Should Central Banks Manipulate Their Money Supplies?

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Many economists believe that central banks (and the partisan politicians that control them) should have the power to manipulate their money supplies. Their primary argument is this: When cyclical deflationary or inflationary trends occur, politicians should be able to inject or remove money from an economy to offset those trends, thereby restoring balance to the economy. There are several problems with this argument. . . .

Politicians. It’s obvious to any conscious adult that most (not all) politicians in virtually all countries today cannot be trusted to act in the best interest of their citizens. (It’s not that they’re all bad people; they simply have broken incentives.) This problem is getting worse as giant transnational cannibals continue to dominate the global economy and hijack the economic policies in their home countries to serve their narrow interests. This problem is magnified in countries like the U.S. where central bank policies are dictated by government officials who have strong incentives to collude with transnational cannibals to manipulate the economy to serve their personal interests.

The Knowledge Problem. It is impossible for any politician to understand enough about the true state of an economy to know precisely how much money to inject or remove from the economy. Even if artificial intelligence and powerful data processing systems make this analysis easier in the future, the human interpretation of that data is highly subjective and vulnerable to politically motivated manipulation. If a system can be corrupted by humans, it inevitably will be corrupted by humans.

Violent Inflation & Deflation Are Impossible in Sound Economies. There is an implicit (and usually unconscious) assumption that economists make when citing Keynesian theories of monetary policy: They assume the economy will suffer from violent inflationary and deflationary events, which they believe can only be cured by politicians manipulating the money supply. However, as discussed in greater detail in the Gini book, destructive inflation and deflation cannot exist in an economy that is governed by the Law of Money-Value Creation. Specifically, in an economy that is not plagued by the distortions of a fractional reserve banking system and corresponding reckless speculation that inevitably leads to debt bubbles and violent economic collapses, there is no rational justification whatsoever to allow corruptible politicians to manipulate an economy’s money supply.

Violent Debt Liquidation is Impossible in Sound Economies. To justify their assumptions, many economists cite the rapid debt liquidation of the Great Depression (see What Caused the Great Depression?) as proof that rapid debt liquidation cycles justify monetary manipulation. They ignore the fact that excessive, economy-wide debt overhang is fundamentally impossible in a sound economy. They also ignore the fundamental cause of the Great Depression and the 2008 Financial Crisis: excessive, speculative debt sloshing around the system, created by widespread corporate corruption, which was aided and abetted by incompetent and/or self-serving politicians manipulating their money supply!

The Gini Ecosystem is Intrinsically Resistant to Violent Inflation & Deflation. We’ve taken the time to explain these principles to preemptively respond to anybody who thinks a currency is flawed if politicians are not given the power to manipulate its value and quantity within an economy, based on their assumption that violent inflation and deflation are natural and inevitable. They are not. A sound monetary system like the Gini monetary system is not vulnerable to violent deflationary and inflationary cycles because it’s fundamentally governed by the Law of Money-Value Creation and it’s not distorted by the corrupt and dysfunctional fractional reserve banking system that plagues the fiat economies of our world today. Anybody who wants to learn more about why this is true can read the Gini book.

See also: Price Level Stability and Is Gini a Deflationary Currency?


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