Central Banks, How The Rich Stay Rich Pt. 2

Central Banks, How The Rich Stay Rich Pt. 2

 

Money

 

Photo From moneyfornothingthemovie.org

The key and most important function of “Central Banks” is that of the Creation of Money and its Distribution, which I will henceforth call “MC&D”, (Money Creation and Distribution).

As I previously pointed out this has absolutely nothing to do with banking.

This now is how you create and distribute money for the social good, to help people and relieve poverty and inequality.

If is not within the scope of this paper to discuss whether or not money is a particularly good system to use relative to human commercial endeavors.

If we do accept money as the primary medium for commercial transactions, then it is imperative to have enough of it out there, or such transactions cannot be made. Money relative to the world of commerce is like water for a garden. If there is not enough of it, the garden dries up and dies.

In rare cases there is too much of it, (money) in which case the garden is flooded, (called high inflation) and the health of the garden, (the economy) is also imperiled.

But that is the rarer case. For the moment I will put it aside, because to include this problem would make this paper unnecessarily long and complex.

In any case the problem that the world is suffering through today, is the threat of deflation, (not enough water) rather than inflation (flooding). So that is the problem I will address here.

In order for economies to grow central banks must always produce money. No business can be created or expanded; no home can be built, bought or sold unless there is money in the system to do it.

And as populations grow money must be added to the system, so that there will be enough to accommodate the needs of the new members of a society.

So everyday, or at least periodically new money must be created, printed, (or credited to someone electronically) and distributed.

It is up to the Central Bank to determine how much new money should be created and distributed. Too little and the garden starts to dry up, too much and you flood it. Once that perceived right amount is found, then comes the most political question of all, who is going to get it?

The short answer is that that is indeed a political question. Since this new money, that has just been created is really “money for nothing”, who deserves to get it?

This new money can be used as a social function, to benefit people. For example the Central Bank can simply divide this new money up and send a check to every single person in the country.

Or the Central Bank can load the money up on helicopters and drop it like rain all over the country.

That may seem silly, but Central Bankers have long made it clear that given that they have a fiat currency, (one not tied to how much gold they have) they can print as much money as they want.

And because of that, true deflation, (the garden drying up for lack of money) is not possible.

In a pinch, economists and Central Bankers have said that they can always distribute new money, by just spreading it around as in a helicopter drop. Ben Bernanke, the past Chairmen of the Fed was the last to say exactly that.

When there is a problem of poor distribution of wealth in a country, (IE too much poverty) this function of MC&D can be a God send to alleviate the worst problems of poverty, as the new money can be distributed progressively so that poor people get checks that will be much larger than those sent to people who already have money.

That not only waters the part of the garden that looks most sickly, (or is dying) but as a practical matter it is also the very best way to stimulate an economy.

That is because with money, (unlike water) in order for the garden, (economy) to be healthy it must move around. If you get a check and simply put it under your bed, it does nothing for anyone.

In order for the money you get to help the economy, you must spend it, whether it is on your business or simply to buy the things that someone else’s business produces. The more active the money is, the more it changes hands, the more it stimulates the economy.

So if the newly created money goes to rich people, they may well just put it in the bank or invest it abroad, where no direct good will come from it for the people of the country for whom their representatives created it in the first place.

But when you give newly created Money For Nothing to poor people, they will almost always spend it, because being poor means one almost always has endless unfulfilled needs.

So money given to the poor helps the economy, (usually but not always) much more than giving money to the rich. And where economic inequality exists, Money For Nothing is a powerful and very easy to administer palliative.

This seems to be a clear, simple and kind way to go. The only question people will have is can it really be that easy? The answer is without any question “yes”. You will not find an economist who will disagree that this can be done.

The problem is that pretty much all economists work directly for the Mega Banks and Corps, or the government bodies they control, or smaller banks and corps who are dependent on the system, as it exists.

So these endless economists will have a vested interest. (their pay checks and careers) to explain to everyone who will listen, (and they will have the bully pulpits of the corporate controlled propaganda media) that what I have just written is not really a very good idea.

Such economists will say how wildly “unrealistic and impractical” simply handing out money is, to the people who it is created for in the first place, and that an idea like that could only come from a naive and ignorant fool.

But what they won’t say is that money creation and distribution cannot be done this way. Their argument against it, will usually boil down to, that handing out free money to citizens is some form of a moral hazard.

That is funny, because certainly in the case of privately owned central banks there is no “hazard” of any sort involved, what is done is completely immoral and unethical.

Here in Pt 3 I explain what is actually being done in central banks all over the world, (particularly the one in the US-The Fed) to handle the MC&D process.

And why what these banks actually do typically creates endless money for those with wealth and power at the expense of those who have neither.