Old-new goals of central banking

The ECB and the Fed have been buying government bonds for some time now and are thinking of doing so again. Beneath the magical phrase "quantitative easing" lies the insidious process of printing money and inflation. The government bonds that have been sent to dust on the market are thus paid for with hot banknotes, which have not yet managed to fall properly out of the printing presses.

The building of the American Fed
The building of the American Fed

On the whole, it is surprising that it strikes anyone at all. In essence, this is precisely the real purpose of central banking - under the auspices of the “fight against inflation”, central banks have been entrusted with tools to inflation management. And that means something completely different.

The central banker is actually an absolutist monarch. Whether or not he will be an enlightened ruler is largely a matter of chance. The absolutist monarch is a symbol of concentrated power - he can do anything. He is a judge, prosecutor and lawyer in one person. And to make matters worse, he judges according to the laws that he determines and enforces himself.

The absolutist monarch, who most likely may not be an enlightened man, is easily influenced. It decides in an environment of constant corruption and clientelism, where corruptors and clients call it "giving gifts" and "thanking the ruler for a wise government." But the mistake is not in the ruler as a person, but in his institution. The ruler is impressionable because he is the ruler. He concentrates a lot and can do whatever he likes. Just influence it and we can get a lot of money, influence and power almost carefree, in any area.

These mistakes in absolute governance have led to the division of power and the development of what is now called "modern democracy." It has its flies, it is not ideal, but good, let's say.

In the social sphere, it is clear to almost everyone today that concentrating power is counterproductive. That the plaintiff must be someone other than a lawyer or a judge. That the laws must be approved and enforced again by two different persons. That power must be divided, under control, transparent and unconcentrated. That the interconnection of executive, legislative and judicial powers is wrong.

Why do we still not get the same thing in the economic field?

The central banker is not a robot. Thus, the central bank cannot be independent, whether it is written on a more self-supporting paper (for example, the Constitution). At least because it is not independent of its central banker, of its subjective beliefs, of its value judgments. After all, it would probably be a difference if the central bank was led by Milton Friedman or JM Keynes.

Even if a central banker is a robot, the central bank is still not independent - it is not independent of itself, of its own power, which many want to abuse. Central Bank it is not independent in nature.

The real goal of the central bank is not "independently to control inflation", but "to order inflation to be controlled by politicians." This is about the same difference as between "fighting cars" and "driving a car."

In other words, the central bank was created, among other things, to fulfill one's orders. For example, politicians in need who want to get rid of debt with inflation.

The central bank is thus another way for politicians to collect another tax from us. The inflation tax has thus become a slow but certain income of the state treasury since the beginning of the functioning of central banking. Thus, the central bank does not defend the "interests of ordinary citizens", but the self-proclaimed oligarchs who are closest to the CB. After all, even the absolute ruler was often chosen by the nobility.

It is therefore not surprising that central banks are now raising their inflation targets and preparing to buy government bonds. By devaluing the money in our wallets, we finance government (and other) debts and thus pay (again) fiscal "incentives" for the economy. It is their purpose, the original reason for their origin. The central bank, as a state institution, always works in the interest of the state, in the interest of its debts and liabilities.

To think that the CB is independent, that it operates independently of politicians, and interest groups is naive. The central bank is the place with the highest concentration of power in the state. It is logical and quite clear that it is not possible for it to be independent of politicians, the value courts of central bankers and interest groups. The central bank is one of the main reasons why the market is not working today.

The edited version was released on Finmag.cz October 29 this year under the title "Absolutism of central banking"


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