The Pros And Cons Of Central Banking

In conjunction with their respective governments, central banks have been manipulating economies for decades. Central bankers have sought to control interest rates, inflation and credit through their policies. Their efforts have impacted the stock market, job creation, home construction and many more aspects of the economy. However, in recent years, central bankers have manipulated themselves into a corner and become trapped in the mess that they made.

Why Are Central Banks Trapped in Their Own Mess?

To understand the trap, it is important to understand how the central bank works. The United States created the Federal Reserve System in 1913 after several financial panics revealed that a centralized control over the monetary system was needed. The Federal Reserve Act stated three primary objectives for U.S. monetary policy, which were to stabilize prices, maximize employment and controlling long-term interest rates. In later years, the Federal Reserve was also assigned additional duties, including maintaining

An article appearing on ArmstrongEconomics.comstates that the artificially low rates have devastated pension funds and severely impacted the standard of living among the elderly. These sentiments were echoed by Glenn Stevens, the governor of the Reserve Bank of Australia, which indicates that the issue is not confined to the United States.

The policies of the central bankers have also had a devastating impact on the bond market. An article in Bloombergstates that "yields on $7.8 trillion of government bonds have been driven below zero" and that the central banks are making matters worse by making massive purchases to prop up their economies. The author suggests that the fact that investors continue to buy bonds even when returns are currently "next to nothing" indicates that they are very concerned about global economic