While I have rejected most conspiracy theories that I have encountered so far based on lack of evidence, one of the most difficult ones to set my mind on is central banks.

From my limited understanding of the issue it would seem that, in many countries, privately owned and controlled central banks, responsible for printing new currency to stabilize the economy, have the power to inject the newly produced currency into projects of their own choice. Thus it seems that leaders would be able to fund projects, that the people do not desire to spend tax money on, with newly created money without the knowledge of the people.

Can anyone provide evidence for or against this claim and many others made by those that are for the destruction of privately owned and controlled central banks (UK/US in particular if possible)?

  • "evil" is a bit too subjective to be answerable. Additionally, "many countries" is pretty broad, CBs differ (and not private in most countries, if memory serves - even in USA it's kinda-hybrid, not 100% private)
    – user4012
    Jan 6, 2017 at 16:16
  • I've amended the question - hope this clarifies it a bit
    – Psi
    Jan 6, 2017 at 16:39
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    It still seems a bit too broad, but another problem is that the question does not seem to be describing how CBs work. The legislature funds projects. CBs merely execute general monetary policy, which isn't project specific.
    – user4012
    Jan 6, 2017 at 16:44
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    "Evil" and "undemocratic" are not synonyms.
    – Jasper
    Jan 6, 2017 at 18:07
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    This is tagged as theory, but it asks for evidence - evidence is not really a part of political theory. I'm voting to close as "unclear". Additionally, it would be useful to clarify what we are evaluating. Evil is too broad (unless you provide a meta-ethical framework). Un-democratic is also somewhat broad, but at least answerable with considerable summarizing. Jan 6, 2017 at 18:40

3 Answers 3


privately owned and controlled central banks, responsible for printing new currency to stabilize the economy, have the power to inject the newly produced currency into projects of their own choice.

In the United States, the central bank is a public/private partnership. It was constructed this way in part because it was replacing a de facto private organization. The federal government (i.e. the President with the "advice and consent" of the Senate) appoints the chair and vice-chair of the board of governors. While many decisions are made by democratic vote in the committee, day-to-day operations are run by the government appointees.

In the United States, money is printed by the treasury. However, the Federal Reserve (Fed) can effectively print money by purchasing government debt. Since the Fed maintains the ledger of bank deposits, they can purchase without having physical currency. Money is never actually printed, but it is created.

Without a central bank, that power would reside in the private banks. They would be able to create money by loaning it. In fact, they can still do that, although only up to 90% of their deposits (now, that percentage is set by the Fed).

The Fed was a reform. It replaced a purely private partnership lead by J. P. Morgan. It was a response to a six month banking panic in 1907. During a banking panic depositors would try to withdraw all their deposits. This of course wouldn't work because most of the deposits were tied up in loans. So banks would stop paying out on deposits. Depositors could only spend money by issuing checks. Banks could process checks by crediting the depositing bank with a claim. The Fed took over managing those deposits.

Traditionally, the Fed was only able to buy treasuries and any profits went back to the government. The Fed was not able to pick and choose projects.

More modernly the Fed added the option of quantitative easing which allowed them to buy other assets. In particular, the Fed purchased at least $600 billion in mortgage-backed securities in the last recession. Even there, the Fed wasn't initiating projects. It was removing existing projects from private ledgers. It's supposed to operate in a broad-based fashion measured by objective and even-handed criteria.

Central banks are certainly undemocratic, deliberately so. The problem is that every time a central bank has been operated democratically, people democratically voted themselves more money and caught themselves in an inflationary trap. Markets therefore charge a premium when loaning to a government with a democratically-controlled central bank. Independent central banks that maintain low inflation allow markets to feel secure enough to charge lower interest rates.

The truth is that markets trust an independent central bank that operates as a public/private partnership more than they trust democratic governments. Note that other central banks may be run differently.

  • 3
    Re "the problem is that every time...": It's unclear whether the generality "every time" applies because Democratic Central Banks are so rare that there's very few instances to consider, or if this is a widely observed phenomena, or perhaps a partisan tenet of a particular economic school. Please include a link or citation that provides an overview, or a few examples .
    – agc
    Jan 7, 2017 at 7:58
  • actually with fractional reserve banking they can go far beyond their 90% of deposits Jan 9, 2017 at 18:06

In Russia, the central bank is not private, but constitutionally independent. This gives basis for many conspiracy theories that the bank is controlled by the USA, directed by the USA, invests money into the US treasuries, thus crediting the US government, intentionally holds the credit interest rates high so to prevent Russian industry from developing, prints only as much money as the US allows. Some claim Russian central bank is nothing more than a branch of the FRS of the USA.

It is alleged that ruble is only a shadow of dollar because the central bank is allowed (by the USA) to issue only as much rubles as they have dollar reserves on the US accounts, so that ruble is the "colonial dollar" and nothing more.

These theories are fueled by the constant praise of the Central Bank head Elvira Nabiullina by the Western media and various awards she constantly receives (the last being just 2 days ago, 4th January, 2017 she was declared the best head of central bank in the wold by Western media). These praises are often compared with the praises Mikhail Gorbachev and Yegor Gaidar received in the 1980s-1990s.

She also very often makes statements that ruble should be weak (which benefits oil exporters) while inflation reduced by using austerity measures (reduction of income of the general population).

It should be noted that the austerity measures she justifies are not intended to contain budget deficit (as in Greece) but to reduce the growth of the prices via reduction of the demand, that is, by making the population poor intentionally.

Some call for removal of this central bank independence clause from the constitution as well as other "colonial terms" allegedly forced upon us by the West in the 1990s.

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    Deliberately weakening one's currency, and trying to discourage inflation, are contradictory policies.
    – Jasper
    Jan 6, 2017 at 18:09
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    This answer just describes another conspiracy theory without anything to back it up. A constructive answer would explain how the Russian central bank really works, and back it up with independent sources.
    – Philipp
    Jan 6, 2017 at 18:44
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    @Jasper not really. Former policy of Central Bank was interventions on the currency exchanbge market to support ruble while inflation was high. This was very detrimental to oil exporters, whose expenses were growing while income did not. Then Kudrin declared the policy of targeting inflation while allowing ruble exchange rate to drop. This is the policy of Nabiulina as well.
    – Anixx
    Jan 6, 2017 at 22:56
  • @Jasper - Only if you believe the Keynesian theories. Jan 9, 2017 at 18:23
  • @Philipp - Actually those are the stated goals of Ms Nabiullina... Jan 9, 2017 at 18:32

Central banks are private institutions that loan money to governments, with interest. That money is then used to issue the currency of that country.

The problem with this, is that interest is to be paid on every dollar that is issued by the US Federal reserve. Because a country will always have a loan to repay that's equivalent to the total of currency issued by that country, this results in a continuous & perpetual drain of resources (the interest) from the public, into the hands of the tiny elite that owns the central banks.

This 30 minute animation is a good introduction to the nature of central banking and why it is a threat to the prosperity of any nation.

  • This is a really poor explanation with pretty inadequate evidence to go with it. Sorry but it does not address the question at hand, merely fuels the conspiracy theory that central banks are evil and unnecessary.
    – Psi
    Jan 9, 2017 at 18:44
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    @ThomasHollis : Countries obviously need a centralized institution for issuing currency, but there is no reason whatsoever such an institution should rely on privately owned money that is borrowed with interest, other than the financial interests of those private owners. The drain of resources from the public to the bankers is inevitable in such a system (due to the perpetual interest payments), yet it is perfectly feasible to have a public central bank without it. This is not a crazy "conspiracy theory" but a fact that is blatantly obvious to anyone who knows anything about central banking.
    – user3025
    Jan 10, 2017 at 10:37

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