Monthly Archives: January 2019

Why Central Banks?

I have long argued that the interest-based, debt-money, central banking regime is both dysfunctional and destructive, and advocated for the decentralization of control over credit and the creation of exchange alternatives that use privately issued currencies and direct clearing of accounts among buyers and sellers.

There is a considerable body of literature that makes the case for free money and free banking, most of which has been ignored. These ideas have been overwhelmed by the economic and financial orthodoxy which stands in support of the political status quo which centralizes power and concentrates wealth.

For governments, central banks serve as “lenders of last resort,” enabling deficit spending through their purchase of government bonds and manipulation of interest rates, while for the banking cartel, government serves as “borrower of last resort,” sustaining their privilege of lending money into circulation and charging interest on it. Whenever this unsustainable system threatens to implode (as it did in the crisis of 2008), the government steps in to take bad (private) debts off the bankers’ hands and place them on the shoulders of the citizens (“bail-outs”). When the next bubble reaches its climax, we will likely see another round of “quantitative easing,” but when that proves to be inadequate, we will likely see some combination of inflation and outright asset confiscation known as “bail-ins” (partial seizure of bank balances).

In his recent review, Leonidas Zelmanovitz, highlights the main points in Vera Smith’s book, The Rationale of Central Banking and the Free Banking Alternative, which was published in 1936. Paraphrasing Smith, Zelmanovitz concludes that [Keynsian policies are] “not necessary to solve the problems they are purported to solve; most likely, they are part of the cause of the problem. Furthermore, there is an alternative, and that alternative is free banking,.” and, ” You can have good money without central banking and central banking does not guarantee good money.” You can read the entire review on the EconLib website.

Another classic source on free banking is Henry Meulen‘s, Free Banking (London: Macmillan, 1934). Free download available here. I will provide some excerpts from that source in a future post.


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President Donald Trump – the first two years


The American people elected Donald Trump to shake things up, and, for better or for worse that is what he’s been doing. Most of what Trump has done in the first two years of his presidency has been destructive—to the environment, to social justice, to economic equity, and to civil discourse. But whether he knows what he is doing or not, he has been shaking up America’s longstanding foreign policy in a way that I think is positive. The United States, under both major parties, has, since the fall of the Soviet Union, been working to maintain “full spectrum dominance” around the world. It has been bent upon constraining the power and influence of potential rivals like Russia and China, and promoting by both overt and covert means, regime change in numerous countries around the world in hopes of installing puppet regimes that would be subservient to the demands of the “New World Order.”

Trump may very well be a narcissistic “loose cannon,” and his intentions may be purely self-centered and aimed at self-aggrandizement, but many of his foreign policy actions are moving the world in the direction that it needs to go, i.e., towards a multi-polar world order. He is doing this by (1) trying to cooperate and normalize relations with Russia, (2) pressuring Britain and Western European (NATO) allies, thus undermining longstanding alliances, and (3) upsetting prior trade agreements via the imposition of tariffs.

The turmoil in Washington politics has at times been almost comical, as we’ve seen the evident tug of war between a strong-willed President with his own ideas, and the entrenched “deep state” that is controlled by the elite global power establishment. This has been evident in some of the presidential appointments that seem at odds with Trump’s rhetoric, like the appointment of super-hawk and Russophobe, John Bolton as national security advisor.

The appointment of John Kelly, as White House Chief of Staff, was supposed to control Trump, but now Trump has ousted Kelly and named Mick Mulvaney as his temporary replacement. Does that indicate a power shift in Trump’s favor? Or now that the Democrats have taken control of the House, will they be able to tie Trumps hands?

Time will tell.