ive learned something from the zeitgeist movement, it is money comes from where? its from a large high-tech printer, but who owns the printer? a
private printing press company owns these printer. if this is true, werent we all is in danger or possible abuse? this company could have print all
the money they want and buy the entire economy, the rest of the people will be forced to work under this company. thats precisely where the central
banks comes into the picture, central banks owns this money printing company they decide how much money to be print at a time. without further
clarification, we could end up same issue or power abuse again, central bank could buy up entire economy and everyone else is forced to work under
central bank. so in some country central banks owns by the government & some central bank is privately owned.
central banks primary function is to manage country's money supply or known as monetary policy. it includes control prices or inflation, act as
regulatory for the banking system, interest rate & etc.. if you have got this far, it is important to point out that central banks do not need your
money or gold/silver to put in their vault before lending it out to the public through commercial banks. the monetary system we have today is simply
unlimited as it is just a number in computer. useful reference :
www.bankofengland.co.uk... (p377 or
p405) the idea of unlimited money sounds difficult to comprehend for some people, here is further info :
www.positivemoney.org.uk...
who decides to create money? before we get into that, lets look at how our typical banks operate today. suppose lets say you are employee of a bank,
should you lend the money to public or not? if you lend, you will get commission, bonus, you get to keep your job & you will also get promoted. if you
dont lend, you wont get anything except get fired. so you see we have situation here bank's employee's survival(buy food, pay bills, shelter, etc)
is threaten if they do not lend. back to the question, who decides to create money? as the professor charles goodhart puts it "the supply of money is
actually determined primarily by the demand of borrowers to take out loans.." his book info :
www.positivemoney.org.uk...
if you look at macroeconomic subject, central bank's job is also controlling prices stability. central bank can control inflation by increase or
reduce money supply in the economy. inflation goes up when central bank print more money to buy government bonds, bills or gov issued notes. in order
to lower inflation, central bank sells gov bond in open market, indirectly takes out the cash from the economy. gov create bond papers and sell to
central bank because gov needs money, money usually used to pay gov employee, country's infrastructure development & increase economy growth. as the
old saying goes, more money supply but limited number of goods and services will devalue the money, thus increase of prices.
one of the most obvious is housing prices, around 90+% of the commercial bank loan is on housing & property. thats why house is so expensive, too much
money chasing little goods. banks typically have 2 types of lending, productive and non-productive. productive lending includes actual investment in
business or factory that produce goods. non-productive lending includes housing loan & speculating in financial market, which do not increase how much
stuff or goods in the economy instead make houses more expensive. suppose you are a bank, why you prefer to lend on property instead of business or
factory that produces goods? because business is intangible and if goes bankrupt bank cannot get anything, while if on property loan, banks could
still get hold of something if debtors do not make his/her monthly loan payment to bank. thus, only about 8% of commercial bank loan is on
business/factory.
