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The Function of a Central Bank is Supposedly Stabilization of the Currency and an Even Supply of Money, However the True Goal is to Enslave us to Debt.

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The banking myths we’ve all been taught in school need to be debunked and this can be done through the assimilation of widely known facts.

One fact is that all central banking systems worldwide are now privately owned and operated for profit.

These private central banks profit by creating currency out of nothing and purchasing government bonds with this newly created currency. The central banks then charge interest on these loans. 

The function of a central bank includes the ability to control interest rates on loans, which either promotes lending or restricts lending, which manages inflation or deflation rates and by proxy the exchange rates for currencies.

A central bank is also considered a lender of last resort to the banking industry, which can save private banking institutions from collapse in times of economic recession or depression.

Often times, the function of a central bank will also include supervisory power over other banks to ensure banking financial institutions refrain from reckless or fraudulent behavior.

In the United States, the central bank is named the Federal Reserve System, and in Europe it is the European Central Bank, and the United Kingdom’s is named the Bank of England.

Central banks not only lend to other banks, but also to governments and are a source for quick funds in times of crisis.

The management of foreign exchange rates, gold reserves, and the government stock register are also among the function of a central bank.

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Monetary Policy

Central banking institutions are tasked with implementing national policies for monetary economics.

In the instances of nations whom have their own national currency, the central bank issues a form of standardized currency in the form of promissory notes.

A promissory note is basically a promise to exchange the particular note for something of worth.

Traditionally, these were promises to exchange the cash for precious metals based on a fixed amount.

However, many nations have adopted fiat currency systems, which simply means the promissory note is nothing more than a promise to exchange the note for equal worth in the same currency.

In nations who have adopted fiat currency, which is mandated by the International Monetary Fund, monetary policy generally is applied as shorthand for interest rate targets or other measures actively pursued by monetary authorities.

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Function of a Central Bank: Issue Currency

Most central banking institutions hold assets and liabilities. These liabilities are outstanding currency which is backed by the asset holdings.

Profits are generally gained by trading currency notes for interest-generating assets like bonds.

The profit gained by the interest bearing bonds is called seigniorage.

Central banks usually own government debts, and in many nations, they also have significant holdings of foreign currencies rather than their own national currency, especially when their own currency is tied directly to other currencies.

Although many believe a central bank can control both the interest rates and currency exchange rates simultaneously, this is generally not the case.

Economic theory suggests that if a central bank attempts to control both simultaneously, it will restrict the free flow of capital movement.

Therefore in open economies, a central bank may only target the interest rates or the exchange rates and remain credible, but by targeting both at once it will lose its credibility.

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Policy: Function of a Central Bank

By performing open market operations, a central bank may directly affect the monetary supply.

When the central bank purchases securities from the government, it increases the supply of money in the economy.

This can create inflation as more money is printed.

Conversely, when the central bank sells the securities back, this drains the money supply in the economy and creates a deflationary effect. These operations are considered direct operations.

In the case of repurchase operations, the central bank will temporarily loan currency for the purchase of collateral securities.

Basically, this means the central bank auctions off loans with fixed maturity rates.

In foreign exchange operations, the central bank can take actions such as forex swaps, which can be used to fund foreign exchange balances.

In simple terms this means that when the exchange transactions settle, they can gain a positive position in one currency while having a negative position of the other currency.

All of these forms of economic intervention typically influence exchange markets and rates directly.

As a great example of this, China and Japan occasionally buy billions of dollars worth of U.S. Treasuries in hopes of stopping the devaluation of the U.S. dollar versus their own currency.

These instances truly show that the U.S. dollar is the backbone of world economics and if the U.S. dollar collapses, so do currencies around the world in consequence.

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