DANG (15) - Central Banking

Many people believe that someone in authority must control the supply of money. Governments usually believe that they are the ones with the necessary wisdom. They believe they should manage the money supply through the operations of a central bank.

Most governments now realise that they cannot control the supply of money, and the best that they can do is set interest rates. But even this is too much for them. Interest rates reflect the value that people place on the future. A central banker can never know the future, so we should not trust then to set its price. The chances of a political appointee getting the price of the future right is even less, given that only God knows the future. Governments generally set the interest rate too high or too low.

Central banks did not exist before the beginning of the twentieth century, and economies functioned just as well as they do now. This role is rooted in a false understanding of the way that money works. All that is required to prevent the manipulation of the money supply is punishment of fraud and theft.