The Controlled Demolition Of Nation-States

The Controlled Demolition Of Nation-States

J.B. Shurk

Generally speaking, central banks are empowered to control the supply of money by employing a number of tools that include buying government debt, selling government bonds, adjusting reserve requirements, and setting official interest rates.  Operating under various legal mandates to sustain an overall healthy economy, central banks ostensibly pursue policies that will produce relatively low inflation, steady economic growth, and low public unemployment.  

What if these stated goals are merely talking points meant to justify a central bank's continued monopoly over a nation's creation of money, and the true objective of any central bank is to maximize wealth for the wealthiest economic players?  Central banks, after all, are usually institutionally independent from government interference.  They are private firms managed by the world's financial elite.  How might a central bank pursue a hidden agenda to grow the wealth of its friends at the public's expense?

The easiest and most effective way would be to create artificial "boom and bust" cycles during which economies greatly expand and then quickly shrink.  How does this work in practice?  First, a central bank lowers interest rates — the cost of borrowing money — and thereby encourages ordinary citizens to take out loans.  These loans are used to buy houses and cars and start small businesses.  By artificially lowering interest rates below the natural market rate, central banks stimulate consumer purchases and small business expenditures beyond what Adam Smith's "invisible hand" would have rendered on its own.  Investors who have an economic interest in selling houses, cars, and inventories for small businesses all benefit from the central bank's intervention.

Additionally, because central banks have encouraged borrowing, they have pumped more money into the greater economy.  With the supply of money artificially increased, some individuals are willing to pay more now than before for the same goods or services.  Consequently, the prices of goods and services increase, producing inflation.  There are two important effects stemming from inflation: (1) a middle-class citizen on a fixed income must now pay more for living expenses, while (2) a higher-class citizen who owns stocks, homes, and other assets will see the currency-denominated value of those assets increase.  In other words, inflation acts as a tax on poorer individuals who own little and a supplement for wealthier individuals who own much.  While a middle-class citizen living paycheck-to-paycheck will effectively have less income, a higher-class citizen whose principal wealth exists in the form of assets will have increased net wealth.  Inflation effects a wealth transfer from the poor to the rich.

Now, a central banker will insist that artificially low interest rates and easy borrowing have made it possible for consumers to own more things and for fledgling entrepreneurs to start small businesses that would have otherwise never existed.  A less charitable description would be that low interest rates have induced ordinary citizens to buy things that they cannot afford, take on long-term debt, and risk their financial futures on business start-ups that may well fail.

When interest rates suddenly rise, however, they often end with unpaid bills and the eventual bank seizure of those cars, homes, and business assets.  A central bank's easy money programs momentarily increase consumer ownership and small business creation before inviting financial distress and repossession as rent, payroll, inventory expenses, and other fixed costs increase.

During the "boom" side of the cycle, central banks produce a lot of momentary "winners" and increase overall national wealth by encouraging consumer spending and inflating the currency-denominated value of assets.  During the inevitable "bust" side of the cycle, however, the real winners emerge when the super-wealthy scoop up a bankrupt population's primary assets for pennies on the dollar. 

When the dust finally settles, fewer people own more than ever before.  Then, invariably, after enough public suffering and business consolidation, the "boom and bust" cycle begins again.  Momentary "winners" rise again.  Inflationary bubbles expand again.  When those bubbles burst, the über-wealthy acquire even more than they did the last time around.  The whole process is like the reverse of a snake shedding its skin, wherein central bankers and the financial behemoths behind them add one layer of wealth after the next, until they own everything.  By that time, any mouse that happens to get in their way is so scrawny and desperate that he will gladly be eaten or accept the smallest morsel in return for a promise to obey.  In this way, central bank snakes see everyone else as either easy prey or a future debt slave. 

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