Friday, 4 January 2013

The government is letting banks print money

One of the functions of government is to protect the people from out-of-control inflation. If there is too much inflation the economy cannot function properly and there can be no civilisation. We require a stable currency for commerce to work properly. But if the banks are able to increase the money supply at will due to their being insured by the government then we will have excessive inflation. We have excessive inflation because the government provides deposit insurance to the banks and enables them to engage in fractional-reserve banking. It is the fault of the government that banks are able to increase the money supply and it is the role of government to protect the people from inflation. The government has a responsibility to stop inflation even if it is being committed by the banks. Not even the banks should be able to cause inflation. The government should stop the banks from causing inflation if it is being consistent in protecting the people from economic hardship. It is one of the functions of government to prevent inflation and it is failing to do so.

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