Central Banks: The True Centers of Political Power

Thorsten Polleit, chief economist of the precious-metals firm Degussa Goldhandel GmbH and adjunct scholar of the Ludwig von Mises Institute, is out with an important interview on the current central bank money printing and what it means long term.

His conclusions:

The latest set of improving data is at best indicative of an artificial and eventually unsustainable economic process. It has actually been set into motion by highly distorted interest rates and a new round of fiat money injection. Malinvestment is on the rise again. It is just a question of time until this so-called “upswing” will turn into yet another “bust.” Fiat money creation has caused the malaise. Creating even more fiat money won’t solve the problems. It will make them even worse.

Central banks have been captured by commercial and investment banking interests. I would assume that they will do more of the same: manipulating markets first and foremost by suppressing interest rates and printing new money to keep banks and the financial industry afloat.

With central banks running wild, we’ll be moving toward even more severe “boom-and-bust” cycles, even bigger government, less freedom and liberty, a distribution of income and wealth which is increasingly at odds with true market forces.

Central banks will become the real centers of political power. You could even say they are on the way to assuming the role of a “Politburo.” Central banks will effectively decide who is going to get credit at what conditions. They will decide which governments, which banks, and which kind of business sectors and companies will flourish or go under. The truth is that if the fiat money regime is not brought to an end — either by political will or by economic collapse — the economies will end up in a kind of socialist-totalitarian dead-end. But I tend to be optimistic: namely, that the fiat money scheme will break down before such a situation is reached.

The full interview is here.