Admittedly, I know next to nothing about grand scale economics. Watching this almost broke my brain. (You can probably find it on youtube.) It was eerily appropriate considering current events, especially when you factor in that it was made in 1996. It was a lot to absorb though, so I intend to watch it again soon.
They quote presidents, world leaders, senators, economists, and make a convincing argument all around that central banks which are owned by foreign investors, are being manipulated variously to most people’s detriment.
Considering my ignorance, and a few posts in the financial threads that seem to allude to tinfoil hats, well, it leaves me wondering what the other side of the argument would be.
IANAE (although I’ve sorta taken a crash course in economic theory, just to understand what this “credit crunch” really means and why it’s so dangerous) but economic factors are manipulated all the time. For example, whenever you hear about the Fed raising or lowering interest rates, or the gov’t printing extra currency, that’s a manipulation. (I didn’t view the link.)
The “central bank” in the US is the Federal Reserve, which is part of the Federal government. There are no investors (not counting people who buy their bonds, who have no say in their governance).
Big US banks may have some foreign investors holding stock, but not enough to have any serious influence. Some have been purchased by foreign companies, but all have their own business plans and aren’t being manipulated.
Except the central banks are public institutions, owned and regulated by the national governments. They can’t be bought by foreign investors.
Reality Chuck mentioned this already with the US Federal Reserve.
In Canada, the Bank of Canada Act provides that all the shares of the Bank are owned by the relevant federal Minister, on behalf of the Crown (that is, the federal government).
In Britain, the Bank of England was nationalised in 1946. Under the Bank of England Act (pdf), all the shares of the Bank are owned by the Treasury Solicitor, on behalf of the Treasury of the British government.
I only skimmed the link, but it seems like they want to do away with fractional reserve banking. I don’t know if the reserve should only be 10%, but if it was 100% that would mean that banks couldn’t loan money and therefore why have a bank at all?
The bank could still loan money, just not any more than it had on account via deposits. So there would still be loans, just no multiplication of the money supply.
You erred in using the phrase “central banks” in your synopsis. The beef of the web site authors is with private commercial banks. Central banks (bankers’ banks) have been a government monopoly in virtually every nation in the world since World War I, and there are no longer private investors in central banks.
With respect to commercial banks, the authors’ beef is with “fractional reserve banking”–that is, banks accept “demand deposits” that lenders (depositors) can withdraw at any time, but make term loans which they cannot call. If all of the lenders try to withdraw their money at once, the bank fails.
Fractional reserve banking is and always has been inherently risky, but it’s necessary to mobilize capital because of the different time horizons of small savers and large borrowers. If you think we have problems today, just wait until we try to eliminate fractional reserve banking.
Well, you wouldn’t be able to withdraw your money until the loan had been repaid. There is also the question of who eats it if the loan defaults. I guess it would be sort of like CDs.