The Failure of Central Banking with Matthew Mezinskis - WBD645

Matthew Mežinskis is the creator of the Crypto Voices podcast and
Porkopolis Economics website. In this interview, we discuss why
free banking has always failed due to central bank interference,
and how Bitcoin changes the rules of the game. We also talk about
how credit is a natural economic phenomenon, and why narrow
banking is centralising in nature.


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The history of free banking goes back over 1,000 years and it has
existed in over 60 countries. It was widespread in the 19th
century, but from the early 20th century onwards it was
supplanted by central banking in modern economies. However,
despite some common narratives, it’s demise was more to do with
pressure from governments to create monopolies for currency
issuance, than inherent weaknesses in the free banking system.


The idea of free banking is re-emerging as a response to the
failures of central banks. It is well documented that monopolies
often result in market failure due to their constraining of
efficiency and innovation. Further, without competition, those
running monopolies distort prices and capital through subjective
and misaligned priorities. A sovereign debt spiral is a symptom
of such centralising control.


Matthew Mežinskis is able to bring colour to this issue through
his peerless analysis of the different types of money flowing
through the economy, and how these are currently out of kilter
with the economic system they are intended to support. At the
root of the problem is that central banks control both the base
money (i.e. the money supply) and the credit supplied to the
economy through commercial banks.


These tools have been abused. Further, commercial banks have been
allowed to get around the rules of the system for decades. As a
result, bailouts for commercial banks are happening with alarming
regularity. As Matthew asserts in the show: “In the last 100
years, the central bank, the premier banking institution in the
United States, has gone to three extremes; [this] never ever has
happened in recorded history.” Thank god we have Bitcoin.