How might a central bank pursue a hidden agenda to grow the wealth of its friends at the public’s expense?
The easiest and most effective way would be to create artificial “boom and bust” cycles during which economies greatly expand and then quickly shrink.
Lower interest rates artificially:
First, a central bank lowers interest rates — the cost of borrowing money — and thereby encourages ordinary citizens to take out loans. These loans are used to buy houses and cars and start small businesses. By artificially lowering interest rates below the natural market rate, central banks stimulate consumer purchases and small business expenditures beyond what Adam Smith’s “invisible hand” would have rendered on its own. …
Inflation transfers wealth from the poor to the rich:
There are two important effects stemming from inflation: (1) a middle-class citizen on a fixed income must now pay more for living expenses, while (2) a higher-class citizen who owns stocks, homes, and other assets will see the currency-denominated value of those assets increase. In other words, inflation acts as a tax on poorer individuals who own little and a supplement for wealthier individuals who own much. …
During the “boom” side of the cycle, central banks produce a lot of momentary “winners” and increase overall national wealth by encouraging consumer spending and inflating the currency-denominated value of assets.
The bust is where the rich clean up:
During the inevitable “bust” side of the cycle, however, the real winners emerge when the super-wealthy scoop up a bankrupt population’s primary assets for pennies on the dollar.
Economic crises are like giant “going out of business” sales, where everything a nation owns “must go,” no matter how low the final sale price.
While ordinary consumers lose their life savings and small businesses quickly fold, the über-wealthy who directly or indirectly run central bank policy gobble up housing properties and other assets that have been used as collateral to secure risky loans. Multinational corporations acquire competing mom-and-pop stores for peanuts; banking conglomerates fold local and regional banks into their portfolios; and monster-sized investment groups take controlling interests in an even greater share of a nation’s raw materials, commodities, and publicly traded stocks. …
When the dust finally settles, fewer people own more than ever before. Then, invariably, after enough public suffering and business consolidation, the “boom and bust” cycle begins again.
Trust the experts:
Why would nations give a bunch of global bankers a monopoly to control the supply of money, when that awesome power allows them to impoverish and manage everyone else? Why would politicians who claim to care about income inequality perpetuate a system that specializes in producing income inequality?
The answer is simple: governments are concerned exclusively with power and do not care about preserving democratic ideals, personal freedom, or the livelihoods of their people. …
Central banks permit politicians to supersize their transactional powers in two ways: (1) by buying government debt and increasing the supply of money, they make it possible for governments to spend much more than tax revenues would otherwise permit, and (2) by devaluing currency over time and hollowing out middle-class savings, central banks force citizens to depend more upon government services and benefits for basic needs. In effect, central bank money-printing enables politicians to spend money for votes and influence, as well as to offer welfare and other forms of government assistance to an increasingly impoverished population in exchange for their continued electoral support.
There is no one so obedient as a man who must depend upon another for his survival. If the costs of health care, heating fuel, gasoline, and food are all too expensive after years of steady inflation, then government discretion over who gets what turns politicians into princes.
Manufacturing money out of thin air: Inequality grows, and government gets bigger. The current system was brought in by degrees between 1912 and 1971.