, said that he views the need to further increase in integration in Europe. The German minister went so far as to hint at creating a ‘parliament’ for the euro currency bloc.
    In international currency exchanges things are beginning to change. The world’s major reserve currency, the U. S dollar, has seen investors begin to wake up to the reality of a lackluster expectations from the White House.
    Impact of the U. S Dollar on Europe
    The U. S dollar is now back to levels prior to the November election.
    Does that mean a the euro currency surge caused it? No.

    This post was published at Wall Street Examiner on May 26, 2017.


  • Central banks kept conspiring against gold long after it left the financial system

    A central bank Gold Pool which many people will be familiar with operated in the gold market between November 1961 and March 1968. That Gold Pool was known as the London Gold Pool.
    This article is not about the 1961-1968 London Gold Pool. This article is about collusive central bank discussions relating to an entirely different and more recent central bank Gold Pool arrangement. These discussions about a second Gold Pool began in late 1979, i.e. more than 11 years after the London Gold Pool had been abandoned. This article is Part 1 of a 2 part series. Part 2 will be published shortly.
    These discussions about a new Gold Pool arrangement took place in an era of soaring free market gold prices and in the midst of the run-up in the gold price to US$850 in January 1980.
    The discussions and meetings about a new Gold Pool in 1979 and 1980 and beyond which are detailed below, occurred at the highest levels in the central banking world and involved the world’s most powerful central bankers, some of whose names will be familiar to readers. The aim of these central bank discussions and meetings was to reach agreement on joint central bank action to subdue and manipulate the free market gold price in the early 1980s. Many of these collusive meetings were private meetings between a handful of Group of 10 (G10) central bank governors, and took place in the actual office of the president of the Bank of International Settlements in Basel, Switzerland.
    Above all, these central bank meetings show intent. Intent by a group of powerful central banks to manipulate a free market gold price so as to distort free market gold pricing signals. So these documents are timeless in that regard. The documents also illustrate the concern that a rising gold price in the free market creates for senior central bankers, and importantly, also shows that these same central bankers have no qualms, at least from a legal or moral perspective, of intervening to manipulate a gold price when they see it as a threat to their fiat currency monetary system.

    This post was published at GATA


  • The Fed Will Blink

    Honest Profession
    GUALFIN, ARGENTINA – The Dow rose 174 points on Thursday. And Treasury Secretary Steve Mnuchin said we’d have a new tax system by the end of the year.
    Animal spirits were restless. But which animals? Dumb oxes? Or wily foxes? Probably both.
    Since Thursday there have been two additional very spirited up days with large gaps – this is very rare in the DJIA, particularly from such a high level after a ~240% rally since the lows made 8 years ago… it continues to feel like a blow-off (and it happens against the backdrop of a sharp slowdown in money supply growth) – click to enlarge.
    But what caught our attention were the central bankers strutting across the yard and crowing with such numbskull cackles that even barnyard animals would be embarrassed by them. There was a time when central banking was an honest profession.
    Central bankers provided financing for the government. They backed the banking system, too, by holding savings as reserves, which they lent to solvent member banks in emergencies. They were tight-lipped, tight-laced, and tightwads. Their role was to say ‘no’ more often than ‘yes.’
    When the king wanted money to fight in a war… or build a bridge… the banker would give the terse reply: ‘Sire, we don’t have any.’ Real money was backed by gold. And credit had to be backed by real money, which meant it had to be saved. Savings were limited, as was money.

    This post was published at Acting-Man on April 25, 2017.


  • Central Banking Warfare Model Readies The Next Step

    The global capacity for debt has reached it’s zenith. So-called developed markets and emerging markets have all reached maximum debt load. Of the all the major countries that impact the global GDP name one that’s not fully levered with debt. I’ll wait here while you look for that needle in a haystack.
    We came into the bail outs. The G7 had levered up. Then we had the emerging markets lever up and they’re finished levering up and now everybody’s levered up.
    There is no place to go. We can go to an equity model and we can optimize bottom-up but that requires a legitimate pricing function. And when you’re trying to run the whole thing with fake intel, fake science, fake news… The harvesting machine needs a new way to dig and digital currency and digital cash is that way. But you need all those countries in the tent and you need the ability to force everybody into a digital system. Source
    The world (tent) must get inline with the idea of global governance and global currency, otherwise, it will not work.
    Cryptocurrencies and all the people who believe this digital illusion is going to somehow save us from the evil banksters are overlooking what I have been saying since bitcoin first came onto the scene – it plays into the hands of the banksters and their desire to move us all to a digital currency. If someone believes for a second that Amazon or any other large multinational corporation that conducts retail business is going to accept bitcoin when they have been instructed not to, they are simply living in a fantasy.
    That’s why the guys from bitcoin drive me nuts. Because they think ‘Oh this is how we’re going to be free’. No, you’re prototyping Mr. Globals digital currency. Source
    If a person thinks the central banks and their digital currency will COMPETE with bitcoin you are not seeing the entire picture. That is not going to happen – EVER. The reason gold was outlawed in the U. S. in the 1930’s was to keep gold from competing with the Federal Reserve Note. Why would anyone believe the Federal Reserve is going to allow a digital form of currency to compete with their wealth transferring mechanism on a large scale?

    This post was published at GoldSeek on 20 April 2017.


  • The War on Cash: Old and New

    Before the United States ran aground on the dangerous reefs of State interventionism and centralism, the dollar was not only a sign of stability, but also a symbol of human freedom. A dollar was a means to express your wants and commands to the business class. The consumer, for the most part, was sovereign. Any American could save, consume, and invest his money whose value was not debauched by a government in lack of resources. To this day, and despite the evils of inflationism and central banking, the dollar remains an instrument of freedom and independence for many Americans. There are those, however, who would like to change that. They are the Wall Street financiers, politicians, annointed intellectuals, and central bankers for whom a centralized control of the money supply is not enough. To them, not only the supply of money but also the free and innocent use of money should be strictly limited and regulated by the State. Their new enemy is the banknote and their new war is the war on cash.
    It is said of Heraclitus that he wrote that ‘no man ever steps in the same river twice, for it is not the same river and he is not the same man.’ The river has changed indeed, and so has changed the war on cash. It is an irony of American history that in the 1830s and 1840s, the war on cash meant something totally different than today. In the middle of the 19th century, the circulation of banknotes was synonymous with the excesses of fractional reserve banking and the debasement of the currency. At the time, the war on cash was a war for sound money.

    This post was published at Ludwig von Mises Institute on March 30, 2017.


  • THE CUMULATIVE EFFECTIVE TAX RATE

    Early Americans would roll over in their graves if they heard about modern-day America’s topsy-turvy departure from many of the hard-won freedoms and liberties of the American Revolution. They would be unable to make sense of all the different taxes we pay today, and especially the government’s legal entitlement to a portion of an American’s labor via an income tax. There was no such tax on labor for the earliest Americans; it was unconscionable to tax someone’s personal property, which one’s labor was then considered. The concept of paying one’s ‘fair share’ did not exist until after mid-20th century.
    In general, operating expenses of private corporations and the federal, state and corporate-county municipal governments are passed on to the end users (public) in the form of taxation.
    A partial list of the transparent as well as all the unseen hidden taxes include: federal and state income tax, county taxes, federal and state sales tax, accounts receivable tax, alcohol tax, alternative minimum tax, building permit tax, cigarette tax, corporate tax, dog license tax, education tax, estate tax, excise tax on imports, food license tax, fuel permit tax, gift tax, hotel tax, inheritance tax, inventory tax, car rental tax, IRS interest charges, IRS penalties and levies, license tax, labor tax (withholding), marriage license tax, Medicare tax, municipal state tax on insurance premiums, worker’s compensation and unemployment tax, property tax, recreational vehicle tax, sales tax, self-employment tax, road usage tax for truckers, school tax, Social Security tax, Supplemental Security Income (SSI), telecommunications tax, travel tax, utility tax, vehicle licensing registration tax, vehicle sales tax, watercraft registration tax, well permit tax, hospitality tax and last but not least, the hidden tax of inflation of a debt-based central banking system and all finance charges.

    This post was published at The Daily Sheeple on MARCH 30, 2017.


  • Donald Trump’s Whig Is Showing

    On February 28th, while addressing a joint session of Congress, President Trump quoted Abraham Lincoln and praised his economic philosophy:
    The first Republican President, Abraham Lincoln, warned that the “abandonment of the protective policy by the American Government [will] produce want and ruin among our people.”
    Lincoln was right – and it is time we heeded his words. I am not going to let America and its great companies and workers, be taken advantage of anymore.
    In channeling Lincoln, Trump underscored the reversion of the Republican Party to its economic roots which embraced protectionism, state-sponsored infrastructure spending, and central banking. While a new party in Lincoln’s day, its economic philosophy derived directly from the Whig Party and its champion, Henry Clay.
    Thomas DiLorenzo’s excellent book, The Real Lincoln, chronicles and exposes the Republican-Whig economic platform, known then as the ‘American System’ (the local flavor of mercantilism). While it is unlikely Lincoln addressed the issue of slavery before 1854, he constantly discussed and advocated the American System. As early as 1832, he called for an ‘internal improvements system and a high protective tariff.’ The ‘improvements’ specifically referred to the infrastructure of the day: railroads, shipping, and canals.

    This post was published at Ludwig von Mises Institute on March 22, 2017.


  • Five Reasons for Central Banks: Are They Any Good?

    In a time when Federal Reserve reforms are discussed more openly than ever before, it seems appropriate to also think about the more fundamental question of whether central banks are needed in the first place. In 1936, Vera C. Smith (later Lutz) published her doctoral dissertation The Rationale of Central Banking written under Friedrich A. von Hayek at the London School of Economics. Smith reviewed the economic controversies around central banking from the nineteenth to the early twentieth century in France, Belgium, Germany, England, Scotland, and the United States.
    Smith made very clear that central banks are not the result of natural developments in the banking sector, but come into existence through government favors.
    So what are the justifications for central banks? Smith identified five main arguments for central banks from an economic point of view. Although Smith has written with a gold standard as the underlying monetary system in mind, it is interesting to look at these arguments with the benefit of hindsight more than 80 years later. Has any one of the arguments actually made a strong or even conclusive case for central banking?

    This post was published at Ludwig von Mises Institute on February 22, 2017.