[ExI] Monopolies in banking

[Dan]

--- On Wed, 6/24/09, Stefano Vaj <stefano.vaj at gmail.com> wrote:
> On Wed, Jun 24, 2009 at 3:17 PM, <dan_ust at yahoo.com> wrote:
>> I agree about 'knee-jerk support of "democracy",' but
>> the problem with modern central banks is NOT democratic
>> control -- as in the voters selecting the head of central
>> banks or the legislators selecting ditto.
> 
> The real issue is political, public, sovereign control.

Not in my view.  Public control means little.  In democracies, it's the pretense that everyone has a say, though such a say, in practice, means little in nations of millions or tens of millions of voters.  Why not a free market in money and banking?  In that case, each person can decide what monies to use (e.g., paper dollars or euros, gold coins, whatever) and which firms (e.g., traditional banks*, specie warehouses, whatever) to deal with -- or even to opt out completely?

> In other
> words, removing the crazy rule according to which central
> banks are
> granted "independence" while at the same time they are
> entrusted with
> policy powers and control over the money of the relevant
> country. Who
> would ever grant "independence" in such sense, e.g., to the
> armed forces of a given country?

They truly don't have independence.  That's just another pretense.  You might believe it, but it's little different than "separation of powers" or "federalism."  These are nice words that induce trances in people who believe they are real restraints on power.  (Granted, they might restrain some power around the edges, but they are little more than that.)

> Once the country concerned has some form or other of a
> democratic
> regime, you can call it "democratic" control.

The illusion of control really.  People will feel they have a say in institutions, but since they have no alternative and even with democracy will require coalitions to change anything, nothing fundamentally changes -- save that there might be more openness in central bank activities.  (That might be an improvement -- and Rothbard called for it in the 1970s, I believe -- but it's a cosmetic improvement that rests on the assumption that there should be a monopolist in this area and the main quibble over how to select who is the monopolist.)

Regards,

Dan

*  I mean the current tradition of fractional reserve banking.