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What are the pros and cons of central banking?

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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.

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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.

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