6 ms·

Central banks have very rational reasons to exist. Do you have any examples of an economy operating better without a central bank?

by spupe 4y ago

deleted 4y ago
[deleted]
Ekaros 4y ago
Central banks are backed by governments. And there is no way of at least western ones giving up the monetary control they offer... The results of such actions would ruin their electability for years or decades.
- spupe 4y ago
  You talk as if governments are necessarily adversarial, and as if I as an average citizen would prefer that the monetary control lies with anonymous wealthy individuals rather than an electable body of representatives.
Geee 4y ago
I mean specifically the modern inflationist central banking, which started in the 20th century, and more precisely in 1914 when British pound lost its 1:1 backing in gold, ending the era of the gold standard. You must understand that monetary theft has always happened in many forms, in addition to central banking and fiat currency. For example, even in a gold coin economy, the rulers have always sought to debase the coins with various methods, such as mixing them with less valuable metals. In history, everyone understood that debasing gold coins was theft. Everything worked fine when central banks succeeded in defending the gold standard. However, things changed and this theft became modern economics, and it's difficult to question, because it's "science".
- spupe 4y ago
  I see. The issue with this line of argument is that the gold standard is not good for several of the things we want currencies to do, including the ability to control their supply. It might seem like simply debasing gold coins as you say, but it's not quite. We just went through two very weird years in which the economy went sideways, but we had no massive unemployment, no bread lines and no revolutions. There is a price for it, both in inflation and in unequal access to benefits, with richer people and companies having access to very cheap money. But it's a trade-off either way, not simply theft as you imply.
  - Geee 4y ago
    There's an argument to be made, that the relative stability here is bought from volatility and economic suffering in poorer countries, because the US dollar is the global reserve currency. In addition, there's a few other relatively strong currencies, which are used as reserves for weaker currencies. It seems that globally, the success in these countries is bought from weakening the currencies in poorer countries. There's also a lot of historical inaccuracies and rewriting of history to defend this system. For example, the great depression is partly blamed on the gold standard, but in reality it happened exactly because the gold standard was already broken (since 1914), which resulted in wildly wrong speculative monetary practices and policies.[0] As you said there's plausible rational arguments from both sides. But then again, are the central banks even following practices based on economics, or did they become politicized and corrupted, because of their central position in the economy? We see blatant monetary corruption happening in autocracies, but is it happening in western economies too, but it's just less obvious? I have used years to study these issues and I'm becoming more convinced every day, that it's time for a hard money standard, i.e. Bitcoin. And, I think it's inevitable, because historically, people always vote for harder money in a free market. [0] From this perspective, the Austrian School of economics has the correct explanation for the Great Depression. https://en.wikipedia.org/wiki/Great_Depression#Austrian_School https://en.wikipedia.org/wiki/Great_Depression#Austrian_Scho...
    - spupe 4y ago
      > It seems that globally, the success in these countries is bought from weakening the currencies in poorer countries. Perhaps, but the period since 1914 saw the rise of many peripherical countries, notably China, who also have a tight control over their monetary policy, and use it all the time for their economic plans. For your counterfactual to make sense, you would have to present an example of a country that developed using the gold standard. > But then again, are the central banks even following practices based on economics, or did they become politicized and corrupted, because of their central position in the economy? We see blatant monetary corruption happening in autocracies, but is it happening in western economies too, but it's just less obvious? There is corruption and inefficiency at every level, but I fail to see how that would change by going back to the gold standard or cryptocurrencies for that matter. I am familiar with the Austrian line of argument, and I'm sure in your years of study you have come across many criticisms of it, so I won't bother, but let's just say I don't think this perspective has brought us tangible benefits at all. Meanwhile, the imperfect system we have has shown itself to be at least robust to major hiccups recently.
- orwin 4y ago
  > Everything worked fine when central banks succeeded in defending the gold standard. No, this is revisionism. By the way, you could totally use a gold standard nowadays in a centralized communist country, but if you believe in debt, risk and all that liberalist stuff, better not go back to that. In modern economies, as production and population increase, you need more money in the system. If money is not available (because backed by gold), you'll need to augment your fractional banking ratios. One minor banking crisis and it's 1797/1893 all over again.
  - Geee 4y ago
    Bitcoin doesn't need banks, because it can be practically self-custodied, and therefore the economy runs mostly on full reserve. Fractional banking is still possible, but the risks are contained within private banks and their private IOUs. You don't need more money, because Bitcoin is infinitely divisible. It just means that the value of Bitcoin increases, when demand grows or productivity increases.

Central banks have very rational reasons to exist. Do you have any examples of an economy operating better without a central bank?

by spupe 4y ago

Central banks have very rational reasons to exist. Do you have any examples of an economy operating better without a central bank?

deleted 4y ago

[deleted]

Ekaros 4y ago

Central banks are backed by governments. And there is no way of at least western ones giving up the monetary control they offer... The results of such actions would ruin their electability for years or decades.

spupe 4y ago
You talk as if governments are necessarily adversarial, and as if I as an average citizen would prefer that the monetary control lies with anonymous wealthy individuals rather than an electable body of representatives.

Geee 4y ago

I mean specifically the modern inflationist central banking, which started in the 20th century, and more precisely in 1914 when British pound lost its 1:1 backing in gold, ending the era of the gold standard. You must understand that monetary theft has always happened in many forms, in addition to central banking and fiat currency. For example, even in a gold coin economy, the rulers have always sought to debase the coins with various methods, such as mixing them with less valuable metals. In history, everyone understood that debasing gold coins was theft. Everything worked fine when central banks succeeded in defending the gold standard. However, things changed and this theft became modern economics, and it's difficult to question, because it's "science".

spupe 4y ago
I see. The issue with this line of argument is that the gold standard is not good for several of the things we want currencies to do, including the ability to control their supply. It might seem like simply debasing gold coins as you say, but it's not quite. We just went through two very weird years in which the economy went sideways, but we had no massive unemployment, no bread lines and no revolutions. There is a price for it, both in inflation and in unequal access to benefits, with richer people and companies having access to very cheap money. But it's a trade-off either way, not simply theft as you imply.
- Geee 4y ago
  There's an argument to be made, that the relative stability here is bought from volatility and economic suffering in poorer countries, because the US dollar is the global reserve currency. In addition, there's a few other relatively strong currencies, which are used as reserves for weaker currencies. It seems that globally, the success in these countries is bought from weakening the currencies in poorer countries. There's also a lot of historical inaccuracies and rewriting of history to defend this system. For example, the great depression is partly blamed on the gold standard, but in reality it happened exactly because the gold standard was already broken (since 1914), which resulted in wildly wrong speculative monetary practices and policies.[0] As you said there's plausible rational arguments from both sides. But then again, are the central banks even following practices based on economics, or did they become politicized and corrupted, because of their central position in the economy? We see blatant monetary corruption happening in autocracies, but is it happening in western economies too, but it's just less obvious? I have used years to study these issues and I'm becoming more convinced every day, that it's time for a hard money standard, i.e. Bitcoin. And, I think it's inevitable, because historically, people always vote for harder money in a free market. [0] From this perspective, the Austrian School of economics has the correct explanation for the Great Depression. https://en.wikipedia.org/wiki/Great_Depression#Austrian_School https://en.wikipedia.org/wiki/Great_Depression#Austrian_Scho...
  - spupe 4y ago
    > It seems that globally, the success in these countries is bought from weakening the currencies in poorer countries. Perhaps, but the period since 1914 saw the rise of many peripherical countries, notably China, who also have a tight control over their monetary policy, and use it all the time for their economic plans. For your counterfactual to make sense, you would have to present an example of a country that developed using the gold standard. > But then again, are the central banks even following practices based on economics, or did they become politicized and corrupted, because of their central position in the economy? We see blatant monetary corruption happening in autocracies, but is it happening in western economies too, but it's just less obvious? There is corruption and inefficiency at every level, but I fail to see how that would change by going back to the gold standard or cryptocurrencies for that matter. I am familiar with the Austrian line of argument, and I'm sure in your years of study you have come across many criticisms of it, so I won't bother, but let's just say I don't think this perspective has brought us tangible benefits at all. Meanwhile, the imperfect system we have has shown itself to be at least robust to major hiccups recently.
orwin 4y ago
> Everything worked fine when central banks succeeded in defending the gold standard. No, this is revisionism. By the way, you could totally use a gold standard nowadays in a centralized communist country, but if you believe in debt, risk and all that liberalist stuff, better not go back to that. In modern economies, as production and population increase, you need more money in the system. If money is not available (because backed by gold), you'll need to augment your fractional banking ratios. One minor banking crisis and it's 1797/1893 all over again.
- Geee 4y ago
  Bitcoin doesn't need banks, because it can be practically self-custodied, and therefore the economy runs mostly on full reserve. Fractional banking is still possible, but the risks are contained within private banks and their private IOUs. You don't need more money, because Bitcoin is infinitely divisible. It just means that the value of Bitcoin increases, when demand grows or productivity increases.