The central banking system fundamentally benefits those closest to the banks - corporations and the rich - at the cost of the average citizen

posted 2 years ago by SparkPlasma 2 years ago by SparkPlasma +23 / -0

First of all, inflation. Standard dogma, that I'm not necessarily inclined to disagree with, is that it should be targeted around 2% per year. In order to control inflation, the central bank has to create money commensurate with the desired inflation. It does this by handing out loans at the federal interest rate to banks and corporations. If inflation is too low, the central bank lowers the interest rate spurring banks and corporations to take new loans and increase the money supply.

Now, think about it. If we have say $100 in circulation then adding $2 into the circulation will decrease the buying power of the dollar by 2%, as expected. But who gets this $2? If you hand out that $2 proportionally to all people holding cash, then nothing changes. If I have $50 and you have $50, then giving each of us $1 doesn't change our buying power at all. If the $2 is handed to me and nothing to you, then my buying power has increased by 2% while yours has fallen by 2%.

How does it magically appear into circulation? The answer is it doesn't magically appear, banks and corporations are gifted that money as low-interest rate loans. So banks and corporations are receiving the $2, while everyone else is receiving nothing. Banks and corporations gain buying power, while the average citizen loses buying power. Lowering interest rates just mean that the rich can take out cheaper and cheaper loans, that's why you see interest rates lowering unilaterally across western countries.

Sometimes you're lucky and a bank will cut you some slack. They'll give you a mortgage at 3% or something so you can get a cut into the loan scheme. But they're still making money. The bank is borrowing that at like 2% and then giving it to you at 3%. The game is rigged.

This is why I am honestly in support of UBI. Not the ridiculous sort of UBI that is often proposed of like $2000/month, but like $150/month. This UBI would exist solely to create the desired rate of inflation. The intention would be to stop handing out money to banks and corporations but to hand it out to people instead. $2000/month would result in hyperinflation and/or absurd rates of taxation. $150/month would be approximately enough (just a back of the envelope calculation) to support a 3% inflation. Decrease it to 0 or increase it as needed to support that inflation. The government would borrow from the central bank in place of banks and corporations, hand it out to citizens, and then collect via taxation to pay it back.

For those of you who might be opposed to this, this is literally already happening but the banks and corporations are the ones benefiting, not you. If you'd like an alternative to this, maybe a 0% inflation rate could be more palatable as no one would be getting handouts then, but good luck getting that past the vast majority of economists who support 2% inflation.

The reason I propose UBI is because it is more fair. At present there are two ways to handle inflation:

(a) basically gift money to banks and corporations via ridiculously low interest rate loans

(b) gift money to """disadvantaged groups""" like disabled people and natives via government handouts

(a) is always happening, (b) is pushed by leftists, but in both scenarios normal working class people lose out on their buying power. If you, as a normal person, want money you have to position yourself career-wise as close as you can to serving banks and corporations to get a cut on (a) or serving leftist pet projects by becoming a nurse or government worker to get a cut on (b). If you just want to do normal work without pandering to either of these overarching founts of money, you are shit out of luck and will continually have your buying power eroded.

So my proposal is to end gifts to banks, corporations, and leftist pet projects, and instead either embrace 0% inflation or use a low-valued UBI to reach the 2% inflation number. Anything else is playing favoritism.