There should be no central bank

Comments on a poll question asking whether there should be more oversight of the Fed.

I have to say I did not vote in the question. There should be no central bank. The central bank exists as a "lender of last resort" in a fractional reserve banking system in order to prevent runs on the banks when they overextend. Without fractional reserve banking, banks can't overextend.

It is also this overextension by the banks that causes the expansion and contraction cycle in our economy. Banks issue easy credit to enterprises that would not be viable otherwise. This credit is new money driving an unsustainable boom.

When the enterprises fail because the banks are overextended and cannot extend any more credit the assets of the bank dry up and the bank fails. This contraction, many enterprises propped up by easy credit, we call a recession.