Q:

What are the pros and cons of central banking?

A:

Quick Answer

Supporters of central banking argue that it provides stability to the economy and allows the government to influence important aspects of the economy. However, central banking detractors argue that central banking unnecessarily expands the size and influence of government and leaves the economy more susceptible to corruption.

Continue Reading

Full Answer

The pros of central banking are the establishment of a nationally recognized currency, the implementation of monetary policy and the ability to conduct independent audits. In the U.S., the Federal Reserve's primary method of implementing monetary policy is raising or lowering interest rate. Debate.org explains on their website that this allows the Fed to encourage borrowing and investment in a slow economy and control inflation. The Fed also audits member banks to ensure their financial health, a practice that without a central bank would be left to banks themselves. The cons of central banking include an expansion of government, limitations on the free market and the potential for corruption.

According to SubjectMoney.com, politicians and members of the public believe that a small government results in more freedom and that the concept of central banking is contrary to the core principles of capitalism because it takes control of some market forces away from the free market. Additionally, many of the people who work for central banks are former bankers, leading many to believe that central banks are highly susceptible to corruption and that central bankers do not always act in the best interest of the public.

Learn more about Economics

Related Questions

  • Q:

    What are the pros and cons of DNA fingerprinting?

    A:

    Supporters of DNA fingerprinting argue that the process makes it easier and more efficient for police to solve crimes. Critics claim that DNA fingerprinting is invasive and violates citizens’ right to privacy.

    Full Answer >
  • Q:

    What are the pros and cons of zoos?

    A:

    Supporters of zoos argue that they educate the public, foster appreciation for animals, protect endangered species and help animals breed. Critics argue that zoos unethically imprison animals, confine them to boring or stressful lives and even support the mistreatment or death of some animals.

    Full Answer >
    Filed Under:
  • Q:

    How does a government budget deficit affect the economy?

    A:

    A government budget deficit can affect the economy in many ways, most notably it may force the government to print more money to finance the deficit, decreasing the value of the nation's currency. However, running deficits can be beneficial in the short term, as it allows the government to increase GDP and continue to provide the services that allowed it to secure loans from other governments initially, according to About.com.

    Full Answer >
    Filed Under:
  • Q:

    What countries have a market economy?

    A:

    Countries whose economies attract minimal involvement of the government have a market economy. According to a 2013 Index of Economic Freedom, the United States, Canada, Denmark, the United Kingdom, Hong Kong and Mauritius have a market economy. Most market economies have a degree of state-dictated planning and are thus categorized as mixed economies.

    Full Answer >
    Filed Under:

Explore