Central Banking models

Discussion in 'Economics' started by Apex, Dec 7, 2009.

  1. Apex


    I was hoping someone here might be able to detail what sets central banks apart from each other. Obviously we have models like the Fed, the ECB, and the pre-ECB Bundesbank. But I have had a lot of trouble trying to directly compare them. Also there are some weird examples like the NZ model where it's completely gov't based or the 'old Scottish' system which was largely privatised. I guess I understand how they work, but what kind of advantages and drawbacks do each offer? I've been looking at this book called This Time is Different (by Carmen Reinhart) and mentions the Austrian School, led by von Mises and Hayek, as a possible alternative to the CB paradigm. I've always viewed the CB as a highly useful tool to ease inflationary and liquidity issues, but perhaps my mind isn't open enough. I'd like to hear a good discussion on this central issue. :p
  2. Apex


    Sorry to bump, I know it's not the in the best of form, but I was hoping to really get a discussion going here. I think one reason this thread didn't get going is because of a lengthy delay in its posting (I'm a new member). However I do feel like at least the question of whether each of our booms are just credit-driven illusions merits a strong talking. Are Central Banks necessary and if so, what kind of relationships with the gov't should they have?
  3. Necessary? For whom?

    Our Founding Fathers were adamantly against our ever having a central bank.

    Andrew Jackson abolished the equivalent of our central bank during his administration.

    The only reason we have one now is because scum-sucking politicians are greedy.
  4. Apex


    Okay, that's true, but a quasi-governmental bank (you might know it as the Fed) was established again in 1913 after the 1907 panic. Since the Great Depression, we have seen recessions of far smaller intensity (not including this latest one). A lot of people attribute that to the success of the Fed ... what we are seeing though is the role of the Fed as a consumer regulator and "employment maximizer" called into question. I think my main point here is that ... having a central bank is definitely the current 'status quo' and any alternatives need to be examined as such.
  5. IMHO, they are necessary for a dynamic modern economy...

    I am not entirely sure what sorts of responses you're looking for.

    Fundamentally, the idea behind the Central Bank is that the provision of 'lender of last resort' facilities, as well as management of money stock, is a public good. Public goods need to be provided by a public entity.
  6. Let's see... our country is basically bankrupt, our currency threatens collapse, we've got >20% REAL unemployment, and unfunded liabilities of >$100 Trillion just at the time our largest population segment is reaching retirement... with virtually no savings.

    Oh yeah... our situation is soooo much better and our problems are so much less severe than they would have been had we not had one...
  7. Apex


    What kind of responses am I looking for? One of two I suppose ... The first would be a pro-CB stance, which would advocate a certain CB model and extol its virtues. The second would be an anti-CB stance which would explain what kind of alternative would be appropriate.
    CBs are essentially responsible for rescuing the financial system last fall. Who knows how far we would have sunk if they had let all the troubled businesses fail? At the same time, had we not built our kingdoms on debt, perhaps this crash would have never been a possibility?
  8. the problem is that I don't see how to replace them. My idea is more based on decentralization process.

    In my mind a Central Bank is like the central planing commity in communist party of russia. By this I mean that the CBS ( central banking system ) is like the planed economy of russia, just where the decision of where to allocate money isn't the responsability of the CBS... but it's the individual one. So true their collective action they will be able to shape the economy. However, as the price of money is still fixed by the CBS it cut the freedom of the individual...

    However I strongly feel that there is another way possible. Totally decentralized, where the collective action of individual fix the rates...
  9. Counterfactuals aside, I'd be very happy to listen to any and all logical arguments arnd why the existence of the Fed has made the situation worse.
    #10     Dec 8, 2009