Central Banks Are the Engine of Inflation.

Sunday July 7th 2019 Monaco 64 home of alternative economics and contrarian views today I want to go over a part of a book that I think everyone that is interested in learning about how the monetary system works the nature of money the origin of money you must read this book in my opinion and it's entitled what has government done to our money and the case for a hundred percent gold dollar by Murray and Rothbart he wrote this book in the early 60s Murray Rothbard passed away years ago he was a proponent of the Austrian School of Economics so I highly recommend this book it is an economics book but for the layperson is very easy to read that's the great thing about the Austrian school they tell it like it is they don't make it complicated with equations or formulas like the Cain genes and other economists do so you don't need to be an economist or even have a master's degree or PhD to read this book so I highly recommend it so what does it say here in the back of the book it says from the introduction by Murray and Rothbard and I'll just read it let us first ask ourselves the question can money be organized under the freedom principle can we have a free market and money as well as in other goods and services what would be the shape of such a market and what are the effects of various government of controls if we favor the free market in other directions if we wish to eliminate government invasion of person and property we have no more important task than to explore the ways and means of a free market and money so that's basically what this book is about I'm not going to go over the whole thing I'm gonna go over a section about central banking it's a chapter 3 sex mate and it's entitled central banking removing the checks on inflation why am I going over this now well because there's a lot of talk especially with cryptocurrencies in the blockchain if you know a bit about cryptocurrencies and blockchain it is like a response to the centralization of power in the monetary system through central banks so it's quite funny that we we see central banks that even the BIS Facebook saying they're going to start their own cryptocurrencies or digital currencies it's like a completely an oxymoron because the purpose of cryptocurrencies Bitcoin especially is to decentralize power to not have power rested in one place by the name itself central banking it says right away what it is right so today we'll go over at chapter 3 section 8 to see how the the central banks have managed to basically take the power of the general public away and control their money supply so to speak so let's go to page 80 here and let's start looking at what Murray Rothbard says central banking removing the checks on inflation so it's not just about inflation is about the centralization of the power so and I'm quoting on Murray Rothbard central banking is now put in the same class with modern plumbing and good roads any economy that doesn't have it is called backward primitive hopelessly out of swim America's adoption of the Federal Reserve System our central bank in 1913 was greeted as finally putting us in the ranks of advanced nations central banks are often nominally owned by private individuals or as in the United States jointly private banks but they are always directed by government appointed officials and serve as arms of the government where they are privately owned as in the original Bank of England or the second bank of the United States their prospective profits add to the usual government desire for inflation so yet what he's saying here is that the profits of the central banks are not directed to paying off that or between something productive there are geared towards more and more government spending more and more debt so I'll continue a central bank attains its commanding position from its governmental II granted monopoly of the notes issue that's the important part and he even like puts this part monopoly of the no issue in italics this is often the unsung key to its power invariably private banks are prohibited from issuing notes and the privilege is reserved to the central bank the private banks can only grant deposits if their customers ever wish to shift from deposit notes therefore the banks must go to the central bank to get them hence the central bank's lofty perch as a banker's Bank it is a banker's Bank because the bankers are forced to do business with it as a result bank deposits became redeemable not only in gold but also in central bank notes and these new notes were not just plain bank notes they were liabilities of the central bank an institution invested with all the majestic aura of the government itself government after all appoints the bank officials and coordinates its policy with other state policy it receives the notes in taxes and declares them to be legal tender so those are some of the interest instruments they're monopoly of issuing the note and backing their liabilities with the power of taxation of the states that's how they back their notes what if they only backed it with gold while they wouldn't be able to inflate the system as much central bank's liabilities are multiples of you know the country's gold holdings so he goes on to say as a result of these measures all the banks in the country became client of the central bank gold poured into the central bank from the private banks and in exchange the public got central bank notes and the dis use of gold coins gold coins were scoffed at by official opinion as cumbersome old-fashioned inefficient an ancient fetish perhaps useful in children's socks at Christmas but that's about all so yeah the campaign against gold it's not just against the gold price manipulation even though that's a big part of it it it makes it seem that gold is a risky commodity and it keeps people away from it I mean I've seen in the past when I speak to people and they ask me where would you put your money I say gold coins and they say oh the price of gold is too high right now it's too risky so they've been able to how can I say scare people away from it and that's on purpose because they don't want to give control of the monetary system or the monetary of inflation to the people because if people held more golden they did the power of the central banks and the commercial banks would go down the drain so now you can understand why bullion banks like JP Morgan Goldman Sachs HS BC Barclays Deutsche Bank why they are so important they're there to do the dirty job for the central bank's to keep people away from gold and if people do get interested they tell them to buy ETFs right they don't they don't tell their clients to go and buy gold sovereigns or American Eagles and take delivery that's the last thing a boolean bank will do even though it's called a boolean bank right so I continue here how much safer more convenient more efficient is the gold when resting as bullying in the mighty vaults of the central bank well I'm not too sure about that bathed by this propaganda and influenced by the convenience and governmental backing of the notes the public more and more stopped using gold coins in its daily life inexorably the gold flowed into the central bank where more centralized there you go centralized it permitted a far greater degree of inflation of money substitutes so basically money substitutes he means anything no that isn't gold as JP Morgan said you know gold is money everything else is credit or a substitute and you might be asking elsewhere if you're not in the state's listening to this video what's that got to do with the UK or Australia or anywhere else in the world well it has everything to do with it even though this book is about the United States the present system we have even though the Federal Reserve is younger than the Bank of England is run basically from the Federal Reserve they've got the power there the major central bank and the dollar or the Federal Reserve Note is the almighty reserve currency at the moment and he goes on to say in the United States the Federal Reserve compels the banks to keep the minimum ratio of reserves to deposits and since 1917 that's an important date as well white since 1917 well because the the u.s. went into World War one in that year and they use the excuse of a major war for that as they always do these reserves could only consist of deposits at the Federal Reserve Bank gold could no longer be part of a bank's legal reserves it had to be deposited in the Federal Reserve Bank so there you go so it's no point banks keeping gold as reserves was on say the entire process took the public off the gold habit and placed the people's gold in the non to tender care of the states where it could be confiscated almost painlessly internationalist Raiders international traders still used gold bullion in the large-scale transactions but they were an insignificant proportion of the voting population the other thing I would say about what's going on about the cashless society fact that a lot of people are using debit cards or bank cards or credit cards whatever you want to call it is that's going to eliminate even the the notes that's gonna make that's going to take the inflation one step further just like get taken just like taking people away from gold coins and silver coins has increased inflation the cashless society and using the cards is going to do it even more it's gonna allow the commercial banks and the central banks to create even more money substitutes as Rothbart calls it right so again though what's the way to protect yourself if you're able to how can I say a store some spare wealth or money or capital whatever you want to call it I think there's only one way having physical gold and silver you have to do that they're not gonna stop this inflation in my opinion so here we go one of the reasons the public could be lured from gold to banknotes was the great confidence everyone had in the central bank so this explains to you as well why the mainstream media mainstream economists who who are bought and paid for by this central banking system why they never criticized the central bank and and and when there are people who come on the mainstream media who do criticize it they're looked at as if they were aliens right so surely the central bank possessed of almost all the gold in the realm backed by the mics and prestige of government could not fail and go bankrupt that's partly true but they can inflate away at the money substitutes to kingdom come right and you you get the short end of the stick and it is certainly true that no central bank in recorded history has ever failed but why not because of the sometimes unwritten but very clear rule that it could not be permitted to fail if government sometimes allow private banks to suspend payment how much more readily would it permit the central bank its own organ to suspend when in trouble the precedent was set in central banking history when England permitted the Bank of England to suspend in the late 18th century and allowed this suspension for over 20 years that was during the Napoleonic Wars right he goes on to say the central bank does became armed with the almost unlimited confidence of the public by this time the public could not see that the central bank was being allowed to counterfeit at will and yet remain immune from any liability if it's bona fides should be questioned it came to see the central bank as simply a great National Bank performing a public service and protected from failure by being a virtual arm of the government so what do I think of President Trump's recent criticism of the Fed I think even criticized them yesterday well kind of mixed the positive is at least he's criticizing the central bank but it seems like he's actually pushing the central bank to inflate even more so in that sense I'm not really a hundred percent behind him what he should be saying is that we don't need a central bank and but will he ever say that well don't hold don't hold your breath the central bank proceeded to invest the private banks with public's the public's confidence this was a more difficult task the central bank let it be known that it would always act as the lender of last resort to the banks ie the bank that would stand ready to lend money to any bank in trouble especially when many banks are called upon to pay their obligations so yeah that's a that's the old Badgett philosophy that central banks have to be lenders of last resort what do I think about that while it creates even more inflation moral hazard it gives bankers the idea that they're exceptional and that they can do whatever they want so governments also continue to prop up banks by discouraging bank runs ie cases where many clients suspect chicanery and ask to get their property sometimes they will permit banks to suspend payments as in the compulsory bank holidays of 1933 FDR laws were passed prohibiting public encouragement of bank runs and as in 1929 depression in America government campaign against selfish and unpatriotic gold hoarders how can he be unpatriotic when you're trying to get your property back from a business that is irresponsible I don't understand that he doesn't either he he writes this sarcastically America finally solved its pesky problem of bank failures when it adopted Federal Deposit Insurance in 1933 the Federal Deposit Insurance Corporation has only a negligible proportion of backing for the bank deposits it ensures and it's the same thing all over the world we have deposit insurance in the UK but they they don't have they've got a tiny percentage of all deposits insured really but the public has been given the impression and one that may well be accurate accurate that the federal government would stand ready to print enough new money to redeem all of the insured deposits as a result the government has managed to transfer its own command a vast public conference to the entire banking system as well as to the central bank that's true yeah they they could print all the money and cover FDIC or FSC I think it's a FSC insurance in the in the UK but what would be the consequence of that well inflation loss of purchasing power who would be hurt the common people the general public right more as you can see more of the effects of centralization it corrupts the system there's no checks and balances we have seen that by setting up a central bank governments have greatly widen if not removed two of the three main checks on bank credit inflation what did the third check the problem of the noun is of each bank's clientele removal of this track is one of the main reasons for central bank's existence in the free banking system inflation by any one Bank would soon lead to demands for redemption by the other banks since the clientele of any one bank is severely limited but the central bank by pumping reserves into all the banks can make sure that they can all expand together and at a uniform rate if all banks are expanding then there is no redemption problem of one bank upon another and each Bank finds that its clientele is really the whole country while nowadays I would say it's the whole world right all the central banks are acting in yuneisia now they seem to be telegraphing us that they will continue to print continue to cut rates and the only reason for that is that banks are getting in trouble they're not in great shape that's the only reason they're doing that torture bank comes to mind in short the limits on bank expansion are immeasurably widened from the clientele of each bank to that of the whole banking system of course this means that no bank can expend further than the central bank desires thus the government has finally achieved the power to control and direct the inflation of the banking system so government is taken over and the central bank it's not set by the general public and the free market like it used to be before central banking in addition to removing the checks on inflation the act of establishing central bank has a direct inflationary impact before the central bank began banks kept their reserves in gold now gold flows into the central bank in exchange for deposits with the bank which are now reserves for the commercial banks but Bank itself keeps only a fractional reserve of gold to its own liabilities therefore the act of establishing a central bank greatly multiplies the inflationary potential of the country so I thought that was a great explanation of how this mechanism of central banking works and how it creates inflation and you can understand why there's not only manipulation of the gold price but there's also a campaign continues campaign against going back to a gold-backed system with no central banks these bankers and governments they wouldn't be able to inflate the system they they basically scratch each other's backs the bankers and the politicians the bankers create the inflation and they benefit from inflation bankers okay massively because they're able to take that money substitute or credit and invest in real goods before it gets debased right and the general public gets left holding the bag politicians both parties that's why politics is such a waste of time in my opinion they got to spend as well you be it for the military-industrial complex or the welfare state it doesn't really matter so highly recommend a book what has government done to our money so next week I'll try to find another section of the book that I think is appropriate for our own time and what's happening monetarily in the world if you enjoyed this video make sure you hit the like button subscribe to the channel if you haven't yet you can also follow me on Twitter steam it and on d tube i wish you all a great rest of the weekend take care bye


  1. Stephen Douglas

    Postpone the rollout of 5G in the UK, pending further independent investigation.

  2. Ian Cassie

    Advantages of BASIL3 JOHN RUBINO Z/H quoting Mark Mobius [whats the sense of holding EUROS when you get a negative rate, you might as well put it into GOLD

  3. N/a N/A

    there are no such things as banks today. they are account manipulating centers. institutionalized by the center, their core is from somewhere else. there is no such thing as a central bank. thats all psychological fluff to make you look away from the government, who is the controller of all account manipulating institutions. each account manipulating institution is "named" to make you feel a different business, a different entity. they dont have the integrity of a BANK. they play a large role in printing away your personal wealth you should stop calling them banks. its uneducated embarrasing and an insult to humanity. also stop calling it "inflation" start calling it (public edged monetarywealth theft). use the real intents. as a side note when did the last real bank exist. use the pure language

  4. rumpel stiltskin

    Mario, because of you (thanks to you) I have read some of Rothbard's other books, notably The Mystery of Banking and An Anatomy of the State. Surely you have read these as well. Fodder for future vids?

  5. Universal Vibes TV

    Mario, i'm listening to the audio book of 'What has the Government Done with Our Money?' Very relevant book with the changing times we're heading towards

  6. jim h

    There are so many incorrect statements and assumptions in that book I do not have time to go over all of them just like the Creature of Jekyll Island. Take the part that central banks do not pay down government debt. Nonsense! Under the FED's mandate which was approved by Congress all excess profits must flow back to the taxpayers thru treasury which it does on a regular basis unless they are reducing their balance sheet by letting treasuries mature which is QT and/or providing liquidity to banks. Under their original mandate they could only buy short term commercial paper from banks to provide liquidity so banks could lend and create growth and jobs during the industrial revolution. Banks lent and then the FED would buy this and then banks could lend again as the economy needed much more liquidity because the economy was changing from over 60% people employed in agriculture to a fraction of that as new technology replaced farm labor. Millions of people were moving into cities to find work but banks did not have enough capital to lend hence the FED was born. This was in fact before the great depression and this was one of the reasons for it as more and more people kept fleeing farms to cities and the US government realized they had to create jobs and tonnes of them. Profits that the FED made went back to buying paper and the excess back to treasury to help keep the government running. During WWI Congress actually changed the FED's mandate forbidding them to buy commercial paper but buy only treasuries and US government backed agency debt to fund the war and the government. Banks then were forced to also buy treasuries so the FED could buy them and they could make a profit adding to their liquidity so they could then lend. This is never changed since then. It is Congress who controls the mandates of the FED and not the FED. Because Congress creates deficits they will never change this as the government would have to curtail spending. Folks do we see a pattern here? Congress changed the mandate from the FED pushing economic growth by buying commercial paper to help prop up the government and pushing economic growth.

    During the period when there was no central bank the US economy did not need one as it was an agriculture based economy with most jobs again on farms. As technology changed and the advent of railroads and train cars with freezers, food products started to flow to Chicago then back east especially during harvesting season and with population growth came the need for more liquidity. Banks in the midwest were flush with cash especially after harvest while others around the country were cash poor. Then you had banks making bad loans, corrupt bankers going after farmers, banks making up their own currency, (notes), different interest rates in different parts of the country, no reserve requirements, etc, etc, etc. It became apparent that something had to be done to create a stable monetary and banking system and to regulate banks from themselves and to protect depositors and borrowers. The idea that a free market place would allow this was proved totally false and this is just another great flaw in the book.

    Regardless what you read on the net most central banks are a part of their respective government. Central banks have different mandates on what they can buy. There are a few privately owned like the Swiss central bank but again excess profits must flow back to the treasury equivalent. The Swiss shareholders though can make a maximum 8% return with the rest going back to taxpayers. Back in 2009 when Armstrong Economics computer models alerted clients that Europe was beginning to collapse and capital would flee to dollars and US equities especially the Dow and cause markets to move much, much higher they like all worldwide clients waited for the models to forecast the bottom in the Dow which happened on June 13, 2011. They started buying equities and last count was around over $90 billion. Their shareholders have been making 8% since then and the bank itself has been making huge profits from dividend cash flows and also share appreciation when selling and again all this flows back to the taxpayers which pays for pensions and keeps the government afloat. They were forced to as there is no yield in Europe because of Draghi. The FED under its mandate cannot buy equities or commercial bonds.

    Today gold is still bought as a hedge but that is about it except for jewelry. It has become to cumbersome in its use in monetary systems and the amount of liquidity needed by economies to grow has outpaced the supply of gold and higher priced gold if still used in monetary systems today would collapse these systems as no country can afford to keep buying it to back the new liquidity needed even at today's prices so forget much higher prices.

    No one is discouraging people from buying gold and except for the short term manipulation we see in ALL markets to create short term price movement no one is suppressing the long term price of gold. The theory used by GATA for years and other metal pumpers that the "cartel" suppresses the long term price to instill dollar confidence had been totally debunked as the FED's main problem since 2011 has been dollar strength and this is still there problem and has been desperate to weaken but cannot. If gold was at $10,000 capital would still be fleeing to dollars, buying US equities on the dips and now treasuries as these are all safe haven assets no matter what you read on the net. Large capital flows do not buy physical gold because it is too cumbersome, does not have the liquidity and there is the delivery and storage costs. If these large capital flows want to take advantage of the price movement in the metal, trade on the futures markets where liquidity is huge and they do not have to worry about taking delivery. Most banks who have trading desks actually trade for clients that need to hedge or the clients want to trade for the price movement. Take JP Morgan and the crap on the net owning over 800 million ounces. All bullshit! They no longer trade in their proprietary accounts for themselves but for clients acting again as a broker or a CTA, commodity trading advisor. Anyone who believes in this crap on the net by the metal pumpers just look at their financials every quarter. They act strictly as CUSTODIAN for clients, Comex, etc. and this is exactly what financials state but again the net is full of people giving out false information.

    Gold does not stop inflation and the whole time the dollar was backed by gold there was in fact inflation. This is necessary because would you drop a large deposit down on real estate for part of your retirement next egg, pay the closing costs, pay the taxes, pay the insurance, pay the upkeep and at the end of twenty years only be able to sell it for the same amount as you bought it for? You lost your ass. No one would invest in real estate and the whole economy tied to it would be nonexistent or collapse and the millions of jobs with it. No one would invest in anything. This guy is supposed to be a banker or some trader and he doesn't realize this? Folks this is your more of your typical internet bullshit!

  7. dementeduncle

    Turkish President Erdogan just fired the governor of the central bank of Turkey, installed his puppet and declared that higher interest rates cause inflation. I'd love to hear your thoughts Mario.

  8. Jason Kim

    Bankers and government also can have lottery or scratcher winning investment on human ingenuity and innovation in many different fields that could bring shocks to our economy.

  9. Roy Scown

    Sorry to disagree Mario, but I think Congress by Constitutional authority "to borrow money on the credit of the United States" is the true engine of inflation.The FED monetizes the debt created by Congress, and by the fractional reserve process causes inflation. It is right there in front of peoples eyes, and they refuse to believe it.

  10. Jason Kim

    Cryptocurrency I am not really fond of, BUT I do appreciate the technology of blockchain involved in trade records, transparency, ethical safety, static registry, security, and permeant booking.

    I heard cryptocurrency backed by silver. With blockchain and precious metal backed, cryptocurrency might outpace what gold did in the past.

  11. R R

    Excellent video! Central Banks and Banks will make sure we keep getting inflation………….Keep trading fiat currency for silver and gold coins to protect yourself from inflation. Savings in the bank = ZERO interest!

  12. Shane Lackey

    Fiat currencies are Graphic Demonstrations Law by itself is not a store of Value over time .

    " You must use this currency to the exclusion of all others "

    Good luck with that . Your math skills have abandoned you so in time everything else will .

  13. David Cisco

    Government fiat is dependent on forced taxes in fiat to maintain its purchasing power.
    Crypto purchasing power is dependent on quantitative voluntary Idiocracy.
    Assessing voluntary value to an invisible nonentity is most illogical. But after decades of using Government Fiat currency humans have been conditioned to accept, grade and add value to invisible nonentities. When logic is scarce and conditioning complete, the value of nothing can accelerate to very high levels and last for an eternity.

  14. Mike T

    wow great timing I just bought this book in audio format after finishing the The Creature From Jekyll Island, I hope it is as great as that book you recommended.

  15. Kiril Mihaylov

    Rothbard died back in1995… Austrian school is too focused on inflation. There are some good working concepts and theories but not all are valid and plausible. They have been wrong on inflation for 10years now…

  16. william wiltrack

    I LOVE that concept of, once again, having monetary policy based upon gold. Is it sagacious to expect, in these time, that individual countries would be transparent about their true gold holdings? Are you suggesting that we actually use pieces of gold within a fiat currency or coin? There seem to be other currency/investment vehicles that exist now that would make it all but impossible to have a true value of gold obtained and for that value to be instituted as a means of measure of value.

  17. Lord Humongus



    Learn to pronounce



    short for cryptography.



    a person having a secret allegiance to a political creed, especially COMMUNISM.

  18. DB Stupid

    break gold free from the price discovery on the exchanges. make gold contracts stand for delivery. let's find out how much gold would be purchased if there was a free market in gold. problem solved. gold needs to exist as wealth, not currency.


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