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Well, modern day central banks operate through Keynesian principles of economics which were not developed until the mid 20th century - http://en.wikipedia.org/w

Well, modern day central banks operate through Keynesian principles of economics which were not developed until the mid 20th century - http://en.wikipedia.org/wiki/Keynesian_economics http://en.wikipedia.org/wiki/Keynesian_economics - so I find it hard to apply the writings of Thomas Paine to them. I do realize the US Federal Reserve was founded before that (1913), but modern fiscal policy decisions are based on Kaynes' work. Related to that, the historical US National Bank (http://en.wikipedia.org/wiki/First_Bank_of_the_United_States http://en.wikipedia.org/wiki/First_Bank_of_the_United_States) and Central Bank (Federal Reserve) have very different objectives. Do not confuse the two.

vitaminj 19y ago
Firstly, fiscal policy pertains to government spending and/or tax policy, none of which a central bank is involved in. Central banks are strictly in the business of monetary policy. Secondly, most western central banks (though not the Fed) explicitly concentrate on inflation targeting, not "priming the pump" (as Keynes would say). In fact Keynes wasn't really very interested in inflation, which is fair enough given that economists didn't seem to take it all that seriously until the stagflation events of the 70s. But having said that, I'm more inclined to agree with you than the grandparent. Without a central bank, how is the money supply controlled?
- 1gor 19y ago
  >Without a central bank, how is the money supply controlled? By natural business cycle of economic expansion/ contraction. Cost of money fluctuates, when it goes up there are recessions that clear up the inefficiencies (i.e. all businesses that produce return below required market rate go bust). That's what lacking today thanks to central banks' intervention. They postpone the cleansing as much as possible, until the disbalances grow up in such a monster as we see today. The problem of course is that people don't like even mild recessions and politicians are following them. The Fed system was setup in 1913 after the population was fed up with regular boom/busts of late 1800s/early 1900s.

vitaminj 19y ago

Firstly, fiscal policy pertains to government spending and/or tax policy, none of which a central bank is involved in. Central banks are strictly in the business of monetary policy. Secondly, most western central banks (though not the Fed) explicitly concentrate on inflation targeting, not "priming the pump" (as Keynes would say). In fact Keynes wasn't really very interested in inflation, which is fair enough given that economists didn't seem to take it all that seriously until the stagflation events of the 70s. But having said that, I'm more inclined to agree with you than the grandparent. Without a central bank, how is the money supply controlled?

1gor 19y ago
>Without a central bank, how is the money supply controlled? By natural business cycle of economic expansion/ contraction. Cost of money fluctuates, when it goes up there are recessions that clear up the inefficiencies (i.e. all businesses that produce return below required market rate go bust). That's what lacking today thanks to central banks' intervention. They postpone the cleansing as much as possible, until the disbalances grow up in such a monster as we see today. The problem of course is that people don't like even mild recessions and politicians are following them. The Fed system was setup in 1913 after the population was fed up with regular boom/busts of late 1800s/early 1900s.