Updated: Jul 21, 2021
As the US President, Donald Trump, once said: “you never have to default because you print the money…” And the issue is within these lines, the politicization of money begins when a central banking policy meets politics.
In this week’s episode of Principled Discord, hosted by Thierry Arys Ruiz, CEO/founder of TARCO NGO and AgAu AG interviewed Professor of Business and Economics at the University of Basel Aleksander Berentsen.
According to Professor Berentsen, Central Banks do not “print unbacked money” but instead buy assets with newly created central bank liabilities. Since Central Banks have a balance sheet in which the purchased assets are recorded, they can easily sell these assets at any time (hopefully for a profit) and remove excess liquidity from the economy.
The idea behind this is to prevent excess liquidity to cause inflation.
Professor Berentsen believes that the low-interest rates that we face today are not the result of Central Banks’ policies but are mainly caused by a long-term secular trend — perhaps due to globalization — of falling interest rates and falling inflation that started 40 years ago.He also believes that the recent increase in inequality is partially due to financial regulations that only allow people with a sufficient amount of income or wealth (e.g. accredited investors) to have direct access to certain financial products.
Whilst Mr. Arys Ruiz is convinced that the monetary system will soon “switch into a system which is more transparent, and with less intermediaries thanks to blockchain technology…” But the subject of politicized versus decentralized money is not as simple.
To learn more about the difference between politicized and decentralized money watch the conversation of two industry leaders by following this link and don’t forget to subscribe to Principled Discord’s YouTube channel and watch the entire podcast!