The Socialist Myth of the Greedy Banker
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About this ebook
There is a wide spread belief that it was the private banking sector that caused the current economic crisis. “Greedy” private bankers destabilized the economy, as socialists put it. At the same time, there are many conspiracy theories about central banks around. According to these theories, central banks are controlled by “dark” forces, and these forces caused the crisis of 2008.
As a result, most people without a background in economics are very confused. However reality is much simpler than it seems to be. The purpose of this essay is to explain why the crisis of 2008 has nothing to do with the private banking sector, and also explain the role that central banks play in the economy. This document, together with “The Socialist Myth of Economic Bubbles”, should give the reader a good understanding of the current crisis, and why this crisis was the result of the wrong government policies in Europe, U.S.A. and China.
This essay follows the tradition of the great Austrian economists, like Ludwig von Mises, F. A. Hayek and Murray Rothbard. No prior economic knowledge is required on behalf of the reader. A genuine interest on the subject will suffice.
Iakovos Alhadeff
I have studied economics to postgraduate level. I never worked as an economist though. I worked in the field of charter accountancyand I completed the relevant professional exams (the Greek equivalent of the English A.C.A.). My essays are written for the general reader with no economic or accounting knowledge, and the emphasis is on intuition. All my documents are extremely pro market and quite anti-socialist in nature. I admire economists from the Chicago and the Austrian School i.e. Milton Friedman, Ludwig von Mises, Friedrich Hayek, Henry Hazlitt, Murray Rothbard. I am Greek and English is not my first language, so I hope you will excuse potential errors in my syntax.
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The Socialist Myth of the Greedy Banker - Iakovos Alhadeff
The Socialist Myth of the Greedy Banker
Why Private Banks Cannot Create Money
by Iakovos Alhadeff
Published by Iakovos Alhadeff at Smashwords
Copyright 2013 Iakovos Alhadeff
Table of Contents
Introduction
Why private banks cannot create inflationary money
Creation of money by the government
The gold standard and budget surpluses
Central banks and conspiracy theories
Introduction
Most people are convinced that private banks are responsible, or at least mostly responsible, for the current economic crisis. The truth is that the crisis is the outcome of the policies followed by the political systems of the U.S.A., the E.U. and China. But I describe the major causes of the crisis in my essay The causes of the economic crisis
, and therefore the purpose of this document is not to explore them, but rather to explain in very simple words, why private banks are not at all responsible for the crisis, since they cannot create
money. Even though I have postgraduate studies in economics I am not a specialist, and this document is the knowledge I gathered in an attempt to answer my own questions. Moreover English is not my first language and you will have to excuse my syntax.
To show that private banks cannot create
money, is very important since excessive money creation in the U.S.A., the E.U. and China, was one of the main causes of the current crisis. Equally important is to explain why excessive money creation is always and everywhere a government act. What happened in reality is that excessive money creation was simply used to accommodate the unsustainable fiscal policies followed for years by many countries. Unfortunately it is much easier to notice the private banks credit expansion with the abundance of cheap credit, and the resulting bubbles, and much harder to realize that it was state policies and laws that dictated such expansions and led to bubble creation.
Since the average person is