Is having politicians in charge of the money supply like having Dracula in charge of the blood bank?

Question

The assumption that government has an inherent role in money & banking, (apart from setting standards, as they do with inches and feet, ounces and pounds, minutes and hours) is as preposterous as believing they have a place competing with any private business. In history when banking was most stable it was closest to pure laissez-faire operation. Whenever a nation was growing well, was creative, inventive, & productive you will find a banking system very close to free-enterprise competitive banking.

Benjamin Franklin made a visit to England in 1763 and while there he was asked to explain the prosperity of the colonies while on the other hand, England was suffering a bust, he replied: "That is simple. It is only because in the colonies we issue our own money. It is called 'Colonial Scrip' and it is issued in the proper proportions to the demands of trade & industry.

http://www.jeremiahproject.com/trashingamerica/taxes.html

Do you agree? Why or why not?

Answer 1

You are right but for the wrong reasons. Governments have a responsibility to manage the economy and to ensure satisfactory levels of economic output, employment and manage international economic relations. When the private sector, especially banking, was totally unregualated , it teetered from boom to bust with monotonous regularity - look at the stock market crash of the 30's, the depression and bank failures, and not so many years ago the Savings and Loan crisis.
On the other hand, having politicians in charge of the interest rate and the money supply is an open invitation to having both manipulated for short-term petty political advantage rather than managed in the interests of economic stability and growth. The proper role of a Central Bank - the Federal Reserve in the US - should be to manage both independant of political pressure from the executive, legislature or special interest grroups. When Tony Blair came to power in the UK, the sole responsibility for managing the interest rate and the money supply was vested in The Bank of Engalnd and no longer subject to political decision, with the result that the UK achieved a decade of economic prosperity not experienced in decades. It was a brave decision and a wise one

Answer 2

But at the time, the government existed on tariffs!. The founders were actually not libertarians, and although some were against a central bank, many were for it, and there was in fact a central bank early in our history.

The problem with your historical analysis is that the world has never been richer since the introduction of central banks. It is hard to get around that fact. nor can one argue that the production of gold would in any way be consistent with the growth of the economy. In fact history shows that gold strikes and mines produce inflation and a general weakening of the economy that dominates them. Spain is the best example of the latter.

Nor have you correctly identified the problem. It is not politicians who are in charge of the money. They are far to scared to maintain their responsibility for that. Instead, it goes to business interests who are primarily in the interest of lenders - who are naturally biased against inflation.

Answer 3

First you're complicated entities. the U. S. Mint prints our money and is a divison of the Treasury branch so it quite is a federal entity. The Federal Reserve grew to become into created in 1913 by an act of Congress and is what's a referred to as a quasi-public entity, meaning that it quite is a central authority entity with deepest factors.

Answer 4

Well the bank of England is supposedly independent - But the USA economy is large enough to be remain competitive regardless, its the worlds power house.

Answer 5

Politicians are NOT in charge of the money supply, the banks are. But that fits your analogy much better.

Answer 6

more like having bill clinton in charge of an all girl private college...

Answer 7

NEVER MESS MONEY WITH POLITICIANS.Money and money supply have to be independent from their influence!